Dish's Airwaves Play Needs U.S. Buy-in to Pay $5 Billion
Comment of the Day

October 26 2013

Commentary by Eoin Treacy

Dish's Airwaves Play Needs U.S. Buy-in to Pay $5 Billion

This article by Todd Shields for Bloomberg may be of interest to subscribers. Here is a section
Dish paid $2.78 billion in 2012 for two satellite companies' airwaves that it's readying for use by ground-based smartphone networks, and pledged to bid $2.2 billion at an auction for bankrupt LightSquared Inc.'s mobile frequencies.

Now Dish is offering the Federal Communication Commission a deal: It will ensure the success of a U.S. airwaves auction in January, by setting a price floor of $1.56 billion, if it's allowed to alter uses for airwaves it already has, which would make them more valuable.

“It's elegant,” Paul Gallant, Washington-based managing director for Guggenheim Securities LLC, said in an interview. “It aligns most of the politics needed to push through the proposal, and improves the company's spectrum position.”

The mystery is whether chairman and co-founder Charlie Ergen's intent is to build a wireless network, find a mobile partner such as AT&T Inc. (T) or Verizon Wireless to lease his inventory, or eventually resell the airwaves.

Eoin Treacy's view A point previously made here at Fullermoney is that while the number of companies producing hardware such as smartphones, tablets, laptops, desktops and TVs is comparatively large, the number of companies that provide the infrastructure to facilitate internet access is comparatively small and represents an oligarchy.

Providing wireless internet connectivity tends to have a high barrier to entry so that the companies controlling these networks tend to have formidable pricing power. As demand for online and mobile content continues to grow, the providers of programming should also benefit

Among programming providers, Time Warner Inc., Viacom and CBS Corp remain in relatively consistent uptrends although they have become somewhat overextended relative to their 200-day MAs of late. Netflix pulled back sharply from the $400 area on Tuesday suggesting some consolidation of this year's powerful gains is underway.

Among infrastructure providers Time Warner Cable and DISH Network also remain in relatively consistent uptrends, while Verizon Wireless, AT&T and Sprint have been confined to medium-term consolidations. These latter shares all found at least short-term support in the region of the lower side of their respective ranges last week.

As a provider of billing and customer care systems to the telecoms sector globally, Amdocs has also benefitted from the growth in demand for online access and content. The Share remains in a consistent medium-term uptrend and found support last week in the region of the 200-day MA.

Back to top