Dish Network's Plans Becoming Clearer (DISH, T, S, VZ)

Back in February, Dish Network Corp. (NASDAQ: DISH) acquired two bankrupt satellite communications companies, TerreStar Network Corp. and DBSD North America, Inc., for $1.375 and about $1 billion respectively. At the time there was speculation that Dish was making the acquisition as a way of prettying itself up for a buyout from AT&T (NYSE: T). When AT&T offered to buy T-Mobile, the deal for Dish was taken off the table.

At stake is a commanding position in the rather arcane world of wireless spectrum. The deals with TerreStar and DBSD give Dish about 40 MHz of spectrum, compared with the 59 MHz currently owned by LightSquared, which has agreed to a deal with Sprint Nextel Corp. (NYSE: S) under which Sprint will build and operate LightSquared’s national wireless broadband network. Verizon Wireless, jointly owned by Verizon Communications (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD), is building out its own LTE network.

Dish filed a request with the US Federal Communications Commission yesterday asking that the company be allowed to merge the transfer of satellite licenses that it acquired with its purchases of TerreStar and DBSD. Dish further requested a waiver of the FCC’s service requirement that allows the company to use the combined spectrum to offer only land-based receivers. The company wants to use the spectrum to offer a hybrid terrestrial-satellite broadband service. LightSquared has already received such a waiver.

Dish, and LightSquared, based their requests on the FCC’s stated policy goal of promoting broadband deployment in the US, especially in under-served rural areas. By combining TerreStar’s spectrum with that of DBSD, Dish anticipates providing an integrated mobile and fixed broadband network.

One issue Dish can avoid is the conflict with GPS systems that is now plaguing LightSquared. Because Dish’s combined license would operate on a different part of the spectrum, there is no interference with the nation’s GPS system.

The advantage to Dish, should its waiver be approved, is that the company would enter the lucrative market for video and fixed broadband services now dominated by AT&T and Verizon. In essence, Dish is telling the FCC that its request will encourage competition in the marketplace and lower prices while improving service to customers.

Based on the FCC’s approval of LightSquared’s waiver, the Dish request also seems likely to be approved. That will get the satellite company’s foot in the door of the land-based broadband providers, but competing successfully with AT&T and Verizon may be more difficult than Dish expects.

Shares of Dish Network are up about 1.25% at around noon today, at $21.63, in a 52-week range of $17.33-$32.56.

Paul Ausick