Dish Network’s plans to buyout Sprint and invest in Clearwire have been dashed. Both those companies are only days away from becoming part of SoftBank’s pan-Pacific empire. But that doesn’t mean Dish and its wily chairman Charlie Ergen have been cowed. The satellite TV provider very well may have several other acquisition targets on its radar.
The two most likely candidates attracting Ergen’s gaze are fellow satellite TV provider DirecTV and the newly minted T-Mobile US. T-Mobile would be a target for the same reason Sprint and Clearwire were targets: Dish holds former satellite spectrum it wants to put to use in an LTE network, but it needs an established mobile carrier to make its plans reality.
But we asked satellite services and spectrum analyst Tim Farrar to weigh in, and he told us that Ergen is probably putting its mobile ambitions on hold — at least for now — and is turning its acquisition energies back to its core industry: satellite TV. Dish and DirecTV attempted a merger back in 2001, but regulators put the brakes on the deal. However, the landscape has definitely changed in 12 years.
The expanding universe of Dish
Dish is already conducting trials of a home broadband network with regional operator nTelos using its 2.5 GHz spectrum as a stand-in for a wireline link. A combined Dish and DirecTV, which would have a combined 34 million subscribers, would then be in a better position to offer a residential broadband service to challenge the cable operators and the phone companies.
Ergen, however, has been dismissive of the idea of revisiting Dish-DirecTV. At an analyst briefing in May, he said if he had to pick between Sprint or DirecTV he would pick the wireless carrier. Satellite TV is a mature business, and merging the two big players would only create a larger version of the same company, Ergen said.
DirecTV, however, could fit into a much larger Ergen plan. Dish could use its converted satellite spectrum to offer DSL-like services to its TV subscribers, but the key would be in the architecture, Farrar said. The same satellite dishes that pick up TV signals from space would not only contain the antennas needed to grab its fixed wireless signals from terrestrial towers, but they also could host a cellular network’s transmitters as well. Dish could use its customers’ rooftops as “towers” for some lucky mobile operator’s LTE deployment and then offer up its fixed wireless network as backhaul.
While T-Mobile and even Sprint could be candidates for such a network hosting deal, Farrar thinks Ergen is looking to tie his star to AT&T. Verizon has gotten awfully cozy with the cable operators since they closed their big SpectrumCo deal last year. They’ve been jointly selling cable broadband and mobile services in some of AT&T’s U-Verse markets. AT&T may be looking its for its own Comcast. “The symmetry of such a deal with Verizon’s cable partnership is striking,” Farrar said.
To accomplish all of this, though, Dish will need more spectrum. Ergen already has eyes on another acquisition prospect that would fill that need.
Since the regulators put the kibosh on LightSquared’s grand plan build a nationwide LTE network, the company has been relatively quiet. A big cloud hovers over the satellite spectrum it wants to repurpose for mobile broadband due to interference issues with the GPS band.
But that hasn’t prevented Ergen from buying up a sizable portion of LightSquared’s debt through a hedge fund. He’s also reportedly offered $2 billion to buy LightSquared’s L-band spectrum outright. Ergen could combine those L-band airwaves with Dish’s own S-band frequencies, changing their configuration to produce a high capacity network that wouldn’t interfere with sensitive GPS receivers.
So this year or next, Ergen might be able to accomplish everything Dish failed to do when it gave up Sprint and Clearwire. It could get a bunch of high-frequency spectrum, it would build its nationwide broadband network, and it could get access to a mobile network by partnering with AT&T, Farrar said.
There are other theories out there. Rumors that the newly reborn T-Mobile is in Ergen’s sights still loom large, and one analyst believes that Dish is weighing a bid on the country’s biggest remaining regional operator Leap Wireless, which runs Cricket Communications.
I’ll be the first to admit Farrar’s theory may seem convoluted, involving many twists and turns. But Ergen has demonstrated amply that he can think many moves ahead. When Dish first bought bankrupt Terrestar’s satellite broadband spectrum in 2011, few could have told you it would eventually lead to Ergen bidding on the country’s third-largest mobile operator.
Just how far ahead is Ergen thinking? Farrar believes Ergen ultimately wants to be a seller rather than a buyer. Since regulators came down hard on AT&T for trying to merge with T-Mobile in 2011, there’s no chance the Obama administration is going to let either AT&T or Verizon make any big acquisitions of companies or spectrum. But 2016 will bring a President and a new batch of regulators potentially more friendly to the big operators. Ergen may be prettying up Dish’s wireless spectrum for a sale to AT&T, if not an outright sale of the entire company to Ma Bell.