Spectrum May Translate To Mobile Video For Dish
Analysts Speculate On Satellite Giant’s Next Big Move
By Linda Moss -- Multichannel News, 3/21/2008 10:00:00 AM
Dish Network’s successful spectrum bid this week had Wall Street surprised, and abuzz, about what satellite pioneer Charlie Ergen may be planning.
Dish Network Thursday declined to comment on its plans for the spectrum it’s acquiring with its $711.9 million bid in the government’s 700-Megahertz wireless auction.
But on the heels of Dish’s successful offer, securing 168 licenses in the E block, a number of analysts were laying odds that the satellite provider will be looking to offer mobile video services.
“The bottom line is I see it as a back-to-the-future kind of spectrum step for Charlie Ergen,” said Jimmy Schaeffler, chairman of The Carmel Group, who has consulted for Dish Network.
“That is he got into this business back in the latte 80s and early 90s, and that was by taking a chance on this new DBS spectrum,” Schaeffler said. “He’s showing his imagination and his glean for risk-taking by stepping into a terrestrial spectrum, which is something they haven’t done before. But inevitably, I think that it shows more and more, one multichannel provider becomes another kind of multichannel provider.”
Citigroup analyst Jason Bazinet in his report pointed out that in Dish Network’s most recent 10-K filing, the company said it might make investments or partner with others “to expand our business into mobile video, data and voice services.”
Because Dish’s E-block spectrum does not permit two-way communication, Bazinet and several other analysts wrote that they believes the satellite provider will use it to offer mobile video services, not wireless data or wireless voice services.
Bazinet estimated that it would cost Dish $3 billion to $5 billion to build a wireless network across the country.
The Citigroup analyst also said that Dish Network’s successful bid lowers the odds that the satellite provider will merge with AT&T.
“This level of investment seems to signal that Dish plans to compete with the cable and telco firms on a standalone basis rather than sell to a rival,” Bazinet wrote.
Wall Street analysts were speculating that Dish Network may be looking to offer video service for cellphones or on-demand services. The cellphone video could prove to be a lucrative business down the road, according to Schaeffler. And it gives Dish Network -- which doesn’t have its own bundle of voice, video and data -- another card to play with consumers.
“He hasn’t been able to really get the traction he’s wanted from the satellite spectrum, as it relates to competing with the cable and telco’s quadruple plays,” Schaeffler said.
“What he’s doing here is he’s trying to step into a new spectrum and address some of that competition…They have deeply coveted, as has DirecTV, the ability to compete against a triple play. This gets this a little closer towards that,” he said.
Schaeffler also noted that Dish Network won its spectrum for a fraction of the cost of other successful bidders, such as Verizon wireless and AT&T. They bid $9.4 billion and $6.6 billion, respectively.
“Compared to that, this [Dish Network’s $711 million bid] is penny change,” Schaeffler said.
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