Ergen Purchase of TerreStar Still Likely, Say Observers
Dish Network CEO Charlie Ergen likely is still very interested in purchasing bankrupt S-band licensee TerreStar, according to recent filings and interviews with satellite industry executives. Dish outlined its plans to use DBSD’s mobile satellite service (MSS) assets for a mobile spectrum offering in a FCC license transfer application last week (CD April 12 p7). Dish spent a considerable amount of time on how the combined S-band spectrum of DBSD and TerreStar would effect the status quo. Dish is in the process of purchasing DBSD, which is in bankruptcy, and sister company EchoStar holds most of the first lien debt of TerreStar, also in bankruptcy.
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"The ability to combine the DBSD spectrum with additional spectrum in the future would enhance the effectiveness and competitiveness of any mobile broadband services,” Dish said in the filing. “Taken together, these spectrum assignments, while still paling in comparison to the holdings of incumbent mobile broadband providers, would greatly enhance Dish’s ability to provide high quality services and compete in the provision of mobile broadband services.” Dish went on to discuss the competitive impact “if the two operators were to be combined as the result of a later transaction.”
The filing is vague enough that it could be a reference to a Dish sale of DBSD to the eventual owner of TerreStar, an industry lawyer said. EchoStar, Dish and TerreStar declined to comment. A TerreStar reorganization plan filed last year that would give EchoStar control of the company was turned down by a group of TerreStar’s creditors. Soon after, EchoStar agreed to buy Hughes, and Ergen said efforts to take over TerreStar were no longer in the works (CD Feb 25 p1). He’s chairman of EchoStar.
The combined spectrum holdings of the two bankrupt S-band companies would result in a significant step-up in value and usability, compared to separately held 20 MHz chunks of S-band spectrum, said Tim Farrar, president of TMF Associates. That gives Dish a major incentive to move forward on the purchase, while deterring others from trying to buy just TerreStar, he said. Having both DBSD’s and TerreStar’s spectrum would include several benefits, allowing for operations with wider channels and an enhanced ability to deal with any interference restrictions at the edges of the band, Farrar said.
Ergen appears to be the most likely to end up with TerreStar’s holdings, with “no other obvious candidate on the horizon,” said Farrar. The FCC would probably look favorably at a transaction that would combine the S-band and roll out a new terrestrial mobile broadband network, said Farrar. That’s especially true if LightSquared’s planned wireless service continues to be hampered by concerns over GPS interference, said Farrar. The agency likely wouldn’t be concerned over one company’s access to such a big piece of spectrum, because the commission is focused on increasing competition in the wireless sphere, he said. That issue is also now “exacerbated” by AT&T’s proposed purchase of T-Mobile, said Farrar.
The FCC has made clear its interest in growing broadband use of the spectrum, having issued a notice of inquiry on how best to increase investment of such service, and seems unlikely to oppose such a deal, industry executives said. The commission would “love to have spectrum put to use,” said one: “If Charlie is to end up owning both, from a policy standpoint I think it would be fine,” from both an FCC and antitrust point of view.