All of a sudden companies like Sirius XM (NASDAQ:SIRI) that own satellites might find themselves floating in boatloads of additional revenue. Sirius already is expecting to have almost $1.5 Billion in cash by the end of this year. But now things are looking even brighter. The FCC made a proposal on Wednesday that could change how data is delivered to your smartphone or device.
WASHINGTON (Reuters) - Communications regulators proposed on Wednesday a path for making satellite airwaves available for mobile broadband use, a rulemaking that could help Dish Network Corp (NASDAQ:DISH) launch a wireless cellular network.
The proposal is in line with the Federal Communications Commission push to free up more airwaves to meet the booming demand for mobile devices like Apple Inc's iPad tablet and Google Inc's suite of Android-powered smartphones.
As it stands, analysts think this will not take effect until the end of the year if it is approved. Is this the answer to the data problems that have suddenly brought IPad3 devices to a screeching halt? The new "data hog" uses 2GB (most customers one month allotment) to stream HD video for one hour. Not one hour a day, but one hour total. Although Apple (NASDAQ:AAPL) has yet to officially comment on these numbers, this is a reason for investors to stay tuned to the latest data news.
Being able to stream through a satellite signal will help to cut these data costs by providing more spectrum. This is fuel for speculation that AT&T (NYSE:T) will buy Dish in an effort to use their satellites to relieve the data crunch that they are currently in. However, the CEO has said that Dish will not sell any spectrum. They would rather diversify and roll out a Dish mobile phone network. But one analyst thinks, at the very least, the two companies will form some sort of partnership due to the time it will take to get approval from the FCC:
It may therefore be an outside chance that Dish would agree to partner with AT&T to roll out their joint wireless service. When Dish secures the regulatory approvals, it would have AT&T's infrastructure in place to host its spectrum and AT&T would have the benefit of added spectrum. It could also help AT&T market its services to Dish's current customers and grow its subscriber base and vice versa.
All of a sudden spectrum is very valuable. Although it had value in the past, it was debatable as to how valuable it really was, and if it could be sold. Many asked why would anyone sell it? Sirius XM has licenses and spectrum for Satellite Radio. But who would want it since there are no other Satellite radio companies:
Upon the merger the XM spectrum was valued at $2 billion while the company is still carrying an $83 million value on the Sirius spectrum because that is what they paid. By any reasonable measure the spectrum of both could be worth as much as $5 billion each, if not higher.
This amount will only go up more as the demand rises. Now things have changed. If the FCC rules that satellite spectrum can be used for other things including mobile phones, and data downloads then, at the very least, it could be shared with another company such as Verizon (NYSE:VZ) or AT&T with some sort of an agreement. Right now Verizon is not as desperate as ATT is, because it has 46 to 56 percent more 4G capacity. One article written in January said that AT&T might pay a 77% premium to obtain Dish.
This news makes all of these stocks more valuable. Now Apple can continue building data hogs, Verizon and AT&T can buy or share data with other spectrum owners as the FCC loosens their grip, and Sirius XM and Dish can either sell or lease some of their spectrum capacity, or use it in conjunction with (or as) a data provider. This is a major turning point for satellite owners.
The biggest problem is that this will not happen overnight. First the FCC must approve it, and then it will take time to get these networks running. But in the end this should offer some relief for those of you who are trapped in a no-win data situation.
Disclosure: I am long SIRI.