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DISH to Buy DBSD: Why Does Charlie Ergen Want to Own Two Bankrupt Satellite Companies

|Includes: DISH Network Corporation (DISH) – Dish Network is currently trying to take control of bankrupt DBSD (a subsidiary of ICO Global Communications Ltd.) and Echostar is TerreStar’s largest creditor. Charlie Ergen is the founder of both Dish Networks and Echostar so why is he trying to buy these two bankrupt satellite operators. Well, the answer is in the wireless spectrum that these two companies own. DBSD and TerreStar each own 20MHz of S-band MSS spectrum. This spectrum can be used to one day build a nationwide wireless broadband network assuming the company can get the requisite waiver from the FCC of its Ancillary Terrestrial Component (NYSEMKT:ATC) Service Rule. Given that LightSquared recently received this very waiver from the FCC and, as part of the National Broadband Plan, the FCC is currently looking for ways to accelerate the terrestrial deployment of MSS band spectrum, I don’t think that this is an exceedingly difficult waiver to obtain. So, given the above, I think that Charlie Ergen plans to combine the two 20MHz blocks from each of DBSD and TerreStar to create one large 40MHz piece of wireless broadband spectrum so he can either build out a wireless broadband network or hold the spectrum and then resell it in coming years to some other company who wants it more and is willing to pay a much higher price. Why would Charlie Ergen want to build a wireless broadband network? Well, it’s because he sees the handwriting on the wall which is that his video-only satellite business has a limited future without some form of broadband internet offering to go with it or even replace it down the road as more and more of his subscribers begin to cancel their service as they realize that there are other ways to get their favorite TV shows off of the internet. Well, Phil Falcone has thrown his hat into the ring with his Dish-topping bid for DBSD from LightSquared as he sees what Charlie Ergen is up to and at best wants to prevent it and at worst wants to make it more expensive for him. So we will see what happens here but it is my belief that if Charlie doesn’t get what he wants here, then Dish’s days are numbered.