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Dish boss Ergen gambles $1 billion on MSS spectrum bid

It isn’t at all obvious what the game of the US Dish Network is, with its $1 billion purchase this week of DBSD, an MSS vehicle in the US, currently o

By PETER WHITE

Published: 3 February, 2011

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It isn’t at all obvious what the game of the US Dish Network is, with its $1 billion purchase this week of DBSD, an MSS vehicle in the US, currently owned by ICO Global Communications, a business funded by none other than Craig McCaw. The deal will have to wait until a bankruptcy court gives its go ahead, but involves Dish supplying enough cash, around $87.6 million of debtor in possession finance, to keep other creditors at bay. Dish only has around $2.6 billion in cash and marketable securities to call on, so this deal ties up 40% of its cash capability, so it had better be something real.

If you look between the lines you’d be forgiven for seeing Machiavellian moves afoot which reek of opportunistic control of Mobile Satellite Services in the US. The potential plot feels like one of those unlikely Bond movies such as Diamonds are Forever, which also hinged on control of a satellite, albeit to fry humanity, not give it mobile satellite services.

ICO got into trouble shortly after it began operations as far back as 2000, when it became controlled by Eagle River Investments, a Craig McCaw owned investment arm, which put in $577 million to help bring the company out of Chapter XI. McCaw has repeatedly shown that he understands a thing or two about spectrum assets, and despite holding ICO for over ten years, it looks like he is going to get out of it more than he put in, and it may even buy him enough favors to help him become involved in the MSS business. It’s tenuous logic but bear with us.

DBSD North America is the subsidiary of ICO and it has talked about itself becoming a minor shareholder as DBSD restructures. It seems that the 2GHz S-Band MSS spectrum which ICO owned will go with DBSD, and if Dish CEO Charlie Ergen also manages, through his other vehicle EchoStar, to secure control of the spectrum of the bankrupt Terrestar, he would have a neat little bundle of assets to either compete with LightSquared or lay at its door.

We say this because we do not believe that Ergen will active play outside his area of expertise – satellite signaling – and he might gain plum contracts for EchoStar if someone else builds out this MSS spectrum, and you might guess that this is specifically LightSquared and potentially any collection of financial and operator partners. What Ergen might ask in return will not only be satellite work for EchoStar, but additionally it might be the one chance that his beloved Dish Network has of securing a relatively wide return path, using LTE, to get Dish into the triple play market – voice, broadband and video or quad play if that includes portable voice.

US newspapers are saying that Ergen thinks that the spectrum he might inherit from DBSD is worth more like $2 billion to $3 billion and he could just make a quick turn on the deal, and that is feasible. He has owned, part owned or had debt leverage on some MSS spectrum or other, for some years now and obviously sees its worth.

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