Dish Network Makes Stalking Horse Bid For TerreStar

Dish Network was chosen to provide the stalking horse bid for bankrupt TerreStar, setting the minimum bid price for the S-band licensee at $1.375 billion, court documents filed Wednesday said. The U.S. Bankruptcy Court for the Southern District of New York must still approve the bid. Charlie Ergen, chairman of Dish and EchoStar, had appeared to be the front-runner to win the TerreStar assets (CD April 15 p3) despite saying during an earnings call this year that EchoStar, which has some ownership in TerreStar, would not bid on the company.

TerreStar, which has access to 20 MHz of spectrum in the S-band, has FCC authority for mobile satellite service and ancillary terrestrial component use. The TerreStar bankruptcy is considered a significant factor in how the FCC will act toward increasing terrestrial broadband use in the S-band.

TerreStar also pushed the bid deadline date back to June 27 and the auction to June 30. Ergen’s bid beat several other bidders, including MetroPCS, Reuters reported. EchoStar previously made an effort to buy the company, but that fell through.

TerreStar’s assets are particularly attractive to Dish because of the DBS company’s ongoing effort to buy DBSD, another S-band licensee. TerreStar’s spectrum is next to DBSDs, and an acquisition of both of them would effectively give Dish 40 MHz of spectrum. Dish’s buy of DBSD must be approved by the FCC, which hasn’t put out a public notice on the deal. A TerreStar purchase would also have to be approved by the agency.

Many in the industry see Dish control of the S-band spectrum as the FCC’s most attractive scenario for putting that spectrum into immediate use. At the same time, Dish control of DBSD and TerreStar’s spectrum may make raising funds for the government via incentive auctions or a return of spectrum more challenging, said Tim Farrar, president of TMF Associates. Dish has the ability to continue to use both DBSD and TerreStar under their existing MSS/ATC authorities, assuming the FCC allows the transfer of control. If a hedge fund were to win TerreStar, for instance, it would probably seek to lease or sell the spectrum for build out of a terrestrial network giving the FCC a better chance to impose such conditions, said Farrar.

Dish has signaled, in various FCC filings, its intent to use DBSD’s and its 700 MHz spectrum for wireless broadband, though it hasn’t disclosed detailed business plans. For instance, in opposing AT&T’s purchase of Qualcomm’s spectrum, Dish said it “likely would compete either as a direct retail provider of services or as a wholesaler to other retail wireless service providers” if it were to enter the market (CD June 2 p19). At the same time, Ergen has expressed interest in continued use of the satellite side of the spectrum. If that’s the case, the FCC may not need to move forward on relaxing gating criteria, largely meant to keep satellite as the primary service, for using the band, something the agency is in the process of considering.