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DISH Surrenders Few Spectrum Licenses on Discount Denial

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Ever since DISH Network Corp.DISH failed to avail the $3.3 billion discount in the AWS-3 spectrum auction, the market

was rife with speculations that DISH would pay the entire amount before the Oct 1 deadline or will surrender the licenses.

Yesterday, DISH's affiliates - Northstar Wireless and SNR Wireless - gave up 197 spectrum licenses worth $3.3 billion to the FCC as they were denied the discount. Moreover, the affiliates had to pay a penalty of $413 million to the FCC for failing to make the payment within the stipulated period.

We remind investors that in Jan 2015, FCC concluded this AWS-3 spectrum auction which registered a record-breaking bid value of $44.89 billion. Notably, AT&T Inc. T emerged as the top bidder, spending $18.2 billion followed by DISH's $13.3 billion, Verizon Communications Inc.'s VZ $10.4 billion and T-Mobile US Inc.'s TMUS $1.8 billion.

Thus, DISH secured 702 licenses by winning 25 MHz of AWS-3 spectrum, including 13 MHz of paired spectrum. Interestingly, the company had participated in the auction via three designated entities (DE) - American AWS-3 Wireless, Northstar Wireless and SNR Wireless.

Immediately after the FCC declared the name of the auction winners on Feb 2, 2015, DISH claimed a 25% discount on the total value of the bid, under FCC's "DE" program. This implied that DISH would have to pay just around $10 billion to acquire all the licenses that it has won.

However, in Aug 2015, the FCC unanimously voted against DISH's claim of a $3.3 billion discount. This was undoubtedly a major setback for the company.

Meanwhile, the 197 licenses surrendered will be put up for sale post the FCC's broadcast airwaves auction scheduled for early 2016. Moreover, if the total bids in the re-auction fall below $3.3 billion, DISH and its affiliates will have to compensate for the difference.

Nonetheless, of the total $13.3 billion in licenses won in the auction, DISH and its affiliates will retain 505 licenses worth $10 billion, which has already been paid.

Notably, DISH has created an extensive portfolio of spectrum - arguably, the most important component of wireless networks - over the last two to three years.

DISH presently carries a Zacks Rank #2 (Buy).

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AT&T INC (T): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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