The Federal Communications Commission said on Friday it was delaying its decision on whether Dish Network Corp can build a wireless cellular network, a move that could hurt the value of the satellite television company's newly acquired wireless assets.
Dish shares fell more than 3 percent in after market trading.
Dish was seeking a waiver of its license to allow it to build a purely terrestrial network, rather than one that combines both satellite and terrestrial service.
The FCC denial does not mean the regulator will kill Dish's wireless ambitions, said Brean Murray analyst Todd Mitchell.
"This will prolong the time frame but I do not think it reduces the ultimate likelihood of approval," Mitchell said.
While the regulator said on Friday it had approved Dish's license to acquire more than $3 billion worth of wireless spectrum, an FCC spokesman said that a "rulemaking process will best serve the public interest and maximize the long-term value of the spectrum for the American economy."
Two sources close to the matter said the FCC is aiming to make a decision on whether Dish can use its wireless spectrum to build a cellular network by the end of the year.
Dish Chairman Charlie Ergen said on a conference call in late February that if Dish was not granted a waiver, or if there was a delay with a decision, it may have to look at alternatives with its wireless assets, including writing down their value.
Dish did not respond to a request on Friday to clarify whether it would still follow this plan to seek alternatives.
Mitchell, the Brean Murray analyst, said he interpreted those comments as Ergen trying to put pressure on the FCC, and were not a warning to Wall Street.
"Ergen's comments about rethinking the business plan if it goes into this process were directed at the FCC, not investors," Mitchell said.
Dish spokesman Aaron Johnson said in a statement that "the denial of those waivers will delay the advancement of some of President Obama's and the FCC's highest priorities - namely freeing up new spectrum for commercial use and introducing new mobile broadband competition."
The company said it would work with the FCC on a rulemaking.
An FCC rulemaking could be a lengthy process that involves the agency issuing proposed rules, collecting comments and then issuing a final rule based on the commission's vote.
Dish has spent more than $3 billion on a wireless spectrum it bought from DBSD and Terrestar last year. The second-largest satellite TV provider in the United States is seeking to diversify its business beyond pay TV.
Dish CEO Joe Clayton has previously said the company could build a wireless network on its own or find a partner.
Analysts have said that Dish's spectrum could be an acquisition target for AT&T if Dish had gained the necessary approvals.
The denial of the waiver calls into question that plan and how much its spectrum is worth. Cellular service is much more valuable than satellite services, which are costly and used by few customers.
Dish Network shares fell 3.5 percent to $28.25 per share in extended trade on Friday, after closing 1.7 percent higher at $29.27 in regular trade.