NEW YORK/LOS ANGELES DISH Network Corp's surprise win of wireless airwaves in an auction may be the first step toward building a mobile television service or a bet on a scarce commodity by CEO Charlie Ergen, analysts said on Thursday.
The second largest U.S. satellite television company spent some $711 million for a nearly national block of licenses with one-way communication capability, according to U.S. regulators.
Wireless telephone companies snapped up most of the spectrum in the $19 billion Federal Communication Commission auction of airwaves being vacated by television broadcasters moving to digital formats.
DISH's spectrum would be difficult to use for two-way
communication, such as on mobile phones and data devices. But such devices could receive communication sent over those
airwaves -- such as television.
"That spectrum is best suited for broadcast. The assumption you'd make is that they'd set up some sort of mobile TV service," said Pacific Crest Securities analyst Steve Clement.
The spectrum is adjacent to mobile video broadcast airwaves owned by Qualcomm Inc's Mediaflow broadcast unit. "It makes more sense for one provider to operate both pieces of spectrum," said Clement, but he declined to speculate on whether a deal might happen between DISH and Qualcomm.
Citi analyst Jason Bazinet in a note agreed that DISH was probably focused on building a wireless video network and would need to pay some $3 billion to $5 billion to build the network.
DISH, which won the spectrum through partner Frontier Wireless, declined to comment. But Bazinet pointed out that DISH in a February annual filing said, "We may make investments in or partner with others to expand our business into mobile and portable video, data and voice services."
A mobile TV network would cut cash-flow near term, raise long-term growth prospects, and decrease the chance of a takeover by AT&T Inc, he said.
But Kaufman Bros. analyst Todd Mitchell said the plans weren't clear -- beyond the fact that industry maverick Ergen was getting hold of a limited resource that one way or another was likely to increase in value.
"This is quintessential Charlie Ergen," he said. "It's like there's a road and you don't know where they're going to put the exit ramp but you acquire the property next to the road anyway."
Shares of DISH rose 2 percent on Nasdaq to close at $28.62.
(Reporting by Sinead Carew and Peter Henderson; editing by Carol Bishopric)