Post Auction, Ergen Wireless Bet Now $21B

(Satellite Business News) — Dish Network co-founder and Chairman Charles William Ergen loves people to buy into the notion he is one of the world’s greatest card players and gamblers. How much of that is fact versus legend depends on who is telling the tale.

Regardless, to borrow on that story line, with his company’s additional investment of $6.2 billion in wireless spectrum, which the FCC announced last week, it is pretty safe to say all of Ergen’s wireless chips are now in the middle of the table. As noted last week, when that amount is added to the rest of money Dish Network has spent to acquire wireless spectrum, the company has now shelled out more than $21 billion for spectrum. That is real money. Even for the 47th richest person on earth, as Ergen is.

The consumer media, as well as most financial analysts, continue to believe Dish Network has no option other than to sell the spectrum, or enter into some sort of grand corporate partnership with a well-heeled company interested in entering the wireless business or an existing wireless operation which needs more spectrum.

In this space a few weeks ago, it was suggested that Dish Network’s options on each front are limited and Ergen may have convinced himself to forge ahead and attempt to launch some type of wireless business that would attempt to connect any type of machines and devices through the model advanced by those who employ the goofy label the “Internet of things.”

Dish Network’s most recent FCC filings would seem to support that. The results of the auction also add credence to that, and throw even more water on the consumer media and Wall St. obsession of who Dish Network might sell its spectrum to. In addition to the reasons set out in this space a few weeks ago, there are now other points to keep in mind — financially, company-wise and politically.

The most critical might be the economics that would come into play in any sort of Dish Network transaction. How many companies are out there who want to plop the $21 billion onto their balance sheets — and if it was an outright sale, that assumes Ergen would sell the spectrum without seeking a tidy profit on his investment.

A partnership would also have to assume Dish Network’s liabilities, and that is not considering the floundering DBS service the company is running into the ground. And which companies out there might be willing to pursue such an expensive deal, and yet yield unilateral control of the venture to Ergen?

Some suggest that Dish Network will spin off the wireless spectrum into a new public company Ergen would control, in order to be able to make a transaction viable to another entity. That concept might have been feasible a while back, while the amount of money spent on wireless spectrum was more manageable, and the DBS service was not staring into the abyss.

But would it now, given all that has transpired? And in light of the billions more that would have to be invested to build out a wireless network? Could it be Dish Network has now, for lack of a better term, priced itself out of a deal?

Then there are the politics of any spectrum deal Dish Network might enter into. Right after the election, the roster of those companies that might fare the worst under the Trump administration listed here included Dish Network. That had nothing to do with the “uniqueness” of the new president, but how Washington has worked forever. Dish Network and Ergen were among the biggest corporate contributors to Hillary Clinton’s failed campaign. Ergen and his wife held fundraisers for Clinton at their home.

Dish Network General Counsel Stanton Dodge was a so-called campaign contribution “bundler” for the Clinton campaign, and is known to have a close relationship with House Democratic leader Nancy Pelosi. Does any of that help the chances of a Dish Network spectrum deal getting approved by the government?

Then there is the FCC. It was then-FCC Commissioner Ajit Pai who lead the charge to deny Dish Network (and two firms it owns 80% of each) upwards of $3 billion in discounts in a previous agency spectrum auction. Go back and read some of the statements Pai released at the time. He all but called Dish Network crooked. So how would now FCC Chairman Pai judge a Dish Network spectrum transaction?

Can anyone forecast Pai green-lighting such a deal if Dish Network actually profited? Even if Dish Network just broke even, would Pai be happy rubberstamping a transaction from a company he regards as a spectrum speculator?

How about all the Dish Network spectrum that was purchased with restrictions on who and when that bandwidth could be sold—like the spectrum bought in the most recent auction? The Pai FCC would have to approve a waiver on those deals as well.

One final point many seem to be inexplicably overlooking — Charlie Ergen has no interest in selling. He never has. If Ergen was, he would have cashed out on his DBS business years ago when it was worth a lot. He had more opportunities to do that than are even publicly known. Many who have tried to buy Ergen’s companies came away believing he was just impossible to deal with for a variety of reasons.

That is true to an extent. But it is made more so by the simple reality that he just does not want to sell. As has been argued in this space many times, Ergen’s feelings about selling will not change until he is convinced none of his children want to run his firms. That does not seem near.

Some believe Ergen might sell if he was literally out of all other options. That might be, but it is Ergen himself who has to believe that. How massive a blow would that be to Ergen’s psyche and ego? And to his legacy?

Ergen wants the world to assume he does not care about such things. Anyone who knows him understands the opposite is true. And it is not like the Ergens would have trouble paying their mortgages if Dish Network went satellites-down tomorrow and its wireless spectrum was forfeited. Nor would the trusts established for their kids be impacted by one cent.

All in all, there is little doubt Ergen has made the colossal gamble of his life by spending more than $21 billion on wireless spectrum. And, as also noted here many times in the last few decades, it is never smart betting against Charles William Ergen. But, at least for now, and to stay with the theme, Ergen is not “folding” to another company and has every intent to “hold ’em.”

Bob Scherman is the editor and publisher of Satellite Business News, an independent trade publication. Scherman has covered the satellite TV, cable and related businesses for almost 35 years. Comments on this column can be sent to [email protected].