DISH Network Almost Bags TerreStar

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3 Nov 2010
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DISH Network Corp. (NASDAQ:DISH), the second largest satellite TV operator in the U.S., is all set to acquire currently bankrupt TerreStar Networks Inc., which offers wireless services over a satellite network. TerreStar is at present up for sale after it filed for bankruptcy protection in last October with more than $1 billion in debt. Earlier this month, DISH Network has made a cash offer of $1.375 billion for TerreStar.

On June 21, 2011, the U.S. bankruptcy court in Manhattan has announced DISH Network as the “Stalking Horse” bidder for TerreStar to open the bidding process. The company was expected to compete with a group of senior debt holder of TerreStar and wireless operator MetroPCS Communications Inc. (NYSE:pCS). Any other company can also bid for TerreStar within June 27, 2011. However, any competing offer must start at $55.5 million higher than that of DISH Network’s offer.

Interesting, at the time of the close of bid for TerreStar, DISH Network remains the sole bidder. The bankruptcy auction is schedule to be held on June 30, 2011. TerreStar may cancel the auction if no one bid during that period. Further, if any company bids then it will be difficult to get court approval since it will come after the closing date of June 27. A bankruptcy court will hear the sale process on July 7, 2011. We expect under the changed scenario, DISH Network will easily get the court approval as the only bidder for TerreStar.

We believe DISH Network is trying hard to be the storage medium for the valuable wireless spectrum that can be used to grow a viable pay-TV distribution network or can transform the company to a wireless service provider. TerreStar owns around 20 MHz of wireless spectrum and is currently working on a project to launch world’s first satellite smartphone. TerreStar is currently engaged in a legal battle with Sprint Nextel Corp. (NYSE:S) for $104 million reimbursement claim for costs related to clearing spectrum bands.

In March 2011, DISH Network purchased bankrupt DBSD North America for $1.4 billion. This acquisition provides DISH Network an extremely valuable spectrum of DBSD for both wireless and wireline communications. Additionally, DISH Network itself owns a slot of highly demanded 700 MHz wireless frequency and tablets.Using these slots of airwaves, the company can form a formidable video-on-demand service over a wireless network of mobile handsets such as smartphones.
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