Dish Networks’ nebulous wireless plans received a boost from Standard & Poor’s Ratings Services, which today upgraded its outlook on the satellite television provider and wireless spectrum holder from “stable” to “positive.”
S&P credit analyst Naveen Sarma cited “expectations that we will get greater clarity on [Dish Networks} wireless strategy in the next 12 months,” for the upgrade.
“[Dish Networks] owns licenses for MSS spectrum (2 GHz band) and would like to build out a terrestrial wireless network using this spectrum,” Sarma explained. “Last month, the FCC issued a Notice of Proposed Rulemaking (NPRM), which could allow stand-alone terrestrial services over this spectrum. If this NPRM were adopted, [Dish Networks] would be able to build out its network. Resolution of this NPRM is expected before the end of 2012. We could raise our ratings on [Dish Networks] if the company’s wireless strategy is undertaken is such a manner that we did not believe that debt leverage, which was 2.2x at the end of 2011, would exceed 4.0x.”
Sarma referenced a Federal Communications Commission decision last month to open up a formal debate in regards to Dish Networks’ (DISH) attempt to use satellite spectrum for a terrestrial cellular network. Dish had wanted the FCC to grant it an immediate license to use 40 megahertz of spectrum assets to begin rolling out an LTE network. The move was seen at the time as a setback for Dish, which was looking to gain immediate access to its deep spectrum pool.
“Although we are disappointed that the FCC did not grant the integrated service and spare satellite waivers that Dish requested, we appreciate the cooperative spirit and diligent efforts of the Commission and its staff in reviewing our applications,” Dish noted in a statement following the FCC decision. “We worked hard to demonstrate that the grant of those waivers was in the public interest, and we wish that we had been successful. We believe 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. As we review our options, we will continue working with the FCC on the forthcoming 2 GHz Notice of Proposed Rulemaking to achieve those goals as expeditiously as possible. … We expect to close the DBSD and TerreStar transactions as soon as practicable.”
Dish noted late last month that it had closed on its acquisition of BDSD North America and “substantially all of the assets of TerreStar Networks,” which included the spectrum assets. Dish Networks’ access to those spectrum holdings are seen as even more important to the wireless space following the inability of LightSquared to gain access to its spectrum holdings that it planned to use to launch a terrestrial LTE network to work in conjunction with its satellite communications assets.
S&P did caution that competition for Dish Networks’ ongoing satellite television operations as well as recent acquisitions could hamper the company’s future.
“The ratings on [Dish Networks] are constrained by the lack of clearly articulated strategic and financial policies, particularly with regard to recent acquisitions and investments outside of the core video business,” Sarma added. “The ratings also reflect the strong competition from rival DirecTV and other video providers. Standard & Poor’s believes [Dish Networks’} lack of its own triple-play package … could put it at a competitive disadvantage longer term to cable-TV operators and Verizon Communications Inc. and AT&T (with their respective FiOS and U-verse video offerings). In addition, the rating recognizes the longer term uncertainty of the impact of the new over-the-top (OTT) operators, such as Hulu and Netflix, on the video distribution model.”
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