(DISH) DISH to Open Bidding for TerreStar

Yesterday, the U.S. bankruptcy court in Manhattan has permitted DISH Network Corp. (DISH), the second largest satellite TV operator in the U.S., to open the bidding process for the auction of the currently bankrupt TerreStar Networks Inc. Earlier, DISH Network has made a cash offer of $1.375 billion for TerreStar. With this court judgment, DISH Network has become the “Stalking Horse” bidder for the bankrupt TerreStar.

In the bankruptcy auction, which will be held on June 30, 2011, DISH Network will be competing with other bidders including a group of senior debt holder of TerreStar and wireless operator MetroPCS Communications Inc. (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.

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. The most interesting fact about TerreStar is that it offers wireless communications over a satellite network. TerreStar is currently engaged in a legal battle with Sprint Nextel Corp. (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 very formidable video-on-demand service over a wireless network of mobile handsets such as smartphones.

Satellite TV operators are facing increasing competition from cable TV providers offering innovative triple play bundled services. Competition has also intensified with the rapid growth of fiber-based pay-TV services offered by telecom operators. Moreover, new IPTV products/services have also begun to impact the pay-TV industry.

DISH Network is already  transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider to minimise its subscribers’ churn rate. The company is concentrating its marketing efforts on higher-priced subscribers and raised the prices of its products and cut back discounting to retain its subscribers.

DISH NETWORK CP (DISH): Free Stock Analysis Report

METROPCS COMMUN (PCS): Free Stock Analysis Report

SPRINT NEXTEL (S): Free Stock Analysis Report

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