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By Liana B. Baker
Thu Aug 16, 2012 3:02pm EDT
(Reuters) - Dish Network must seek a partner to enter the mobile broadband market and is not likely to build a network from scratch because of delays from U.S. regulators, company Chairman Charlie Ergen told two Denver publications this week.
In remarks made to the Denver Business Journal and the Denver Post on Wednesday, Ergen said delays by the U.S. Federal Communications Commission on its application to build a wireless network are hurting Dish's chances of being competitive in the mobile market dominated by AT&T Inc and Verizon Communications Inc.
The second-largest satellite TV provider behind DirecTV has spent nearly $3 billion on wireless spectrum and assets, but cannot move forward with building a wireless network until it gains approval from the FCC.
"The only problem I see with the time that has gone by is that it's become increasingly risky for us to try to go it alone," Ergen told the Denver Business Journal. "That process takes more than three years, and there's not any way to make that go faster, so we're probably going to lose that time-to-market advantage, because while we're handcuffed, AT&T and Verizon are continuing to plan and put in ways they can build that out before we can get there."
Dish spokesman Bob Toevs confirmed on Thursday that Ergen made these comments after an event in Denver on Wednesday that officially opened Blockbuster's new headquarters. Dish acquired video rental chain Blockbuster last year.
"The net effect of the delay is that it has become (less likely) that we would be able to build a network from scratch ourselves," Ergen told the Denver Post.
Dish previously said it could become a major wireless player if it found a partner or acquired a wireless company. Chief executive Joe Clayton has said Dish would consider working with partners such as Clearwire Corp, T-Mobile USA, Sprint Nextel Corp, MetroPCS Communications Inc and Leap Wireless International Inc.
On an earnings conference call last week, the company said it expects a favorable resolution from the FCC in the next few weeks. The Department of Justice cleared the way on Thursday for Verizon Wireless to proceed with its $3.9 billion purchase of airwaves from big cable providers, but said the companies would have to abide by several conditions to gain final approval.
The FCC still needs to approve the deal.
Brean Murray analyst Todd Mitchell said Ergen's comments should be interpreted positively by investors because Dish's foray into wireless will be less risky with a partner that can cover some of the expenses.
"It means Dish is not going to spend a zillion bucks on building out its own wireless terrestrial infrastructure that it then has to go fill up with customers," he said.
Mitchell added the partnership may help Dish find new customers for its pay TV service. It currently has about 14 million TV customers.
Dish will also offer a satellite broadband Internet service in the fourth quarter to rural customers through a satellite that its sister company, EchoStar Corp launched in July, a source close to the matter told Reuters on Thursday. Bloomberg previously reported on that new Dish offering.
Dish shares were trading down 5 cents at $31 on Thursday afternoon.
(Editing by Andre Grenon)
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