Telecommunications honcho Charlie Ergen begins 2019 in the middle of a perfect stock and regulatory storm that will be difficult to escape from.
Continue Reading Below
Shares of Dish Network, the company he co-founded, are well off their highs of $80 per share reached back in 2014, and have tanked 41 percent over the past year. Meanwhile, FOX Business has learned that the straight-talking chairman remains in the crosshairs of the Federal Communications Commission and its chairman Ajit Pai over billions of dollars in wireless spectrum licenses his company has purchased in recent years as part of his plan to transform Dish from a satellite carrier, to a new company focused on 5G wireless broadband.
Over the past six months, the two sides have exchanged letters on the progress of the 5G wireless buildout with Dish saying it is meeting its stated goals, and the government questioning the company’s actual progress. Sources inside the FCC tell FOX Business that Pai remains unimpressed with Dish’s explanation of its wireless buildout, and is closely monitoring the situation.
If Dish doesn’t meet a 2020 government mandate for the buildout that covers a substantial part of the U.S. population—or convince President Trump’s FCC to give it an extension--it faces the possibility that the federal government will pull some of its wireless licenses leaving the cash-strapped company billions of dollars in the hole.
Making matter worse, Ergen isn’t just facing a skeptical FCC, but one that is part of an administration that he has opposed politically. Since 2009, Ergen and his wife Candy have contributed more than $1.6 million to Democrats running for federal office and have held a high-profile fundraiser for Democratic presidential nominee Hillary Clinton that generated nearly a $1 million for her failed 2016 presidential campaign.
Pai’s boss, Republican President Donald Trump, meanwhile, received no contributions from the Ergens and since 2009, the couple has contributed just $210,000 to Republicans running for federal office, according to federal records. Despite having an estimated net worth of nearly $9 billion, as tracked by Forbes and being an executive whose company could benefit from bipartisan support locally and in Washington. Ergen and his wife also co-founded EchoStar and of which he is also chairman.
“Several years ago Ergen made two big bets: One to enter the wireless broadband market and another to protect himself politically just in case he would have trouble building it out,” an FCC attorney told FOX Business. “That’s why he made a big bet on Hillary hoping a friendly FCC would enable him to sell licenses or get an extension on the build-out requirements. Both of those bets appear to be souring.
A spokeswoman for the FCC had no comment. A spokeswoman for Dish told FOX Business: “As we’ve consistently shared with the FCC, DISH anticipates meeting all construction milestones applicable to the spectrum licenses. Our plan presents the most promising technology to fulfill a growing demand for IoT [Internet of Things ]connectivity in the near term and will serve as a bridge to build the first standalone 5G network in the United States. Our plan is consistent with the flexible use policies the FCC established for the spectrum licenses, and will help advance our country’s goal to lead in the global race to 5G.”
The spokeswoman declined to comment on the impact of Ergen’s political contributions that were funneled mainly towards Democrats, other than to say he has given to politicians in both parties over the years.
Ergen’s skeptics, of course, go beyond those in government, which is why Dish’s stock is in the doldrums. Dish has issued tens of billions of dollars in dent snapping up wireless spectrums in a bid to compete with AT&T and Verizon in the 5G wireless race, as Dish’s fortunes in satellite stalled.
|DISH||DISH NETWORK CORPORATION||29.80||+0.46||+1.57%|
|VZ||VERIZON COMMUNICATIONS INC.||57.09||+0.26||+0.46%|
To build out the wireless network he will need as much as $20 billion or more, even as he concedes he doesn’t have the funds on his balance sheet.
Lack of funds and or financing, coupled with a not-so-friendly FCC, which has put him on notice over the wireless buildout, could send shares of Dish even further south.
Dish, for its part, maintains the company is on schedule to meet its required 5G buildout, even if it’s still in the first phase process, creating something called “narrowband IoT.” Ergen has recently told analysts he has never missed a buildout deadline, and won’t miss 2020 5G deadline.
One tactic Ergen could use, is to potentially sell his licenses by selling Dish—and he has said there are interested parties. But bankers and analysts say the market for Dish and its licenses has dried up with industry consolidation, plus lots of potential buyers aren’t interested in negotiating with Ergen, who is known as a difficult merger partner.
Ergen could also try and convince Pai at the FCC to grant Dish an extension on the licenses facing the 2020 deadline, but people at the agency tell FOX Business that the chairman may not want to set a precedent by allowing Dish to get a pass on something it had agree to as part of its deal to buy the licenses in the first place.
“Time seems to be running out on Charlie,” the FCC attorney told FOX Business.