Dish CEO Charlie Ergen in hot water, could face billions in clawback to FCC

Ergen's shrewd ways may have backfired

Dish CEO Charlie Ergen is known as a great poker player, but not good enough to overcome a weak hand that has now resulted in a potentially devastating blow to his business.

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FOX Business has learned the Federal Communications Commission ruled unanimously Tuesday night that Ergen improperly bid on $12 billion worth of wireless spectrum back in 2015, and received a $3-plus billion discount through a government program designed to benefit small businesses. Ergen bid on the spectrum not through Dish Network, a massive satellite and soon-to-be 5G carrier, but through an outfit known as Northstar Wireless, which he has a stake in.

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For the past five years, as the controversy over the deal worked its way through the federal courts and the FCC, Ergen argued that Northstar was a separate entity from Dish. The government didn't buy the claim and fined him $500 million and also forced him to essentially give back $3 billion in spectrum until the matter could be sorted out. On Tuesday, the FCC finally ruled in a decision that has yet to be made public, but has been confirmed by FOX Business.

By a 5-to-0 bipartisan vote, the FCC said that Dish is the owner of Northstar based on holding an 85% stake in the outfit, and the government now legally owns the $3 billion in spectrum, sources confirm. The ruling is expected to be made public in the coming days.

A spokesman for the FCC declined comment, as did a spokeswoman for Dish. Neither would deny the FOX Business report.

Following our report on the ruling, shares of Dish dropped 6% and finished the day down 1.62% to $33.50 and have lost 5% this year.

TickerSecurityLastChangeChange %
DISHDISH NETWORK CORPORATION35.82-0.09-0.25%

Ergen is expected to appeal the ruling, but legal experts are giving him low odds for a victory since the ruling was unanimous. In addition to weighing an appeal, the next step for him will also be figuring out how much he may owe the government, which will likely auction the licenses given the high demand for spectrum as companies build out wireless capabilities and compete in the super-fast 5G business.

The problem for Ergen: If the government does not recoup the entire $3.3 billion discount that Ergen received off the sales price, he would have to make up the difference.

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"There is no doubt that Charlie will be paying something," said one telecom executive, who spoke of the condition of anonymity. "The government will auction this off and there is demand, but there are other auctions which means it will probably not go for $3 billion."

Some telecom executives say Ergen and Dish can ill afford a big government payout. Under the terms of the government's approval of the T-Mobile purchase of Sprint, Ergen and Dish agreed to build out a competing 5G wireless network to increase competition. If he didn't agree to the buildout, the FCC was threatening to seize other wireless licenses he was sitting on.

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Ergen is known as a shrewd poker player -- skills he brings to the negotiating table with government officials and rivals. He is also embroiled in a possible joint venture with AT&T to merge Dish's satellite operations with AT&T's DirecTV.

AT&T officials want to do a deal to pay down the massive debt the company holds following a deal spree that included the $85 billion purchase of Time Warner, but they’re said to be wary of negotiating with Ergen given his track record on various issues including this latest FCC dust-up.

"This Northstar deal was typical Charlie Ergen," the telecom executives said. "He likes to gamble but this time he lost."

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