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Share Price: 75.62
Bid: 75.58
Ask: 75.62
Change: 0.84 (1.12%)
Spread: 0.04 (0.053%)
Open: 74.90
High: 75.90
Low: 74.52
Prev. Close: 74.78
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NEWSMAKER-Ergen plays wireless hand with bet on Clearwire

Wed, 09th Jan 2013 07:30

By Liana B. Baker Jan 8 (Reuters) - Satellite mogul Charlie Ergen, thebillionaire founder and chairman of Dish Network andEchoStar, has cemented his reputation as a wild cardwith a surprise $2 billion-plus bid for Clearwire as part of hispush into the wireless industry. The former professional card player, who made his fortuneafter starting out selling satellite dishes door-to-door, hasspent more than $3 billion on wireless spectrum assets in thepast few years in a bid to diversify Dish Network beyondsatellite pay-television. Ergen's latest bet counts as his boldest yet to become aplayer in the wireless space and sets the stage for a battlewith rival Sprint Nextel for Clearwire Corp. At the Consumer Electronics Show in Las Vegas this week,Ergen joked with trade show attendees around the Dish booth, andwas polite and friendly - a persona in stark contrast to hisusual hard-charging approach. As the 59-year-old pressed the flesh, his company was makingan unsolicited $2.28 billion bid for Clearwire, trumpingSprint's $2.2 billion offer. Ergen has been raising eyebrows in the past few years bymaking acquisitions that do not seem core to his company'sassets, which are concentrated heavily in pay TV. He foundedDish Network in 1980 as part of a company then called EchoStar,after selling satellite dishes from the back of a truck with hiswife Cantey. Today, he is one of the country's richest people with a networth of at least $9 billion and controls the No. 2 U.S.satellite provider with 14 million subscribers. But aftertelling investor conference calls that the pay TV industry hasmatured, he has looked to diversify and bought video chainBlockbuster and companies with wireless spectrum such as DBSDand TerreStar in 2011. "Like most visionaries he's a little different," said DishCEO Joe Clayton on Tuesday, who has known Ergen for more than 20years. "The boy can see around corners." In the wireless space, "I would watch him closely becauseCharlie is always a disrupter," Clayton added. "I'd payattention." Analysts speculated that Dish's wireless bid for Clearwireis a power play meant to spark a bidding war with Sprint. "If he doesn't get it, the worst is, he increases the pricefor Sprint. It's a classic Charlie Ergen move," said WunderlichSecurities analyst Matthew Harrigan. Brean Capital analyst Todd Mitchell agreed that it is atypical business tactic Ergen employs, similar to how heinvested in distressed debt of DBSD and TerreStar. "I think it's a stalking horse bid and the reason why it's aclassic move is because it's a hedge bet. His chief goal is notto get it," Mitchell said. Ergen may also be trying to hurt Sprint, which itsquared off against at the FCC late last year. Dish saidSprint's opposition to some of its spectrum plans impeded Dish'snetwork building. "At least part of this may be payback for Sprint's meddlingin the (FCC) proceeding," said Tim Farrar, a telecom analyst atTMF Associates. Farrar added that Dish's bid could be adding fuel to thefire over Crest's objections to Sprint's bid for Clearwire.Crest, one of the largest Clearwire shareholders, has said itmay file a complaint with the FCC over Sprint not paying fullvalue for Clearwire. "It does give Crest a lot more to work with in its courtfight," Farrar said. WIRELESS DREAM Harrigan, the Wunderlich analyst who follows Dish, said thatErgen becoming a wireless player carries a "very high risk,"with challenges ranging from competing against establishedincumbents like Verizon and AT&T and getting access tocell towers. Ergen stepped back from his day-to-day running of Dish inMay 2011 to focus on the company's wireless strategy. He spentthe past year lobbying the U.S. Federal CommunicationsCommission to let Dish use the wireless assets it acquired. To investors, he has been vague about his wireless bets. InMay 2011, he insisted he was employing a "Seinfeld strategy", ora plan that does not seem to make sense at first but comestogether later. He owns more than 50 percent of both Dish and EchoStar, theset-top box maker he spun out in 2008, and has voting control ofboth, which makes him less beholden to shareholders asexecutives at other Pay TV companies. While the FCC finally rewarded his efforts by approvingDish's plans in December to build a wireless network, Ergen isstill a newcomer to the telecoms industry, which is dominated byincumbents. But at CES, even the telecom heavyweights werebuzzing about Ergen. Verizon CEO Lowell McAdam called him a "smart guy". When T-Mobile USA CEO John Legere was asked whether hiscompany was interested in a potential relationship with Dish,Legere told Reuters, "the answer is obviously yes. They'd beinteresting for us to talk to and we'd be fascinating for them." Risk-taking seems almost natural for Ergen. He has often recounted about how there was a 50-50 chancehis company's first satellite would fail when launched intospace on a Chinese rocket in the 1990s. The satellite launchsucceeded and Dish went on to generate $14 billion in revenue ayear. A FIGHTER A looming takeover battle for Clearwire is no stretch forErgen, who has appeared in many highly public spats withcompanies and has taken his fights to courts across the country. Ergen testified in a New York Court in October as part of abreach of contract case with Cablevision over a failedjoint venture called Voom. But on the same day he was scheduledto take the stand, Dish paid Cablevision $700 million to settlethe suit. In May 2011, Dish paid $500 million to settle a patentinfringement lawsuit with TiVo that had dragged on forabout eight years. Ergen provoked a lawsuit by all the major U.S. broadcasterslast year for introducing a digital video recorder called theHopper that has a feature that lets Dish subscribersautomatically skip commercials and threatens the broadcasters'revenue. Analysts say Ergen loves leverage, or getting the upper handover other companies, which may be the reason he finds himselfin so many corporate battles. "This is the Dish way," Mitchell, the Brean Capital analystsaid. "Anytime they get a moment of leverage, they'll think 'letme get you for cheaper,' and will start negotiating." Still, despite the uncertainty of Dish becoming a wirelessplayer, investors seem to believe in Ergen's bid to move Dishaway from its pay TV roots. Shares are up 26 percent since Dec.30, 2011 while EchoStar shares are up 65 percent in the sameperiod. A day before Dish's bid for Clearwire became public, Ergenwas entertaining people at the Venetian casino in Las Vegaswhere Dish had just held a press conference. Asked if he was going to hit the poker table to take awhirl at his old profession, Ergen said no and joked, "meplaying poker would be a gamble."
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