Dish Settles with Cablevision, AMC Networks, Gains MVDDS Licenses

Dish will pay Cablevision and AMC Networks $700 million -- including $80 million for the MVDDS licenses -- to settle a long-running breach of contract suit for far less than the $2.5 billion that had been sought for the satellite service operator’s dropping Voom HD four years ago. In addition, the agreement restored the AMC Channel effective Sunday to Dish Network, potentially with an increased affiliate fee or annual payment to offset the seemingly low settlement, Bernstein Research analyst Craig Moffett said. AMC’s Independent Film Channel, Sundance and WE channels will return to Dish Nov. 1. Cablevision will get $390 million and AMC $310 million, Moffett said. A trial in the case had been under way in U.S. District Court, New York City, before Judge Richard Lowe adjourned it last week for settlement discussions, analysts said.

The agreement ends a costly legal battle for Dish, which was sued by Cablevision in 2008 after it dropped Voom channels, ending a 15-year distribution pact signed three years earlier. It also gives Dish control of MVDDS licenses covering 80 percent of the U.S. population, which it had sought since South.com, which was 49 percent-owned by EchoStar, paid $39 million in 2004 in an FCC auction for spectrum in Atlanta, Boston, Dallas-Ft. Worth, Detroit and Washington.

While MVDDS licenses are too high a frequency -- 12.2 to 12.7 GHz - for mobile communications services, they are suited for fixed wireless and mobile backhaul, analysts said. Cablevision introduced an MVDDS service in Florida earlier this year under the Clearband brand that offered 50 Mbps/3 Mbps downstream/upstream service for $29.95 monthly plus a $10 monthly charge for equipment. But Dish would appear more likely to use the spectrum for the wireless network it’s trying to stitch together, analysts said. Dish has spent $3 billion to acquire 40 MHz of wireless spectrum, buying the assets of TerreStar and DBSD. It also bought 700 MHz licenses in 2008 for $712 million. Dish has sought a waiver of satellite rules from the FCC that would allow it to operate the wireless service in the 2 GHz band. As a condition of its approval, the FCC has sought a 5 MHz upward shift at 2000-2020 MHz. An FCC decision is pending.

"The inclusion of the MVDDS licenses is perhaps the most interesting part of this deal and speaks unambiguously to Dish’s desire to follow through on building out a network,” Moffett said. “In essence, these licenses represent support infrastructure that would backup the better known S-band spectrum that would be used to transmit signals between users and cell sites."

Dish could use MVDDS spectrum in urban areas for microwave backhaul, he said. Provisioning for wired backhaul is typically difficult in urban areas and the MVDDS also could be deployed in regions where leasing ILEC or cable backhaul is too expensive, Moffett said. The MVDDS licenses require that “substantial service” be provided by September 2014.

The agreement restores advertising and subscriber revenue for AMC after a nearly four-month hiatus from Dish and could provide a $200 million one-time after-tax cash benefit for the programmer, BTIG analyst Richard Greenfield said. With the addition of “surging” ratings on the AMC Channel, Greenfield raised his estimate for AMC’s fiscal 2013 EBITDA to $600.9 million from $578.8 million, while also the revenue projection to $1.45 billion from $1.42 billion. For 2012, Greenberg cut his EBITDA forecast to $500.2 million from $505.2 million in light of legal expense, while lowering the revenue forecast to $1.29 billion from $1.30 billion.