WASHINGTON, Jan 30 (Reuters) - U.S. regulators will review a $3 billion discount claimed by Dish Network Corp and partners including investment management company BlackRock Inc during a U.S. government wireless spectrum auction that ended this week.
In a relatively common process for Federal Communications Commission auctions, Dish and partners invested in separate companies with little to no revenue that can receive a 25 percent discount in auction bidding.
The FCC will now scrutinize the details of legal and financial ties of those separate companies to Dish and other corporations, aiming to make sure the airwaves will be used to compete against Verizon Communications Inc, AT&T Inc and others instead of turning the winnings over to incumbents.
"From a Dish perspective, they just created $3.3 billion worth of value," said Jonathan Chaplin at New Street Research. "Now we will see if they get away with it or not."
The companies spent $13.3 billion at the auction but provisionally received a $3.3 billion discount, results showed on Friday. The government gives the discounts with the goal of helping new entrants to the industry better compete with incumbents.
The FCC has been leery of handing discounts to potential speculators or unknown entities unlawfully fronted by large corporations.
That does not mean that large companies cannot support small entities, but the key is what the winning bidder does with the acquired spectrum, that it improves competition in the industry, said S. Jenell Trigg, telecom lawyer at Lerman Senter PLLC.
"The objective to buying spectrum at auction is to provide service to the public," she said.
Speculation about Dish's sights for its amassing spectrum has ranged from potentially building a wireless network of its own to selling the licenses to Verizon, the largest U.S. wireless company.
Dish did not elaborate on its thinking, citing FCC's anti-collusion rules.
Analysts suggested that Dish's partner bidding surpassing that of Verizon lowered the chances of an immediate sale to the biggest wireless carrier. Such a sale within the first year would invalidate the discount, experts said.
FCC disclosures previously showed Dish and its chairman, Charlie Ergen, had indirect ownership in the partner entities that received the discount, Northstar Wireless LLC and SNR Wireless LicenseCo LLC.
Investment management company BlackRock had membership shares in SNR. Northstar's disclosures also showed direct and indirect ownership interest by Doyon Ltd, an Alaska Native corporation with numerous affiliates in various fields including oil and gas land drilling.
Financial firm Catalyst Investors has an indirect ownership interest in Northstar, disclosures show.
The FCC is also weighing whether to alter the bidding credits eligibility and other rules for its auction of highly coveted low-frequency airwaves planned for 2016.
Reporting by Alina Selyukh; Editing by Lisa Shumaker