Dish Network 2015 Annual Report Download - page 157

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-53
Letters Exchanged between SNR Wireless and the FCC Wireless Bureau. As outlined in letters exchanged between
SNR Wireless and the FCC Wireless Bureau, SNR Wireless paid the gross winning bid amounts for 244 AWS-3
Licenses (the “SNR Licenses”) totaling approximately $4.271 billion through the application of funds already on
deposit with the FCC and a portion of an additional loan from American III in an aggregate amount of
approximately $344 million (which included an additional bid withdrawal payment of approximately $3 million).
SNR Wireless also notified the FCC that it would not be paying the gross winning bid amounts for 113 AWS-3
Licenses totaling approximately $1.211 billion.
As a result of the nonpayment of those gross winning bid amounts, the FCC retained those licenses and SNR
Wireless owed the FCC an additional interim payment of approximately $182 million (the “SNR Interim Payment”),
which is equal to 15% of $1.211 billion. The SNR Interim Payment is recorded in “FCC auction expense” on our
Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2015.
SNR Wireless immediately satisfied the SNR Interim Payment through a portion of an additional loan from
American III in an aggregate amount of approximately $344 million. As a result, the FCC will not deem SNR
Wireless to be a “current defaulter” under applicable FCC rules.
In addition, the FCC Wireless Bureau acknowledged that SNR Wireless’ nonpayment of those gross winning bid
amounts does not constitute action involving gross misconduct, misrepresentation or bad faith. Therefore, the FCC
concluded that such nonpayment will not affect the eligibility of SNR Wireless, its investors (including DISH
Network) or their respective affiliates to participate in future spectrum auctions (including Auction 1000 and any re-
auction of the AWS-3 Licenses retained by the FCC). At this time, DISH Network (through itself, a subsidiary or
another entity in which it may hold a direct or indirect interest) expects to participate in any re-auction of those
AWS-3 Licenses.
If the winning bids from re-auction or other award of the AWS-3 Licenses retained by the FCC are greater than or
equal to the winning bids of SNR Wireless, no additional amounts will be owed to the FCC. However, if those
winning bids are less than the winning bids of SNR Wireless, then SNR Wireless will be responsible for the
difference less any overpayment of the SNR Interim Payment (which will be recalculated as 15% of the winning
bids from re-auction or other award) (the “SNR Re-Auction Payment”). For example, if the winning bids in a re-
auction are $1, the SNR Re-Auction Payment would be approximately $1.029 billion, which is calculated as the
difference between $1.211 billion (the SNR winning bid amounts) and $1 (the winning bids from re-auction) less the
resulting $182 million overpayment of the SNR Interim Payment. As discussed above, at this time, DISH Network
(through itself, a subsidiary or another entity in which it may hold a direct or indirect interest) expects to participate
in any re-auction. We cannot predict with any degree of certainty the timing or outcome of any re-auction or the
amount of any SNR Re-Auction Payment.
Amendment to SNR Wireless Credit Agreement. On October 1, 2015, American III, SNR Wireless and SNR HoldCo
amended the First Amended and Restated Credit Agreement dated October 13, 2014, by and among American III, as
Lender, SNR Wireless, as Borrower, and SNR HoldCo, as Guarantor (as amended, the “SNR Credit Agreement”), to
provide, among other things, that: (i) the SNR Interim Payment and any SNR Re-Auction Payment will be made by
American III directly to the FCC and will be deemed as loans under the SNR Credit Agreement; (ii) the FCC is a
third-party beneficiary with respect to American III’s obligation to pay the SNR Interim Payment and any SNR Re-
Auction Payment; (iii) in the event that the winning bids from re-auction or other award of the AWS-3 Licenses
retained by the FCC are less than the winning bids of SNR Wireless, the purchaser, assignee or transferee of any
AWS-3 Licenses from SNR Wireless is obligated to pay its pro-rata share of the difference (and SNR Wireless
remains jointly and severally liable for such pro-rata share); and (iv) during the period between the due date for the
payments guaranteed under the FCC SNR Guaranty (as discussed below) and the date such guaranteed payments are
paid, SNR Wireless’ payment obligations to American III under the SNR Credit Agreement will be subordinated to
such guaranteed payments.
DISH Network Guaranty in Favor of the FCC for Certain SNR Wireless Obligations. On October 1, 2015, DISH
Network entered into a guaranty in favor of the FCC (the “FCC SNR Guaranty,”) with respect to the SNR Interim
Payment (which was satisfied on October 1, 2015) and any SNR Re-Auction Payment. The FCC SNR Guaranty
provides, among other things, that during the period between the due date for the payments guaranteed under the