Dish Network 2011 Annual Report Download - page 142

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-48
During the first half of 2011, we entered into a transaction to acquire 100% of the equity of reorganized DBSD North
America for approximately $1.4 billion upon DBSD North America’s emergence from bankruptcy, which included
capital stock and convertible securities of, and certain claims related to, DBSD North America. In addition, in June
2011, we entered into the TerreStar Transaction for a purchase price of $1.375 billion. We have paid all but $30 million
of the purchase price for the TerreStar Transaction (included in the table above), which will be paid upon closing of the
TerreStar Transaction, or upon certain other conditions being met under the asset purchase agreement. Additionally,
during the fourth quarter 2011, we and Sprint entered into the Sprint Settlement Agreement pursuant to which all
disputed issues relating to our acquisition of DBSD North America and the TerreStar Transaction were resolved between
us and Sprint, including, but not limited to, issues relating to costs allegedly incurred by Sprint to relocate users from the
spectrum now licensed to DBSD North America and TerreStar. Pursuant to the Sprint Settlement Agreement, we made
a net payment of approximately $114 million to Sprint. Our ultimate acquisition of 100% of the equity of reorganized
DBSD North America and consummation of the TerreStar Transaction are subject to certain conditions, including
approval by the FCC.
Under our agreements to acquire DBSD North America and purchase TerreStar’s assets, we paid substantially all of the
purchase price for both transactions prior to the receipt of certain regulatory approvals (the FCC with respect to DBSD
North America, and the FCC and Industry Canada with respect to TerreStar). On February 7, 2012, Industry Canada
approved the transfer of the Canadian spectrum licenses held by TerreStar to us. If the remaining required approvals are
not obtained, subject to certain exceptions, we have the right to require and direct the sale of some or all of the assets of
the relevant company to a third party and we would be entitled to the proceeds from such a sale. These proceeds could,
however, be substantially less than amounts we have paid in the respective transactions.
In addition, our consolidated FCC applications for approval of the license transfers from DBSD North America and
TerreStar were accompanied by requests for waiver of the integrated service requirement, the spare satellite requirement
and various technical provisions. Waiver of the integrated service requirement would allow DISH to offer single-mode
terrestrial terminals to customers who do not desire satellite functionality. The spectrum licenses currently held by
DBSD North America and TerreStar do not include a waiver of this integrated service requirement. Our integrated
service requirement waiver request has been opposed by certain parties, and there can be no assurance that the FCC will
approve it. If our FCC applications and waiver requests are not granted by the FCC, or are granted in a manner that
varies from the form we have requested, it could cause the value of these assets to be impaired, potentially requiring us
to take significant write-downs on these assets. We assess potential impairments to these assets annually, or more often
if indicators of impairment arise, to determine whether an impairment condition may exist. We use a probability
weighted analysis considering estimated future cash flows discounted at a rate commensurate with the risk involved and
market based data to assess potential impairments.
To the extent we receive these approvals and waivers, there can be no assurance that we will be able to develop and
implement a business model that will realize a return on these spectrum investments or that we will be able to profitably
deploy the assets represented by these spectrum investments. We will likely be required to make significant additional
investments or partner with others to commercialize these licenses. Because we have not received approval from the
FCC, we do not yet know the full costs (including any build-out requirements) associated with complying with
regulations applicable to our acquisition of DBSD North America or the TerreStar Transaction. Depending on the
nature and scope of such commercialization and build-out, any such investment or partnership could vary significantly,
which may affect the carrying value of our investments and our future financial condition or results of operations.