February 06, 2013, 2:24 PM — If that computer company he's buying doesn't work out, Michael Dell has another bet going: TV stations.
The PC pioneer, who launched a bid on Tuesday to buy back the company that bears his name, made another acquisition last month that was just the latest in a string of such deals. OTA Broadcasting, a subsidiary of Dell's private investment company MSD Capital, agreed on Jan. 15 to buy WYCN, an independent TV station in rural Nashua, New Hampshire.
Michael Dell probably isn't planning to become a local news, sports and weather mogul, industry analysts said. Instead, he's one of many investors buying up TV stations for their spectrum licenses, which could be worth far more to mobile operators than they are to broadcasters. A law passed last year called for auctioning those licenses for mobile use.
Through OTA, Dell has been snapping up stations around the country over the past few years. The company, based in Washington, D.C., now owns at least five stations, including two in the Seattle area, one near San Francisco and one in New York City. Other TV deals, including the US$4.1 million WYCN acquisition and a station purchase in Providence, Rhode Island, are moving toward approval. MSD Capital does not comment on its investments, spokesman Todd Fogarty said.
Dell probably sees a pot of gold in these stations' spectrum licenses, and if so, he has a sharp eye, according to mobile industry analysts. Under the FCC's so-called incentive auction process, holders of TV licenses will be able to put them up for sale and recover a portion of the proceeds. The government would bundle that spectrum into chunks big enough for mobile carriers to buy and use. The rules of the program are complex and not yet finished, but it's clear that auctions will take place eventually, analysts said.
With the rising demand for cellular data capacity, mobile operators may pay much more for those licenses than they are worth for broadcasting, observers say.
"Michael Dell and quite a few of the smart private equity guys are buying up TV stations for the spectrum value," said Roger Entner of Recon Analytics.
For the auctions to work, broadcasters in the biggest cities will have to put their licenses up for sale, Entner said. Mobile carriers will want spectrum in those big markets first, because that's where they need more capacity to serve subscribers. "We don't have a spectrum shortage in Wyoming. We have an imminent crisis in New York, in San Francisco" and in other major cities, he said.