ENLARGE Billionaire Michael Dell[7] has been scooping up local TV stations across the country in recent years. Now, he stands to make as much as $4 billion from a government effort to buy back those airwaves.
In more than a dozen deals since 2011, a company controlled by Mr. Dell's investment fund has spent about $80 million on independent TV stations, according to government records.
The purchases include about $5 million for a Spanish-language broadcaster in Seattle and $7.25 million for a collection of Pittsburgh-area stations that aired a daily noon Mass from a local Catholic church and reruns of "Roseanne."
Those stations collectively broadcast over airwaves that could be valued at as much as $4.2 billion, based on prices recently set by the Federal Communications Commission. The agency is gearing up to run an auction to buy those airwaves, so they can be resold to wireless operators like AT&T[8] Inc. [9] later this year.
The most valuable license controlled by Mr. Dell's investment arm is from a former Korean station in New York. The computer mogul's representatives bought the station in March 2012 for $6.6 million. The FCC's opening bid for that license is $377 million.
Mr. Dell is unlikely to walk away with the opening bids for his stations because of how the FCC auction will be run. The agency will start by offering top dollar and then lower its offers, in a process similar to a Dutch auction, until it gets the cheapest price for the airwaves it needs. The process was designed to spark participation from more than 2,000 eligible broadcasters. The final prices paid are expected to be much lower and many stations that join may not be purchased at all.
Tuesday was the application deadline for participating in the auction. Some big owners of local stations decided to jump in, including CBS[10] Corp. [11], Comcast[12] Corp. [13]'s NBCUniversal unit and Univision Holdings Inc. These companies can opt to sell some airwaves but continue to broadcast by moving their channels or sharing frequencies. Others like a Lansing, Mich., PBS station chose not to join the auction, despite the potential for huge returns.
ENLARGE Mr. Dell, who took his namesake computer company private in 2013 for $25 billion, isn't the only spectrum speculator. Investors including Fortress Investment Group[14] [15] LLC and Blackstone Group[16] [17] LP also have purchased stations, seeking to cash in on the surging values for spectrum. An FCC auction of airwaves last year drew nearly $45 billion in bids, more than double the amount analysts expected.
Mr. Dell's investment arm, MSD Capital LP, created OTA Broadcasting LLC in 2011. Its mission, says its website, is to own and operate independent TV stations in large markets around the country.
OTA declined to comment and a representative for Mr. Dell declined to make him available for comment.
The first stations OTA purchased, in mid-2011, were a San Francisco station with Asian programming and a Seattle broadcaster affiliated with Spanish-language Azteca America, both for less than $10 million.
In late 2012, OTA approached Pittsburgh station owner Ron Bruno to buy his local station and its affiliates, which control 11 spectrum licenses. Having spent 30 years building his portfolio of local stations, Mr. Bruno said the realities of the business made him open to selling.
"It felt at the time that it was a declining business and our sales showed it," he said. "It was the right time."
In May 2013, he sold to OTA for $7.25 million. The sale closed before any estimates of what stations could get out of the auction were released. At the time, the auction was highly uncertain, and the rules for it weren't set. Last year, the FCC set opening bids for those licenses at $1.5 billion.
"In retrospect, it might not have been the right decision," Mr. Bruno said. "Would I sell them today? No."
OTA was still acquiring new TV stations last year, convincing Amador Bustos to sell his family-oriented station in Lenoir, N.C.
Mr. Bustos, who runs a Portland, Ore.-based group of radio stations that broadcast in Russian, Spanish and Vietnamese, sold the Lenoir station after abandoning a push to expand into television, an effort he found costly and too far removed from his radio operations.
After lengthy negotiations, OTA paid $550,000 for the station, and Mr. Bustos accepted, saying it was three times the investment he made eight years earlier.
The FCC set a top price of $88 million for the license in the coming auction.
Mr. Bustos now concedes he may not have sold if he knew the potential payout. "At the time it was a fair price," he said. "It seems like OTA had a broader plan."
References
- ^ CANCEL (www.wsj.com)
- ^ Biography (topics.wsj.com)
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- ^ Thomas.Gryta@wsj.com (www.wsj.com)
- ^ 52 COMMENTS (www.wsj.com)
- ^ Michael Dell (topics.wsj.com)
- ^ AT&T (quotes.wsj.com)
- ^ T -0.47 % (quotes.wsj.com)
- ^ CBS (quotes.wsj.com)
- ^ CBS.A -3.62 %
(quotes.wsj.com) - ^ Comcast (quotes.wsj.com)
- ^ CMCSA -2.41 % (quotes.wsj.com)
- ^ Fortress Investment Group (quotes.wsj.com)
- ^ FIG -8.95 % (quotes.wsj.com)
- ^ Blackstone Group (quotes.wsj.com)
- ^ BX -2.86 % (quotes.wsj.com)
