Analysts: Dish execs say wireless options, including wholesale or partnership, are not mutually exclusive

Dish Network (NASDAQ: DISH) is keeping all of its wireless options open and does not think that its potential choices are mutually exclusive, meaning Dish might both launch a wholesale wireless network and acquire a partner, according to financial analysts.

Yesterday Dish hosted a meeting with financial analysts and investors to discuss its wireless options as well as its Sling TV service, according to research notes from the analysts. Present at the meeting were Dish Network CEO Charlie Ergen; Tom Cullen, Dish's executive vice president of corporate development; Roger Lynch, CEO of Sling TV; and Jason Kiser, vice president and treasurer.

As usual, according to a research note from Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata, Ergen kept his options open. He noted, as he as many times before, that Dish can "partner, sell spectrum, be an acquirer, or move to a wholesale model."

Dish controls 40 MHz of mid-band AWS-4 spectrum in the 2 GHz band and 10 MHz of 1900 PCS H Block spectrum. Dish's designated entity partners won 25 MHz of spectrum in the FCC's recent AWS-3 auction, though the FCC has not yet awarded those companies the spectrum licenses.

"Given the spectrum depth, the options are not mutually exclusive and Dish is solely focused on economics and where it can achieve the best return," the Jefferies analysts wrote. "Given the need for service consistency, Dish appears to favor partnering or acquiring where build out costs would be significantly better (or de minimis), with network wholesale a viable option."

According to the Jefferies analysts, Dish's management sees no particular need to own the network, and thinks others could likely run it better. The wholesale option of selling capacity to others "is desirable given the company's spectrum position with no legacy technology exposure."

Dish is also unlikely to spin off its spectrum assets into a different company. "While some have speculated about a possible spectrum spin-off, management believes the best way to maximize spectrum value is to maintain the current corporate structure, for now," the Jefferies analysts added.  

Dish's AWS-4 spectrum licenses require that it build out a network covering 40 percent of the population served by its nationwide AWS-4 holdings by 2017. Dish has until the end of 2020 to cover 70 percent of the population.

Interestingly, the Jefferies analysts wrote that "the timing of any build could coincide with 5G deployments, which should bring further efficiencies, lower latency and better performance." The first commercial 5G networks are expected to be deployed around 2020. "Mr. Ergen is confident the appropriate opportunity will present itself (between now and 2020) and indicated there is no urgency to act," they added.

Evercore ISI analysts Jonathan Schildkraut and Justin Ages wrote in a research note that in addition to not seeing its wireless options as mutually exclusive, and noting that Ergen said there is no urgency to act, "we believe Dish continues to progress toward determining a proper path forward."

"In each scenario described, Dish would likely leverage existing infrastructure to establishing a network (i.e., a ground up network build is not going to happen)," they added.

The Evercore analysts think Dish is more likely to strike a deal with T-Mobile US (NYSE:TMUS) than with Sprint (NYSE: S), though Dish wants to see T-Mobile keep expanding its network coverage. Dish tried in 2013 to acquire Sprint but lost out to SoftBank, with the chief prize being Sprint's trove of 2.5 GHz spectrum.

"In describing the arrangement that almost came to pass, Mr. Ergen highlighted a difference in opinion as to the opportunities around 2.5 GHz spectrum (Dish thought less of the 2.5 GHz spectrum than S) as well as lack of clear network plan from S," the analysts wrote. "In discussing TMUS, Mr. Ergen highlighted that company's simpler network design, more common spectrum bands, and already dense network ('it's dense where it exists, but needs to exist in more places')."

Dish sees its over-the-top Sling TV video service as the first step  its wireless plans, "providing video via the cloud while addressing key customer pain points, including contracts and lengthy installs, while satisfying consumer thirst for video whenever and wherever they want," the Jefferies analysts noted. Looking to the future, Dish's "management sees significant opportunity for dynamic ad insertion, leveraging data available via social media and other sources," they added.

The Evercore analysts said although Dish made an effort to distinguish Sling TV from Verizon Wireless' (NYSE: VZ) forthcoming OTT video service (with Sling TV being a streaming service of live and library content compared to what they view as Verizon's offering a more traditional broadcast model using LTE), there are actually more similarities than differences. That's because of the collection of assets that Verizon has amassed, including content delivery network, EdgeCast Networks, the OnCue interactive TV platform from Intel and now AOL's advertising technology. The two offerings also have "a focus on allowing customers to choose a narrower selection of content" and an "emphasis on longer-term advertising support."

"In our view, both packages support a vision of moving more of what has traditionally been delivered over wireline networks to wireless networks," they added.

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