AT&T's (NYSE: T) announcement that it will buy DirecTV (NASDAQ: DTV) in a $49 billion deal leaves Dish Network (NASDAQ: DISH) once again without a potential partner or suitor. However, analysts say the deal could be what pushes Dish and its Chairman Charlie Ergen to find a long-term wireless partner.
Dish controls more than 50 MHz of spectrum, including 40 MHz in the AWS-4 band and 10 MHz of the 1900 MHz PCS H Block, part of which is adjacent to AWS-4. Many analysts and investors had speculated that Dish could be a takeover target for either AT&T or Verizon (NYSE: VZ), though AT&T is obviously out now. Speaking in the context of the billions of dollars Dish has spent to acquire spectrum, Ergen said earlier this month "we're ready to harvest our investments."
Yet with speculation building that Sprint (NYSE: S) will try to merge with T-Mobile US (NYSE:TMUS), and Ergen noting that Dish would not try to outbid Sprint, the question returns to what Dish will do with all of its spectrum. By the end of 2016 Dish must cover at least 40 percent of the population in areas covered by its AWS-4 spectrum with a wireless network or face penalties.
Ergen recently outlined the company's strategic options on Dish's first-quarter earnings conference call--and said he felt good about them. Ergen said it was unlikely, but a possibility, that Dish could build out its wireless network itself. However, as he has in the past, he said he remains open to selling Dish, merging with another company or partnering with another firm.
"We have to be well-positioned so that no matter what happens it's all good for us, and I think we're there," he said. He also said that if "Sprint didn't proceed or was denied, then T-Mobile would have strategic interest to us, yes."
"On the one hand this is a negative for Dish because it takes the two most likely merger partners off the table," New Street Research analyst Jonathan Chaplin wrote in a research note, referring to AT&T and DirecTV. On the other hand, he wrote, Dish's spectrum, which also includes some 700 MHz airwaves, could be worth as much as $29 billion. He also wrote there "are still potential merger partners in Verizon (most likely), TMUS and Sprint."
Credit Suisse analysts Joseph Mastrogiovanni and Michael Baresich wrote in a research note that they would be surprised if Ergen "sat on the sideline for long." They speculated that even though Ergen said Dish could not compete with AT&T for DirecTV, he could try and it might at the very least force AT&T to make a higher offer.
The Credit Suisse analysts also wrote that Dish could "look to acquire T-Mobile or partner with T-Mobile or Sprint to build a wireless network. This deal could be a catalyst that causes Dish to act sooner rather than later. Furthermore, discussions with T-Mobile could push Sprint into making a move sooner rather than later."
Dish is also working with Sprint on a trial of fixed TD-LTE service in Corpus, Christi, Texas. The companies have said that service will be available in the middle of 2014, but have not provided a more specific timeline than that. Sprint CFO Joe Euteneuer said at an investor conference Monday that the companies are continuing to work on the deployment to get it ready for operation, but he declined to say more than that.
- see this WSJ article (sub. req.)
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H Block auction ends at $1.564B, with Dish Network as likely winner
Sprint, Dish to launch trial of fixed TD-LTE service on 2.5 GHz in mid-2014