Analysts cautious of talk about a Dish-Amazon tie-up

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Amazon is far from the only potential candidate for a wireless play with Dish, analysts noted.

A wireless partnership between Dish Network and Amazon makes sense on multiple levels, but analysts don’t expect the companies to rush to the altar any time soon.

Reports surfaced Thursday that the satellite TV company and the online retail pioneer were discussing potential arrangements as a way to take on incumbent service providers as well as cable companies that have begun to enter the wireless space. Possible models include Amazon helping to fund Dish’s buildout of the IoT-focused network it is considering, or Dish offering mobile services to Amazon Prime users for an additional fee.

Speculation of a Dish tie-up with a carrier—or a would-be carrier—has heated up in recent months due primarily to its significant portfolio of spectrum assets. Dish is sitting on a pile of mid-band airwaves and spent $6.2 billion on 486 licenses in the recent incentive auction of 600 MHz spectrum, far exceeding the expectations of most analysts.

But the clock is ticking for Dish to put its airwaves to use one way or another because of the FCC’s buildout mandates, and in March the company announced plans to build a narrowband IoT (NB-IoT) network.

Meanwhile, Amazon has tinkered with several wireless initiatives but has yet to jump headlong into the market. The company’s ad-subsidized Blue Products R1 HD phone appeared to be a modest hit last year—in contrast to 2014’s Fire phone, which was an unmitigated flop—and earlier this year it applied to the FCC for Special Temporary Authority status to conduct tests using prototype equipment and spectrum frequencies including parts of the 700, 800 and 1900 MHz bands.

But while Amazon is the larger company by far—its market cap is $466 billion compared to Dish’s $30 billion—a straight-up acquisition likely isn’t in the cards, according to Kannan Venkateshwar of Barclays.

“We would be very surprised if Amazon decided to buy Dish outright instead of partnering in some other form,” Venkateshwar wrote in a note to investors. “An outright purchase would bring Amazon within the purview of the FCC, something internet companies would want to avoid for multiple reasons, in our opinion. Additionally, assuming the Whole Foods Market acquisition goes through, Amazon’s net cash position and heavy capex requirements for AWS/retail would likely limit any transaction of this size.”

Dish has been at the center of a flurry of M&A speculation in recent years, of course, but it has failed to pull the trigger on any major wireless deal, independent tech analyst Jeff Kagan told S&P Global Market Intelligence.

“I expected them to do a partnership with someone (by now), whether it was Verizon or CenturyLink or any of the wireless providers,” Kagan said. “A couple years have gone by and now we’re looking at them again and wondering what’s next for them. I don’t know for sure—I don’t think anybody does.”

And Amazon is far from the only good fit for Dish, as Venkateshwar noted. Nearly every carrier would love to leverage Dish’s spectrum, and AT&T could be a particularly good fit by combining the company with its DirecTV business. Meanwhile, cable companies and other newcomers could leverage its airwaves to offer their own services.

“Beyond this, we believe the biggest hurdle to a transaction with Dish in the past has been the bid-ask,” Venkateshwar wrote. “At this point in time, even Dish is likely to have the build-out clock at the back of its mind, which might ease the path to a deal of some kind.”