Analysts: Dish could lay out wireless options at investor meeting

Dish Network (NASDAQ: DISH) is holding an impromptu meeting with financial analysts Tuesday and could lay out its plans for its wireless spectrum, according to Wall Street firm New Street Research.

In a research note, New Street analysts Jonathan Chaplin, Spencer Kurn and Vivek Stalam noted that Dish CEO Charlie Ergen is likely calling the meeting to get investors to think about the value of the company differently. Dish has kept the market guessing for a while now on what it plans to do with its trove of spectrum. The New Street analysts think Dish has three main options: start a wholesale wireless business and sell capacity to other carriers; sell the airwaves; or buy a wireless carrier.

A Dish spokesman did not immediately respond to a request for comment.

"Ergen believes his equity is undervalued (as we do); we assume he has a message for investors that he hopes will get them to value his assets differently," the analysts wrote. "The two areas he could focus on are spectrum and Sling. Spectrum is the asset that is most undervalued; however, we are not sure what he will be able to say on this beyond laying out the options. We doubt that he will commit to a specific course of action and, if he did, he would undoubtedly leave himself with the flexibility to change course if another more valuable option materialized. He could announce his intention to move the spectrum to a separate corporate entity that might make a sale or a wholesale model easier; however, this wouldn't preclude an acquisition either (all options would remain open)."

Dish already 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.

The New Street analysts note that they think demand for wireless capacity will grow indefinitely, that supply is limited and Dish controls "one of the largest reservoirs of marginal supply." The analysts are "relatively indifferent between the three options. We think a wholesale model could be worth the most; however, it would come with execution risk and take time such that we would be content with a sale. We are least excited about an acquisition; however even this should lead to significant upside from here."

Some analysts, including those at Macquarie Capital, have speculated that a deal between T-Mobile US (NYSE:TMUS) and Dish is the most likely option for T-Mobile to strike in the near term. Ergen has repeatedly praised T-Mobile's management team.

Importantly, according to New Street, the three categories of options that they think Dish has "are not mutually exclusive."

"In fact, the best option may be a hybrid of two of these categories," they write. "For instance: DISH could acquire TMUS but still launch a wholesale capacity business with excess capacity. Or better still, they could do this with Sprint, effectively cornering the market in marginal capacity. We think Verizon needs significant additional spectrum urgently; however, instead of selling to Verizon, DISH could partner with Verizon such that they get access to Verizon's network and Verizon is an anchor tenant for the wholesale business with a capacity guarantee at a predetermined price; or, DISH could sell some spectrum to VZ to help fund a TMUS acquisition."

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