Dish Network, reportedly at the center of talks about creating a fourth carrier amid the T-Mobile/Sprint negotiations, is generally in a win-win situation—deal or no deal, according to Cowen analysts.
In a note to investors on Tuesday, the Cowen team, led by analyst Gregory Williams, said Dish is sitting on a “treasure trove” of wireless spectrum estimated to be worth $33 billion.
The analysts believe the spectrum is worth far more than what’s implied in the stock price today. Dish’s shares, trading around $40, have risen about 60% since the beginning of this year. Shares are up about 14% since the "fourth carrier" news broke.
Last month, reports surfaced that Dish was nearing a deal to pay $6 billion for T-Mobile and Sprint assets, including spectrum and wireless prepaid brand Boost Mobile. Other names like Amazon and Google (which denied it) have been floated as potentially in the mix, but Dish has consistently stayed in the headlines, either as partnering with a bigger brand or someone else.
Dish founder and Chairman Charlie Ergen left his position as CEO in 2017 to focus efforts on various ways to best monetize Dish’s spectrum assets. Dish has spent roughly $20 billion over the past decade amassing a significant spectrum portfolio stretching from 600 MHz to AWS-4.
The company owns roughly 95 MHz of low- and mid-band spectrum, according to Cowen. Last year, the company discussed how it was building out a NB-IoT network and lining up vendors after years of speculation about which wireless carriers were most likely to buy spectrum from Dish. That speculation continues.
“Dish has put itself in a win-win situation,” the Cowen analysts said Tuesday. “That is, either Dish demands and receives a sweetheart deal (including concession with the FCC on the shot clock and AWS-3 discount dispute) or it walks away. If the deal were to break, both T-Mobile and Verizon could end up paying up for spectrum, turning to the Dish portfolio.”
The Cowen report also notes that media reports suggest that T-Mobile and majority owner Deutsche Telekom (DT) are seeking to limit any operational partner to a 5% stake in Dish to dampen the threat of a deep-pocketed disruptor such as Amazon or Google.
“We believe the 5% stake is too low and likely a deal breaker,” the analysts wrote. “If Dish were to build a $7-$10 billion national wireless network (over ~3 years), lacking the expertise, wrought with operational risk, only then to compete with a long-standing oligarchy of three incumbent carriers, Dish will need a partner to defray the operation/financial risks and subsequently need a larger commitment than 5%. A deal with multiple operational partners is not out of the question.”
As to why Amazon and/or Google would be interested, “we believe the primary interest in doing so would likely be tied to 5G/Enterprise IoT, and only limited interest in going after the legacy phone market.”
Although media reports have Boost Mobile going to Dish as part of these talks—despite Dish having no track record in the prepaid market—the interest on the part of Amazon or Google is most likely in the wholesale agreement aspect versus Boost subscribers, although it would take both, Cowen said. Much like Amazon/Google wholesales the cloud today, it could wholesale the wireless IoT network for an endpoint-to-cloud wholesale solution.
Some industry analysts have questioned the government’s intense focus on the competitiveness of the U.S. wireless industry if it goes from four to three, while others suggest the "four to three" situation should be decided without executing the merger.
Alex Gellman, CEO of Vertical Bridge, which bills itself as the largest private owner of towers in the U.S., said in a recent interview that he believes the merger should go through.
“If you believe that 5G is the next industrial revolution and that it’s critical for the U.S. to lead, this is a necessary step,” he said, noting that a lot of players, including Dish and the cable companies, have a lot of spectrum or access to it if they want it.
“The bottom line is in my view is a fourth carrier is going to emerge if the market needs it,” he said. “The fourth carrier we have isn’t viable. It’s better to let them merge into a third carrier and make a true competitor for Verizon and AT&T. I don’t think the government needs to over-steer on this.”
Cowen and other analysts have noted that media reports suggest the Dish negotiations could take another two to three weeks to complete. Meanwhile, states that are suing to block the deal may seek to delay a trial if a full deal is not announced by July 12, according to New Street Research analysts. A trial has been scheduled to start in October.