'Dish would bring no benefit to Sprint whatsoever': MoffettNathanson

Dish Network satellite dishes on rooftop
Sprint parent SoftBank is reportedly eyeing a merger with Dish Network.

A rumored merger between Dish Network and Sprint might benefit the beleaguered satellite TV company, MoffettNathanson analysts wrote this morning. But it isn’t likely to happen, and it wouldn’t help Sprint at all.

Nikkei reported earlier this week that Sprint parent SoftBank was considering pursuing a merger between Dish, which has stated its intentions to leverage its spectrum holdings by building an NB-IoT network, and the U.S. carrier. That report is just the latest in a series of rumored deals that have Sprint tying up in some form with T-Mobile, Charter, Comcast or a combination of those three companies.

A marriage with Sprint makes some sense for Dish, which continues to see both its subscriber base and total service revenues wane. It does nothing to help Sprint, though, which controls an impressive portfolio of 2.5 GHz spectrum but faces serious financial challenges as it gradually deploys service on those airwaves.

“Perhaps reports that SoftBank is considering an acquisition of Dish Network are true … but we sort of doubt it,” Craig Moffett of MoffettNathanson wrote in a note to investors this morning. “To be sure, given Dish’s rapidly deteriorating financial position, we can understand why Dish would be interested. And a deal with Sprint would actually have strategic merit for Dish, which would secure infrastructure that would help reduce the cost of deploying its spectrum.

“Unfortunately, Dish would bring no benefit to Sprint whatsoever—Sprint already has more spectrum than it knows what to do with, and Dish’s rapidly declining EBITDA would hurt Sprint’s liquidity position more than it would help.”

That isn’t to say that both companies don’t need help in the wireless market, of course. Dish faces a significant challenge in building an IoT-focused network from the ground up, and the company has no experience in wireless. And Sprint needs a cash infusion to help it continue to narrow the network gap with its bigger rivals as U.S. carriers prepare to roll out 5G services.

But the economics of an arrangement between Dish and Sprint appear to be unworkable, Moffett said.

“And here’s the bigger problem: both companies’ stock prices discount a high probability of being acquired … but not of being an acquirer,” he wrote. “Merging the two, with no meaningful synergies and no infusion of cash, would create a rapidly shrinking combined company with a warranted valuation far lower than the sum of their current market caps.”