Jefferies analysts took issue with recent claims that Dish Network's (NASDAQ: DISH) spectrum holdings are over-valued, saying the mid-band airwaves are superior for supporting increasing data usage and ramping up capacity.
"Some would argue that the availability of low-band spectrum via the broadcaster auction diminishes carrier appetite for mid-band spectrum held by Dish," Jefferies analysts wrote in a research note published this morning. "If all spectrum were created equally, we might agree. However, that is not the case and carriers' needs may vary by band or geography. While the 600 MHz spectrum (being auctioned off) is attractive to carriers seeking to build out greater coverage, to best handle rapid growth in data usage and enhancing network capacity, mid-band is more attractive spectrum."
Jefferies' note follows last week's report by Kerrisdale Capital describing Dish's spectrum holdings as a "warehouse full of overpriced inventory." Kerrisdale opined that U.S. operators already own plenty of spectrum, and "The scarcity of spectrum is vastly overstated."
Dish's stock fell from around $47 to roughly $45 per share following the release of Kerrisdale's report, and the satellite TV provider dismissed Kerrisdale's claims.
The ongoing debate over the value of spectrum -- and of Dish's airwaves in particular -- comes as 99 bidders including the three largest U.S. carriers prepare to participate in the upcoming forward auction of TV broadcasters' unwanted 600 MHz spectrum. The FCC recently said it has cleared 126 MHz of spectrum for the event -- the maximum amount it could have -- stirring hope the event could be the "spectrum extravaganza" FCC Chairman Tom Wheeler has predicted it will be.
But Jefferies analysts noted that it's impossible to forecast when the next major spectrum auction will be following this year's event. The analysts also noted that while higher-frequency airwaves are likely to be more suitable for 5G use -- due to their ability to provide increased capacity -- use cases "could be very limited" until next-generation technologies and services start to come online. And although some observers are concerned Dish won't be able to put its airwaves to use in time to meet FCC mandates, the company could hold a public auction for the spectrum. And "we believe carriers would show up in size" at such an event, Jefferies wrote.
"We continue to believe the Street has an overly bearish view on Dish, driven by investor concerns over lack of catalysts for the stock and substantial under-appreciation for the spectrum value," the analysts wrote in summary. "We believe there are many outcomes and opportunities to realize value for Dish shareholders, and with 80 percent upside, we add Dish to our Franchise Pick List."
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