Dish Networks reported relatively mixed quarterly financial results this week, but Wall Street analysts noted that the ongoing uncertainty over its wireless efforts is casting an increasingly dark cloud over their short-term outlook on the company.
“Dish valuation continues to be centered around its lucrative spectrum portfolio, while quarterly results simply need to show the company is in good enough health (sub metrics, margin, FCF) to service debt maturities as Dish ‘ages’ the spectrum portfolio for an outsized investor payoff,” wrote the analysts at Wall Street research firm Cowen. “In that context, Dish delivered good enough results in 1Q18 to prove outer-year sustainability, however T/TWX, CMCSA/SKY/FOX, and now S/TMUS is putting the Dish spectrum in the unenviable ‘always a bridesmaid, never a bride’ holding pattern which we believe is taking its toll on the stock.”
Dish’s shares have fallen from around $50 per share at the beginning of this year to around $30 today.
Other analysts also offered a somewhat tepid outlook on Dish’s near-term prospects.
“A Sprint/T-Mobile combination, ongoing carrier initiatives to add capacity, and upcoming spectrum auctions all suggest little appetite for DISH's portfolio in the near-to-mid term,” wrote the analysts at Jefferies.
Indeed, despite its substantial spectrum holdings, Dish has remained largely outside of the industry’s recent M&A. Sprint and T-Mobile announced a merger, while AT&T purchased FiberTower and Verizon snapped up Straight Path.
Meanwhile, the FCC continues to work to release more spectrum: It completed the 600 MHz incentive auction last year, and later this year will hold the first of what will likely be multiple millimeter-wave spectrum auctions.
According to analysts, all that activity is reducing the likelihood that an operator like Verizon will ink a massive purchase of Dish’s spectrum holdings.
“Dish may soon, or may already, face a make or break choice; sell their AWS-4 spectrum, even if at a sharp discount, or face losing it altogether and getting nothing at all,” wrote the analysts at MoffettNathanson. “If there is ANYONE out there willing to pay even a lowball price for Dish’s AWS-4 spectrum—that’s the principal band with the ticking lock—then now would be the time for Dish to take the money and run.”
However, most analysts still retained a positive outlook on Dish’s long-term prospects, arguing that the company’s spectrum holdings remain valuable.
“We estimate the market is valuing DISH's spectrum at ~$0.38/MHz-POP … While we have little doubt the market is under appreciating the spectrum assets, we see few near term catalysts for spectrum monetization, and believe an investment in DISH must be longer-term in nature,” wrote the analysts at Jefferies in a note to investors.
For its part, Dish’s Charlie Ergen is now heading up the company’s wireless efforts. The company announced earlier this year that it would spend between $500 million and $1 billion through 2020 building out the “first phase” of its wireless network. The company said it would deploy an NB-IoT network initially and would potentially build out a 5G network later as standards for that network are made available.