DISH Network Corp Needs a Friend, Stat

Poor DISH Network (NASDAQ: DISH  ) keeps getting left out of telecom speed-dating events. The company is one of the best positioned to benefit from industry consolidation, considering its substantial presence in the pay-TV world and a very valuable portfolio of spectrum, yet its options are thinning quickly. With the most recent news of the DirecTV (NASDAQ: DTV  ) and AT&T (NYSE: T  ) deal, DISH's competitive position in the TV world is under even greater pressure. Is something keeping suitors away from DISH? Let's take a closer look. 

Great on paper
For a telecom looking to snatch up a complimentary business, DISH should be an attractive mate. The company owns heaps of what wireless businesses need most -- spectrum. DISH Chairman Charlie Ergen made accumulating spectrum a priority years ago, with eyes on jumping headfirst into the wireless business, but that has turned into something strikingly similar to the way Floridians drive -- slow and seemingly directionless. Even though it has temporary approval  from the FCC to deploy its spectrum (a valuable asset in itself), the company can't seem to find a suitor.

DISH's core pay-TV business isn't too shabby, either. As opposed to many cable operators (mostly part of telecom conglomerates) that continue to lose video subscribers, DISH recently posted a net subscriber gain of 40,000. Average revenue per user, the go-to metric for unit-level profitability, grew by roughly $4. Churn rate, which reflects monthly shifts in customers leaving the service, shrunk down to 1.42% from 1.47%.

DISH Network is not a shoddy applicant by any stretch of the imagination, so what gives?

Compatibility problems?
Why did AT&T pursue DirecTV over DISH? One big reason may be that, on the pay-TV front, DirecTV is a better business with a tremendous presence in Latin America. AT&T could use the company's presence in the region as a launch pad, considering that its existing international business is achieved largely through partnerships. As opposed to in the U.S., where Comcast is by far the industry juggernaut (and even more so if it's own merger with Time Warner Cable passes regulatory muster), DirecTV is Latin America's largest pay-TV provider.

Now, AT&T needs as much spectrum as possible to meet demand, as do all telecoms, given the rapidly increasing data usage in the United States and beyond. But when compared with the opportunity of tapping into one of the most underpenetrated, fastest-growing pay-TV markets in the world, the company may have seen more value (especially on a comparable price basis) in DirecTV than DISH's spectrum offering.

Going forward, DISH investors need to see interest from another major telecom, such as Verizon, or a partnership with a company that enables DISH to launch its spectrum before its too late. The price of the stock has baked in the opportunity and value of the multibillion-dollar portfolio, and without it there is considerable downside. The consolidation may not be in the best interest of the end user, but it's happening, and DISH needs to partner up. Otherwise, this satellite player may be left out in the cold.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple



Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 20, 2014, at 11:05 PM, oolnnac wrote:

    Good points.

    With all the spectrum that DISH has been buying, I believe that partnering-up will be attractive and needed by both parties - whoever that other party may be. Based on comments made by both parties, my bet has been on T-Mobile, and still will be, if Sprint's efforts collapse.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2964406, ~/Articles/ArticleHandler.aspx, 8/29/2015 3:45:30 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Michael Lewis

Michael is a value-oriented investment analyst with a specific interest in retail and media businesses. Before coming to the Fool, Michael worked with private investment funds focusing on deep value and special situations. Currently living in the media capital of the world--Los Angeles, California.

Today's Market

updated 6 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
DISH $59.62 Up +0.51 +0.86%
DISH Network Corpo… CAPS Rating: **
CMCSA $56.78 Up +0.01 +0.02%
Comcast Corp CAPS Rating: ***
DTV $0.00 Down +0.00 +0.00%
DirecTV CAPS Rating: ***
T $33.29 Down -0.15 -0.45%
AT&T CAPS Rating: ****
TWC $187.43 Down -0.46 -0.24%
Time Warner Cable,… CAPS Rating: **