Citi Downgrades Dish Network Based on Fairly Valued Spectrum

In a report published Thursday, Citi Research analyst Jason Bazinet downgraded

from Buy to Neutral and maintained a $61.00 price target as the company's spectrum is fairly valued. Last August, Bazinet commented that Dish Network's spectrum was undervalued by the market and listed Dish's spectrum at $1.25 per MHz-POP in his Breaking Symmetry note. Spectrum is defined by Citi as "the virtual real estate on which wireless networks are built." In this earlier report, the analyst wrote, "We believe the industry is on the cusp of a paradigm shift for spectrum valuations given the growing importance of downlink spectrum over total spectrum positions. As such, investors and carriers should place a 9x premium on downlink (versus uplink) spectrum. We refer to this as Breaking Symmetry, and Buy-rated Dish may be the best way to capitalize on our thesis." Citi added that Dish will have more downlink than what Verizon Communications Inc.

and AT&T Inc.

currently use. Bazinet noted that Verizon could be a possible buy of Dish Network's spectrum. In the analyst's recent note, Jason Bazinet reported that with shares of dish trading for $58.00 per share, "we believe the market is reflecting $1.25 per MHz-POP for all of Dish's current spectrum (DBSD, TerreStar, 700MHz) and likely future spectrum (H-Block). We now believe the market is correctly pricing in Dish's spectrum at $1.25 per MHz-POP per our Breaking Symmetry thesis." Citi remarked that Dish has options for additional upside and notes the risks. Bazinet commented that Dish could sell or lease the spectrum, or merge with DirecTV

. The analyst see the DirecTV merger as the "most reasonable." Shares of Dish Network closed at $58.32 on Thursday and are currently trading down 2.30% at $56.98.