Updated Research Report on DISH - Analyst Blog

On Apr 1, 2014, we issued an updated research report on DISH Network Corp. DISH. A strong portfolio of wireless spectrum, innovative product launches and a video streaming deal with Disney are likely to spur growth for the company going forward.

Except for one quarter, DISH Network delivered positive earnings surprises in all the remaining three quarters last year, with an average beat of 30.42%. The company declared mixed financial results for the fourth quarter of 2013. The bottom line outpaced the Zacks Consensus Estimate but the top line missed the same.

Recently, DISH Network won the bid for PCS H Block wireless frequencies auctioned by the Federal Communications Commission (FCC), thereby allowing the company to overcome FCC's previous restriction of avoiding interference with an adjacent PCS H Block frequency. Thus, the newly acquired radio spectrums will significantly raise DISH's power and emission levels to establish a profitable venture in the wireless market.

DISH Network also achieved a significant milestone by signing an online pay-TV deal with the leading media mogul Walt Disney. The agreement will allow DISH Network's customers to watch live shows on devices like PCs, smartphones and tablets, thereby bypassing the need for a set-top box.  Moreover, Walt Disney will also drop its earlier objection against DISH Network's ad skipping Auto Hop device. Hence, the new deal with Walt Disney will not only drop the technical objections against the satellite TV operator but will also set the platform for the future online TV agreements with other network companies.

The ongoing merger between the largest and the second largest cable TV operator in the U.S., Comcast Corp. CMCSA and Time Warner Cable Inc. TWC has hinted at a possibility of collaboration between DISH Network and DIRECTV. Earlier, in 2002, the FCC denied a merger proposal between DISH and DIRECTV citing that it will create monopolistic power in the U.S. pay-TV industry.

However, the U.S. pay-TV industry witnessed massive changes since then. At that time, cable TV and satellite TV operators were the only video service providers. However, these traditional players are facing intense competitive pressure from fiber-based video offerings of large telecom operators and the significant growth of low-cost video streaming providers like Netflix, Inc. NFLX and Hulu.

According to SNL Kagan, in 2013, the U.S. pay-TV industry lost 251,000 subscribers. Hence, merger between these two entities will be a potential solution to evade such competition. Moreover, if the cable giants get FCC clearance, it will facilitate merger approvals for the satellite players.

However, the failure to strike any deal with other wireless operators to deploy nationwide wireless network has been a major drawback for DISH Network in recent times. Moreover, rising programming costs and mounting debt may act as headwinds for the company going forward.

DISH currently has a Zacks Rank #3 (Hold).