Dish Network Is Getting Hamstrung

• Shares of DISH Network Corp. DISH have decline more than 16 percent, year to date.
• Wunderlich’s Matthew Harrigan has maintained a Sell rating on DISH Network, while lowering the price target from $65 to $48.
• Apart from the volatile macro environment, the four US mobile carriers are advancing their network strategies without using the company’s spectrum in the near term.

“DISH's financial latitude is furthermore hamstrung by the weakening satellite video business as well as the FCC disallowing the $3.3bn Designated Entities (DE) auction discounts,” according to the Wunderlich report.

There is also increasing pressure on the company, even from build requirements that apply to 2020/2021. Although DISH Network’s AWS spectrum is a good fit for the portfolio of Verizon Communications, Inc. VZ, Harrigan believes that Verizon is likely to wait to acquire the company at a lower price.

“Our $23.5bn 2020E shared network build valuation assumes that the wireless effort reaches 18.8mm customers 10 years post launch at a $59.75 eventual ARPU,” Harrigan said, while adding that the estimate includes the assumption that the company finds a build partner.

Harrigan expects DISH Network to eventually sell its spectrum, although the price realization might be constrained by the company’s limited capacity and desire to finance a network build.

Harrigan believes that the video only nature of DISH Network’s satellite business “limits tactical flexibility, with the company ending up with lower latitude to play with.

“The effect on DISH's stock price has to be assessed against not only immediate ARPU trimming relative to programming costs, but also the effect for LT activity, churn, and pricing,” the report added.