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In A Consolidating Space, Acquisition Target Dish Network Could Be The 'Kingmaker'

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In A Consolidating Space, Acquisition Target Dish Network Could Be The 'Kingmaker'

Barclays said in a note Thursday DISH Network Corp (NASDAQ: DISH) could emerge as the "kingmaker." Accordingly, the firm upgraded shares of the company.

Analyst Kannan Venkateshwar believes, in the coming days, the differences in relative competitive positioning of various wireless players could be magnified further due to M&A activity. The analyst sees Dish emerging as a preferred partner for most of the carriers, although for different reasons.

"This process is also likely to highlight the strategic value of Dish's satellite business which, despite challenging trends, is in our view an underappreciated strategic asset," the analyst said.

Barclays looked at various M&A options that could materialize within the sector.

Sprint–T-Mobile: Providing Entry Into Wireless Business

Barclays believes a Sprint Corp (NYSE: S)–T-Mobile US Inc (NASDAQ: TMUS) deal, though helped by the political realities, will still need to offer significant concessions such as making available MVNO arrangement to new players, voluntarily or otherwise.

"With Dish now owning critical component pieces of spectrum required to run a network, an ability to access the combined network of Sprint–TMUS could offer Dish the ability to enter the wireless business, wholesale or retail, without having to invest in infrastructure," the firm said. This, according to the firm, would explain Dish's recent low-band spectrum acquisition.

DirecTV–DISH: Interesting Future Option

According to Barclays, a DirecTV (parent company, AT&T Inc. (NYSE: T))–Dish not only benefits AT&T strategically, but also financially. The firm believes synergies alone could fund the deal with the scale comparable to the Sprint–T-Mobile combination.

Although believing AT&T might be cautious in discussing this deal, given its pending deal to acquire Time Warner Inc (NYSE: TWX), Barclays aid this could be an interesting option in the future.

Competitive Pressure On Verizon To Intensify

Barclays feels the competitive pressure on Verizon Communications Inc. (NYSE: VZ) could intensify If Sprint-T-Mobile were to enable Dish's wireless entry and/or AT&T goes after DISH's DBS assets.

In theory, the firm feels Verizon could combine with a cable company to deal with this pressure.

"However, the deal with Charter is likely to be tough to justify financially while a deal with Comcast is unlikely to align with Comcast Corporation (NASDAQ: CMCSA)'s priorities," the firm believes.

"Therefore, VZ is likely at a point where it may find Dish the most attractive of all the alternatives although DISH's recent spectrum purchase complicates an outright combination."

Determinate Path For Dish's Wireless Operations To Materialize Soon

Barclays believes Dish is closer to realizing determinate paths for its wireless aspirations. The firm thinks it is only right that spectrum should be priced as a distribution of outcomes. As these outcomes are actively explored, the firm believes the strategic value of Dish's DBS business is likely to be accentuated.

As such, Barclays upgraded shares of Dish Network to Overweight, while it has a valuation of $74 for the stock, which represents 6.5 times for the DBS business.

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Latest Ratings for CMCSA

DateFirmActionFromTo
Oct 2019Initiates Coverage OnMarket Perform
Oct 2019MaintainsBuy
Sep 2019Initiates Coverage OnBuy

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