How Spectrum Strategy And Streaming Services Could Be Key For Dish TV’s Valuation

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Spectrum is Dish Network‘s (NASDAQ:DISH) most valuable asset and constitutes nearly 60% of its valuation as per our estimates. We believe Dish’s strategy around monetization of this asset, especially given the FCC requirements, will be key for its valuation in the future. With the growing trend of video consumption on handheld devices, alternative streaming platforms are becoming increasingly popular. Dish TV’s  venture in this space – “Sling TV” – would be key to drive growth in the future, as it should be able to compensate for subscriber loss from the Pay-TV network, and also fuel an increase in subscribers in the long run.

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Spectrum Strategy

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Dish TV’s spectrum holdings constitute nearly 60% of its valuation according to our estimates. The company’s strategy to monetize its spectrum holdings will be a key value driver for the company. Dish relinquished $3.4 billion worth of its AWS-3 spectrum to the FCC in October 2015. [1]., in lieu of the canceled $3.3 billion discount. While the company has stated that it is not in any hurry to monetize its spectrum holdings, its AWS-4 spectrum licenses are subject to certain interim and final build out requirements by the FCC, and license authorization can be terminated if these build out requirements are not met. We believe the company’s strategy around optimizing the spectrum assets and ensuring that the FCC deadlines are met will be key for its growth in the future.

Streaming Services – Sling TV

Online streaming platforms such as You Tube and Netflix are gaining viewership primarily due to the ease of watching videos on handheld devices and anytime availability of high quality content on these platforms. This trend is causing pay TV networks to lose subscribers, and to leverage this trend, Dish introduced Sling TV, its streaming service in January 2015. The company’s management believes that offering Sling TV at competitive pricing will enable Dish to gain streaming subscribers and compensate for the reduction in its traditional subscriber base. Sling is primarily targeted at the 10.6 million broadband-only subscribers in the U.S. and we believe that the service has the potential to maintain its current subscriber momentum in the coming quarters. [2]. Dish can generate around $1 billion in annual revenues if the streaming service manages to penetrate around 40% of its target market in the long run.

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Notes:
  1. Dish Statement on AWS-3 Spectrum, businesswire.com, October 2015 []
  2. Dish Network Unveils Sling TV, A Streaming Service To Rival Cable (And It Has EPSN), nytimes.com, Jan 2015 []