Why We Are Revising Dish Network’s Price Estimate To $77

We recently increased our price estimate for Dish Network (NASDAQ:DISH) to $77. We believe that Dish’s spectrum holdings contribute close to 60% of the company’s stock price, with Dish’s pay-TV business constituting the rest. Dish has made significant investments in spectrum over the past few years and is now the fifth largest holder of wireless spectrum in the United States. The company currently owns licenses to approximately 75 MHz of spectrum nationwide, covering over 23 billion MHz-POPs. We estimate the pre-tax fair value of Dish’s spectrum holdings to be around $37.1 billion. Dish’s current stance leads us to believe that the company is in no hurry to start making money off of its spectrum investment. Dish is more concerned about making sure that it chooses the most optimal option when it comes to monetizing its spectrum holdings.

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Dish Looking For Most Optimal Way To Monetize Spectrum Holdings

The FCC’s cancellation of the $3.3 billion discount Dish received in the AWS-3 spectrum auction had generated uncertainty regarding Dish’s spectrum strategy. Dish CEO Charlie Ergen had stated on an earlier earnings call that a liability of that magnitude might derail future plans. ^[1] However, instead of paying the amount, Dish decided to relinquish $3.4 billion worth of its AWS-3 spectrum to the FCC. ^[2] Ergen now believes that forfeiting the spectrum was a good decision, as it leaves most of the company’s options still open in terms of how they want to use their spectrum. ^[3] He maintained that the company has not finalized any plans regarding how they want to monetize their spectrum holdings. However, Ergen did state that Dish’s sizeable spectrum holdings can be strategically beneficial to certain companies and these companies will find it hard to ignore Dish’s spectrum. Verizon CEO Lowell McAdam had claimed in September that the telecom giant has had talks with Dish about a partnership which could lead to Verizon using Dish’s spectrum in exchange for providing Dish with wireless capacity. ^[4] Dish’s current stance leads us to believe that the company is in no hurry to start making money off of its spectrum investment. Dish is more concerned about making sure that it chooses the most optimal option when it comes to monetizing its spectrum holdings.

Dish’s AWS-4 Spectrum Is Its Most Valuable Asset

Dish amassed 40 MHz of AWS-4 spectrum when it acquired TerreStar and DBSD North America out of bankruptcy in 2011 for a combined sum of less than $3 billion. We estimate the pre-tax value of the same spectrum to be close to $22.4 billion at $1.73 per MHz-Pop. (See our calculation methodology – Dish Network – Price per MHz/Pop for AWS-4 Spectrum Analysis) The AWS spectrum supports LTE and can be used by wireless phones and other mobile devices for voice, messaging, and data services. Most smartphones are AWS-enabled and can communicate using this spectrum. It should also be noted that there is a significant difference in the value of downlink spectrum as opposed to uplink. The FCC has conditionally allowed Dish to use its entire AWS-4 spectrum for downlink purposes, thereby increasing the spectrum’s value. Dish has also acquired 10 MHz of the H Block Personal Communications Service (PCS) spectrum in an FCC auction which concluded on February 27, 2014. The H Block spectrum band is adjacent to, and can be paired with, Dish’s AWS-4 licenses, which is highly desirable. Another desirable aspect is that the spectrum covers every territory in the United States. Using our estimates, the combined pre-tax value of Dish’s total spectrum holdings comes close to $37.1 billion, and we have incorporated this value into our price estimate. We believe that Dish’s spectrum holdings contribute close to 60% of the company’s stock price with Dish’s pay-TV business constituting the rest.

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1. DISH Network (DISH) Charles William Ergen on Q2 2015 Results – Earnings Call Transcript, August 5, 2015, Seeking Alpha [↩]
2. DISH Statement on AWS-3 Spectrum, October 01, 2015, Business Wire [↩]
3. DISH Network (DISH) Charles William Ergen on Q3 2015 Results – Earnings Call Transcript, November 9, 2015, Seeking Alpha [↩]
4. What Telecom CEOs Are Saying: Highlights from Goldman Sachs Conference, September 18, 2015, Wall Street Journal [↩]