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Below are key drivers of Dish Network's value that present opportunities for upside or downside to the current Trefis price estimate for Dish Network:
For additional details, select a driver above or select a division from the interactive Trefis split for Dish Network at the top of the page.
Dish Network is the third-largest pay-TV provider in the U.S. after Comcast and AT&T-DirecTV. The pay TV market includes cable providers such as Time Warner Cable, Comcast, and Cablevision, satellite providers such as AT&T-owned DirecTV and Dish Network, and telecom providers such as AT&T and Verizon, that offer fiber optic TV services. More than 85% of TV households in the US subscribe to Pay TV services. Dish is the second-largest satellite TV provider in the U.S. after DirecTV.
Dish makes money by charging digital TV subscription fees to customers, selling digital TV boxes, selling premium services like HD and DVR, and by charging advertisers to advertise on some of the channels it carries.
Dish Network acquired DBSD North America and TerreStar in 2011. These were strategic investments by Dish in which the company got access to valuable AWS-4 spectrum that could help it in building a wireless network. Dish also made a successful bid for H-Block spectrum in 2014 and AWS-3 spectrum in 2015, taking its total spectrum holdings to 81 MHz. It acquired 486 spectrum licenses in 600 Mhz bands for $6.2 billion in 2017. Dish is currently the fifth-largest holder of wireless spectrum in the U.S., and the pre-tax value of its spectrum is around $25 billion, according to our estimates.
The majority of Dish's value comes from its spectrum holdings and its core satellite TV service. Although the company offers customers additional services like HD and DVR service, the value contribution of these services to Dish's overall value remains limited due to the lower fees charged for these services, and the limited number of Dish customers that opt-in for these additions.
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 has spent a combined sum of $21 billion in acquiring its spectrum. The value of spectrum in the U.S. has increased with time due to its growing demand in the wireless industry. This demand can be gauged from the AWS-3 auction conducted by the FCC in early 2015. The auction raised a total of $44.9 billion by auctioning 65 MHz of spectrum. In 2016-2017, the FCC offered more spectrum in the 600 Mhz band through a reverse auction 1000. Dish currently owns licenses to more than 80 MHz of spectrum, and we estimate the pre-tax fair value of Dish’s spectrum holdings to be around $25 billion.
The Fee per Satellite TV Subscriber for Dish's core offering was about $110 per month in 2020.
At the end of 2020, Dish had about 15.7% market share in the US Pay TV market, representing around 11.3 million subscribers. We expect Dish's market share to increase slightly throughout our forecast period. However, as many households are cutting chords, the viewers using cable service will decline in the coming years.
Dish's strategy of acquiring wireless spectrum, bundling of services (TV, internet, phone), and increased competition from telcos (AT&T, Verizon) are the primary trends impacting Dish.
There is a looming spectrum crunch in the U.S. wireless industry, given the increasing data needs of mobile customers. Realizing this spectrum crunch and the associated opportunity, Dish Network has been strategically amassing spectrum. The company currently has more than 80 MHz of spectrum holdings, including 40 MHz of AWS-4 spectrum, 10 MHz of H Block PCS spectrum, 20 MHz of AWS-3 spectrum, and 24 Mhz of the 600 Mhz spectrum.
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. 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 AWS-4 and H Block spectrum cover every territory in the United States. Dish can now move forward with several options, such as launching its own nationwide wireless network, partnering with an existing wireless carrier, or leasing/selling the spectrum.
Before AT&T's U-verse and Verizon's FiOS fiber optic TV services were launched, telcos and satellite providers would team up to provide bundled TV, Internet, and phone services to compete with triple-play offerings from cable operators like Comcast and Time Warner Cable. However, telcos now compete with satellite providers in certain areas, and the level of competition will continue to increase as telcos continue to roll out their TV services.
Several large telcos have upgraded old copper wire lines with fiber optic lines in their markets. The fiber optic lines provide high capacity bandwidth, enabling these companies to offer increased HD content, and the ability to bundle services.
Dish Network, in particular, and pay-TV service providers, in general, face a threat from emerging online video platforms such as Netflix and Hulu. Although these platforms mostly provide content that is not running live on TV, they are now slowly penetrating the pay-TV provider's core turf. Netflix's successful entry into original programming with the success of its shows, such as House of Cards, Orange is the New Black and Daredevil, is an example.
Dish Network has engaged in conflicts with content owners in the past over the issue of its demand for higher carriage fees. We believe Dish Network's periodic price rise is a response to cope with such demands, so that channel interruption does not occur. Dish blocked several channels in 2017 amid carriage disputes.