Dish Rides Higher on Subscriber Growth Despite FCC Delay on Broadband

+80.22%
Upside
20.78
Market
37.45
Trefis
DISH: DISH Network logo
DISH
DISH Network

Last year Dish Network (NASDAQ:DISH) acquired spectrum assets of DBSD North America and TerreStar Networks for $2.8 billion. The idea was to acquire these assets at cheap prices and use them to build a wireless broadband network that Dish Network can bundle with its existing pay-TV services. This can give Dish an edge against its rival DirecTV (NASDAQ:DTV) and help it access rural areas where cable companies such as Time Warner Cable (NYSE:TWC) do not have adequate infrastructure.

However a recent decision by the Federal Communications Commission (FCC) suggests that Dish may not be able to put its plan in action this year at all. The FCC denied Dish’s waiver request for new wireless network and has stated that it will resort to formal deliberation of the request. [1] This make drag on and lower the attractiveness of this move for Dish and is gives peers time to build out their offerings.

See our complete analysis for Dish Network

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Dish Network has been betting on its launch of Blockbuster streaming service to improve subscriber trends and that has worked so far as evident from the company’s Q4 2011 results. In Q4, Dish was able to reverse the trend and gain 22,000 net pay-TV subscribers. However the move to offer broadband is a long-term strategic move that will strengthen Dish Network’s competitive position over a period of 2-3 years. If Dish can continue to leverage Blockbuster’s service and gain subscribers, the delay with the FCC may not prove to be much of a set back.

Nevertheless the downside is that the other pay-TV providers have now sped up the process of significantly enhancing their services and that could possibly weigh on Dish in 2012. Some of the examples include Comcast (NASDAQ:CMCSA) launching Xfinity Streampix, DirecTV planning to launch its streaming service in Q2 of 2012, Time Warner Cable launching streaming apps for several devices and Verizon (NYSE:VZ) partnering with Redbox.

Our price estimate for Dish Network stands at $30.88, implying a slight premium to the market price.

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Notes:
  1. FCC Deals a Setback to Dish’s Wireless Network Plans, The Wall Street Journal, Mar 2 2012 []