Here’s Why Dish Network Can Benefit From Amazon As A Partner

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Dish Network‘s (NASDAQ:DISH) pay-TV business is struggling a bit, as the company lost 143,000 net subscribers in Q1 2017 despite solid gross additions. It appears that the company is now looking at other revenue streams to drive growth, and on its recent earnings call management hinted that they may soon finalize a strategy for the company’s portfolio of spectrum. Dish’s spectrum holdings constitute 65% of its valuation, according to our estimates, making it incredibly valuable for the company. Reports suggest that Dish is looking to use this spectrum for a wireless service, in collaboration with Amazon and T-Mobile USA. In the deal, Dish would bring the spectrum, T-Mobile would contribute to the roll-out and Amazon would be the first customer bringing its commercial applications to the service. If such a partnership materializes, we believe it will be a win-win situation for both Dish and Amazon, and could allow Dish to effectively monetize its spectrum holdings.

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Leveraging Dish’s Network For Wireless and Other Services

With its wide array of services, Amazon could use a reliable network to differentiate from some of its competitors. Its e-commerce platform, streaming service, home assistant (Amazon Echo) and proposed drone delivery services could leverage the uncongested spectrum owned by Dish. This would allow Amazon to have better control over its services and not depend on other wireless service providers. The company could also look at providing wireless services to its Prime customers and use the spectrum for its ambitious streaming service, which includes live broadcasts of sporting events. As Amazon looks for an efficient solution, Dish Network can benefit significantly from Amazon’s deep pockets, wide consumer base and an expanding range of services. If a partnership between these two companies were to materialize, it would be a win-win situation for both players. Dish has the spectrum that Amazon would need to expand its services, especially on smartphones, and would allow Amazon to grow without significant capital expenditures. For Dish Network, Amazon is a cash-rich customer who might be willing to pay a premium for the uncongested spectrum.  We believe Amazon can give Dish the right returns for its biggest asset, which the company has not yet been able to monetize. Dish Network also believes that its spectrum is a good fit for 5G services. This technology is likely to be put to commercial use by 2020 and can be used for drones, further indicating that Amazon could benefit significantly from Dish’s spectrum.

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While reports of the partnership between Dish and Amazon are not confirmed, we believe such a deal would greatly benefit both companies. For Dish, it would generate a steady revenue stream from leasing its spectrum to a large customer, and for Amazon it would provide the much needed mobile push to its services without having to pay for spectrum up front.

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