If you look at its fundamentals, Dish Network (NASDAQ:DISH) may seem a dumb place to park new money.
A few months ago, so was Sprint (NYSE:S).
By that I mean that, if you want to buy DISH stock, you buy it as an arbitrage play. While Dish is a dying business, facing mammoth capital requirements, it could easily be bought by this time next year.
DISH stock opened for trade Feb. 18 at $39.89 per share. That’s a year-to-date gain of 16%. It has a market capitalization of $21.5 billion. But it’s 6% below its most recent peak — one it hit in July 2019. Five years ago, Dish was trading at $75 per share.
What’s the Deal?
Dish Network began life in the 1980s as EchoStar Communications. It was one of two direct satellite broadcasters. The other is DirecTV, now part of AT&T (NYSE:T).
As consumers began rejecting satellite, and other forms of cable, for streaming services, Dish rolled out Sling TV, a “cable-lite” package delivered online, in 2015. Since 2015, Dish has continued to shed customers, but Sling has hung in there, gaining 214,000 subscribers in the third quarter of 2019.
But that’s not the point, my friend. Dish has been a regular entrant in the Federal Communications Commission spectrum auctions throughout the decade. It has put $20 billion into wireless spectrum now estimated to be worth $30 billion.
For years, however, Dish has been a “spectrum hoarder,” refusing to build out services on what it owns. Early in its fight to buy Sprint, T-Mobile (NASDAQ:TMUS) even urged the FCC to take the spectrum away from Dish for that reason.
But the two companies are now on better terms. That’s because in July, Dish agreed to pay $5 billion for key T-Mobile assets, including Boost, Sprint’s re-sale business. The deal helped pave the way for T-Mobile’s merger with Sprint to be completed.
Is Dish for Sale?
Dish Network CEO Charles Ergen may be the richest man you never heard of. His stake in Dish was estimated to be worth $10.5 billion last year.
Ergen is litigious, and often gets into arguments with his union. He may have also bit off more than he can chew with T-Mobile.
Dish still hasn’t built out its spectrum, which will cost $10 billion. If it doesn’t get that done by 2025 it faces fines of $2.2 billion. Ergen is also 66 years old, young for a presidential candidate but old for a CEO. Which is why many feel the next step for Dish should be its sale.
Who would buy it? Comcast (NASDAQ:CMCSA) has gotten nowhere with its Xfinity wireless service, which is based on the side bands of its own customers’ WiFi signals. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is a re-seller of T-Mobile and Sprint services with its Google Fi. It could buy Dish for what amounts to seat cushion money. So could Apple (NASDAQ:AAPL).
This is the last mile for the major cloud companies, the key connection they need with customers during this coming decade. They won’t let the sun go down on it.
The Bottom Line on Dish Stock
Dish Network hasn’t said it’s for sale. But it is.
Dish lacks the financial strength to compete in the wireless business. But there are buyers who would see AT&T and Verizon not just as peers, but as mere irritations. Comcast is nearly as valuable as they are. Google is worth about twice what the two wireless giants are, put together. Apple’s worth $400 billion more than that.
One of these companies is likely to make Charles Ergen a very rich man in the next few years. With earnings tomorrow, you can speculate on getting a share of it.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL.