Dish Network (
DISH
) had an exciting last year as it witnessed fluctuating subscriber
additions, settled critical lawsuits and got FCC approval to build
a nationwide wireless network. There couldn't have been a more
fitting start to 2013 than Dish starting a bidding war with Sprint
(
S
) for the proposed acquisition of Clearwire (
CLWR
). This was a surprising move as we didn't expect the company to go
against Sprint, who was actually willing to partner with Dish to
launch its wireless service. However, it appears that Dish has
bigger ambitions or is using this maneuver to gain leverage.
See our complete analysis for Dish Network
What Is Dish Network's Master Plan?
It is no news that Dish Network has been amassing spectrum
through a series of acquisitions. 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 playing
its cards and has acquired spectrum assets from TerreStar and DBSD
North America.
Dish has been smart in its approach, realizing that even if it
cannot build its own wireless network, it can at least sell the
spectrum for a substantial profit. The company's gamble paid out as
the FCC granted permission to Dish to build a ground-based wireless
network in the U.S. As a result, the spectrum's valuation
skyrocketed to $12 billion.
Dish's proposed acquisition of Clearwire indicates that it just
doesn't want to build a wireless network, but desires to become one
of the major players that can challenge the existing telecom
giants. It is unlikely that Dish's bid will be approved given that
Sprint already holds a 50% stake in Clearwire. However, the move
could certainly help Dish in a couple of ways. First, if Dish is
able to acquire even a non-controlling stake in Clearwire, it could
give it the upper hand in negotiating a potential partnership with
Sprint or other carriers. Second, the bidding war for Clearwire
could influence the value of spectrum, thus raising the value of
Dish's own spectrum. This is again favorable for Dish Network's
market value.
Dish has struggled in the saturating U.S. pay-TV market and is
directing some of its attention towards wireless. If successful,
this approach could make it a formidable competitor in the long
term as the company could bundle wireless services with pay-TV.
Our price estimate for Dish Network stands at
$36.20
, roughly in-line with the market price.
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