Analyst: Dish bankruptcy “overwhelmingly probable”
November 24, 2023
Charlie Ergen is in the process of – in effect – merging Dish Network with sister business EchoStar in a strategy to tap into EchoStar’s cash war chest and in order to further build out Dish’s near-national 5G cellular spectrum in the US. The problem, according to analysts at MoffettNathanson, is that the moves might not be enough to avoid bankruptcy.
MoffettNathanson (MN), in a note to clients earlier in November was blunt, saying that there was an “overwhelming probability” that Dish & Co will enter bankruptcy some time in the next few years.
Dish & Co must continue investing in spectrum acquisition and has until April 1st 2024 to fund a purchase of more spectrum (800 MHz) from T-Mobile. Dish has already paid $100 million as a down-payment but needs to find $3.5 billion to pay T-Mobile to close the agreement.
Analysts from New Street Research (NSR) in a note on November 22nd, says that if Dish & Co can fund the spectrum purchase then the company’s overall spectrum could be worth conservatively $57 billion and as high as $91 billion if sold after 2026.
NSR has compared and contrasted the sums paid by various spectrum buyers over the past year. NSR reports that the core book value of Dish’s spectrum portfolio is worth about $29 billion, but adds that almost every slice of spectrum has increased in value since its acquisition.
“If we revalue just the portion of AWS-4 that is part of Band 66, the 600 MHz and 3.45 GHz based on appropriate precedents, we arrive at a market value of $57 billion. If we revalue all bands, we get to $90 billion+,” says NSR analyst Jonathan Chaplin.
The report adds that different locations naturally affect the potential value of Dish & Co’s spectrum assets. A chunk of bandwidth in the middle of nowhere clearly is worth much less than something serving Manhattan.
But Dish & Co is far from bankrupt just yet. EchoStar is sitting on cash (and cash equivalents) of $2 billion as at September 30th 2023, up from $1.9 billion three months earlier and $1.7 billion as at March 30th. EchoStar is making gross profits of a steady $260 million – $280 million every quarter.
Ergen is somewhat of a master of wholly leveraging and exploiting company assets. Few doubt he has his eyes on a longer-term positive outcome from his Dish plus EchoStar merger, and that vision does not include bankruptcy.