Those who follow the telecom space closely likely noticed that DISH Network’s shared dropped by 10% over the last few weeks. While stock fluctuation is normal, a drop of that amount is usually caused by a specific event. In this case, DISH’s stock drop can be directly tied to a recent downgrade by Wall Street.
Given DISH Network’s recent acquisition of EchoStar’s broadcasting satellite business, many suspected that DISH stocks would be on the rise. So, why was DISH Network downgraded? In short, analysts are concerned that a possible telecom delay will in turn delay DISH from monetizing their massive spectrum holdings. Holdings, that are being tightly monitored by the FCC.
According to the Motley Fool, “Analyst Jeffrey Wlodarczak downgraded DISH to a hold from a buy on that progress, saying that the likely approval of a Sprint/T-Mobile deal ‘significantly pushes back the timing’ for a sale of DISH spectrum.”
The future of DISH’s spectrum holdings has always been tied to the outcome of the merger between Sprint and T-Mobile. If that merger was shot down by the government, than a bidding war would likely break out between Verizon and T-Mobile for DISH’ spectrum holdings. However, since the FCC seems poised to approve that merger, that bidding war will never happen which means DISH needs to find some way to monetize all of that spectrum.
While the EchoStar acquisition is big for DISH, it won’t make any real difference in the short term. It just gives them more assets that they can then monetize down the line.
Now, it is important to point out that while DISH stocks did dip after the downgrade, the company is still significantly up for the year. Even after this recent 10% decline DISH is still look at a 27% increase for the year to date. However, unless a bidding war over their spectrum does end up breaking out, it is unlikely that DISH will see any more growth than that this year.
All of this is not to deter people from investing in DISH. The satellite company is still one of the few major players in the telecom space, and owns the most unused spectrum by a considerable margin. The question is now if DISH will monetize that spectrum, but how.
Sources:
https://www.fool.com/investing/2019/05/20/why-shares-of-dish-network-are-down-10-on-monday.aspx
