DISH Network Corp. (DISH) reported mixed financial results for the second quarter of 2011. The company lost massive net subscribers in the last quarter. Despite this, we remain optimistic for DISH in the long term due to several reasons: (1) re-branding itself as a premier tier pay-TV operator (2) management decision to install a two-way hybrid satellite-terrestrial broadband network that will enable the company to offer transaction based video-n-demand and high-speed Internet services.
DISH Network at present holds a significant amount of airwaves and its acquisition of movie rental Blockbuster will enable the company to convert its business model as an innovative triple-play voice, video, and data service provider. However, it requires proper integration and effective utilization of productive resources. Recent debt crisis in the U.S may also become a short-term hindrance. We therefore, reaffirm our long-term Neutral recommendation.
In March 2011, DISH Network got a bankruptcy court approval to acquire 100% stake of DBSD North America Inc. for a total consideration of approximately $1.4 billion. In July 2011, DISH got another court approval to acquire bankrupt TerreStar Networks Inc. for $1.375 billion. DBSD provided a block of 20 MHz S-band spectrum to DISH for both wireless and wireline networks. On the other side, TerreStar provided another block of 20 MHz S-band spectrum. Additionally, DISH Network itself owns a slot of highly demanded 700 MHz wireless frequency.
Recently, the company applied for FCC approval to deploy a high-speed wireless broadband network to offer mobile Internet services to its customers. Although it is not clear whether DISH Network will deploy its own wireless network or will partner with some established wireless operator, management just hinted that the company may offer mobile broadband services from 2014.
Still today,the cable TV and telecom operators have the technical advantage of being able to offer the ‘triple play’ package of VOD (video-on-demand), local HD, high-speed Internet access and telephony. The satellite TV operators including DISH Network and DIRECTV (DTV) cannot provide VOD, Internet access or telephony as their platforms lack two-way interactivity (no uplink). The consumers are generally attracted toward cable TV providers as they like the convenience of having all their services on one bill and avail discounts given by the cable companies by bundling their services.An approval from FCC will place DISH head on with other cable MSOs and telecom operators, which offer triple-play bundled TV, Internet, and telephony services.
