DISH to Raise $1B for Wireless - Analyst Blog
April 03 2013 - 12:31PM
Zacks
In to implement its wireless deployment plan, DISH
Network (DISH) -- the second largest satellite TV operator
after DIRECTV (DTV), plans to raise nearly $1
billion through its subsidiary DISH DBS Corp. The amount will be
raised by issuing senior notes. Fitch has rated BB- to the
company’s recent debt offering plan.
Last year, DISH Network raised nearly $4.4 billion through the
issue of senior notes. We consider two aspects for the company to
raise such a huge amount of debt during the period.
Firstly, DISH Network gained the much-awaited FCC approval to
set up wireless network across its footprint. So, DISH’s plan to
set up wireless network without any wireless partner will be an
extremely difficult task as it requires a huge investment and
marketing support.
Secondly, there is a growing shortage of spectrum in the
country. So, we believe that a mere 40 Mhz of spectrum will not be
enough for DISH Network to establish a strong foothold in the U.S.
To overcome that, the company may acquire further spectrum.
To materialize both its objectives, DISH Network bided for
Clearwire Corporation (CLWR) at $3.30 per share.
Clearwire currently holds a 2.5 GHz band of spectrum, which is
suitable to deliver huge data, mainly comprised of HD videos. It
also offers fixed and wireless services in the U.S.
However, the deal looks to be a distant dream as the parent
company of Clearwire, Sprint Nextel Corp. (S),
plans to acquire full stake of its sister concern at $2.97 per
share.
DISH Network exited fiscal 2012 with an enormous $11.6 billion
in long-term debt and $7.4 billion in cash. So, a further issue of
debt will increase the financial risk for the company in terms of
higher interest payments and increased leverage.
In the next five years, senior notes worth $4.7 billion will
mature. Moreover, a debt of $500 million will be due in the current
year. Hence, we believe that constant maturity of debt during this
five-year period will not only affect DISH Network’s cash position
but will also impact its future plan to rollout mobile broadband
network across its footprint.
DISH Network currently has a Zacks Rank #3 (Hold).
CLEARWIRE CORP (CLWR): Free Stock Analysis Report
DISH NETWORK CP (DISH): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
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