DISH Network Suffers a Setback - Analyst Blog
April 04 2013 - 11:40AM
Zacks
Recently, DISH
Network Corp. (DISH) suffered a setback as
Standard & Poor’s Rating Services (S&P) lowered its outlook
on the company to Stable from Positive. The rating agency cited
growing leverage of DISH coupled with uncertainty related to its
wireless venture, as the primary reasons for this outlook
downgrade. However, the S&P reiterated its existing corporate
credit rating of DISH at “BB-“, which is three notches into the
rating agency’s junk category.
Although DISH received the FCC
approval to deploy a nationwide wireless network, it came with a
restrictive condition. The FCC stated that DISH may start
installing its nationwide wireless network using a truncated power
level than what the company was initially holding. A reduction in
DISH’s frequency level is required to avoid interference with an
adjacent PCS H Block frequency that FCC will auction in 2013.
DISH’s plan for the wireless
spectrum is not yet clear. Management said it may try to
collaborate with several established telecom or tech companies to
jointly establish a wireless network or it may even sell its
airwaves for simple monetary gain. Recently, DISH decided to raise
$1 billion of debt for general corporate purposes, which may
include wireless and spectrum-related strategic transactions.
In Jan 2013, DISH offered to
purchase the remaining 49% stake of 4G WiMAX wholesalers
Clearwire Corp. (CLWR) for $3.30 per share. In Dec
2012, Sprint Nextel Corp. (S), the 51% shareholder
of Clearwire, proposed a $2.97 per share bid to acquire the
remaining 49% of Clearwire. DISH’s proposal has a total
consideration of $5.15 billion and includes several conditions.
DISH is the second largest
satellite TV operator in the U.S. after DIRECTV
Inc. (DTV). The pay-TV market is quickly becoming
saturated and is highly competitive. In order to diversify its
business model, DISH has decided to enter into the wireless market.
Currently, DISH 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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