How Dish Could Be Verizon Acquisition Target

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Includes: DISH, VZ
by: Trefis

Given some of the recent developments in the telecom market, we look at how Dish Network (NASDAQ:DISH) might be a candidate for acquisition from Verizon’s (NYSE:VZ) perspective. Dish’s shares have jumped in the past due to a similar rumor which involved AT&T (NYSE:T). [1] But given that AT&T chose to acquire T-Mobile, we feel that Dish might be a candidate for Verizon.

Our price estimate for Dish Network’s stock stands at $27.77 which is roughly a premium of 15% to the market price.

Verizon could get spectrum and cross marketing opportunity

According to the data provided by AT&T, the spectrum holdings per subscriber (Mhz per million subs) for AT&T stood at 0.86, the least among the major U.S. wireless carriers. Verizon stood at second last. [2] What this means is that after AT&T’s deal with T-Mobile goes through, Verizon will probably be the one with least spectrum holdings per subscriber. Verizon would definitely like to have more spectrum at its disposal to support future data traffic. An acquisition of Dish Network could provide it just that. Dish’s recently announced acquisition of DBSD gives it access to broadband spectrum which some believe that the company could potentially use to build out a wireless network that supports data and voice (that’s in case Verizon doesn’t acquires Dish). Additionally, Dish is getting DBSD for cheap [3]

Apart from Spectrum, Dish Network’s customer base will prove Verizon an opportunity for marketing its own voice services. The company could even offer its mobile voice service bundled with Dish’s pay-TV service to gain more subscribers. But why doesn’t Verizon do that with its own pay-TV service FiOS? Dish Network has a much broader footprint and its satellite-TV technology virtually gives it a country-wide coverage which FiOS doesn’t have.

Chart created using Trefis' app

However, just last week Dish picked up Blockbuster’s assets at auction. Given that both DBSD and Blockbuster are going through bankruptcy, their assets might seem less attractive on the surface. It all comes down to whether Verizon sees the long-term opportunity here or not.

See our full analysis for Dish Network’s stock.

Notes:

  1. Dish Jumps After Credit Suisse Says AT&T May Bid for Satellite-TV Company, Bloomberg, Feb 11 2011
  2. http://www.mobilizeeverything.com
  3. Dish Network Poised to Land DBSD for $1 Billion, The New York Times DealBook, Feb 1 2011

Disclosure: No positions