Dish Will Turn Eyes to Wireless, After AT&T-DirecTV Strands It at Pay-TV Dance

Dish Network chairman Charlie Ergen is the odd man out at the M&A poker table, and the only big cards he’s left holding point to a future play in wireless.

With AT&T’s proposed $67 billion bid for DirecTV, Dish “loses both of its best exit options,” MoffettNathanson senior analyst Craig Moffett said in a note. “Dish Network just lost its game of musical chairs.” The analyst downgraded his rating on Dish to “sell,” maintaining a price target of $47 per share.

Dish shares were down about 3% in Monday morning trading, after opening down 1.7% at $58.92 per share.

Analysts see a takeout of Dish by the last big player in the telecom space — Verizon Communications — as unlikely. “If (Verizon) doesn’t acquire Dish (and we don’t think it does), then this leaves (T-Mobile) or (Sprint) as Dish’s only options,” Oppenheimer & Co. analyst Tim Horan wrote in a research note.

SEE ALSO: AT&T, DirecTV Deal Details Emerge as CEOs Sell Merger Benefits

But Dish’s options in wireless are narrowing, too. With the upcoming FCC auction for AWS-3 spectrum, “Dish’s spectrum doesn’t feel like a must-have for anyone right now,” Moffett said.

On Dish’s May 8 earning calls, Ergen acknowledged that “we don’t have the kind of money to go outbid Sprint for T-Mobile.” He said that if Sprint didn’t pursue T-Mobile or the deal was denied, “then T-Mobile would have strategic interest to us, yes.”

In its core TV business, Dish’s growth is plateauing and it will face two far bigger rivals in Comcast-Time Warner Cable and AT&T-DirecTV (assuming those deals pass regulatory muster).

Dish has a hedge against future declines in subscribers with its planned over-the-top TV service. Dish earlier this spring cut a deal with Disney for OTT rights to five networks, including ESPN, and Ergen claimed the satcaster has enough programmers on board to launch a viable Internet TV service by the end of the year.

SEE ALSO: Dish’s Ergen Says Satcaster Has Critical Mass of OTT Deals, Eyes Launch by End of 2014

However, even Ergen isn’t sure whether Dish can make money on the offering, with a $20-$30 monthly price point targeted at younger consumers who aren’t interested in traditional pay-TV.

“OTT is not going to move the needle this year for anybody. It’s probably not going to move the needle next year,” Ergen said. “It’s a precursor to where we think the industry is going.”

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  1. Reblogged this on Beverly Hills Biz and commented:
    AT&T made a smart move to buy DirectTV even if it is expensive it will pay big time in the long run. DirectTV is the only significant provider left within 20 miles of where I live in Los Angeles and Comcast has already shown what they can do when the Clipper game got cut off in all of Los Angeles two weeks ago with only ONE MINUTE remaining… I hope AT&T Pushes through and is able to service the same areas as time warner cable because as of right now I’m forced to be with TMW since they are the ONLY service provider on my “street” .

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