“The bottom line is that we now see bankruptcy in the next four to six months as the most likely outcome,” said Craig Moffett, a senior managing director at MoffettNathanson. Moffett issued his bleak assessment of DISH last week following the company’s first quarter earnings report.
Six months ago, DISH Network merged with EchoStar (NASDAQ: SATS) to gain access to EchoStar’s balance sheet and borrowing capacity in what analysts, Moffett included, saw as a desperate move to stave off bankruptcy. At the time, DISH’s leverage ratio was a whopping 10.8x EBITDA. Just six months later, the new business is in even worse straits, according to Moffett.
During the earning’s call, Paul Orban, EchoStar’s CFO and EVP, said there was an “urgent need” to address $2 billion in maturing debt by November 24. The company had already paid out $1 billion in available cash in March. Orban said the company was looking at various funding sources due to the lack of projected cash flows and sufficient cash on hand to support operations.
Moffett said being just over three years out from 2021’s C-band auction, where Verizon (NYSE: VZ), AT&T (NYSE: T), and T-Mobile (NASDAQ: TMUS) collectively spent more than $80 billion before clearing costs, new 5G services haven’t generated very much in the way of new revenues.
“And there, ladies and gentlemen, is your list of potential buyers,” Moffett said.
He cited the 3.45 GHz auction that followed a year later, another $23 billion for another 100 MHz of spectrum, has left Verizon paying a total interest expense of $6.0 billion per year. AT&T is levered at 4.5x EBITDA and incurs interest expense of $6.7 billion per year. T-Mobile carries leverage of 3.4x EBITDA and pays $3.4 billion in annual interest. All have either promised or hinted that share repurchases are in the offing, according to Moffett.
“What spectrum bands does EchoStar own,” Moffett said, “and what do past auction comps say those bands are worth? That’s been done. Over and over and over again. No one would quibble with the assertion that EchoStar’s spectrum is enormously valuable. But how valuable?”
By Jim Fryer, Inside Towers Managing Editor
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