Analyst Disses DISH Network’s Sustainability

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DISH Network is sitting on the proverbial short end of the stick as the coronavirus outbreak has the potential to upend its financial stability, according to one market analyst. MoffettNathanson’s Craig Moffett cautioned Tuesday, “Even in the best of times, the prepaid business is a high-churn business. But with a customer base that skews urban, with lower credit, and with lower income, the current crisis seems almost certain to cause churn to spike higher as unemployment rises.”

DISH’s prepaid brands are tied closely to the T-Mobile/Sprint deal and DISH’s acquisition of Sprint’s Boost Mobile and Virgin Mobile. With the T-Mobile/Sprint deal now closed, DISH is expected to move forward as the 4th carrier while using T-Mobile’s network as it builds out its own infrastructure. 

Last year, DISH Chairman Charlie Ergen negotiated with the Department of Justice and FCC to give him two more years to build a 5G network, Inside Towers reported. As part of the agreement, DISH must build a 5G network that covers 20 percent of the country by June 2022, and 70 percent of the U.S. population by June 2023. If it doesn’t, DISH will have to pay the U.S. Treasury as much as $2.2 billion.

The prepaid portion of DISH’s business isn’t the only concern Moffett has about the company’s financial stability. According to Market Watch, DISH’s satellite business is also at risk as unemployment continues to rise and sporting events are cancelled indefinitely. “Some anxious Dish satellite customers may abandon their subscriptions,” said Moffett. According to Moffett, cross-selling satellite and prepaid wireless plans is an unlikely solution since many satellite subscribers live in rural areas and prepaid wireless subscribers are typically in urban areas.

Moffett cut his price target for DISH from $30 to $15 after factoring in the company’s debt levels, saying that it was “preposterously levered” at 4.4 times trailing earnings before interest, taxes, depreciation and amortization as of the end of 2019. According to Market Watch, Moffett anticipates the company’s leverage ratio will increase further when the deal for the prepaid brands formally closes – “all [of] that’s before spending a penny on building a wireless network.”

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