Risk, Reward Balance DISH

We reiterate our Neutral recommendation on DISH Network Corp. (DISH - Analyst Report) following its mixed financial results in the third quarter of 2012. Although the revenue fell below the Zacks Consensus Estimate, net income topped the same. Blockbuster movies streaming services, better overall pay-TV services, and growing customer loyalty helped the company to improve its net income. DISH Network is continuously improving its technically superior hardware, the latest of which is a HD DVR set. This new device will enable the subscribers to automatically skip all advertisements for the prime time TV programs.

On the other hand, the recent proposal of the FCC to allow DISH Network to establish a wireless network with limited power is a major setback as it was trying to become a unique bundled service provider of wireless voice and data together with a state-of-the-art video distribution network. The company has spent over $2.9 billion to purchase wireless spectrums and altogether it has spent more than $4 billion till now to pursue its wireless broadband ambitions.

Nevertheless, we believe the FCC Proposal may become a long-term positive for DISH Network. The company still enjoys the opportunity to collaborate with several established telecom or tech companies to jointly establish a wireless network or may just sell its airwaves for monetary gain. Google Inc. (GOOG - Analyst Report) is already negotiating with DISH Network for a specialized wireless network using DISH Network’s spectrum, while AT&T Inc. (T - Analyst Report) and DIRECTV Inc. (DTV - Analyst Report) may look to buy those airwaves.

At present, DISH Network is exploring its opportunities in the over-the-top TV streaming segment. The company is also negotiating with several media companies, including Viacom Inc. (VIAB - Analyst Report), Scripps Networks Interactive Inc. (SNI - Analyst Report), and Univision Communications Inc. regarding online TV services.