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We reiterate our long-term Neutral recommendation on DISH Network Corp. (DISH - Analyst Report) backed by the company’smixed financial results for the fourth quarter of 2012. Although net income fell below the Zacks Consensus Estimate, revenue topped the same.

Why Keeping at Neutral?

DISH Network is transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider to reduce its subscriber churn rate. The company is focused on increasing distribution of the highly rated DVR and HD equipment, as value addditions to drive subscriber growth and retention.

We believe management’s decision to raise investments in technically advanced equipment will sustain the company’s future growth. Better pay-TV service, dishNET satellite broadband service and growing customer loyalty helped the company to improve its top line.

Nevertheless, following last year’s 32.4% stock price growth, we are apprehensive of restricted market gain in the near term. Hence, we see the DISH Network shares as currently fairly valued.

Risk/Reward Virtually Balanced

Last October, DISH Network launched a nationwide satellite-based broadband service called “dishNET” using a satellite of EchoStar Corp. (SATS - Snapshot Report). The company also provides satellite Internet service using the network of  ViaSat Inc. (VSAT - Snapshot Report) in certain parts of the U.S., the West Coast in particular. The newly deployed nationwide Satellite broadband covers around 2 million people with a starting speed of 5 Mbps.

Although DISH Network received the FCC approval to deploy a nationwide wireless network, it came with a restrictive condition. The FCC said that DISH Network may start installing its nationwide wireless network using a truncated power level than what the company was initially holding.

A reduction in DISH Network’s frequency level is required to avoid interference with an adjacent frequency that FCC will auction in 2013. Sprint Nextel Corp. (S - Analyst Report) is desperately eyeing this frequency for its proposed expansion of the  LTE network. The FCC proposal will reduce DISH Network’s power and emission levels to establish a profitable venture in the wireless market.

However, we believe the FCC nod to DISH Network for the use of its 40 MHz airwaves to deploy a nationwide wireless network with limited power may become a long-term positive for the company.

Although this truncated deal may force management to abandon its decision to build a wireless broadband network, DISH Network still enjoys the opportunity to collaborate with several established telecom or tech companies to jointly establish a wireless network. It may even sell its airwaves for monetary gain.

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