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Is DISH Network Eyeing Wireless Joint Venture with Amazon?

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According to recent news by The Wall Street Journal, leading satellite TV operator DISH Network Corp. is considering a joint venture (JV) with online retailing giant Amazon.com Inc. (AMZN - Free Report) . With the JV, the company aims to install an Internet-of-Thing (IoT) centric wireless network. However, the news magazine has cautioned that no agreement is imminent. Also, neither side has confirmed the news.

In the last one decade, DISH Network has developed an extremely strong portfolio of lucrative wireless spectrums which are still unutilized. The company spent nearly $21 billion to build this spectrum portfolio, which, according to some estimates, is currently valued at no less than $45 billion. In Mar 2017, the company announced plans to build a narrowband IoT (NB-IoT) network to meet the FCC’s (Federal Communications Commission) buildout requirements.

Positives for DISH Network

As far as the deployment of spectrum is concerned, DISH Network must achieve 40% signal coverage on the 700 MHz E-Block licenses it purchased in 2008 by the end of Jul 2017, or reach a 70% buildout by Mar 2020 to meet the FCC’s stipulated rule. The same rule is applied to all licenses that the company acquired in the AWS-4 band. Notably, in the just concluded 600 MHz low band Incentive Auction, it bought 18 MHz of spectrum spending a little over $6.2 billion and acquired 486 licenses.

Therefore a partnership with Amazon will provide the much needed money to install 5G wireless network which will target the massive untapped potential of IoT. Further, the company can also leverage this network to offer internet TV (Sling TV of DISH Network), phone and broadband services.

Positives for Amazon

Amazon is primarily an internet-based logistics company. It also dominates information warehousing and distribution through its cloud computing infrastructure. However, the company lags communications network close to end users. DISH Network’s wireless network can solve this problem. A wireless network will be very much helpful for Amazon’s delivery drones which management plans to deploy in the future.

Amazon offers an online video streaming service call Prime. The company can also leverage wireless network to offer online TV streaming and phone services through a high-speed network.

Wireless Competition Intensifying

The U.S. wireless market is becoming intensely competitive day-by-day. In addition to four national wireless operators, cable MSOs (multi service operator) -- Comcast Corp. (CMCSA - Free Report) and Charter Communications Inc. (CHTR - Free Report) -- have decided to enter the fray this year. Both these companies have MVNO (mobile virtual network operator) agreement with Verizon Communications Inc. (VZ - Free Report) . Moreover, these two cable MSOs have formed a partnership to strengthen their wireless operations. Recently, Sprint Corp. (S - Free Report) is reported to be considering an agreement with this partnership.

Price Performance of DISH Network

The last six months have brought mixed fortune to DISH Network’s investors. During this period, the stock returned 9.44%, lagging the Zacks categorized Cable TV industry’s gain of 11.66%. Moreover, cable TV industry is facing a massive cord-cutting threat from low-cost online streaming service providers. We believe that these are the primary reasons for the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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