Dish 'materially improves' spectrum value by designating AWS-4 for downlinks, pushing Band 70 approval

Dish Network (NASDAQ: DISH) opted to designate all 40 MHz of its AWS-4 spectrum for downlink operations in a move that's sure to boost the value of those airwaves. And in a surprising announcement, the satellite TV operator said it expects that by the end of the month the 3GPP will approve Band 70, which will combine unpaired AWS-3, AWS-4 and H Block airwaves "into a single efficient spectrum plan."

Band 70 comprises Dish's current AWS-4 spectrum (2000 MHz to 2020 MHz), its H Block downlink spectrum (1995 MHz to 2000 MHz), and unpaired AWS-3 uplink spectrum (1695 MHz to 1710 MHz). The 3GPP agreed to the specifications last week; formal approval will enable the development of devices and infrastructure supporting Band 70.

"Consumer trends clearly support the efficient combination of different spectrum blocks into a single, asymmetric band," said Tom Cullen, Dish's executive vice president of corporate development, in the company's announcement. "Moreover, our AWS-4 election leads to a better coexistence with the adjacent downlink PCS operations. We're pleased with the working group level completion of Band 70 as these standards efforts are a necessary step in developing the ecosystem."

Walter Piecyk of BTIG Research said designating AWS-4 as downlink spectrum was an unsurprising move that "materially improves the usability and value of that spectrum" as carriers increasingly view mid-band airwaves as key to adding capacity. And formal approval of Band 70, which wasn't expected until later this year, enables Dish to divvy up its spectrum assets for sale once the incentive auction of 600 MHz is complete, which could occur in just a few months.

"By pairing what was auctioned as uplink-only spectrum with its excess downlink spectrum, Dish has materially increased the usability of that spectrum and therefore its value. Dish was uniquely positioned to execute on this plan based on its existing assets. While the process was lengthy, it will have tangible benefits to the industry as spectrum previously thought of as unusable can now play a critical role in providing additional wireless data capacity," Piecyk wrote in a research note. "We believe this spectrum can fully utilize densified wireless networks, including small cells, a benefit that low band spectrum does not share."

The value of Dish's spectrum remains unclear, however. New Street Research analysts said in April that the airwaves appear to be undervalued, observing that "spectrum hasn't traded this low since the VZ/SpectrumCo deal in 2011 and even at the time that seemed like a steal."

Verizon, AT&T and T-Mobile are "possible and interested buyers" for Dish's spectrum, Piecyk continued, and the airwaves could conceivably be used by a player such as Comcast, Google or Facebook. Dish executives have sought to partner with or acquire an existing wireless carrier to leverage its airwaves, according to BTIG, and could secure a deal by the end of the year if the FCC's ongoing incentive auction ends as anticipated.

"In as little as three months and likely not longer than six, Dish will be able to re-engage in strategic discussions because of the conclusion of the incentive auction," Piecyk wrote. "The official banding of its spectrum and lack of sizable spectrum alternatives leaves few if any hurdles for Dish. We believe investors should own the stock before that happens."

For more:
- see this Dish press release
- read BTIG's research note

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