Dish Network enters dangerous financial orbit - Reuters

NEW YORK, July 31 (Reuters Breakingviews) - When money is cheap, it’s easy to be optimistic about assets with dwindling or no cash flow. Near-zero interest rates inspired some to buy art or bitcoin. Billionaire Charlie Ergen staked Dish Network’s (DISH.O) future on wireless spectrum, a decision looking worse by the day.

The satellite operator has spent some $25 billion since 2008 acquiring the finite resource used to carry data. Its balance sheet now bulges with about $21 billion of debt; $5 billion of it comes due in 2024 and 2025, according to Refinitiv. Refinancing costs will add up quickly with interest rates higher. In January, Dish issued $1.5 billion of senior notes, secured by spectrum, with an 11.75% coupon.

The $4 billion company’s cash is flowing in the wrong direction, too. It’s projected to burn around $1.6 billion of it this year, based on estimates gathered by Refinitiv, and revenue has been declining nearly 10% annually as TV customers flee. Selling equity might be a possibility, but the shares have lost nearly half their value since January.

Although Dish may be in worse shape than many, it is hardly alone. U.S. companies hold $2.6 trillion of debt that matures between 2023 and 2025, per Morgan Stanley analysts. Moreover, if earnings growth remains flat, interest coverage ratios could fall to 4.5 times by year-end after having slipped 20% since 2021 to below historical averages.

Recombining Dish with EchoStar(SATS.O), which it spun off in 2019, is one option, Semafor reported earlier this month. Ergen controls both companies and could borrow more against EchoStar assets. With just $600 million in EBITDA, however, the amount that could be raised would only be a stopgap measure.

Alternatively, Dish could seek users for its bandwidth. It has built a network covering 70% of the U.S. population. It must expand further by 2025, or face $2 billion in government fines and possible spectrum forfeiture. The capital expenditure involved might run to $3 billion, based on New Street Research analysis. Hawking cheap cellular plans on Amazon.com(AMZN.O) may be a first step. Competing with larger AT&T (T.N), which has delivered shareholders a 3% loss including reinvested dividends over the past decade, would be foolish, however.

Selling airwaves is a better option. The problem is that prices are variable with few buyers and infrequent deals. Moreover, roughly 40% of Dish’s stockpile cannot be sold until 2027. Offloading the rest for what it paid would yield $19 billion, according to MoffettNathanson. That would buy some time, but little else.

Follow @rob_cyran on X

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

CONTEXT NEWS

Dish Network said on July 25 it had partnered with Amazon.com to sell wireless service to the e-commerce giant’s Prime subscribers for $25 a month for unlimited talk, text and data for life.

The satellite operator said on July 17 that its 5G network covered nearly three-quarters of the U.S. population. The U.S. Federal Communications Commission required the company to reach 70% by June. Dish must meet additional thresholds in 2025 or it could face up to $2.2 billion in fines and might be forced to forfeit wireless spectrum.

Editing by Jeffrey Goldfarb and Sharon Lam

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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