Spectrum Auction Drives Shares in Dish Up 20%

The $37 billion-and-counting AWS-3 spectrum auction has boosted Dish Network stock to new highs and fueled speculation that the satellite-TV provider could be on the hunt for a wireless partner — probably T-Mobile USA.

Through 32 rounds, the AWS- 3 auction had generated bids of about $37 billion, more than triple the $10.6 billion reserve the government had established in advance.

The auction was expected to set a valuation floor for Dish’s own substantial wireless assets. And it has done so, helping the stock gain 20% since the auction began Nov. 13. Dish shares have been shattering all-time highs, including their Nov. 24 closing price of $76.05.

That makes the stock more valuable as deal currency — which could very well be used to make a run at T-Mobile, Elevation Partners analyst Stephen Sweeney said. He was one of several analysts who increased their 12-month price targets on Dish; his estimate rose to $100 per share from $82.

Pivotal Research Group principal and senior media and communications analyst Jeff Wlodarczak boosted his Dish target to $102 per share from $78.

The rise is all about spectrum value. Dish’s market capitalization was about $35 billion last Tuesday, while groups such as New Street Research were valuing Dish spectrum at more than $40 billion.

Making a play for T-Mobile has long been an option. Chairman Charles Ergen said back in September that Sprint’s decision to reconsider an expected bid for T-Mobile presented Dish with more “optionality.”

As the No. 4 U.S. wireless player, T-Mobile has had other suitors. Since an announced $39 billion merger with AT&T was rejected in 2011 by regulators as being anti-competitive, Sprint and French telco Iliad have kicked the wireless company’s tires, to no avail.

Dish’s hand has improved since then, partly because of the stock price increase and partly because there’s little regulatory threat associated with a combined Dish and T-Mobile. A purchase would not reduce the number of wireless players and would arguably make the fourth player stronger.

Regardless of what Dish decides to do — buy, sell or partner — Sweeney said he sees several possible options, including accumulating even more spectrum when it becomes available in the next auction, slated for 2016.

“Either way, the auction results are very positive for Dish and we think they have given Ergen maximum flexibility,” Sweeney said.