Shares of Dish Network (NASDAQ: DISH) dropped this morning after the company posted a disappointing quarter including a $516 million expense related to the FCC's October denial of $3.33 billion in credits to two of its affiliates in the recent auction of AWS-3 spectrum.

But investors and analysts are still trying to determine just how much its current spectrum holdings are worth, and what it plans to do with them.

Dish holds an average of 75 MHz of spectrum nationwide, as Evercore ISI pointed out in a research note, and is positioned to add to those assets in the upcoming incentive auction of broadcast spectrum. But the satellite TV company's plans for the airwaves it has spent years compiling are as murky as ever, analysts noted. Long-time rumors of partnerships with existing carriers have yet to be realized, and building its own network from the ground up is a daunting -- and massively costly -- challenge. And while many have speculated that Dish is sitting on its spectrum while the value of that spectrum grows, investors' valuations of the licenses have decreased in recent months.

"After 3Q15 results we made the call to own Dish into the auction on the view that Verizon was likely to at least explore a transaction with Dish ahead of the auction; there was tremendous upside if a deal was consummated, and little downside if no deal occurred," New Street Research said in a note following this morning's earnings. "At that point Dish's mid-band spectrum was being valued at $1.18/MHz-POP. We were clearly wrong about the limited downside; today the mid-band portfolio is being valued at just $0.80/MHz-POP."

New Street estimated the current value of Dish's spectrum portfolio is just 30 percent of the value paid for comparable spectrum in last year's AWS-3 auction, and only 16 percent higher than the 69 cents MHz-POP Verizon paid for SpectrumCo's AWS spectrum licenses in 2011 (which, the firm noted, "everyone thought was a steal at the time").

"We are about to have an auction for less valuable spectrum where we think 70-100 MHz of spectrum could sell for (roughly) $1.50/MHz-POP," the firm continues. "Verizon has said repeatedly that they would ascribe higher value to Dish's mid-band spectrum than to the 600 MHz spectrum to be auctioned. It is difficult to question the intrinsic value of the spectrum with the industry about to spend at least $33B and potentially as much as $47B on less valuable spectrum."

But investors today seemed much more concerned about Dish's full-year pay-TV subscriber losses of 81,000 for 2015. As analyst firm MoffettNathanson points out, that implies Dish lost 12,000 pay-TV customers during the fourth quarter, better than Wall Street's consensus that Dish would lose 24,000 subscribers.

The details get murky once again, though, as Dish continues to lump Sling TV subscriber numbers in with its total pay-TV metrics, making it difficult to discern how the company's two businesses are performing.

Using calculations involving Dish's subscriber acquisition costs for 2015 and the operator's churn and total gross additions, MoffettNathanson estimates Dish added 220,000 Sling TV customers during the quarter. That shows healthy growth for the OTT platform but it also implies that Dish's core TV platform lost a staggering 223,000 subscribers in the fourth quarter. The analyst firm said in a research report that, if those numbers are accurate, it would make for the worst fourth quarter Dish has ever had in terms of traditional pay-TV subscribers, and during a historically favorable quarter for pay-TV in general.

"That comes on the heels of their worst Q3 ever, by the way," MoffettNathanson said.

"All of this matters because the next step for Dish isn't likely to be an outright sale or lease of spectrum, it's likely to be a separation or spin-off of Dish's spectrum holdings from its core business," MoffettNathanson said. And given Dish's struggling TV audience, the company "may embark upon a value-destroying wireless build-out or acquisition strategy, causing substantial direct financial losses as well as a radical de-rating of the stock as the company's spectrum holdings are negatively revalued by investors."

For more:

- see this FierceCable article

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