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Are DISH Network’s High Debt Levels a Concern?

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The reason for more debt

DISH Network (DISH) ended 3Q17 with long-term debt of $15.1 billion against $15.5 billion at the end of 2016. In the last five years, the company’s debt levels have increased considerably at a CAGR (compound annual growth rate) of 8%, driven by higher investments in spectrum assets.

At the end of the first nine months of 2017, DISH incurred capital expenditure of $324 million against $470 million in the same period last year. Higher programming costs forced the company to maintain lower capital expenditure.

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However, the company continues to spend heavily on spectrum licenses. Since 2008, it has spent nearly $11 billion to acquire wireless spectrum licenses. It has also invested more than $10 billion in a non-controlling stake of other companies’ spectrum assets. In the second quarter of 2017, it made the remaining payment of $4.7 billion on 486 wireless spectrum licenses of 600 MHz (megahertz) capacity for its subsidiary ParkerB.com Wireless.

The company has also set a target for its 5G (fifth-generation) network deployment. It has notified the FCC (Federal Communications Commission) that it will be focusing more on the narrowband IoT (Internet of Things). The company believes that the initial phase of the network rollout will be over by March 2020.

In order to compete with big players such as AT&T (T) and Verizon (VZ), DISH expects that it may require more wireless spectrum licenses. That means it could further drive up its debt levels going forward.

Peer analysis

Pay-TV operators Comcast (CMCSA) and Charter (CHTR) ended 3Q17 with long-term debts of $59 billion and $66 billion, respectively, with debt-to-equity ratios of 1.17x and 1.54x, respectively, compared to DISH’s ratio of 2.94x. That clearly suggests that the satellite operator is largely dependent on debt as a source of financing.

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