Dish Network’s (DISH) wireless business is currently in the making, as cord cutting has hit US satellite pay-TV providers harder than their cable counterparts. The company shed 266,000 subscribers, and DIRECTV shed 543,000 subscribers in the first quarter. Therefore, the two leading satellite pay-TV providers lost 810,000 subscribers combined during the first quarter.

In contrast, the top US cable TV providers lost significantly fewer subscribers, according to data from Leichtman Research. The country’s top six cable pay-TV companies, including Comcast (CMCSA), lost fewer than 350,000 subscribers combined in the first quarter.

Dish’s Wireless Endeavor Is Facing Headwinds

DIRECTV is a unit of AT&T (T), a conglomerate that has diversified its operations. AT&T sells broadband and owns WarnerMedia and its collection of media businesses, including CNN. AT&T is also one of the top wireless companies in the US. Generally, AT&T has tried to be everything to every household in the country from an entertainment and communications standpoint. However, the same cannot be said of Dish, whose business is mainly selling satellite pay-TV services. As a result, Dish is more vulnerable to the shrinking pay-TV market.

According to data from eMarketer, cord cutting will continue in the US. The number of American adults that stopped purchasing traditional pay-TV subscriptions stood at 33 million in 2018. This number is on track to top 55 million by the end of 2023.

Dish is pursuing a wireless deal with T-Mobile

Dish appears to have learned its lesson from its many years of relying on the single business of selling pay-TV subscriptions. It’s now keen to diversify. The company is discussing the purchase of certain assets from T-Mobile (TMUS) and Sprint (S). The assets will allow Dish to venture into selling wireless phone services in addition to its core satellite pay-TV business. T-Mobile and Sprint are seeking to merge their operations, and they want to divest certain assets to secure regulatory approval. T-Mobile and Sprint have earmarked the Boost prepaid business and some spectrum for sale.

Dish was building its own wireless network even before the opening to purchase the wireless assets from T-Mobile and Sprint. However, the purchase of those wireless assets should help accelerate Dish’s entry into the business of selling wireless phone services and allow it to open a new revenue stream quickly.

Dish’s Wireless Endeavor Is Facing Headwinds

Continued weakness in the traditional pay-TV market has seen Dish’s revenue shrink recently. Dish saw its first-quarter revenue fall to $3.2 billion from $3.5 billion a year ago. The company’s profit fell to $340 million in the first quarter from $368 million in the previous year’s quarter.

Purchasing the wireless assets that T-Mobile and Sprint want to divest could also help Dish avoid penalties. Dish has built a massive portfolio of wireless spectrum. Regulators want Dish to put the spectrum to use soon or risk having some of it taken away. Losing even part of its spectrum would be a huge blow to Dish. The company has invested heavily in spectrum, spending over $20 billion on spectrum purchases, according to the Wall Street Journal.

Therefore, a deal with T-Mobile would provide a quick opening for Dish to put its spectrum to use and avoid penalties.

Support for Dish’s bid for divested T-Mobile and Sprint assets

Last month, Bloomberg reported that purchasing the assets T-Mobile and Sprint divest would cost Dish around $6.0 billion. However, Dish doesn’t have much in its bank account. The company finished the first quarter with just $1.6 billion in its cash reserve.

Still, a shortage of funds is unlikely to stop Dish from purchasing the assets T-Mobile and Sprint have agreed to sell. Apollo Global Management is willing to provide Dish with financial backing for the purchase of T-Mobile’s and Sprint’s wireless assets, Reuters reported. The New York Post also reported that Google (GOOGL) had explored teaming up with Dish to purchase the assets. However, a Google spokesman later denied that the company had been in talks with Dish about backing its wireless acquisition bid.

Google is also into the wireless business through its Google Fi unit, which sells phone services. The Google Fi service runs on networks rented from several mobile network operators, including T-Mobile, Sprint, and US Cellular.

While funding may not be a deal-breaker for Dish, disagreements over ownership restrictions may. According to a report from the Wall Street Journal, T-Mobile is seeking to somewhat clip Dish’s wireless wings. T-Mobile and its parent Deutsche Telekom want to block Dish from bringing a major investor into its wireless venture.

Particularly, T-Mobile and Deutsche Telekom want to include conditions in their sale agreement that would prevent Dish from selling a large stake in its wireless business to a cable or technology company such as Google. Cable companies Comcast and Charter Communications have ventured into providing wireless phone services. Altice USA is also gearing up to join them. Joining forces with a tech company such as Google or a cable provider such as Comcast could make Dish a stronger competitor. A stronger Dish wireless business could limit the benefits T-Mobile and Sprint may be anticipating from the merger.

Dish boasts 12 million potential wireless customers

T-Mobile and Sprint want to join forces so they can better compete with market leaders such as AT&T. They’ve pledged to invest $40 billion in expanding and upgrading their networks. 5G deployment is at the center of the network upgrade.

Dish has over 12 million pay-TV customers, providing it with a massive ready market for its wireless service when it launches.

Dish’s Wireless Endeavor Is Facing Headwinds

Dish’s quest to become a more diversified company goes beyond venturing into the wireless phone business. The company has also joined the pursuit of subscription video dollars. Dish’s online TV service, SlingTV, is steadily gaining ground. SlingTV had over 2.4 million subscribers at the end of the first quarter compared to 2.3 million a year earlier. SlingTV is also doing better than its rival DIRECTV NOW from AT&T. DIRECTV NOW had 1.5 million subscribers in the first quarter after losing 83,000 subscribers in the period.

The market for online video services is booming. The global streaming video market was worth $36.6 billion in 2018. Grand View Research expects it to jump to $124.6 billion by the end of 2025. The top providers in this market include Netflix (NFLX) and Hulu, a joint venture of the Walt Disney Company and Comcast. Netflix finished the second quarter with 151.6 million subscribers worldwide and more than 60 million subscribers in the US. Hulu has 26.8 million paying subscribers in the US.

Like AT&T, Dish now also wants to be everything for every household’s entertainment and communications needs.

Dish spruces up its executive team

As Dish works to diversify its business, including its wireless venture, the company is also firming up its executive team. This month, it named Paul W. Orban as its CFO. Orban is a 23-year veteran of DISH who has served in various roles in the company’s finance department. CEO Erik Carlson said that Orban has been an outstanding leader at the company.

Dish shares are up 63% year-to-date as of July 17, as investors have welcomed its business-diversification efforts.

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