A Data Breach and System Outage Adds Yet Another Challenge for Dish

The systems outage that has hit Dish Network DISH over the past several weeks has created yet another challenge for the firm. We’ve cut our fair value estimate to $19 from $31, leaving the shares still significantly undervalued, but the ability to realize value from Dish’s impressive spectrum holdings remains highly uncertain.

The outage, which resulted from a cyberattack and data breach in late February, has immediate financial repercussions as Dish remediates the situation and deals with any resulting fines. For context, T-Mobile agreed to pay $500 million to cover fines and technology investments following a customer data breach in 2021. In addition, with systems at limited functionality for going on a month, the television business will likely take a direct hit, and management’s attention is diverted from wireless network deployment.

On the other hand, this event could push Dish to finally throw in the towel on—or substantially modify—its wireless effort. The current financial climate has hit the firm hard. Bonds secured by its spectrum holdings were issued in November and January with an 11.75% coupon and currently yield more than 13%, highlighting the market’s lack of confidence. We expect Dish will burn more than $2.5 billion during 2023, roughly equal to cash on hand after repaying a debt maturity earlier this month. The firm will clearly need to raise capital later this year to meet debt maturities in 2024 and fund network spending, to say nothing of the $3.6 billion T-Mobile spectrum purchase option it may like to exercise.

At least one of the major U.S. wireless carriers would likely be interested in further solidifying its spectrum position, while several cable companies are still trying to determine their long-term wireless ambitions. With far more spectrum than it needs for the foreseeable future, Dish should have options to raise cash and demonstrate the value of its spectrum holdings. The question is whether chairman Charlie Ergen will acquiesce.