DISH Network Is Hoping to Join the Communication Services Big League
Over the last several months, the merger between telecoms T-Mobile US (NASDAQ: TMUS) and Sprint (NYSE: S) has been inching along through a variety of legal hurdles. Several state attorneys general are still arguing in court that the merger should be blocked, as it would further consolidate power in the industry, reducing competition and potentially hurting consumers. A federal judge will likely rule on the case in the next few weeks.
The most affected investors are likely those holding Sprint stock (which has seen a price fall of some 40% over the last six months). But the biggest winner of the deal may actually be DISH Network (NASDAQ: DISH). As part of the merger agreement, Sprint's prepaid business and some wireless spectrum will be sold to DISH. By taking over Sprint's assets, DISH will be in a good position to expand from a media-content provider into a diversified provider of media and telecom services, in the same league as AT&T.
While still uncertain, signs point to the merger between T-Mobile and Sprint eventually going through. When that happens, DISH will effectively catapult itself from a satellite-TV provider operating in a slow-growth market into a diversified communications company competing as a major contender in the faster-growing national wireless market. Furthermore, DISH will be categorized not as a stock in the media and entertainment sector, but rather into a new, bigger, broader investing sector: communication services. This new classification, developed by investment outfits like MSCI and S&P Dow Jones, accounts for 10.4% of the S&P 500 (compared to 2.8% for telecom) and significantly opens up interest from deep-pocketed groups of interested investors. That's good news for DISH.
Source Fool.com
