The real reason: Early results of a government auction of wireless spectrum came in much stronger than expected Tuesday evening. The government is holding an auction of advanced wireless services (AWS) spectrum used by wireless operators for voice and data services.
The likes of AT&T and Verizon remain hungry for spectrum to offer faster, more extensive coverage as customers continue to strain capacity with data usage. Those companies are likely bidding in the auction and Dish is participating as well.
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The news is positive for Dish because it owns a large block of spectrum itself that it may eventually license or sell. Over the last few years, Ergen has accumulated a large block of spectrum that can easily be used for mobile services. Analysts say Dish holds some of the most valuable spectrum left—worth more per unit than what's up for sale in the current auction.
Indeed, Dish's spectrum has become the sole major focus point for investors as the company's core business has softened. Thanks to weak subscriber growth and rising equipment costs, analysts expect a 1.5 percent decline in Dish's earnings before interest, taxes, depreciation and amortization in 2014.
It's hard to get excited about the pay-TV business, particularly as more customers watch video over the Internet through services like Netflix. The company is also embroiled in a dispute with CBS over paying the company fees to air its top-rated network. If a deal isn't reached, CBS could fall off of Dish's channel menu in coming days. Dish did not respond to a request for comment and CBS did not immediately respond to a request for comment.
Analysts are divided on how much the spectrum is worth, but demand in the auction suggests the bulls have been right. Based on the current auction prices, Dish's spectrum is worth $18.6 billion or $40 per share on an after-tax basis, according to Wells Fargo analyst Marci Ryvicker.
Ryvicker believes that auction prices will continue to rise before it finishes a few weeks from now, possibly exceeding her current estimate of $54 per share for Dish's spectrum. If her estimate is correct, it accounts for the majority of Dish's current share price of $74 per share.