Dish Network on Monday made traction on its plans for a nationwide 5G network by inking its first major infrastructure agreement, in a long-term deal with Crown Castle to lease space on up to 20,000 towers.
Crown Castle is also providing fiber backhaul services for Dish as part of the multi-year anchor tenant macro tower deal. It also gives Dish the option to tap Crown Castle for pre-construction services, such as site engineering, zoning and permitting. Crown Castle has a small cell business as well, but small cells are not part of this agreement.
Dish declined to comment on financials or any additional terms of the deal.
Today’s news marks the first tower deal Dish has signed with one of the big three public tower companies as part of its commitment to be a fourth facilities-based nationwide wireless carrier. Dish’s greenfield wireless build plans call for a cloud-native standalone 5G network and an open radio access network (RAN) architecture.
Dish turned on its first trial site just a couple of weeks ago and expects construction beyond trials to begin in mid-2021.
Prioritizing Crown Castle
When recently asked on Dish’s third-quarter earnings call about network buildout, Chairman Charlie Ergen indicated he had tower contracts on his desk.
Public tower companies including Crown Castle and peers American Tower and SBA Communications have had their eyes on the potential impacts from Dish’s greenfield wireless build down the line.
In a Monday note to investors, analysts at New Street Research wrote they think the deal could imply Dish will prioritize Crown Castle’s towers wherever it can, potentially meaning Crown Castle scores a bigger portion of Dish’s cell site business.
Equity research analysts at Cowen also view the deal as incrementally positive for Crown Castle.
The deal “…appears to ensure that CCI will support a meaningful portion of DISH’s network buildout,” wrote the Cowen team Monday. Still, the firm thinks there will only be a limited impact on 2021 cash guidance because Dish’s network ramp isn’t expected until the second half of 2021.
As for value, Cowen said estimates from channel checks suggest Dish could pay $1,500 per tower per month (slightly lower for private tower cos and higher for public ones), equating to roughly $360 million annualized revenue opportunity for Crown Castle for 20,000 towers, not including fiber and network services. Still, they cautioned the actual number of towers “is likely to be less and roll in over multiple years.”
Dish has pegged the cost of its virtualized open RAN 5G network build at $10 billion.
In terms of Crown Castle as Dish’s first pick of public tower company partners, Cowen analysts noted that Crown Castle’s portfolio is more focused on urban areas, with higher populations where Dish is likely to build initially in order to meet population coverage targets. Crown also has its fiber transport business which Dish will need to connect sites and handle data.
“With this agreement, Dish can essentially ‘kill two birds with one stone’ by utilizing Crown’s fiber network for backhaul and other network needs…”, wrote Cowen analyst Greg Williams, also pointing to exploring a deeper relationship with Crown’s small cell and private network build capabilities.
View mixed for other tower companies
When it comes to the tower sector more broadly, analysts had slightly different takes.
New Street Research views the deal as a positive not only for Crown Castle, but for the tower sector overall.
“CCI accounts for 30% of the US tower market, which could suggest that Dish intends to build to 65,000 towers if Dish’s network build is evenly distributed across the tower companies,” wrote New Street analyst Spencer Kurn. That would be more than the 50,000 New Street had assumed for the early phase, the team noted, “so all of the Towers are likely better off than we initially expected.”
Cowen, meanwhile, thinks it's slightly negative for American Tower and SBA “given the potential size of the CCI deal when taking into consideration DISH’s limited needs the next few years.”
Stephen Bye, Dish EVP and chief commercial officer, said during Q3 earnings that Dish was on track to meet its stated target of at least 15,000 sites to hit its minimum buildout coverage requirement for June 2023. Dish is aiming to cover 70% of the U.S. population by mid-2023.
Along with needing only slightly more than 15,000 sites to hit 70% coverage, Cowen analysts attributed a slight negative for American Tower and SBA to “what we presume is a desire to work with as many privates as possible given what we believe would be slightly better pricing terms.”
As Light Reading reported, the FCC approved an order in September modifying Dish’s spectrum license buildout deadlines that allows some of Dish’s broader coverage targets to be extended if the provider hits 50% of the population by that time.
Dish has made a suite of vendor announcements, including Fujitsu for radios, Nokia for its core network, Mavenir and Altiostar for software, VMware and others. However, Cowen sees the tower deal with Crown as Dish’s first major spending commitment on its capital target of $10 billion.
“All said, the agreement is another step in the right direction for Dish and expect the stock to work further on build execution proof points,” wrote Cowen’s Williams.