Ahead of Dish Network’s fourth quarter earnings call Wednesday, analysts looked toward the operator’s planned 5G network build, which some think will cost far more than the satellite TV provider expects.
Since T-Mobile and Sprint’s merger deal was given the green light, Dish is set to enter the wireless market and committed to ultimately build a nationwide 5G network meant to compete with the likes of AT&T, Verizon and the New T-Mobile.
Related to the Department of Justice's T-Mobile/Sprint consent decree, Dish is starting out with Sprint’s prepaid business, including roughly 9 million Boost Mobile subscribers, and will initially operate under a seven-year MVNO agreement that allows new and existing customers to ride on T-Mobile’s network as Dish works on its own 5G network build.
Dish already has a spectrum portfolio worth roughly $22 billion, and it secured buildout timeline extensions from the FCC. It’s committed to deploy a 5G network covering 70% of the U.S. population by June 2023.
Dish has previously pegged the cost of building a new 5G network at $10 billion. In reporting Q4 results, the operator said it expects to spend between $250 million and $500 million on wireless capex in 2020.
However, analysts at MoffettNathanson remain skeptical about the total price tag and in a Wednesday research note said the firm still expects build-out costs to be considerably higher than Dish anticipates, noting virtualization will help reduce equipment costs, but those don’t account for the majority of network build costs.
“Equipment is only 20% or so of the cost of building a network,” wrote the team led by Craig Moffett. “The rest – labor, tower leases, powering, zoning and siting, and backhaul – doesn’t benefit from virtualization.”
In November, Dish Chairman Charlie Ergen said that its greenfield 5G build couldn’t be compared to that of existing providers as it would cost less than incumbents’ networks in part thanks to a virtualized, software-driven approach.
“The cost structure goes down,” he said at the time. “The vast majority of capex for the incumbents is not for 5G, it’s to maintain the legacy. We don’t have that cost going forward.”
Moffett on Wednesday morning wrote that AT&T and Verizon have each spent roughly $200 billion on building their respective networks over the last 10 years and have virtualized considerable portions, but still spend more on maintenance than Dish expects to spend on constructing a brand-new network.
The firm questioned Dish’s vision for 50,000 macro cells, indicating that the implied cost of $250,000 per cell site doesn’t sound as reasonable when other required costs like backhaul and power, among others, are considered.
“And where in the budget are the literally hundreds of thousands of boosters and small cells for airports and stadiums and shopping malls and other public buildings that are required for a competitive network experience?” Moffett questioned.
New Street Research, in a quick take before the earnings call, didn’t mention concerns over the price tag, but pointed to network cost reductions from a 5G-only build.
“Altogether, we think Dish is well positioned to disrupt the wireless marketplace, with incumbents Verizon and AT&T most at risk,” wrote the New Street team led by Jonathan Chaplin.
New Street said Dish’s plan for an all-5G network would drive a cost-per-gigabyte that is approximately 35-50% lower than wireless incumbents. “This should enable Dish to take meaningful share in wireless,” New Street continued.
When it comes to the expected $10 billion in capital, New Street said potential operating partners like tech or cable companies could “serve as sources of low-cost financing.”
Still, New Street expects financing and capital-raising efforts will be the third phase for Dish over the next 12-18 months, starting only after the near-term focus of network planning, followed by business plans and partnerships, are complete.
“We suspect that the company will seek to finalize vendors and perfect its network plan before moving ahead, as the network is the most important underlying component for the value creation opportunity,” wrote New Street.
New Street noted that Dish has already issued five RFPs for its network build that address end-to-end network elements, software, deployment services, physical network components and telecom transport.
While the firm is still in the midst of updating its analysis, New Street said it believes Dish’s network business is worth at least $45 billion, “irrespective of partners or financing plan,” and could be worth more than $100 billion over time.
Dish won’t need to start offloading wireless traffic on to its own network right away, but MoffettNathanson pointed out that support for the prepaid MVNO business will be immediate. The firm said that the Boost business is “shrinking rapidly” with increased churn and subscriber losses. Its distribution network has also been curtailed. As Jeff Moore of Wave7 Research explained in a recent FierceWireless article, Dish will need a retail strategy.
“Managing their soon-to-be inherited pre-paid business is going to be hard enough. But actually building a network, whether virtualized or not, will prove much harder,” wrote Moffett.