Dish Network’s fourth quarter 2019 earnings call was timed nicely following Judge Victor Marrero’s decision last week in favor of the T-Mobile purchase of Sprint. Dish President and CEO Erik Carlson said on yesterday’s earnings call the decision “for us is a key step forward as we look to acquire Boost Mobile from Sprint and activate the MVNO agreement with T-Mobile.” Dish will pay $1.4 billion for Boost and then operate the MVNO on the new T-Mobile network, comprised of both T-Mobile’s and Sprint’s combined networks.
Carlson noted that there are still a few loose ends that have to be tied, specifically the California Public Utility Commission must approve the deal. But he said Dish has teams working with Boost to ensure a smooth transition for Boost’s employees, retail partners and customers.
One of the first questions Dish Chairman Charlie Ergen was asked on the earnings call was essentially “Who is your mystery partner?” Ergen replied: “The short answer is you're not going to get a lot of information on particular partnerships and all that during the call, which you guys always want, but you'll know whenever it’s best for you to know.”
Ergen did give some interesting hints though, saying that Dish is looking at strategic partnerships in a number of ways, and not all of those are financial. “Where the infrastructure's good, so we don't have to build it” then it would make sense to strike a partnership with “somebody who has got infrastructure things in place,” said Ergen.
Editor’s Corner: Who is Dish’s mystery partner?
Which companies have infrastructure already in place? Ergen didn’t specify, but cable companies, ILECs and utility companies all have a lot of existing vertical infrastructure that could be leveraged, including cable strands and utility poles. And the big cloud providers — such as Amazon, Microsoft and Google — have data centers and extensive fiber connections, which make them almost like telecommunications networks in their own way.
All eyes on capex
The telecommunications ecosystem is anxiously waiting for Dish to start investing in its new 5G network. But Dish won’t be spending billions in 2020. Dish CFO Paul Orban said, “Our 2020 wireless expenditures are currently expected to be between $250 million and $500 million.”
Dish EVP and General Counsel Timothy Messner laid out the company’s four most immediate priorities. He said the top priority is “to integrate the Boost business so we're operational day one.” The second focus is to finalize the architecture of the network. Dish has been very public about its plans to create a virtualized network using O-RAN standards. Chief Network Officer Marc Rouanne has been leading the charge on the network architecture for about four months.
Messner said the third area of focus is to move into contract finalization with key vendors. The company has issued five RFPs to date. And Messner said it’s working with “various sets of vendors” in multiple labs around the country to narrow down its final list of vendors.
Finally, Messner said the company’s fourth priority is to plan network deployments. “We want to start deploying later in 2020. We're very cognizant of the FCC obligations that we've made,” he said.
In terms of its deployment plans, Ergen said the towers that T-Mobile will decommission as part of the deal “are a big part of things that we're going to need,” and “T-Mobile is not allowed to squat on the towers.”
According to the final judgement in the T-Mobile, Sprint deal, T-Mobile shall make at least 20,000 decommissioned cell sites available to Dish over the next five years. In addition, analyst Craig Moffett with MoffettNathanson writes, “Dish’s wireless network vision appears to call for something like 50,000 macro cells, at an implied cost of around $250,000 each.”
If Dish moves quickly on its tower build-out that would certainly make the tower players happy.
However, in a note to investors Wells Fargo analyst Jennifer Fritzsche wrote, “We heard from several contacts who had met with Dish that the company was having a bit of sticker shock in seeing some of the vendor pricing coming back." Fritzsche didn't specify which vendors she was referring to. But she added, "One of the most interesting contacts noted this to me when asked about Dish’s RFP: ‘Currently our customer base is paying far beyond our submitted pricing to Dish and their targets are even lower than that....if needed we can revisit, should our current work slowdown, which I don't anticipate.’"
Dish CEO Carlson said, “The first thing we're doing is our planning and making sure we get our towers in the permitting. And so there's not a lot to build this year because…we've got to get those permits in zoning.” He said that with the T-Mobile MVNO deal Dish can start offering wireless service via Boost almost immediately. And the company has a lot of flexibility to build its own 5G network until 2022 when it’s promised to cover 20% of the U.S. population with its wireless service. “I think what you're going to see is the capex being a pretty steady run rate sometime next year, but it's not very big this year,” said Carlson.