Dish Network could spend as little as $2.6 billion to launch a wireless network that meets the FCC’s build-out demands for its significant spectrum holdings, according to MoffettNathanson Research. And that would buy more time for the company to find a bidder for its airwaves.
Dish spent $6.2 billion to buy licenses during the auction of 600 MHz that wrapped up last month, far exceeding the expectations of most analysts. The company was already sitting on a significant portfolio of spectrum, and earlier this year it outlined plans to build an NB-IoT network to provide connectivity to a wide range of devices other than traditional tablets and smartphones.
Dish has until March 2020 to build a network using its spectrum to cover 70% of the areas in which it holds licenses, and some believe the FCC may extend that date. One major question, according to analysts, is whether Dish’s financial status forces its hand before the FCC’s mandate does.
Last year the company opted to designate all 40 MHz of its AWS-4 spectrum for downlink operations in a move that boosted the value of those airwaves. That move may enable Dish to meet the FCC’s build-out requirements with far fewer cell sites than it otherwise would have, Craig Moffett of MoffettNathanson wrote in a note to investors.
“Whether that was their intent or not, by re-designating their spectrum for downlink only, Dish was able to convert spectrum that would otherwise have been constrained to a coverage area of just six square miles to 77 square miles instead,” Moffett wrote. “In other words, by re-designating as downlink only, Dish would only need 1/13th the number of cell sites to cover the same area compared to before the spectrum’s reclassification.”
The company would need only 10,600 cell sites to meet the AWS-4 downlink build requirement alone, Moffett said, suggesting an initial investment of roughly $2.6 billion, or $250,000 per macrocell. It could use its 700 MHz spectrum to provide uplink, raising its overall initial cash outlay to $4 billion, and operating the network would cost nearly $800 million a year.
“That’s an enormous sum for a company that generates only about $2 billion of cash per year (and falling),” Moffett said. “And just because Dish is only on the hook for $4 billion in capex, and potentially another $800 million a year in opex, doesn’t mean that that is all they would need to spend to deploy a commercially viable network. One can, and probably should, think of the $2.6 billion to $4 billion in initial spending as the minimal required option payment required to buy Dish more time… to sell.”