During T-Mobile’s Q2 earnings call, T-Mobile CEO Mike Sievert mentioned an August 11 deadline for Dish Network to decide if it’s going to buy 800 MHz spectrum from T-Mobile.
But Dish referenced an August 30 deadline in its most recent 10-Q SEC filing, so investment analysts – who were on Dish’s conference call Tuesday to discuss its merger with EchoStar – understandably sought clarification.
As New Street Research (NSR) analysts noted in a report for investors, Dish Chairman Charlie Ergen seemed to say that there was no real deadline, as the parties could continue negotiating after the August 30 deadline mentioned in Dish’s 10-Q.
“I think as long as the parties are negotiating, I think things will remain open,” Ergen said during the Q&A. If it becomes clear to one or both of the parties that there’s no path forward, then negotiations would cease. “I can only say there are negotiations going on at the highest levels between the companies and neither company has come to a resolution on that."
Ergen also emphasized that Dish would in no way leverage Dish’s own balance sheet but didn’t go into detail as to how it would be financed. One of the big take-aways from the call about the EchoStar merger was the new combined company will only spend $2 billion in capex in 2024 and 2025, which includes the cost of meeting Dish’s 5G FCC buildout requirements.
Under an agreement in 2020, Dish has the option to purchase certain 800 MHz spectrum from T-Mobile for about $3.6 billion; the closing of any sale remains subject to FCC approval. Under certain conditions, if Dish doesn’t exercise the option to purchase the 800 MHz licenses, they eventually may be auctioned off.
But given Dish is financially constrained and already has spent some $30 billion on spectrum, why would Dish now entertain the option of obtaining more spectrum?
Ergen said Dish’s competitors have almost twice as much spectrum as Dish and low-band 800 MHz spectrum has coverage advantages, which helps with buildout costs. Plus, the 800 MHz spectrum is already in Dish radios so there wouldn’t be added costs there.
They do think spectrum is important. “We don’t think there’s a hard date … I think both sides are negotiating in good faith,” he said.
Interest in UScellular
Last week, UScellular’s parent company Telephone & Data Systems (TDS) signaled it’s ready to explore “strategic alternatives” for the wireless company. TDS owns 83% of UScellular, which has about 4.2 million customers and operations in rural parts of the U.S.
Asked about Dish’s interest in UScellular, Dish EVP Tom Cullen said it’s still new and there’s not a lot of information in the market yet as to the process.
However, given UScellular’s towers, spectrum position and presence in markets where Dish hasn’t fully built out, it’s something they’d be interested in looking at.
Retail wireless moves
Regarding its postpaid wireless business, Dish met its 5G network buildout deadline in June to cover 70% of the U.S. population, and executives on Tuesday’s call said it’s actually covering 73% of the population. As for 5G voice services, that’s another story.
Dish’s commercial 5G Voice over New Radio (VoNR) is now available in geographies that cover 75 million people, but there remain some constraints around compatible handsets, according John Swieringa, president and COO of Dish Wireless. It’s going to market with Samsung and Motorola devices and expects to expand the line-up next year. “So far, it’s going pretty well” with respect to the performance of those handsets on the network, he said.
Last month, Dish announced that it will start selling Boost Infinite, the postpaid version of its service, through Amazon Prime. Swieringa said the relationship with Amazon is a little different than the typical retail partnership in that Dish runs its core network on AWS, so as Dish adds customers, it’s of benefit to Amazon. “It’s early days” and Dish hopes to expand the relationship, he said.
Ergen also spoke to where the world is headed with artificial intelligence (AI). With AI, data and the processing of it becomes more important, and he gave a lot of credit to Chief Network Officer Marc Rouanne because he’s been talking about AI for years and designed Dish’s network in a way that is cloud native and provides an advantage to Dish.
“Our data is going to be in the cloud where you can now automate, analyze and do things that perhaps others can’t,” Ergen said. “We’re where the puck is going,” from an architectural point of view. Obviously, “we have to execute,” but AI is taking off faster than anticipated.
“We’re well positioned to take advantage” of the growth in data usage and ability to use it for AI, Ergen said.
Dish and EchoStar executives kept their comments during Tuesday’s call confined to the merger, but they also released Q2 results.
Analysts at MoffettNathanson said the merger with EchoStar gives Dish access to cash on hand of $1.7 billion, which might give Dish some additional headroom to borrow a little more. But the bigger story is Dish’s own cash generation capacity, and given the dire picture, EchoStar’s balance sheet is a Band-Aid and not a cure, they said.
“As has been the case for some time, every one of Dish’s businesses is hemorrhaging subscribers,” and with falling subscribers come falling revenues, wrote analyst Craig Moffett.
In the wireless segment, Dish lost 188,000 subscribers in Q2 and reported higher-than-expected churn of 4.54%, according to NSR. Wireless ARPU was $36.37 and retail wireless EBITDA losses were $59 million.