As the coronavirus inflicts havoc on financial markets, it’s a big question mark as to whether Dish Network will be able to live up to its commitment to build a fourth nationwide wireless network under the timeline required by the U.S. government.
Dish is supposed to build a 5G network that covers 70% of the U.S. population by June 2023, and it needs the capital to do that. In today’s COVID-19 environment, it’s unknown where that money is going to come from – although Dish continues to remain steadfast in its plans.
T-Mobile closed its merger with Sprint seemingly in the nick of time, as it wasn’t sure it would be able to do so if banks could not provide the bridge financing beyond April 1. That was the situation for T-Mobile, an established player in wireless, while Dish is just beginning to build a network after years of amassing spectrum.
The New York Post earlier reported that Dish founder Charlie Ergen’s plans to build the country's fourth nationwide wireless network by 2023 were being thrown into doubt, quoting a source saying there is no financing to build a telecom network.
But the report also cited those who believe two months of severe market uncertainty doesn’t change the company’s ability to execute on a three-year plan. Dish has estimated the cost of building a network at $10 billion, a far lower amount than some analysts are forecasting.
Dish recently revealed it was laying off an undisclosed number of technicians who perform services in consumers' homes. A spokesperson declined to comment on Dish’s wireless network buildout plans, but in a statement emailed to employees, Dish CEO Erik Carlson said the company is being strategic and optimistic about opportunities in the days ahead. “We are committed to entering the wireless business, bringing full, standalone 5G to America, and delivering unparalleled innovation that will benefit U.S. consumers,” he stated.
Before it builds a network, as part of the government’s approval of the T-Mobile/Sprint deal, Dish is acquiring Sprint’s prepaid business, led by the Boost Mobile brand. The plan is for Dish to operate the prepaid business and use T-Mobile’s network under an MVNO arrangement while it builds its own greenfield 5G network.
In a note for investors today, MoffettNathanson analyst Craig Moffett spelled out the reasoning for cutting his target price on Dish shares from $30 to $15, saying that Dish’s entry into the prepaid wireless business would have been challenging even under the best of circumstances. But adding prepaid is “but a footnote” to the larger questions at Dish, and that's the same as it’s always been: “Is building a de novo wireless network a positive NPV project?” he wrote. "To be fair, we've never thought so. But it will be even harder now."
No company will escape the current crisis unscathed, Moffett added. But Dish’s subscription satellite TV business – one that involves airing sports that aren’t happening during the pandemic – has always positioned itself as Pay TV’s budget option, and a prepaid wireless business that caters to urban lower-income folks – will face a particularly challenging path, he said.
Alternatively, analysts at New Street Research distributed a report for investors over the weekend saying that while the Boost business has lost subscribers in the last few quarters, they expect the business to return to growth under Dish’s management, and that business will be helped by a shift from postpaid to prepaid as consumers look to cut costs.
Moffett noted that his firm never included a full network buildout in its model for Dish. "And we're still not building it in. We simply don't have enough information about what they will build or when they will built it," he wrote.
A lot of unknowns
“Everything is up in the air right now,” said Iain Gillott, founder and president of iGR. “We just don’t know. I’m not sure they do. Does any business know what the future holds right now? I don’t think any business can say for sure what the world is going to look like at the end of this year. Certainly not Dish.”
Dish faces penalties if it doesn’t use the spectrum licensed by the FCC to build out a network by certain deadlines. “I think they’ve got a pretty good case to go back to the FCC to say, ‘hey, we’re not going to make our buildout requirements because of COVID-19,” Gillott told FierceWireless “I think it’s pretty reasonable to expect that they’d get a delay in their buildout requirements.”
Between its satellite TV business, wireless prepaid and building a 5G network, Dish obviously has a lot to consider during the craziest of times.
“There’s a lot of balls in the air that they need to juggle in all different sectors of their business or emerging businesses,” said Bill Ho, principal at 556 Ventures. “There’s a lot of challenges.”