With Dish’s commitment to enter the wireless market as a new facilities-based fourth national carrier, its planned 5G network build is a positive for tower companies, some analysts say, though perhaps not a major boon in the near-term.
Although the deal is not done yet, the U.S. Department of Justice on Friday officially blessed the $26.5 billion merger of T-Mobile and Sprint with a deal that includes divestitures aimed at setting Dish up as a nationwide competitor. A lawsuit previously filed by a group of state attorneys general to block the merger must still be resolved.
As part of the settlement, Dish has agreed to pay $1.4 billion for Sprint’s prepaid businesses including Boost Mobile, and $3.6 billion for 14 MHz of Sprint’s 800 MHz spectrum. The company also has access to the merged company’s network for seven years via an MVNO agreement, as Dish builds its own network.
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Dish has committed to deploying a nationwide 5G network that covers at least 70% of the U.S. population by June 2023 (though if it hits a 50% benchmark in that time, an automatic 2-year buildout extension is guaranteed).
“DISH will therefore be very active over the next ~4 years leasing up new macro towers to meet that requirement, while it utilizes the TMUS MVNO in the interim,” wrote Wells Fargo Senior Analyst Jennifer Fritzsche in a Sunday note to investors.
Dish also committed to deploying at least 15,000 5G cell sites by June 2023, though MoffettNathanson Senior Analyst Craig Moffett noted it’s too soon to know just how many sites Dish will need to hit its coverage requirements.
“While an imperfect comparison given they did not own national spectrum portfolios, we would note that MetroPCS and Leap Wireless together covered about two thirds of the US population with about 22K cell sites when they were still standalone companies (high single-digit penetration of covered POPs, no low-band spectrum),” wrote Moffett in a Friday blog post.
Moffett noted Crown Castle could see an incremental benefit among the big three tower companies because its portfolio skews toward more urban markets – areas Moffett said Dish is likely to focus initial network investment given prepaid customers tend to populate more urban regions. The company’s small cell business could see a slight benefit as well, while leasing activity for American Tower and SBA “could be somewhat laggard,” according to Moffett.
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The Dish deal also provides the option to assume leases on up to 20,000 cell sites for five years that the New T-Mobile plans to decommission. Analysts had different takes on the impact of this, with Fritzsche calling it a “major positive,” but Moffett not viewing it “as very meaningful for the Towers one way or another.”
Still, Fritzsche indicated it does lessen the positive impact towers may have otherwise seen from new builds.
“While this is a positive and lessens the looming churn risk the towers faced as S (Sprint) sites would be decommissioned, it also lessens the "manna from heaven" impact of bringing in a new carrier (DISH) that would have a Greenfield tower build,” wrote Fritzsche.
Before the deal, Dish was scurrying to build a narrowband IoT (NB-IoT) network in order to meet a March 2020 FCC-imposed deadline to use its spectrum licenses or risk losing them. With that deadline looking like it will likely be pushed back and a requirement for 5G imposed, Dish’s Charlie Ergen recently confirmed that if approved, work on the NB-IoT network would be put on hold.
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Both Fritzsche and Moffett noted that in the near-term, towers who were currently benefiting from Dish’s NB-IoT work could feel a slight near-term impact, or as Moffett said a modest ding on “tower growth rates” from the pause.
Dish’s MVNO agreement also allows it to stagger or delay network investment, Moffett noted, and he thinks Dish will try to get more favorable terms through deals with private tower companies.
“While Dish’s commitment to enter as a facilities-based player is a clear positive for the Towers, it is not a simple ‘replacement’ for Sprint,” wrote Moffett.
In a Friday SEC filing, American Tower provided some business information in light of the DoJ’s decision on Sprint and T-Mobile’s tie up.
For first quarter, T-Mobile accounted for about 10% of American Tower’s property revenues, while Sprint made up 8%.
On sites where both companies had separate leases for antenna space, revenue generated from each T-Mobile and Sprint represented about 4% of American Towers consolidated property revenues.
American Tower said the average remaining non-cancellable current term of the leases closest to expiration on these sites is between two and three years.
American Tower is holding its second-quarter earnings call Wednesday morning, while Dish scheduled its Q2 earnings call for Monday afternoon.