As the coronavirus continues to flip our world upside down and seemingly brought every business to a grinding halt. There’s one major quandary regarding the future of DISH Network, will they be able to hold up their end of the bargain to build out a 5G network by 2023 as required by the U.S. government?
In today’s COVID-19 environment, it’s unknown how DISH is going to get the money to build out its 5G network. As the new fourth-largest nationwide wireless network, DISH promised to build out a 5G network that would cover 70% of the population by 2023. Ambitious even before the pandemic started, many are wondering how it’s going to happen- though DISH continues to move forward with their plans. They’ve spent years accumulating real estate on the spectrum in preparation for becoming a new carrier. The merger with Sprint and T-Mobile was finalized right on time because it wasn’t clear if the banks could provide the bridge financing by April 1st.
There have been some doubts as to whether they could get the job done. The New York Post reported that a source noted that there was no financing to build the promised telecom network and that Charlie Ergen’s plans were being questioned. DISH estimated it will cost about $10 billion to build out its 5G network, but some analysts believe that number is a bit too low. However, it’s worth noting that the report also said that although this pandemic does throw a curveball into their short-term plans, it has no effects over their three-year goal.
As it’s no surprise to some, that no company has been immune to the financial stress the pandemic has created, even DISH Network. The Denver-based business recently revealed that they laid off an unknown number of technicians. DISH CEO Erik Carlson said in a statement emailed out to employees that despite the setbacks, the company remains confident regarding their future. Carlon’s email read, “We are committed to entering the wireless business, bringing full, standalone 5G to America, and delivering unparalleled innovation that will benefit U.S. consumers.”
Until they build their own greenfield 5G network, DISH in the meantime will be operating T-Mobile’s prepaid business led by Boost Mobile using T-Mobile’s network under a MVNO deal per the merger agreement.
MoffettNathanson analyst Craig Moffett recently explained why he halved his target price on DISH shares from $30-$15, noting that even under the best of circumstances DISH’s takeover of the prepaid business was not going to be an easy feat. Moffett said, “Is building a de novo wireless network a positive NPV project?” He then went on to say, “To be fair, we’ve never thought so. But it will be even harder now.”
DISH will face several challenges according to Moffett, including DISH’s satellite TV business that promotes sports channels that aren’t even showing sports during the pandemic. Moffett noted that DISH is usually seen as the budget-friendly TV option and that a prepaid business whose customer base is mostly low-income urban customers will create a very difficult path forward for the company.
On a brighter note, Boost business has been losing customers for years, and New Street Research believes that the prepaid business will flourish under DISH’s management. A shift to prepaid from postpaid consumers will help eliminate any additional costs.
Moffett isn’t saying DISH can’t do it, he’s just noted that his firm never included DISH’s 5G network buildout in their model. He wrote, “And we’re still not building it in. We simply don’t have enough information about what they will build or when they will build it.”
The future is uncertain, and that’s one thing for sure. Iain Gilliot, founder and president of iGR recently said, “Everything is up in the air right now.” He went on to say, “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 will have to pay hefty penalties if they don’t have their promised 5G network by 2023. Gilliot recently told FierceWireless, “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,” he continued, “I think it’s pretty reasonable to expect that they’d get a delay in their buildout requirements.”
It’s clear that DISH has a lot to balance right now, between their established satellite TV business, a new acquisition of a prepaid business and the massive undertaking of building out a functional 5G network. Bill Ho, principal of 556 Ventures recently said, “There’s a lot of balls in the air that they need to juggle in all different sectors of their business or emerging businesses,” and continued, “There’s a lot of challenges.”