Judge Victor Marrero’s approval of the T-Mobile/Sprint merger set in motion a series of steps for DISH Network to establish itself at the fourth national wireless carrier, as stipulated by the U.S. Department of Justice (DOJ).
In its 4Q19 earnings call, DISH updated its wireless implementation plan. First step is to acquire Sprint’s 9.3 million prepaid businesses and customers, including Boost Mobile, Virgin Mobile and the Sprint-branded prepaid service for $1.4 billion. The deal includes access to the New T-Mobile (NTM) network for seven years, including the ability to serve DISH customers seamlessly between NTM’s nationwide network and DISH’s new independent 5G broadband network.
DISH will suspend work on its narrowband IoT build.
Subject to contingencies and commitments, DISH can pay $3.6 billion for 14 MHz of Sprint’s 800 MHz spectrum that adds to DISH’s significant holdings in low-band 600 MHz along with Lower 700 MHz E block and mid-band 2 GHz AWS 4 and AWS H Block spectrum.
After the prepaid business acquisition, DISH has a year to start offering nationwide postpaid retail mobile wireless service. The company claims it can build a greenfield 5G network faster and cheaper by utilizing virtualized radio access network (RAN) and core network elements. Keep in mind a ‘virtualized’ network still involves tens of thousands of cell sites with radios and antennas that are programmable. DISH must still identify its partners but a number of very capable infrastructure vendors are ready to step up. Besides access to 800 MHz spectrum, DISH will acquire infrastructure assets from both T-Mobile and Sprint. In return, it may lease a portion of its 600 MHz to NTM.
How much will it all cost and how will DISH pay for it?
The company’s 2020 wireless capex guidance is $250 to 500 million as it continues to lay the groundwork for 5G. Overall, DISH has committed $10 billion to build the 5G network. As the fourth national carrier, however, DISH is going head-to-head with AT&T Mobility, Verizon Wireless and now NTM that each spend $8-10 billion every year to build and upgrade their existing networks.
It is important to note that DISH’s financial performance has been waning for the past five years. Total revenues declined at more than 4 percent a year to $12.8 billion at year-end 2019, and Pay TV subscribers declined at 3.6 percent a year, now down to 12 million. Its market cap has dropped nearly 12 percent a year since 2015, to a current $21 billion.
Bankers are willing to underwrite the $10 billion although that figure might be the low end of the capex range needed to build a nationwide 5G network. DISH Chairman Charlie Egen, as the largest shareholder, may be compelled to reduce his holdings to raise more money.
The bigger question is: Can DISH marshal sufficient contractor resources to get the job done? Anecdotes from contractors who responded to DISH’s Deployment Services RFP suggest they are not willing to accept DISH’s low cost targets, especially now that contractors can command higher rates in view of the shortage of qualified field technicians to install macrocells and small cells. This is a problem. Dish must build a 5G network that covers 20 percent of the country by June 2022, and 70 percent of the U.S. population by June 2023, or pay the U.S. Treasury as much as $2.2 billion.
But don’t underestimate Mr. Egen and his band of intrepid entrepreneurs. They once disrupted the entrenched cable TV industry with satellite TV and aim to repeat such success in the public wireless business. Details of their 5G rollout plan will unfold in the coming weeks. It should be a fun ride – fasten your seat belts!
By John Celentano, Inside Towers Business Editor