Whereas Dish Network’s last quarterly conference call was all about whether it was going to meet its June 14 deadline for building out its 5G network, its latest call was more about the pace at which it’s going meet 2023 and 2025 deadlines.
The next milestone Dish faces is covering 70% of the U.S. population by June 2023. After that comes the really big challenge of covering 75% of the population in each of about 400 or so Partial Economic Areas (PEAs) by mid-2025.
How it’s getting there is slow and steady, according to executives on Wednesday’s conference call to discuss second quarter financial results. But in the near term, they’ve also got some big challenges to overcome if they’re ever going to make money in wireless.
Dish has 5,000 sites deployed and on air for its 5G standalone (SA), open Radio Access Network (RAN) network. It’s on pace to roll out about 1,000 sites a month, and it will continue on that track throughout this year and into next year, said Dave Mayo, EVP of Network Development. The goal is to be on 15,000 towers next year.
In terms of quality, “I think we’re pretty happy with the data experience,” he said. “I think we continue to have work to do on the VoNR experience, as does the rest of the industry. We’re not unique in that respect.”
VoLTE took some time to get it working when it was initially rolled out about 10 years ago, and at that time, carriers had the circuit-switched system to fall back on. With 5G, the end game is to have a Voice over New Radio (VoNR) network.
“We don’t have that but we will have a VoNR network that is standalone and will operate well,” he said. “We’ll launch VoNR when we have that capability fully optimized and available and working really well for our customers. We’ve got the MVNO deals [with T-Mobile and AT&T] to support us until we get to that point.”
Dish had to make a choice as to whether it wanted to put a lot of legacy gear into its network for voice and decided to go with the better technology of VoNR, said Dish co-founder and Chairman Charlie Ergen. “That has been an unexpected negative in the sense that has taken longer” than expected.
So far, T-Mobile and Dish are the farthest along on VoNR, although T-Mobile is in only two markets and “obviously we’re in over 100 markets with it,” he said. “But it is not good enough, in my opinion, for the customer experience that you have to have in voice. It is hampering our ability to put users on our network unless they’re data users. We’re a lot more of a data-centric network” for the time being, he said.
On the positive side, the addition of Samsung as a vendor in the most recent quarter with true open RAN was a big plus, according to Ergen. It offers another provider of radios, so Dish doesn’t have to rely on Fujitsu as the single source.
Samsung is also a large device manufacturer and it’s very attuned to the needs of Band 70 and VoNR, two of Dish’s pain points right now. In addition, it’s taken some of the system integration work off of Dish’s shoulders. “That was a huge positive for us,” he said.
Dish is on track to get Band 70, which is spectrum unique to Dish, in devices with a broad range of manufacturers; devices will start shipping in the third quarter and Dish will start distributing them in the fourth quarter, said John Swieringa, president and COO of Dish Wireless.
Having Band 70 plus VoNR is important, Swieringa said. There are some Band 70 devices that exist today, but they haven’t quite gotten to the VoNR certification yet. “So we really need to get both of those things right and we’ll be bringing those devices in,” starting with an expanded Android line-up later this year, he said.
In June, Dish and T-Mobile announced that they had agreed to new terms of their master network services agreement, which resulted in Dish paying lower MVNO rates to T-Mobile to use its network, retroactive to January 22, 2022. That came as the two were resolving their dispute over the CDMA network shutdown.
On Wednesday, Ergen described the previous relationship with T-Mobile as unhealthy and that has now become a healthy one. The CDMA shutdown was a huge negative; “our phones were jammed with people about upgrades and why did they lose their service. Our marketing money had to go to convert people and now our marketing money gets to go to new customers. When we talk to people on the phone, it’s about becoming a customer and not about how their phone is going to be shut off,” he said.
Yay or nay
Some analysts still don’t have much faith in Dish’s business plans. In a report for investors on Wednesday, MoffettNathanson analysts noted their target price for Dish shares of $18, which, they explained, is based on “an admittedly subjective approach to the salvage value of Dish’s spectrum in the event of a bankruptcy (which we view as the most likely outcome for their wireless business.)” Dish shares were up about 3% today, trading around $18.80.
Dish is in need of capital – there’s no debate around that. The company has $1.5 billion of debt coming due in March of next year and while the markets are “choppy” and more expensive than they’d like, Ergen said, they’ll continue to monitor for the right strategy. Ergen wasn’t specific on how it will raise the capital.
One way Dish could raise money is to offer its spectrum as collateral, noted MoffettNathanson’s Craig Moffett. Offering a lien against Dish’s spectrum would seem “a relatively easy solution to Dish’s financing conundrum… but equity investors would likely not be pleased,” he wrote.
However, Moffett said Dish’s increasingly urgent need for capital isn’t the only issue. “The fundamental problem here is that Dish doesn’t appear to have a compelling way to make money in wireless,” Moffett said. Dish’s 5G core, open RAN-native wireless network would offer benefits to enterprise customers, but management hasn’t presented a convincing case as to why an enterprise would choose to put mission-critical applications on Dish’s network over, say, Verizon’s or T-Mobile’s, he said.
On the more positive side for Dish, analysts at New Street Research (NSR) are bullish on Dish on the view it will have a lower cost for wireless capacity than the incumbents. In the past, they’ve argued that Dish would be worth well over $100/share over time, selling capacity at prices below Verizon’s cost.
“We think the unit cost thesis is intact,” wrote Jonathan Chaplin in an August 3 note about Dish.
The market’s doubts about Dish’s ability to complete its build or even continue operation have soared over the course of the year, he said, noting the NSR analysts understand their concerns; the company needs to raise fresh capital amidst a tightening of financial conditions.
“We nevertheless think the credit and equity reflect higher odds of bankruptcy than is warranted. Moreover, we believe there is likely to be compelling upside in Dish even in the event of failure, creating an attractively asymmetric risk/reward for the patient investor with a stomach for volatility,” Chaplin wrote.
On the earnings call, Ergen left no doubt about where he stands. “We're going to get our network built… We're going to become a Fortune 100 company. And that means we're twice as big and twice as profitable as we are today,” he said. “I don't have timeline on that, wish that was tomorrow, but that's where we're headed.”