COVID-19, Not Funding Dish 5G Buildout, ‘Keeping Us Up At Night,’ Says Ergen
Dish Network doesn’t have a “funding need today” to fulfill its eventual goal of raising and spending $10 billion for building out 5G, said Chairman Charlie Ergen on a Q1 investor call Thursday (hear the call here). “We’re not standing still. That $10 billion now is $9 billion, because we raised a billion dollars of equity.”
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The “funding part” of 5G is “not the thing that’s keeping us up at night,” said Ergen. The “potential for the COVID crisis” to worsen, “that probably does keep us up,” because that’s the big “unknown,” he said. “Where it is today, we feel like we can manage through that.”
The $10 billion 5G investment plan "essentially gets us to scale nationwide coverage,” said Ergen. It’s to build a network “that can be competitive,” he said. He conceded Dish hasn’t done a good job “articulating” those goals: “I think people think it’s $10 billion just to get to the milestones for the FCC, but it’s really beyond that.”
When Ergen looks back on where Dish stood a year ago, “this has been one of the most productive years” since he entered the satellite TV business with EchoStar in 1980, he said. “A year ago, we were building a narrowband IoT network, which wasn’t exactly what we wanted. It certainly wasn’t what the FCC wanted because it wasn’t going to move the needle in how people communicate in the United States.”
Now, Dish is “building a broadband network that will be the envy of the world,” said Ergen. It will be “open-architecture” and cloud-based, and compatible with global open radio access network (O-RAN) specifications (see 2002190048), he said. “We’re aligned” with the FCC, executive branch and both chambers of Congress, he said.
Ergen thinks Dish now is “materially better off, and materially less risky, than it was before,” he said. “We now know that O-RAN is real. It’s not pie in the sky. We know there’s vast support in the United States and around the world for it.” The only way the U.S. is “going to be better” than the Chinese on 5G is to “out-innovate” them, he said.
A quarter after being asked to identify potential 5G vendor partners, Dish still feels no “urgency” to do so, said Tom Cullen, executive vice president-corporate development. “If anything, the momentum around O-RAN has vastly accelerated in the last quarter.” That will broadly expand the potential pool of partners, he said.
The company’s three “swing lanes” of 5G activity are preparing for the Boost prepaid wireless “integration,” completing the design of its 5G network architecture and building a 5G “deployment plan,” said Cullen. Once Dish is able to demonstrate "what a virtualized network can do, we think that’s a better time to attract third-party interest,” he said. Ergen insisted there's lots of interest already.
Dish stands by its previous forecast of spending $250 million-$500 million this year on its 5G network buildout, said Cullen. Its more conservative fiscal strategy amid the pandemic likely will bring 5G spending closer to the lower end of that range, he said.
Through the Boost acquisition from Sprint, Dish was “thrust into the retail business in a way we didn’t expect,” said Ergen. “We have to prepare for competing against three pretty entrenched incumbents.” Ergen thinks the Dish retail business “will just be a slice of our network,” he said. “We got a cherry on top we didn’t think we were going to get, so we didn’t have plans for it.”
Dish still hopes to launch at least one 5G trial market by year-end, “and I believe we will do that,” said Ergen. “We also expect that a year from now, we’ll be in the postpaid business.” Prepaid is “not nearly as good a business” as postpaid, he said.
Dish TV subscribers shrank to 11.3 million in Q1 from 12.06 million a year earlier. Net subscriber losses in the quarter grew to 413,000 from 259,000. The satellite business reduced net sub losses by roughly half to 132,000 from 266,000, but the 281,000 Sling TV net subscriber losses compared unfavorably with the 7,000 net subscriber adds in Q1 2019.
The long-term satellite TV strategy at Dish has been “anchored” on acquiring and retaining “long-term profitable customers,” with the focus on a “more rural” and credit-worthy subscriber base, said CEO Erik Carlson. “We remain committed to that path.”
Sling TV’s downward swing in Q1 to more than a quarter-million net customer losses was “certainly disappointing,” said Carlson. Losing live sports to the pandemic in late March dealt Sling a big blow, as did the competitive impact from Netflix, Disney+ and other advertising-free streaming services that thrived as the U.S. went into lockdown, he said.