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4G/3G/WiFi

Dish buys Ting, scores mobile management deal with Tucows

Dish Network purchased roughly 154,000 more mobile subscribers from Tucows, an Internet technology and service provider that operates the Ting Mobile MVNO. But the heart of the companies' agreement involves a Mobile Services Enabler (MSE) deal that will eventually see Dish move its entire MVNO operation onto Tucows's mobile platform.

The first stage of the companies' transaction calls for Dish to purchase Tucows's Ting Mobile-branded retail MVNO. That postpaid operation counted 154,000 mobile subscribers using 272,000 mobile devices in its most recent quarter, generating roughly $20 million in revenue in the period.

Dish plans to continue to operate the business and to retain the Ting brand.

As part of the sale of its Ting brand, Tucows said it would pivot into the mobile "enabler" business. Meaning, it will provide functions including billing, activation, provisioning and marketing to other mobile providers; Dish will be Tucows's first customer for that enabler business.

Further, Dish is set to expand its use of Tucows's platform dramatically. According to a Tucows representative, Dish will move the 9 million Boost Mobile customers it purchased from T-Mobile onto Tucows's platform in the second half of 2021.

The companies didn't disclose the financial terms of their agreement. However, a representative from Ting said that "there is no consideration at close. Instead, Tucows will receive a fair value earnout for the life of the Ting Mobile subscribers."

The representative added that Dish would pay Tucows a monthly fee for Tucows's MSE services.

An MVNO business worth $160 million
A Dish representative didn't immediately answer questions from Light Reading on topics including whether Dish would retain the Boost and Ting brands separately for the long term. However, the deal appears to position Dish to focus most of its efforts in wireless on the construction of a nationwide 5G network.

"Dish is likely bringing in Tucows to help manage aspects of the retail wireless business so that management can focus more time and resources on the far more important development of the network and the wholesale wireless business that will ride on it," wrote the analysts at New Street Research in a note to investors immediately following Dish and Tucows's announcement.

"We wouldn't ascribe much value to the ~270K subscribers that Dish is acquiring from Tucows," the analysts continued. "The subscribers carry ARPU [average monthly revenue per user] of $37, gross margins of 60%, subscriber acquisition costs of below $100, and churn of ~3.25%. We estimate these characteristics would support a customer lifetime value of $583, or a valuation of nearly $160MM for all of the subs; however, the subscriber base has been declining, reaching 4% declines in 1Q20, so this valuation may be optimistic."

Verizon MVNO drama
Tucows first entered the wireless industry in 2012 with an MVNO piggybacking on the Sprint network. The company in 2014 expanded to also using T-Mobile's network.

However, Ting has recently faced some difficulties in the MVNO sector. The company announced in the summer of 2019 that it would shift its MVNO business away from Sprint and T-Mobile thanks to a new deal with Verizon. But it appears that effort ended up providing Ting with better MVNO rates from T-Mobile because earlier this year, the company added T-Mobile back to its MVNO roster in addition to Verizon.

In its most recent quarterly filing with the SEC, Tucows said that it cut almost $1 million from its quarterly expenses in large part due to "reduced minimum commitment charges with network operators." The company didn't provide details – MVNOs and wireless network operators generally do not discuss the details of their financial relationships – but Tucows's CEO Elliot Noss said in May that T-Mobile gave Tucows a "favorable guarantee." As a result, the company no longer had the "same urgency to migrate customers to Verizon."

It's unclear whether Dish will retain Ting's MVNO agreement with Verizon. A representative from the company didn't immediately answer questions on the topic. But a Dish release on the deal only made mention of T-Mobile.

Ting's usage-based pricing
Ting launched in 2012 with a unique "pay for what you use" pricing scenario that it still offers today. Customers select exactly how much calling, text and data they want to pay for each month. If they use more than they expected, they can pay for that extra usage. But if they use less, their account is credited by the amount they didn't use.

This billing scenario is noteworthy in an industry that has been rapidly shifting toward unlimited data plans in recent years. However, it ensures that Ting can keep careful tabs on its wholesale access expenses, because MVNOs like Ting typically pay their host network operator partners based on how much traffic their customers generate.

It's unclear whether Dish will continue to use Ting's billing setup in the future, or whether it will expand it to its Boost brand. A Dish representative hinted the company may unveil new Boost Mobile pricing plans sometime this week.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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