April 14, 2020
There are growing concerns that Dish Network's plan to build a nationwide 5G network could be significantly impacted – or completely prevented – by the economic upheavals sparked by the pandemic.
After all, with companies and investors suddenly hoarding the cash they have, how is Dish going to find the money it will need to build 5G across America?
Dish, for its part, has so far remained silent about its plans, despite the fact that T-Mobile and Sprint closed their long-gestating merger at the beginning of April. That transaction essentially represented "day zero" for Dish's 5G ambitions.
Indeed, the only real news to come from Dish in recent weeks was the company's acknowledgement that it is cutting jobs as part of a broader reorganization to, in part, help the company cope with the economic impact of the COVID-19 pandemic.
"No company will escape being impacted by the COVID-19 crisis," wrote the analysts at Wall Street research firm MoffettNathanson in a note to investors Tuesday, warning that the spreading pandemic casts further shadows over Dish's already cloudy 5G strategy. "Capital will be much costlier and partnerships will be much harder to come by. Long-dated and speculative network construction stories are a tough sell even when risk tolerance is high. In a recession, risk appetites decline. Predictably, Dish's cost of capital has already risen. Dish has understandably responded by tapping the brakes (again) on network construction. But the clock to their buildout deadlines continues to tick."
Partly as a result, the analysts cut their price target on Dish in half, to $15 per share.
The MoffettNathanson report dovetails with a recent NY Post article casting doubt on Dish's ability to build a 5G network. "There is no financing to build a telecom network," an unnamed source within the company told the publication.
Indeed, the NY Post cited comments from T-Mobile's incoming CEO about the difficulty of raising money for major initiatives amid the spread of the new coronavirus. "If we do not close the transaction on April 1, it is conceivable we may never be able to do so," T-Mobile's Mike Sievert said of his company's decision to close its Sprint merger.
Finally, the analysts at MoffettNathanson pointed out that Dish's existing businesses likely won't contribute much toward its 5G buildout. They noted Dish's satellite TV operations continue to shed customers, and that the Boost-branded prepaid cellphone business it is expected to purchase from Sprint likely will too.
"Our forecast calls for only a modest increase in gross additions, coupled with a meaningful increase in churn, all of which adds up to an accelerating rate of decline in overall subscribers," the MoffettNathanson analysts wrote of the Boost customers Dish is expected to acquire from Sprint. The move will allow Dish to act as an MVNO of T-Mobile. "That's right. We expect Dish's prepaid MVNO will be yet another shrinking business for Dish."
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