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Dish's wireless retail strategy competitive, not disruptive – analyst

Dish Network's Boost-branded wireless retail strategy is decidedly competitive, but has not quite met the bar set by company officials more than a year ago, according to at least one knowledgeable market watcher.

"As far as wireless pricing, yes, we do think we'd be disruptive, day one," Dish's Tom Cullen said in July of 2019, when discussing his company's plan to purchase Boost Mobile and enter the US wireless industry. "Not only because of attractive rates, but also bundling capabilities that are addressed in the deal."

"Boost still has very competitive pricing," acknowledged analyst Jeff Moore with Wave7 Research, a research and consulting firm that tracks the US wireless industry. "They continue to be highly competitive and they continue to provide high value for the dollar."

But Moore added that Boost today is "slightly less competitive than before" Dish acquired the business.

An evolving strategy
Dish closed its long-gestating acquisition of T-Mobile's Boost Mobile retail business at the beginning of July. Out of the chute, Dish introduced new Boost pricing options focused on buckets of monthly data allotments in addition to unlimited data offerings. Dish also revived the "$hrink-It" customer loyalty program that Boost introduced in 2010 but discontinued in 2014.

Wave7's Moore explained that, following Dish's acquisition of Boost, the company is now focusing heavily on selling 10-15 Gigabyte buckets of monthly data allotments, whereas before it had been focused on selling unlimited data.

The reason, Moore said, is no secret: "They don't own their own network. They are paying to use their network."

Thanks to its 2019 agreement with T-Mobile and the Department of Justice, Dish's Boost business piggybacks on T-Mobile's network via a seven-year MVNO agreement between Dish and T-Mobile.

According to Moore, Dish has made a few other major tweaks to Boost since acquiring the business:

  • Customers purchasing phones must stick around for 120 days instead of 90. Moore said this change – which is becoming common among prepaid providers – is designed to prevent customers from hopping among different service providers in order to purchase new phones.
  • Boost is no longer offering unlimited data offers for families. "That was a heavy pitch before [Dish acquired Boost], and that is absolutely gone," Moore said.
  • Dish's new Boost logo is popping up in some retail locations.

That said, Moore explained that most things at Boost have not changed.

"Boost is still true to who it is. They're still doing what they do," Moore said of the prepaid provider. He added that the operation counted roughly 5,600 retail locations around the country in June, down slightly from the 5,900 it counted in November.

One other noteworthy item: Moore said Dish's Boost isn't focused much on 5G. The company sells several phones capable of connecting to T-Mobile's growing 5G network, but that's not emphasized by Boost's marketing. That's important considering Dish Network has bet much of its corporate future on 5G.

Putting the pieces together
In Dish's most recent quarterly conference call with analysts, Chairman Charlie Ergen explained that Dish would initially work on cleaning up its Boost customer base.

"Some customers that were very good customers for Sprint potentially aren't good customers for us," he said, according to a Motley Food transcript of his remarks. "We're a little bit more conservative on how we account for things so we'll have a little bit of cleanup there that we'll go through and we'll try to get all that done in the first quarter rather than wait."

Ergen said Dish is working to ensure it can run its Boost business so it can make at least a slight profit.

Taking on that task will be Dish's new Boost mobile management team headed by John Swieringa, the company's president of "retail wireless." Other top executives include David Kim, Boost's SVP of retail wireless sales and operations, who is responsible for the operation's national field sales organization, distribution strategy and sales operations. Rob Hussa is Boost's finance chief, and Andrea Henderson is its director of marketing.

As Dish takes its first steps into the US wireless industry, analysts remain somewhat divided on their outlook on the company, both in the near and long term.

'Attractive option' vs 'nowhere good'
"We believe Dish presents an attractive option on the 5G future, partially funded by cash on hand and the cash cow pay-TV business," wrote the analysts at Wall Street research firm Raymond James in a note to investors earlier this month. The firm reiterated its "strong buy" rating on Dish's stock.

However, they added that Dish will be saddled by Boost's high churn and the fact that Sprint pumped money into the business to help lower the cost of customers' phones. "We expect wireless margins will improve significantly over the next 3 years as Dish builds 15-20K cell sites and migrates customers to its own (vs. T-Mobile's) network," they wrote.

But the Wall Street analysts at MoffettNathanson are far more pessimistic in their view of Dish. They argued that Dish now faces the expenses that go along with being a national retailer of wireless services: "Stores, handsets and customer service. That, too, will be incredibly expensive," they wrote.

And the MoffettNathanson analysts paint an even bleaker picture of Dish's long-term future, arguing there will be little demand for a 5G network from Dish built out on a city-by-city basis when AT&T, Verizon and T-Mobile all offer nationwide alternatives.

"Unless the rest of the industry (Verizon and AT&T) inexplicably decides to let customers pick and choose geographies (fat chance), then Dish Network will have to have a fully built out network before the T-Mobile deal expires," the analysts wrote, noting that Dish's MVNO agreement with T-Mobile expires in seven years. "If they don't, then on year seven-and-a-day, their customers will simply... leave. Facing that eventuality, Dish will have no choice but to fully build out a national network long before then. And they will have no choice but to attempt to fill it with high-cost retail customers."

Continued the MoffettNathanson analysts: "So where does this leave us? Unfortunately, nowhere good, at least for Dish Network. Hoping for a wholesale approach that allows geographical cherry-picking seems more like wishful thinking than it does an actual strategy. But that means they'll probably have to rely on a much more pedestrian retail go to market approach, where the basis of advantage is national network coverage and quality. Building a ubiquitous wireless network that is competitive with Verizon's, T-Mobile's, and AT&T's will be incredibly expensive."

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

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