Dish's Charlie Ergen: We Have No 'Plan B'

Jeff Baumgartner
11/7/2019

The proposed T-Mobile/Sprint deal is making progress, but it's still not done. Despite that uncertainty, Dish Network is plowing ahead with ambitious mobile network and service plans that hinge entirely on that transaction getting closed.

In fact, Dish Chairman Charlie Ergen, a man known for his prowess at a poker table, seems to be all-in.

"Everything we're doing here is assuming this merger's gonna go through," Ergen said Thursday on the company's Q3 earnings call. "We're not working a plan B."

He again likened Dish's plan, which is to become a fourth US mobile carrier and embark on a new, soup-to-nuts 5G network, to its work around pay-TV decades ago. Once Dish got a satellite into orbit, it could then focus on the execution of a plan to be disruptive in US pay-TV. "And I feel like that as soon as this transaction goes through with T-Mobile and Sprint that we can do the same thing."

Dish is making moves to prepare for that day. In addition to recently issued requests for proposal for its wireless network, Dish today announced two key hires and a proposed $1 billion offering that will be used in part toward its wireless/mobile investment.

To bolster its wireless exec team, Dish hired Marc Rouanne as chief network officer and Stephen Bye to chief commercial officer. Rouanne is late of Nokia, where he once was president of mobile networks, and was chairman of the board at Alcatel Lucent. Bye, another wireless and mobile industry vet, most recently was CEO of Connectivity Wireless, president of C Spire and CTO of Sprint. He also played a key role at Cox Communications when the cable operator developed its own mobile platform and service before exiting that business in 2011.

"Marc will architect the network and Stephen will commercialize it," Erik Carlson, Dish's president and CEO, said.

RFPs helping to guide Dish's 5G path
Dish's proposed rights offering of $1 billion will be used in part to help fund the company's wireless business. Dish believes it could cost $10 billion to construct a virtualized 5G network.

Regarding those capital requirements, Dish expects its RFPs for the proposed greenfield 5G network will "guide us a little bit," Ergen said. He's still hopeful that Dish's plan for a fully virtualized 5G network will be less expensive to operate and more flexible that today's existing wireless networks.

"Because we'll be cloud native in that network we can just do things faster, better cheaper," he said. "We don't have the legacy of 2G, 3G and 4G. The cost structure goes down across the board."

Dish has received a "healthy response rate from traditional and non-traditional vendors" from its RFPs, Tom Cullen, Dish's EVP of corporate development, said. Dish has received "dozens and dozens" or responses but has yet to negotiate any final agreements, he added.

Dish was also was asked to react to T-Mobile's promise today to offer a $15 mobile plan if its Sprint deal goes through. That offering could have competitive ramifications for Dish if the merger happens and it takes control of Sprint's prepaid Boost business.

Ergen was generally pleased that T-Mobile is incented to tailor a mobile offering for lower income consumers, but stressed that the promises made regarding the MVNO deal Dish would get would still enable Dish to be competitive and grow that business.

"The United States has the highest prices in the world for mobile services," he said. "It's ripe for disruption."

Though Dish appears to be all-in on the mobile and wireless plan that would emerge from a consummated Sprint/T-Mobile marriage, some investors still believe a rejection of the deal is the "best case scenario for Dish," Craig Moffett, analyst with MoffettNathanson, said in a research note.

If the deal was killed, Dish, he said, "would then be more likely to be spectrum sellers rather than network builders (yes, that's still the best case scenario for most people, at least judging from the conversations we've had with current and would-be shareholders)."

Moffett also believes that the costs of a 5G network will be much higher than $10 billion. Dish's wireless construction underway, including property and equipment, rose to $189.9 million in Q3, up from $59.2 million in Q2. "That’s still only a trickle compared to what will soon be required," Moffett noted.

Ergen, meanwhile, doesn't appear to be overly concerned about the capital requirements of Dish's ambitious 5G plan. "Any good business plan today can raise way, way more than $10 billion," he said.

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— Jeff Baumgartner, Senior Editor, Light Reading

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