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Dish could slow 5G spending later this year

According to one financial analyst estimate, Dish Network is comfortably on schedule in its big 5G network buildout program. However, there are some questions around whether the company will have the wherewithal to continue its efforts after it reaches the FCC's 70% coverage mandate this summer.

In a recent report to investors, the analysts at New Street Research wrote that Dish will have started construction on around 17,500 5G cell sites by March, which is the figure the analysts said is required for Dish's 5G signal to cover 70% of the US population.

Under Dish's 2019 agreement with T-Mobile and the US Department of Justice, the company is required to cover 70% of the US population with 5G by June 2023. The FCC has been tracking Dish's progress.

However, there are growing questions about what Dish might do after it reaches that deadline. "Activity suggests a 2H23 slowdown (taking a breather after meeting its June 2023 FCC shot-clock) as we also consider the company is being mindful of its balance sheet," wrote the financial analysts at Cowen in a recent note to investors regarding 5G operators' spending on cell towers.

The Cowen analysts are not alone.

"The trajectory of Dish's [cell tower] leasing and commencements remains the biggest mystery heading into 2023," wrote the financial analysts at Wells Fargo in a recent note to investors.

Raising and spending money

Dish is working to become the fourth big 5G provider in the US following the 2020 merger of T-Mobile and Sprint. The company last year met the first of several FCC-managed network buildout goals by covering 20% of the US population with 5G by June 2022.

In the company's latest SEC update last week, Dish disclosed that it has so far started construction on over 15,000 5G sites that, if completed, will be capable of providing broadband coverage to over 60% of the US population.

In that same update, the company said it scored $1.5 billion in new funding via secured notes with a 2027 due date and an 11.75% interest rate. Like its previous round of fundraising, Dish's notes are secured by its spectrum holdings.

Analyst Roger Entner, with Recon Analytics, told SDxCentral that Dish was "punished" in its latest fundraising effort with the 11.75% interest rate. He said the company could have obtained a 5% rate if it had done so before rates started rising amid a potential recession.

A disagreement among analysts

In a recent note to investors, the Wells Fargo analysts wrote that Dish needs to bring at least 5,000 additional cell towers online during the first half of 2023 to reach its coverage targets. "Dish remains a key wild card to watch," they wrote, adding that they expect Dish to raise more money to finish its 5G buildout.

But the New Street analysts offered a much different outlook. They argued that Dish's fundraising last week "would fully fund the business through breakeven." They also suggested that Dish is on track to reach its June 2023 buildout goals. "Success is now in the company's hands," the analysts wrote.

A critical difference between the two analyst firms is that the New Street analysts are counting the number of Dish cell sites under construction while the Wells Fargo analysts are counting the number of operational sites.

Regardless, the financial analysts at MoffettNathanson argued that Dish is now well positioned to fund a network buildout program that ought to ultimately reach 30,000 to 35,000 cell sites by 2026.

But the MoffettNathanson analysts remain relatively negative on Dish's overall business prospects.

"We would judge the likelihood that Dish is able to build a robust, sustainable, viable wireless business to be low," they wrote in a recent note to investors. "The history of wireless startups in the US is poor and the company's targets – consumer and enterprise – strike us as overly ambitious."

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

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