A day after helping to cut 5% from the value of Dish Network's shares, the financial analysts at J.P. Morgan remained unrepentant.
"We were not surprised to get a lot of pushback from [stock] owners on our downgrade of Dish Network on Wednesday, but none of it was particularly new," wrote the analysts at J.P. Morgan in a note to investors early Thursday.
The downgrade of Dish's stock from "neutral" to "underweight" on Wednesday received widespread coverage and helped to cut the price of the company's stock from around $44 per share to around $40 per share over the course of this week.
Nonetheless, the analysts largely reiterated their concerns over Dish's $10 billion plan to put its extensive spectrum holdings to use by constructing a nationwide open RAN 5G network over the next few years in a direct challenge to heavyweight incumbents like Verizon and T-Mobile.
In their Thursday note to investors, the analysts outlined their concerns, starting with Dish's open RAN network design and its plan to rely on Amazon Web Services (AWS) for cloud computing.
"We agree that working with AWS for its core network gives Dish a tremendous cost advantage over a similar new company building a traditional new network and that O-RAN will help Dish's speed to market, but we are skeptical that it will convey an advantage over AT&T, Verizon, or even T-Mobile," they argued.
The analysts also took on the notion that Dish's spectrum holdings for 5G – which span bands including AWS-4, 700MHz and AWS H Block – will allow the company to chew into overall 5G industry revenues.
"Our first issue there is that the Dish network is unlikely to have as high a quality as the incumbents, which spend 5-10x more in capital per year, so will have to take a substantial discount per-bit to draw customers away from their current provider," the analysts wrote. "T-Mobile and Sprint had that problem for decades (no joke – decades), and Dish is just getting started – getting anything like a proportionate share of industry traffic could take 5-8 years, and with lower quality, it will receive lower prices as well."
They calculated that Dish will only be able to command $21 billion in 5G service revenue by 2030, or just 9% of industry revenue.
Finally, the J.P. Morgan analysts also pushed against the idea that Dish will eke out an advantage among business customers targeting the broad Internet of Things (IoT) space.
"Selling to enterprises is very difficult, and we don't know why anyone would work with Dish, which has no experience in building networks or working with enterprises," they wrote.
Added the J.P. Morgan analysts: "We have a hard time getting excited about IoT because we haven't seen many exciting applications that will drive a lot of new revenue – for Dish or anyone else."
Dish continues moving ahead with its network-construction plans: For example, the company has been making new hires and affixing its 5G radios atop some cell towers. Dish's most recent 5G announcement – made by the company's CEO on LinkedIn – centers on the hiring of Chris Gu as Dish's new head of CI/CD (continuous integration and continuous delivery) and automation for 5G. According to his LinkedIn profile, Gu previously worked at telecom companies including ThinNet and Tellabs.
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