Dish launched commercial services in its first market, Las Vegas, in early May. Known as Project Genesis, the service costs $30 per month for unlimited data, text and voice services. Dish plans to run Genesis as an extended beta mode service for the next few months, using early adopters to provide feedback in order to improve the network’s robustness.
Dish’s Hits First FCC’s Milestone
Dish was required to provide 20% population coverage in 27 markets by June 14th as part of its regulatory commitments. Last week, the company provided confirmation that this first hurdle had indeed been achieved, adding that the Project Genesis service is now available in 120 cities in the US. However, the service offered on Dish’s network is essentially a data-only service in most markets – which nevertheless satisfies the FCC’s requirements – with voice services provided by Dish’s MVNO partners. Counterpoint Research understands that this is due to difficulties encountered in implementing seamless call transfers between the VoNR technology used on Dish’s 5G SA network and VoLTE used on partner networks. However, Dish claims that these issues have now been resolved in Las Vegas. In addition, Project Genesis offers a hotspot data service costing $20 per month. Both services are only available directly via Dish and is currently limited to just three devices: Samsung’s Galaxy S2, Motorola’s Edge+ and a 5G hotspot router from NetGear.
Falling Subscribers and Revenues
At its recent Analyst Day, Dish announced ambitious plans to increase its mobile subscriber base from just over 8 million today to 30-40 million by 2030. However, unlike its brethren Rakuten in Japan, Dish is losing subscribers and revenues are falling steadily, including in its core pay-TV business (Exhibit 1). Dish has been adversely impacted by T-Mobile’s accelerated CDMA shut down, both in terms of lost subscriber revenues, as well as incurring unexpected extra costs. To make matters worse, the company is still waiting approval from the Department of Justice (DOJ) on its joint agreement with T-Mobile relating to the CDMA shutdown.
However, this week Dish announced a new 5-year roaming deal with T-Mobile worth a minimum of $3.3 billion. Under this agreement, Dish expects to gain around 100,000+ additional Boost-branded customers as well as receive some “financial assistance” from T-Mobile. Again, this new deal requires approval from the DOJ, which is scheduled for mid-August. In recent months, uncertainty surrounding the DOJ’s approval has hindered the company’s ability to retain customers, as the worsening churn rate in Exhibit 1 shows. Clearly, Dish will be hoping that this latest deal will be approved as quickly as possible so that it can draw a line under this saga and move on.
©Counterpoint Research; Data Source: Dish Wireless
Exhibit 1: Dish Wireless Customers and Churn Rate (3Q 2020 to 1Q 2022)
Capex, Cash Flow and Debt
With Dish’s 5G network likely to be in extended beta mode at least until the end of the year, revenues from the network will be limited. At the same time, the company’s aggressive 5G network during the next 12 months will result in high capex expenditure and coupled with declining revenues from its existing MVNO and pay-TV businesses may put pressure on cash flow. This may affect Dish’s ability to refinance the $1.5 billion of debt maturing in March 2023. Dish also needs to participate in the upcoming 2.5 GHz Auction 108 as it has less mid-band spectrum than its main rivals. However, tightening cash flows may limit its participation.
Extending Network Coverage
Deploying a 5G network using new open RAN technologies is no mean feat and the news that Dish has successfully hit its first FCC coverage target is therefore impressive. However, the company is still at the beginning of its 5G wireless journey and faces numerous challenges. Clearly, extending coverage will be its first priority. Its three biggest rivals today cover around 230-310 million people in the US, which will have risen by the time Dish reaches its statutory 70% coverage target in mid-2023.
However, Dish needs to quickly expand its 5G footprint for commercial as well as regulatory reasons, as its current limited 5G footprint will hinder its ability to compete in the retail market. This will involve deploying at least 15,000 radio sites nationally, and probably significantly more, in order to properly densify its network. Networks take time to deploy and there are always unforeseen problems, particularly with new technologies, as the issues with VoNR have shown. This is not likely to be the last such issue. In the meantime, Dish will have to rely on its MVNO partners and pay roaming costs.
Retail vs Enterprise Market
New entrants such as Dish cannot seriously compete in the retail wireless market until the user experience on its network is on a par with rivals. There are other issues too. Dish lacks a notable brand presence in the retail mobile market and currently only offers a limited number of devices. It also needs to build up its smartphone distribution channels. Clearly, these are early days and all these issues can and no doubt will be rectified – but it will take time.
As a result, Counterpoint Research believes that Dish’s commercial focus in the short-term will be on the enterprise market, where its limited network coverage may not be a problem for some companies. For example, Dish could start to offer campus wireless type private networks which could be connected to its MVNO partners’ public networks, if required. Spectrum leasing is another major opportunity, and to a lesser extent, the rural fixed wireless market, where there are synergies with its existing pay-TV business. Here, Dish could conceivably use its 12 GHz band frequencies. However, that is a contentious topic perhaps best saved for another day!