A Gambler's Biggest Gamble Yet

By some metrics, Dish Network’s value now rests on the ability to monetize the $21 billion worth of mobile spectrum it has purchased over the past decade or so. Consider that Dish Network’s shrinking video business represents only about a third of the firm’s $31 billion invested capital.

If the wireless licenses represent about $46 per share, and Dish Network’s equity sells for $34.61, it can be argued that the total value of Dish now rests on its ability to monetize mobile spectrum.

If the core television business is worth about $12 billion (4.6 times EBITDA), that only matches Dish Network’s debt. That raises questions about how Dish Network will raise the additional funds to build a nationwide 5G network, in addition to the narrowband IoT network.

Dish says it is building a wholesale narrowband IoT network. But there is apparently growing skepticism  about the viability of that approach, and the spectrum gamble Dish has undertaken.  

Dish’s narrow strategic options are further complicated by the buildout requirements surrounding its longest-held licenses, including AWS-4. If the firm doesn’t build a network covering 70 percent of the geographic area covered by each affected license by March 2020, those licenses will revert to government ownership.

To meet this requirement, Dish has proposed building a narrowband Internet of Things network at a cost of about $1 billion. As late as June 30, 2018, construction of this network had yet to commence. But Dish is building now, and the Federal Communications Commission seems skeptical Dish will have the network built in time. Others wonder whether revenue will prove attractive.

Dish also has talked about following up its narrowband IoT network with a full 5G network, which might cost $10 billion or so.

The Federal Communications Commission appears to have its doubts about this plan, sending Dish a long list of questions concerning the network in July 2018. Dish’s response to those questions presented little new information, in our view, and likely don’t fully address the FCC’s concerns.

If the FCC rules against Dish, licenses attached to nearly half of its spectrum holdings could be repossessed in 2020. Dish could also end up fighting the FCC in the courts, a process that could take years. In the meantime, Dish would need to decide how to proceed with its remaining licenses.

Dish could have sold some or all of the spectrum, but that window seems largely closed, now, as any potential buyer would face the same network buildout schedule Dish Network faces. That also makes a partnership with a major mobile service provider unlikely, at this point.

Dish CEO Charlie Egen is a scrappy businessman who has seemingly defied the odds before. But he also has been described as a tough guy to do business with. Ergen would say he is all in on mobile, and has burned his boats behind him.

But some would argue he has missed opportunities to monetize the spectrum, get partners to help build a network, or sell his company. Perhaps a dedicated wholesale IoT network made sense five years ago. Today, all the four leading mobile companies can support IoT on discrete networks.

Ergen has faced long odds before. But perhaps none so long as those he now faces.