Dish Network said it will purchase Republic Wireless, a mobile operator with about 200,000 customer relationships, for an undisclosed sum.  

Republic Wireless provides service via a Mobile Virtual Network Operator (MVNO) agreement with T-Mobile. Dish, which is in the process of building its own 5G wireless network, has agreed to buy spectrum from T-Mobile and also operates a prepaid wireless business (Boost Mobile)  which uses T-Mobile’s network. 

Also Read: Dish: No Partner Needed for Wireless Dance 

This is the second small wireless acquisition Dish has made since agreeing to buy about $3.6 billion in wireless spectrum from T-Mobile over three years (and the Boost Mobile business for another $1.4 billion) in 2019  as part of the larger company’s purchase of Sprint. In August, Dish agreed to purchase prepaid phone company Ting Mobile.  As part of the Republic deal, Dish said  SVP of Ting Mobile and MVNO platform Rob Currie, will lead the Republic Wireless business.

"Republic has created a loyal following and established a brand known for innovation, customer service and value. We plan to build upon that strong foundation," said Dish chief operating officer and president of its Retail Wireless unit John Swieringa, in a press release. "As we continue to grow our retail wireless business, Republic broadens our existing customer base and positions us to deliver even more value to the market, expanding our portfolio of mobile solutions to meet a variety of customer needs. We look forward to welcoming Republic customers to the Dish family."

After the deal closes, expected in the second quarter of this year, Republic’s Relay division, which provides communications service to hospitality, healthcare, facilities management, manufacturing and education clients, will continue to operate as a standalone  company. Relay will also become a wholesale customer on Dish’s 5G network. 

Dish Network chairman Charlie Ergen told analysts Monday that its much awaited wireless service is expected to launch in its first major market in Q3, adding that the satellite giant doesn’t necessarily need a strategic partner to help it build what he said is going to be a state-of-the-art 5G network.

Dish has been accumulating spectrum and finalizing plans to build out its wireless system -- it forged a deal with T-Mobile in 2019 where it will pay $3.6 billion over three years for 800MHz spectrum -- and Ergen said its first major market should go live in the third quarter. He didn’t name the city, only to say it will be an NFL market. 

Also Read: Ergen: We Stumbled with Sling TV 

Ergen also put the kibosh on speculation as to who Dish’s strategic partner in the wireless venture will be. Early on, the Dish chairman speculated that he would need a deep-pocketed partner -- some had speculated it would be Amazon -- to help him build out the service. Now, fresh off a convertible notes offering in December that raised $2 billion, and with about $4 billion in cash on its balance sheet, Ergen said Dish has the funding he needs. He likened the company’s current situation to the early days of the satellite TV business. 

“I think we always thought we might need a strategic partner when we didn’t have any capital,” Ergen said, referring to the early days of Dish’s satellite business. But just like that time, he said once the company’s vision became clear, and it began to hit execution milestones, that partner was no longer needed.

Also Read: Dish Loses 133,000 Subs But 4Q Earnings Increase 

“Ultimately, we got confident enough and good enough in what we were doing, that it just made sense to keep the equity,” Ergen continued. “And it didn’t make sense to give up the equity. I think we’re probably in a similar situation today, in the sense that we do have enough capital on our balance sheet today to build our network.”

In the past, Ergen had estimated that its wireless network would cost about $10 billion to build, although some analysts have said that figure may be dangerously low. 

Although Dish may not need a partner to get its wireless service off the ground, it will likely need one after its launches have passed the test phase. Ergen said that already Dish has enlisted tower companies as partners and has other companies in the pipeline. The company has said earlier that one of its next steps would be in seeking out an agreement with a cloud provider like Oracle, Microsoft or Amazon.  While that decision hasn’t been made yet, Ergen said the network’s cloud provider has to be “best in class technically” and there are several vendors that can live up to that criteria. Later, EVP of corporate development Tom Cullen, said “We clearly expect our cloud partner will have to bring a go-to-market component to the relationship.” 

Dish’s wireless network will utilize Open Radio Access Network (ORAN) architecture, which Ergen said allows for more flexibility, lower costs and the network slicing capabilities of its cloud-native technology should be attractive to enterprise business customers.

“So they can have what looks like their own network, and they get access to the data in the cloud where they can actually use that data to make a better product,  a less expensive product and a safer product,” Ergen said. 

Ergen said he isn’t expecting the first market launch for the wireless product to go without a hitch. Like most new rollouts, he expects some glitches, but added Dish will work quickly to iron out any bugs by the time the next market goes live. Dish is up against federal deadlines to have about 20% of the country covered by June 2022, and 70% by June of 2023. 

“We’re not going to be running on our first city, we’ll be crawling,” Ergen said. “And hopefully we’ll be walking by the end of the year.”

At the same time, Dish will be facing a big shakeup in its Boost prepaid wireless business. In its 10-K annual report filed with the Securities and Exchange Commission, Dish noted that it has been informed by T-Mobile that it will discontinue its CDMA network on Jan. 1, 2022. Dish said the majority of Boost customers ride on the T-Mobile CDMA network, meaning that once the network is shutdown, Dish will have to provide a huge number of customers with new devices. On the call, Ergen doubted that could be done.

Ergen said that most Boost customers are “economically challenged” and having to upgrade from one phone that works on the CDMA network to another phone that works on a different network, could be a burden. In addition, that new phone wouldn’t work on Dish’s new network, because it is 5G. 

“If you run the numbers on that, and there would be significant fallout in my opinion,” Ergen said. “The second thing is, I don't even think we could get the supply of the phones we would need. You can’t order phones and not know that you could move the phones, and the supply is somewhat limited of the phones we would need for that.”

On the positive side, he said the Boost team  has shown that they can turn around things in a short period of time. Later, he hinted that there may be a regulatory solution. 

Asked later if he had contacted the Federal Communications Commission about T-Mobile’s CDMA shutdown, Ergen said he hadn’t spoken to the agency personally, but it is possible one of his staff may have. He added he believed T-Mobile’s decision to discontinue the CDMA service is anti-competitive.

“I can’t speak to the motivations,” Ergen said. “But what we can say is that one of the beneficiaries of a premature turn off of the CDMA network would be T-Mobile.” 

Dish stock fell nearly 4% Monday after MoffettNathanson principal and senior analyst Craig Moffett downgraded the shares to “sell,” adding in a note to clients that despite some recent signs of improvement, the only positive path for the satellite giant would be a sale of its wireless spectrum.

Dish stock was as low as $33.88 per share in early trading Aug. 13 (down $1.29 each or 3.7%) but rallied later to trade at $34.61 each, down 56 cents per share or 1.6%. The stock closed Aug. 13 at $35 each, down 17 cents or 0.5% per share.

Moffett, who also reduced his 12-month price target on the stock to $29 per share, placed a “sell” rating on the stock since June 2016, upgrading shares to “neutral” in March  of this year, after it appeared the stock had bottomed out after a series of declines.

Dish shares were down 30% in the first six months of this year, but gained some ground earlier this month after the company showed some improved subscriber metrics in Q2– its satellite net customer losses were less than the prior year and churn improved. That resulted in an almost 23% rise in the Dish’s share price between Aug. 2 and Aug.9.

Moffett acknowledged that Dish’s Q2 results were “genuinely better,” but added it may be short-lived.

Dish, Moffett noted, is “bewilderingly complex,” adding that while the company is moving ahead with plans to build out its wireless spectrum, there are a dizzying number of scenarios that could play out, including several different ways to build out the network, selling spectrum at high and low prices and potential regulatory wins and losses tied to that buildout.

“We further observed that all that complexity can be boiled down to one simple proposition: a spectrum sale (and at a price above which is already implied in Dish’s stock price) is the ONLY positive scenario for the stock,” Moffett wrote. “EVERY other scenario, including every variation on a network buildout, is a negative. Unfortunately, those ‘other’ scenarios have only gotten more likely.” 

Dish Network shares rose more than 11% Friday (Aug. 3) after the satellite TV service provider reported second-quarter subscriber numbers that surprised many analysts, and offered some more detail on its plans to build out its wireless spectrum.

Dish ended the quarter with a net loss of 151,000 customers, better than the nearly 200,000 it lost last year. On the satellite TV side, Dish shed 192,000 satellite TV customers (compared to a loss of 316,000 in Q2 2017) while Sling TV customer gains came in at 41,000, below the 75,000 gain some analysts expected. Sling TV ended the quarter with 2.3 million customers. Overall churn for the period was down to 1.46% compared to 1.86% in the prior year.

Revenue for the period was $3.5 billion, down 5% from $3.6 billion in Q2 2017. Net income of $439 million compared to $40 million a year ago.

Dish shares rose as high as 11.2% ($3.33 each) to $33.19 per share in early trading Friday. The stock calmed down later in the session, priced at $32.07 each (up 7.4%) at 10:52 a.m. on Aug. 3

In a note to clients, Evercore ISI media analyst Vijay Jayant said the subscriber results were better than expected – he had estimated the satellite TV segment would lose 225,000 customers. But Dish revealed in its 10-Q quarterly report filed with the Securities and Exchange Commission that it has entered into tower master lease agreements for towers and contracts for chipset and radio development and manufacture, as the company works toward meeting a federally mandated deadline to being offering service to 70% of its licensed area by March 2020.

“The results support our view that the DBS business provides a substantial financial runway for Dish to monetize its spectrum investments,” Jayant wrote. “We estimate that assuming a 5x multiple on 2018E EBITDA, the market is valuing DISH’s spectrum portfolio at approximately $0.53/MHz-POP, well below the $1.26/MHz-POP average value we place on the portfolio.” 

Dish Network stock, down more than 20% after speculation it could be a prime takeover target has waned, could be in for sharper declines as analysts estimate that even its biggest asset — its wireless spectrum — isn’t as valuable as once thought.

Dish stock has fallen about 21% since mid-July, when talk was it could be a target of companies such as Verizon Communications, which saw value in Dish’s 13.3 million satellite subscribers, its Sling TV over-the-top platform and its wireless licenses. Up to that point, and despite sharp declines in its subscriber base — it lost 196,000 pay TV customers in the second quarter — Dish stock had been a strong performer.

For its part, Verizon had repeatedly denied it was on the hunt for Dish. And after Verizon chairman and CEO Lowell McAdam insisted at an industry conference that the telco had “moved on” and isn’t interested in any M&A at all for now, and Dish chairman and CEO Charlie Ergen hinted on a second-quarter conference call that he may have to build out his own wireless network, the stock has plunged.

Related > Ergen: More M&A Is Coming

The End of a Roll
For 10 of the past 12 months, Dish stock had been on a roll, up 21.4% from its Sept. 27, 2016, price of $54.35 per share to $66 each on July 14. But the stock couldn’t hold that momentum: It dipped to $52.15 on Sept. 26, down 21% from its July high. And according to some analysts, that could just be the beginning.

In a note to clients last week MoffettNathanson principal and senior analyst Craig Moffett noted that Dish has underperformed the market by about 54% since 2015, the year the federal AWS-3 wireless spectrum auction results were released.

“Despite this sharp underperformance, however, we believe the shares have much further to fall,” Moffett wrote. The analyst also lowered his 12-month price target on the stock to $37 per share from $45.

It’s unclear where the stock will end up shortterm; Ergen has frequently been on the winning side of long-odds bets in the business of television, and the current stock drop could be a momentary stall.

Still, Moffett doesn’t see any daylight in Dish’s core satellite-TV business — he estimates it has lost about 1 million satellite-TV subscribers since 2016 — and its Sling TV business is beginning to slow. While Dish doesn’t release Sling TV subscriber figures, Moffett estimates the OTT pioneer added about 89,000 customers in the second quarter, down from 177,000 additions in the first quarter but ahead of the 49,000 additions in Q2 2016. Moffett estimates that additions will further decelerate from about 214,000 in 2017 to just 65,000 by 2021.

He’s not alone. In an August research note after Dish’s second-quarter results, Telsey Advisory Group media analyst Tom Eagan wrote that “Dish’s business model is proving increasingly unsustainable.”

In an email message, Eagan said Dish has options, including trying to block a merger of wireless carriers Sprint and T-Mobile to extract spectrum concessions, which it could then use to negotiate favorable terms with Amazon for its IoT service.

“Or, neither of these strategies could work out favorably relative to Dish’s current valuation,” he said.

Adding further pressure are aggressive promotions from its top OTT and satellite competitor, AT&T. According to Moffett, AT&T is offering its 60-channel DirecTV Now service to its unlimited wireless plan customers for just $10 per month (normally priced at $35). Unlimited wireless customers can get DirecTV’s 145-channel Select package, normally priced at $90 per month, for just $25 per month for two years. Dish’s lowest priced satellite-TV package is priced at $49.99 per month.

Spectrum Unlikely to Pay Off
But the biggest drop could be in spectrum value. For years, analysts have said that despite the maturation of the pay TV industry, Dish was poised to come out ahead because it had invested wisely and cheaply in buying wireless spectrum. The belief was that even if Dish never built out its own wireless network, it could sell the spectrum at a ridiculously high profit. At one point a little more than a year ago, Dish’s spectrum was estimated to be worth as much as $40 billion.

That estimate has dropped considerably in the past several months. After Dish reported its Q2 results in August, Eagan estimated the spectrum was worth about $26 billion. Last week, Moffett valued it at $24 billion.

The decline in value has occurred even as wireless usage has grown exponentially and pay TV providers are increasingly looking at wireless as the future of content delivery. And as wireless providers gear up for the next generation of the technology — 5G — there appears to be greater need for fiber connections between cells than for more bandwidth.

In his note, Moffett argued that even the lower spectrum valuation may be too high, adding that an asset is only worth what others might pay for it, and there do not seem to be any buyers. Verizon has said it isn’t interested in more spectrum — it sat out the most recent federal spectrum auctions earlier this year — and AT&T is tied up trying to gain approval for its $107.8 billion purchase of Time Warner Inc. Given Sprint and T-Mobile’s reported merger talks, a spectrum buy for either carrier is out of the question, at least in the short term.

Meanwhile, federal regulations require Dish to build out its spectrum to 70% of the country by 2020 or risk losing the licenses. That, according to Moffett, is the company’s more pressing issue.

Dish Network chairman and CEO Charlie Ergen briefed about 80 analysts at a meeting in the Denver suburbs June 2, addressing some of the more pressing issues that have weighed on the company in recent months and offering hope that the time may be nigh for Dish to finally monetize its highly valuable wireless spectrum.

According to analysts that attended the meeting in a hotel near Dish’s Englewood, Colo., headquarters, Ergen didn’t offer any new information, but his reassurance that Dish is on pace to meet its spectrum buildout requirements, reinvigorated a bullish outlook for the company.     

“The time to revisit this name is RIGHT NOW,” Wells Fargo media analyst Marci Ryvicker, who attended the meeting, shouted in a note to clients June 3. Ryvicker added that “transformational talks” among wireless players could begin after the current Federal Communications Commission 600 MHz broadcast spectrum auctions are completed. In her note, she said the “path to monetization will begin in [2018] AT THE LATEST.”

That is the period when Dish can finally begin unencumbered talks with potential partners/lessors for its spectrum, to either build the network out with a partner, lease the licenses to a third party or sell them outright.

According to Ryvicker and other analysts, because of federal regulations around the auction process to prevent collusion among wireless bidders, Dish was unable to hold substantive talks with any major provider that participated in spectrum auctions. The government has held auctions for AWS-3 and AWS-4 wireless spectrum and currently is taking bids for 600 MHz of broadcast spectrum. The timing of the 600 MHz auction is a bit hazy, but regulators expect it to last at least several months. FCC chairman Tom Wheeler has signaled to Congress the auction could drag past October.

“…For the first time in three years, given restrictions around the AWS-3 auction, they will be able to talk to potential partners / lessors,” said Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak.

Dish investors were equally optimistic, driving the stock up 5.5% ($2.95 per share) on June 2 to $53.68 each. The stock is up about 22% since May 5.Dish shares fell slightly in afternoon trading June 3 to $53.60 each, down 8 cents each or 0.15% per share.

Dish’s 80 MHz of wireless spectrum has been the main reason to own the stock over the past few years, with some analysts valuing the spectrum at as much as $20 billion.

According to federal regulations, Dish has until 2020 to build out the spectrum or risk losing it. At the analyst meeting, Ergen reassured analysts that the company will meet that deadline.

In her note, Ryvicker wrote that Ergen “finally put the timing issue to bed,” telling the crowd that when other carriers begin building out their AWS-3 spectrum in 2017 and 2018, Dish will be next to them.

“Charlie could not have been clearer– he has never missed an FCC deadline and doesn’t intend to do so now,” Ryvicker wrote. She added that recent moves to incorporate its licenses in two bands – Band 66 and Band 70 – allows for the Dish spectrum to be placed in chip sets, which makes it a more attractive build-out partner.

Ergen also addressed issues brought up about a month ago by hedge fund Kerrisdale Capital Management, which has raised $100 million in a special fund for the sole purpose of shorting Dish shares. Kerrisdale estimated then that Dish stock was worth about $20 per share, or about half its price at the time.

Kerrisdale raised eight points to short Dish, and at the June 2 meeting, Ergen answered all of them, according to Ryvicker.

Ergen also quashed the idea that other carriers aren’t interested in its spectrum.

“We wish people would stop calling…..It isn’t just T [AT&T] and VZ [Verizon],” he said at the meeting, according to Ryvicker’s report, adding that foreign carriers, new media and cable operators were among the interested.

Despite the analyst optimism, Kerrisdale chief investment officer Sahm Adrangi said he still holds to the thesis that Dish is overvalued.

“The stock price movement isn’t indicative of how things will play out,” Adrangi said in an interview. “There haven’t been any actual events. Our argument is ultimately that $20 billion of value will not be realized.”

CTIA president Meredith Attwell Baker said the wireless industry's need for spectrum will outstrip all the current efforts to find it, share it or free it up.

In a speech at the National Telecommunications & Information Association's (NTIA) International Symposium on Advanced Radio Technologies (ISART) in Boulder, Colo., Thursday (May 14), Baker suggested the government has no "what next" plan beyond its current spectrum efforts, and it needs to have one.

"Mobile broadband demand cannot be met by improved spectral efficiency alone," Baker told the audience. "More towers and more wireless infrastructure can never be enough; AWS-3 and the incentive auction will not suffice."

Baker is the former head of the NTIA, which oversees government spectrum use, just as the FCC oversees commercial use (she is a former FCC commissioner as well).

To handle an expected six-fold increase in already hefty data flows, the country needs infrastructure, standards and technologies, but mostly, it needs spectrum, she said, particularly licensed spectrum. Baker said while sharing spectrum is good, it should not be a substitute for clearing spectrum.

The AWS-3 auction, which freed up licensed spectrum for auction, was not a laurel to rest on, she suggested, because it would take 20 years to bring it to consumers. That is too long, particularly given that "we are already behind in identifying what’s next."

"We just had AWS-3, and the broadcast incentive auction looms ahead of us," Baker said. "and after that, right now, we don’t know what’s next."

The Obama administration in 2010 came up with a 10-year plan for freeing up 500 MHz of spectrum, but Baker said it has no plan beyond 2020.

"Because spectrum policy is a long game, we need to start planning today," she said. "Just months after AWS-3, it may seem strange to be here, saying we have to start again. But we do."

Of the need for more licensed spectrum, she said: "As a country, the U.S. cannot settle too quickly into sharing regimes that rely on unproven and complex government roles and nascent or untested technologies. We can’t ask carriers to depend upon limited and undefined access for the spectrum they need to serve tens of millions of subscribers every day."

Dish Network, sitting atop a pile of wireless spectrum and seeking a telecom partner to help build it out, said Wednesday in a Securities and Exchange Commission filing that it has named former Qwest Communications president and chief operating officer Afshin Mohebbi to its board of directors.

Mohebbi’s appointment comes after Dish’s board agreed to increase its size from 10 to 11 members.

Mohebbi is a private investor and advisor to public and private companies and has served as a Senior Advisor to TPG Capital since March 2003. But it is his telecom experience that should be a boon to Dish, which has so far unsuccessfully tried to attract a partner, either by acquisition or otherwise, to help it build out its vast wireless spectrum, currently valued at about $17 billion. A 31-year veteran of the telecom business – he began his career at Pacific Bell in 1983 – Mohebbi served as president and COO of Qwest from April 2001 to December 2002, but has a long history in the telecom business – he was president of worldwide operations at Qwest from July 2000 to April 2001 and was president and COO of the company from 1999 to 2000 prior to its merger with US West. Before joining Qwest, he served as president and managing director of the United Kingdom Markets for British Telecom and was a member of its management board from 1997 to 1999.

While Mohebbi’s appointment is no guarantee that Dish will find a telecom partner, his expertise will help it in its quest. In a statement announcing his appointment Dish noted his “financial and managerial experience in the telecommunications and related industries,” as a reason for his appointment.