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Can DISH Network Back Up Their Cost Saving Claims?

DISH Network has long been known as the premier satellite-television and internet provider in the United States. The rise of cord-cutting forced the company to pivot into other revenue sources. For a long time, many hoped that the creation of DISH’s own streaming solution, Sling TV, would be enough to keep the company profitable. Unfortunately, that has yet to be the case.

As a result, DISH has found itself at the center of the mega-merger pending between T-Mobile and Sprint. The U.S. Department of Justice approved the merger on the condition that DISH be able to purchase enough wireless assets to become a wireless carrier in its own right.

Becoming a wireless carrier overnight won’t be easy, but a key factor will without a doubt will be creating a network with 5G capabilities. If the DOJ’s deal is accepted, DISH will be able to utilize Sprint and T-Mobiles existing network for seven years while they create a network of their own. DISH insists this won’t be a problem, others disagree.

DISH co-founder and board chairman Charlie Ergen have spent the last six months preaching to anyone who will listen that DISH can build the necessary wireless infrastructure for $10 billion. Experts remain very skeptical.

According to Ergen, this wireless buildout is possible at such an affordable price because they will build a network that is focused on software, not hardware. As a result upfront costs would be lower than a hardware-focused network by up to 60%.

MoffettNathanson’s senior analyst Craig Moffet spoke with The Motley Fool about Ergen’s bold assertion. “The idea that DISH might spend $10 billion (their own estimate on previous conference calls) and then somehow be finished is, well, just silly,” said Moffet. “Verizon spends $15 billion annually to maintain a network that they’ve already built.”

The truth will come down to just how much money a software-focused virtualized network will bring. At this point AT&T has managed to virtualize roughly two-thirds of their wireless network, but that change has not significantly lowered their capital spending or operating costs, like DISH asserts a similar move would do for them.

Of course, DISH proponents are quick to point out that AT&T is not just in the business of wireless and mobile phones .As a result, wireless virtualization will never have the same overall affect on their business as it would for a purely wireless carrier.

A fully virtualized network is cheaper if it’s running correctly. The reality of getting a network to 100% virtualization and fully integrated with all necessary partners if an expensive one. AT&T is just the latest example of the massive amount of funds needed to troubleshoot and create a fully virtualized network. DISH seems to be overly optimistic of how easy and affordable it will be to create a fully virtualized wireless network.

Does all of this spell disaster for DISH? Not necessarily. It does mean that the timeline they are currently advertising will likely be delayed. It also means that the creation of this wireless network will likely cost far more than the $10 billion number that Ergen keeps throwing around.

Sources:
https://www.fool.com/investing/2020/01/08/dish-network-ceo-cost-savings-claims-dont-add-up.aspx

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