Dish Expects to Settle on Its IoT Network Plans Later This Year, Says CEO Ergen

Dish Network has multiple options for how to build out its planned IoT network expected to be operational by March 2020 (see 1703080026) and should make decisions later this year on frequencies being used, CEO Charlie Ergen said in an analyst call Monday. The planning process will then follow, with construction to start in late 2018, he said.

Ideally, Dish would use the 600 MHz spectrum it bought in the broadcast incentive auction (see 1704130056), though the clearing schedule might not allow its use, Ergen said. Dish's auction strategy was to land a nationwide block of low-band spectrum, and the company ended up "pleasantly surprised" at the pricing, he said.

The satellite-TV provider quit marketing its dishNET broadband service, with the expectation the subscriber count will decline through attrition, the company said in an SEC filing Monday. It said it has roughly 560,000 U.S. subscribers as of the end of March. Dish said it decided in Q1 on its wholesale arrangement with Hughes, one of the providers of satellite broadband coverage, that gives Dish the right but not obligation to market and solicit orders for HughesNet broadband satellite service and install the Hughes service equipment for activations Dish generations.

Despite the attention being given to declining subscriber numbers, Dish is "one of the few companies that can take a long-term view" and weather the ongoing disruptions in the MVPD universe driven by forced bundling and rising retransmission consent costs, Ergen said, though he said that transition to a connectivity business "is difficult." For the quarter, Dish lost 143,000 net subscribers, compared with a loss of 23,000 in Q1 2016. It ended Q1 with 13.53 million subscribers, compared with 13.87 million at the end of Q1 one year earlier.

Those net sub losses were no surprise given the launch of pay-TV competition YouTube and DirecTV Now, Macquarie analyst Amy Yong emailed investors. Dish seemingly is deliberately not chasing subscribers "given the competitive environment," and instead has a big focus on spectrum monetization as soon as possible, Wells Fargo analyst Marci Ryvicker wrote investors.

Expectations that Dish either will be sold or will lease its spectrum holdings anytime soon "are overdone," Pivotal Research Group analyst Jeffrey Wlodarczak wrote. He said the likeliest suspects for an acquisition or partnership "may be off the table" for the rest of this year, with AT&T tied up in regulatory review of buying Time Warner, Sprint and T-Mobile perhaps looking at their own deal and Verizon potentially more interested in diversifying its wireless revenue stream.

Dish "seems increasingly to be playing a game of Beat the Clock," with its subscriber losses and margins "in free fall," MoffettNathanson analyst Craig Moffett emailed investors. He said Dish is essentially stripping its business of its cash generation ability.

Dish's IoT network buildout could be "with or without partners," Ergen said. He said possible opportunities could even be partnering with wireless operators as they build out their own networks, with Dish and those companies doing their network work jointly in order to share savings "even though you might be separate companies and in some cases even competitors." Ergen said the 600 MHz spectrum "solidifies [its] spectrum position" and makes it easier to separate and sell some assets, but Dish's direct broadcast satellite and spectrum and Sling TV businesses "belong together."

Ergen said most of its over-the-top competitors are aping traditional MVPD service, meaning for now, "the OTT model is probably going to be a license to lose money." He said Dish's Sling TV service has largely focused on skinny bundle offerings, but most OTT services are largely converting cable subscribers to OTT ones.