Dish Won’t Invoke Supply Crunch to Seek 5G Buildout Delay

Dish Network Chairman Charlie Ergen is unfazed by investor skepticism about the company’s capability to build out its 5G network in time to meet regulatory deadlines and do so within the $10 billion budget it allocated for the rollout, he said on a Q3 call Thursday. With supply chain bottlenecks so widespread, Ergen dismissed an analyst’s suggestion that Dish should consider asking the FCC to postpone its 5G buildout deadline for 2022.

Disclosure that Q3 capital expenditures on Dish's 5G network buildout nearly doubled sequentially sent the stock plunging 14% to close at 37.08. Capital expenditures on the 5G buildout are expected to “increase significantly” for the rest of 2021, said the SEC 10-Q.

Investors shouldn’t be surprised “that capital expenditures are where they are” on the 5G network deployment, said Ergen, when asked about the falling stock price. “That’s what it takes to build a network, and we’re doing it infinitely less expensively than anybody that’s ever done it before.” He regrets that Dish wasn’t “a little faster on rolling out in Las Vegas,” he said, another factor that has investors squirming. Investor pushback about the Las Vegas delay is “fair” criticism, but “most everything we’re doing, we’re doing quite better than we anticipated,” he said.

Dish knows “the power of this network" it’s building for 5G, said Ergen. “We know how special this network’s going to be, and we know the opportunity. So it’s on us to execute, and then give people the road map to see why their investment in Dish is a smart investment. We certainly have work to do there.”

The company is in “a beta test mode” in Las Vegas, said Dave Mayo, executive vice president-network development. “We were a little delayed” because the project operated in a “preproduction environment” until recently, he said. “Just getting the radio software and the core network software to work well together and be reliable” was a challenge, he said. Vegas is “coming along,” and will “progress” over the next 90 days to an actual market launch “sometime” in Q1, he said. The company previously projected the launch would happen in this year's Q3.

It's “making great strides” in the leasing and permit “process” associated with the 5G network buildout, said Mayo. Dish is up to 42 markets with 5G “construction activity,” he said. As for “sites that are required to meet” the FCC “obligation” to offer 5G to 20% of the U.S. population by June, “we have building permits on two-thirds of them,” he said. “We have started construction on well over 30% of the sites required for 2022. We’re really just building in markets that we plan to launch in 2022, and we’ll start the build activity on markets for 2023 in the new year.” Dish’s FCC commitment is to offer 5G to 70% of the population by June 2023.

As “the fourth player” in the wireless market, Dish knows “we’re not going to dominate the retail handset business,” said Ergen of its go-to-market wireless strategy. “We’ll get our fair share, and that will be a very profitable business for us.” Dish is “willing to wholesale” some of its large spectrum holdings, especially for the “enterprise,” he said. That market segment is “kind of a jump ball” competitively, he said. “All the carriers are going to do well in the enterprise, because demand in the segment can “rival” that of the consumer business, he said.

Dish is working “with all the major OEMs and partners” to procure handset supplies, said John Swieringa, executive vice president-group president, retail wireless. “It’s incumbent upon us to build up our ecosystem on the device side.” Dish is challenged by the “pretty common theme” of supply shortages in the “low- and mid-tier Android space,” he said. “We don’t really have scale, so we are on allocation with some partners now, which impacted us in the quarter.”

Ergen brushed aside one analyst’s suggestion of possibly citing the supply shortages as grounds for urging the FCC to postpone the June 2022 buildout requirement. “There’s no doubt there are supply chain issues, but there are a lot of issues,” said Ergen. “We’ll just have to overcome those challenges.” Of the June 2022 deadline, Ergen said: “We’re going to get there. That’s just the way we’re going to do it.”