Despite rising 5G network costs and a longer-than-anticipated Las Vegas network rollout, DISH Network Corp. executives say the satellite operator is building its next-generation 5G network more cost-effectively than competitors.
"I don't think there shouldn't be a surprise that the capital expenditures are where they are since that's what it takes to build a network, and we're doing it less expensive than anybody has ever done it before," DISH Chairman Charlie Ergen said.
DISH continues to expect capital expenditures, excluding capitalized interest, for its 5G network deployment to total approximately $10 billion.
But MoffettNathanson analyst Craig Moffett noted that DISH's long-term tower lease obligations are mounting, now totaling more than $13.6 billion. "For a network that is supposedly only going to cost $10B to build — and, yes, they haven't even started really 'building' yet — they are already $14B underwater," Moffett wrote.
Shares in DISH tumbled almost 14% on Nov. 4, closing at $37.08.
After being postponed, beta testing of DISH's Las Vegas network is currently underway. Once beta testing is completed within the next 90 days, the network will launch some time in the first quarter of 2022. Previously, the company expected beta testing to begin in the third quarter for an earlier completion date.
"I think we should have been a little faster on rollout in Las Vegas. I think that's fair, but other than that, most everything else we're doing is we're doing probably better than we anticipated on," Ergen said.
DISH President and CEO W. Erik Carlson said DISH is also making "great strides and great progress" with leasing and permitting activities associated with its goal of covering 70% of the U.S. with 5G by 2023. Both AT&T Inc. and Verizon Communications Inc. recently agreed to delay C-band launches for at least a month while the Federal Aviation Administration investigates safety concerns associated with the equipment. Ergen said DISH would consider leasing C-band to interested companies if delays last longer than expected.
In July, DISH signed a 10-year network services agreement with AT&T under which customers of DISH's retail wireless brands — including Boost Mobile, Ting Mobile and Republic Wireless — will gain access to AT&T's wireless network. Ergen said T-Mobile US Inc. remains an essential part of DISH's commercial service launch despite a strained relationship resulting from DISH's deal with AT&T.
"[T-Mobile] remains a very important partner for us and we can't launch commercial service without T-Mobile," Ergen said.
DISH said in the call that pay TV subscriber numbers will suffer due to failed negotiations with broadcaster TEGNA Inc. DISH and TEGNA were unable to reach an agreement in a dispute over retransmission fees, which has led to almost 3 million DISH customers in 53 markets losing access to some local stations. DISH filed a complaint with the Federal Communications Commission last month, claiming TEGNA abandoned public interest duties. TEGNA responded and called the complaint "utterly baseless." Ergen said on the third-quarter call that serious negotiations are no longer happening between DISH and TEGNA.
The company ended the third quarter with approximately 10.98 million pay TV subscribers, including 8.42 million DISH TV subscribers and 2.56 million Sling TV subscribers. Net pay TV subscribers decreased approximately 13,000 in the quarter, compared to a net increase of approximately 116,000 in the year-ago quarter.
As of Sept. 30, DISH had 8.8 million retail wireless subscribers. It had a net decrease of approximately 121,000 in the third quarter, compared to a net decrease of 212,000 in the year-ago quarter.
Revenue totaled $4.45 billion for the third quarter, compared to $4.53 billion for the year-ago period.
Net income attributable to DISH for the quarter was $557.0 million, or about 88 cents per share, up from $504.6 million, or 86 cents per share, in the third quarter of 2020.
The S&P Capital IQ consensus estimate for EPS in the third quarter was 90 cents on a normalized basis and 91 cents on a GAAP basis.
