After Dish Network (NASDAQ:DISH) reported another year of subscriber losses or minimal growth across its three core businesses, the company's wager on spectrum and 5G may be its last hope. However, there are two reasons why the television and wireless provider is unlikely to be able to turn around its struggling stock.
1. Dish is steadily losing customers
Dish Network continues to bleed subscribers across its three core businesses: DISH TV, Sling TV, and wireless. First, its DISH TV business lost 595,000 net subscribers in 2021, for a total of 2.81 million who've left since 2017 as consumers continue to "cut the cord." Meanwhile, the company has been raising its prices to help with its bottom line, but as a result, is only compounding its subscriber losses, by management's own admission.
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Second, Sling TV, the company's Internet-based streaming solution to cord-cutting, has lost subscribers in four out of the last eight quarters, gaining only 175,000 subscribers out of its 2.48 million total subscribers. For comparison, Roku, a streaming TV ecosystem, added 20.3 million users out of its 60.1 million active accounts during that same time period.
Lastly, the company's wireless business has lost roughly 1 million subscribers since it began when Dish acquired Boost Mobile's 9 million subscribers in July 2020.
2. Dish's big bet on the future is already losing
With Dish well aware that its three core revenue streams are losing market share, since 2008 the company has directly or indirectly invested $36 billion in spectrum -- radio frequencies that provide wider bandwidth for consumers -- to build a first-of-its-kind cloud-native 5G network. But there's one problem that mirrors its past failures: execution.
Management claimed that the first phase of its network would roll out in March 2020, which was delayed to December 2021, and most recently to June 2022. Dish's co-founder and chairman Charlie Ergen cited the fact that the company "didn't anticipate that we would have to do as much on the technical side." Dish -- unlike its wireless competitors AT&T, T-Mobile, and Verizon -- needs to build its entire 5G network from scratch, at an expected cost of $10 billion, and the company underestimated its crucial technical needs prior to launch.
Worse yet, there's a real possibility that the FCC could revoke $4.3 billion worth of spectrum licenses if Dish doesn't meet certain deadlines -- like providing 5G broadband service to at least 20% of the United States population and having developed a core network by June 14, 2022. Ergen recently updated Dish's progress with this not-so-reassuring statement: "So the good news is we're going to get there. The bad news is we're not there yet." And even if Dish is able to meet the deadline in 100 days, the company will additionally have to offer 5G broadband service to 70% of the United States population by June 14, 2023.
What is Dish's plan for spectrum?
By going all-in spectrum, Dish has effectively tied its future to the rollout of its cloud-native 5G network. It's designed to let software running via the Internet handle many of the tasks now performed by other networks' physical hardware -- making its network faster and more cost-effective than older rivals. The company plans to sell access to its big chunk of spectrum in two ways: to consumers via Boost Mobile, and directly to businesses who want to set up their own private, in-house wireless networks.
As we highlighted above, its consumer network is losing users, so Dish is hoping that wholesaling its network's coverage, speed, and security for other companies' use will propel its future growth. Still, management's staying vague about how potential customers could benefit from using its spectrum to set up private networks, saying mostly that gathering and analyzing more of their own data will allow those companies to make a "better" and "more efficient" product.
In theory, this model could make up for Dish's declining core businesses; the company's management predicts more than half of the Fortune 500 companies will implement private networks within five years. As the only cloud-native private network, Dish believes it could potentially hold advantages over competitors in terms of "reaching true 5G speeds."
Additionally, Dish believes that Citizens Broadband Radio Services (CBRS) 3.5GHz spectrum will be the primary band for private networks, and in a recent auction, it recently purchased the most licenses among its competitors for that part of the spectrum. CBRS, in the middle of the spectrum band, offers a balance between shorter wavelengths' faster data speeds and longer wavelengths' greater range.
Is Dish stock worth buying?
Dish Network is at the most important inflection point of its 26-year history. But given the company's current lack of growth and history of delays, it doesn't seem likely that the company can pull off the massive undertaking without any future hiccups. Keep an eye out for any updates on Dish's 5G network rollout, including the FCC's deadlines of June 14, 2022, and June 14, 2023, to see whether the company can deliver on its lofty promises. Until it successfully launches its 5G network and signs contracts for private networks, Dish's future remains fuzzy.
