AT&T to be the primary network services provider for DISH MVNO customers

Dish Network has announced a long-term Network Services Agreement (NSA) with AT&T, making the carrier the primary network services partner for Dish MVNO [1.] customers, including retail mobile brands such as Boost Mobile, Ting Mobile and Republic Wireless, in addition to its own new Dish 5G network.
Note 1. MVNOs do not own physical networks, but rent capacity from established mobile network operators to sell services to their customers.

The ten-year agreement, which CNBC said was worth at least $5 billion, will serve as a back-up while the company rolls out its own mobile network. Dish has relied to date mainly on the T-Mobile network, as part of the deal signed last year to acquire Boost Mobile and other assets from T-Mobile following its merger with Sprint.

AT&T will also provide transport and roaming services, to support Dish’s 5G network roll-out. Dish said it is committed to becoming the fourth facilities-based carrier in the U.S. and is aiming to bring its cloud-native, OpenRAN-based 5G network to 70% of the population by 2023.

“With an MVNO deal past 2027, Dish can focus on denser markets and leave rural to AT&T,” said MoffettNathanson principal analyst Craig Moffett. “Dish desperately needs an MVNO to fall back on past 2027, because the economics of building to rural are awful, and a network that doesn’t have rural isn’t tenable.”

Tammy Parker, Senior Analyst at GlobalData, a leading data and analytics company, offered her opinion:

This deal is highly beneficial to AT&T as the company not only gains at least $5bn in revenue streams over the term of this ten-year agreement from new MVNO subscribers, it will also have access to DISH’s spectrum holdings to support DISH customers on the AT&T network. The NSA is not exclusive for either party, so both can go out and find new dance partners; however, given the depth and breadth of this agreement, that would appear both unlikely and unnecessary.

Both companies are poised to ride the US wireless industry’s ongoing growth wave. This is increasingly driven by the rollout of 5G, which enables faster network speeds, lower latency and new use cases, including Internet of Things services, that will result in many users having multiple wireless subscriptions. According to GlobalData’s latest forecasts, the number of unique mobile users in the US will increase by 5% over the next five years. Furthermore, total mobile subscriptions in the US will expand by more than 30% during that time and there will be nearly 692.6 million US mobile subscriptions by year-end 2026.

A fascinating part of this new arrangement is that it provides a glimpse into AT&T’s concerns regarding the possibility that DISH could sell out to another entity, perhaps even Amazon or Google. Rumors have abounded, even before DISH agreed to build its 5G network on Amazon Web Services’ (AWS) cloud platform, about possible negotiations between Amazon and DISH regarding the former’s potential use of DISH’s forthcoming 5G network to offer new services. Though there is nothing new to report there, this NSA stipulates that AT&T will be allowed to terminate the NSA in the event of a qualifying change of control of DISH. This could include a rival wireless provider, US cable company or ‘certain large technology companies’ taking over 50% more of the voting power or economic value of DISH. AT&T would still have to support DISH’s MVNO customers for up to two years after such a termination. “T-Mobile, and its Sprint network, is currently the primary MVNO partner for Boost and Republic. Ting operates on every nationwide network except AT&T. However, although DISH’s involvement saved T-Mobile’s acquisition of Sprint, the relationship between DISH and T-Mobile appears to have been fraught from the start. T-Mobile’s plans to shutter its 3G network by January 2022, leaving many of DISH’s customers without network service, has created an especially contentious standoff between the two companies, which likely helped pave the way for DISH’s new agreement with AT&T.”

Dish has 8.89 million retail wireless subscribers as of its last quarterly earnings report, while AT&T has more than 186 million mobile subscribers.

CNBC said that the pact is a potential precursor to a DirecTV-Dish merger since it brings AT&T and Dish closer together.  Jonathan Chaplin, an analyst at New Street Research, said in a note to clients that one of the biggest obstacles to a merger has been the notion that “AT&T hates Dish.” Some of those bad feelings stem from the botched 2007 merger, when AT&T felt Ergen had reached a handshake deal and negotiated in bad faith, according to people familiar with the deal who asked not to be named because the discussions were private.

But the telecommunications world has dramatically shifted from 2007. AT&T is no longer run by Randall Stephenson, who stepped down as CEO last year. The wireless giant is reorganizing itself around 5G and fiber networks.  AT&T could use the $5 billion Dish will give it over the next 10 years to pay down debt from its two enormous acquisitions of WarnerMedia and DirecTV.

While AT&T’s MVNO pact allows Dish to be a stronger competitor to AT&T, “getting access to Dish’s spectrum could help improve AT&T’s competitive position,” noted Chaplin, and facilitating a merger between DirecTV and Dish will help both companies.

Bringing together two competing satellite-TV providers — especially as both companies lose pay-TV customers each quarter as the world shifts to digital streaming television — would unlock billions in synergies, as satellites can be retired, duplicative jobs eliminated and competitive costs eradicated.

Still, regulators would need to feel comfortable that a Dish-DirecTV would be beneficial for consumers. While that remains uncertain, “it is a hurdle, not a barrier,” wrote Chaplin.



3 thoughts on “AT&T to be the primary network services provider for DISH MVNO customers

  1. Wow, this is a big deal and points to what seems to be AT&T’s focus on getting back to its core business of connecting people via its network. Even though Dish and AT&T will compete at retail, this will provide more traffic for AT&T’s network. At the same time, Dish will be able to meet its commitments in providing service.

    Moffett’s comment about Dish being able to focus on urban areas makes sense. I just had a chance to see first-hand how well T-Mobile’s 5G network worked on the Interstates of the Southwest. The word to describe the performance is disappointing. Differences between 5G (using an iPhone 12) and 4G (Pixel 2) were marginal, at best. It was disappointing, as the 600 MHz spectrum didn’t seem to do much to eliminate the dead spots along I-5. The point being that there is still an opportunity for AT&T in rural areas, particularly if they can use Dish’s spectrum to serve both fixed and mobile customers.

    This is an interesting statement

    “According to GlobalData’s latest forecasts, the number of unique mobile users in the US will increase by 5% over the next five years.”

    The would mean the user growth is about 1% per annum, which probably tracks somewhat closely with population growth.

    The next sentence with its forecast is hard to believe, both in the growth rate (30%) and the sheer number of US mobile subscriptions (692M).

    “Furthermore, total mobile subscriptions in the US will expand by more than 30% during that time and there will be nearly 692.6 million US mobile subscriptions by year-end 2026.”

    This would be more than 2 subscriptions for every person in the U.S.

  2. In a note to clients, Craig Moffett wrote:

    The T-Mobile MVNO agreement came with a 2027 cliff. It isn’t hard to read between the lines here and conclude that T-Mobile was unwilling to extend that existential deadline. AT&T was. The deal between AT&T and Dish extends ten years and, with a two-year “transition period” on top, it is arguably more like a twelve-year deal.

    That’s a huge, game-changing win for Dish. And it is a catastrophic loss for T-Mobile, Verizon, and… yes, AT&T.

    The issue isn’t the wholesale revenues that T-Mobile will lose and that AT&T will now gain. What matters here is the competitive damage done to the industry by enabling Dish to now be a hybrid MNO/MVNO indefinitely.

    Recall that Dish is obligated, under the terms of the consent decree between Dish, T-Mobile, Sprint, the DOJ, and the FCC, to build out wireless facilities covering 70% of the U.S. population by 2025 [1.]. We’ve never viewed that 70% commitment as being particularly challenging. After all, the first 70% of the population lives on just 2.9% or so of the U.S. by landmass. It has always been what would come after that that mattered. Table stakes for coverage in the U.S. is widely viewed to be something like 95% of the U.S. (by population). Without an MVNO agreement to fall back on, Dish would have to build that out themselves by 2027, when the T-Mobile deal was slated to expire… and the next 25% of the country occupies nearly ten times the landmass of the first 70%.

    Note 1. The 70% obligation relates to Dish’s AWS-4, H-Block, and 700 MHz spectrum. They face a slightly higher 75% hurdle for their 600 MHz spectrum, but given that spectrum’s lower frequency, it is the 70% threshold for the AWS-4 that is most important.

    In fact, thinking of Dish’s network challenge as one simply of “coverage” dramatically understates the issue. Even in the first 70% of the country, there’s “coverage” (defined, for simplicity, as “sufficient to check the box at the FCC”) and “coverage” (defined as “good enough to satisfy customers”). The latter definition of coverage is vastly more demanding than the first; it means fill-in facilities in every airport, stadium, convention center, and congested downtown area, and every dead spot along every highway. Under the T-Mobile agreement, Dish had until 2025 to satisfy the FCC, but only two more years afterwards to satisfy the much more exacting demands of customers. That was always the real challenge. And it was why we never believed Dish would succeed as a facilities-based provider (the fact that they were going to be Open RAN based was largely irrelevant to this challenge). AT&T has just let Dish off the hook.

    AT&T clearly decided that the near-term benefit of additional wholesale revenue was sufficient justification to offer a long-dated contract. We beg to differ. By allowing Dish to compete as a hybrid MNO/MVNO, AT&T has allowed Dish the same opportunity to arbitrage network costs that Verizon’s “perpetual and irrevocable” deal affords the cable industry. Just as Cable can build out facilities in dense (low cost/high return) areas and leave the low density (high cost/low return) areas to Verizon, now Dish, too, can build only in high density areas, leaving the rural areas – where much of the heavy lifting is done – to AT&T. That the deal also allows for in-region roaming to fill-in areas when Dish’s own facilities don’t have sufficient coverage – all those high density dead spots – is icing on the cake.

    We can’t stress enough what a windfall this is for Dish. And what a terrible decision it is for AT&T. The transfer of wholesale revenue from T-Mobile to AT&T is at best an afterthought. For the record, we estimate that T-Mobile will generate $1.5 – $2.0 billion from the Dish deal this year. That’s reasonably high margin revenue, but it was always, in our view, to be short lived (given the cliff in 2027), so it isn’t terribly consequential to valuation. The new deal between AT&T and Dish is for a minimum of $5B, suggesting that AT&T will now capture a significant portion of Dish’s wholesale revenue. Importantly, this deal doesn’t help solve Dish’s CDMA sunset problem at all; AT&T doesn’t offer CDMA service and never has. Again, this is all about duration. It’s quite possible – likely, even – that Dish’s wholesale price with AT&T will be higher than what they were paying T-Mobile. Getting the last penny in the rate negotiation was almost certainly less important than the duration of the contract.

Comments are closed.