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bmichaud

By bmichaud
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AJDelphi Newbie

AJDelphi

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A bit delayed in getting these posted. But I flew out to Denver for the DISH Annual Meeting on November 3rd and took some notes. Charlie mostly answered questions the whole time and said a couple of things I thought were really interesting.

 

I was just writing these on a notepad so they aren't 100% accurate but I think they are good enough. I couldn't tell if it was being webcast and haven't seen any transcripts of the meeting so I thought I would make these available to whoever else is interested on the board.

Dish_Annual_Meeting_2015_Notes.pdf

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merkhet Newbie

merkhet

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A bit delayed in getting these posted. But I flew out to Denver for the DISH Annual Meeting on November 3rd and took some notes. Charlie mostly answered questions the whole time and said a couple of things I thought were really interesting.

 

I was just writing these on a notepad so they aren't 100% accurate but I think they are good enough. I couldn't tell if it was being webcast and haven't seen any transcripts of the meeting so I thought I would make these available to whoever else is interested on the board.

 

Thanks!

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cookiemonster Newbie

cookiemonster

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Wondering if anyone has a view on how the potential T-TWX tie-up and the current spectrum auction is impacting the value of DISH's spectrum assets? Presumably, this takes T out of the M&A market for some time taking a potential DISH bidder out of the game. From what I gather from the 600Mhz spectrum auction, demand has not come close to meeting sellers' expectations.

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CorpRaider Newbie

CorpRaider

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I am interested in this name.  Just going through some of the press and watching some youtube interviews with this guy.  Seems like these guys won the Sprint, TMUS deal.  Wasn't Ergan one of the rumored additional chapters of Thorndike's "The Outsiders"?

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dwy000 Newbie

dwy000

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I am interested in this name.  Just going through some of the press and watching some youtube interviews with this guy.  Seems like these guys won the Sprint, TMUS deal.  Wasn't Ergan one of the rumored additional chapters of Thorndike's "The Outsiders"?

 

I'm not sure "won" is the right framework for Sprint/TMUS.  Looks like they are buying (for full price) the Boost Mobile and some other prepaid business as well as some spectrum.  The goal of becoming the 4th mobile carrier is crazy in my mind.  The failure of Sprint proved beyond a doubt that the market will not support 4 nationwide network carriers (with infrastructure).  The cost is too prohibitive unless you can put 50-100mn subscribers on it.  If Sprint couldn't do it with 2 large, strong competitors (plus TMUS), how is Dish going to do it from scratch against 3 of them?  They have nothing to compete on but price - and when you rent your network from a competitor it's hard to beat them on price.

 

Charlie Ergan may have had some dastardly plan for hoarding spectrum over the past 10-15 years but it hasn't worked out.  He now has a dying asset (Dish), a ton of spectrum nobody seems to want to buy and needs to show some rationale as to why anyone would buy this stock. 

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CorpRaider Newbie

CorpRaider

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Thanks for the responses.  I've just started nosing around to even potentially place on the watch list.  I haven't even listened to the call from last night yet. 

 

Seems like DISH gets the boost customers (~9MM) and a 7 year agreement from T-Mobile (forced seller) to use their network as a platform.  Ergan has been talking about building a modern, software-based, 5G network where data, voice, and video converge allowing for cost advantages over incumbents, but there's a lot remaining to be seen.  I've come across some speculation he will partner with GOOG or AMZN based on prior interactions over the last several years.  When asked about the hoarding charges, it seems like he responds by saying network building (or partnering) is/was premature until the 5G disruption begins in earnest (circa 2020 according to him...seem there may be some implicit acceptance/endorsement of this assertion by FCC deadline for him to get moving (2020)...prior to recent deal).

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changegonnacome Newbie

changegonnacome

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Any updated thoughts on how Dish can possibly compete with the Big Three to be a viable 4th carrier in 5G and nationwide cell business.........by the time they get their 5G network built out (& the Tmobile 7 year mvno expires) its gonna be 6G time and the new Capex/spectrum cycle beings again.............with a refocused on connectivity AT&T post-Warner serving mid-high end market....Verizon a premium connectivity focused FCF cash flow machine at the high end and Tmobile on the march having assembled an impressive spectrum bundle and retail footprint post-Sprint playing in the mid-low end. I see a pretty rational breaking out of the market . It seems like suicide to try to go toe to toe with the big boys with dreams of a virtualized network architecture that is kind of a hodge podge of promising but nascent technologies.

Its for sure kind of bet the company stuff given the already existing leverage at Dish legacy, the recent dilutive capital raise is one of many to come I imagine unless an infrastructure player likes Phase 1 of the project and wants in on JV basis. Even now the Boost business that was picked up in the regulatory remedy is bleeding subs to Tmobile & MetroPC sub-brand. While the very low end cellular business is being addressed effectively by MVNO's and you could easily see a Mint Mobile (with Ryan Reynolds/Deadpool star power) becoming the 4th largest player by subs........and why wouldn't the Big Three use favored MVNO partnerships to ensure Dish never gets out of the crib to become a Tmobile v2.0 in the future. 

Core Dish is a melting ice-cube not even the 2020 pandemic could stop the slide in cord cutting which surprised me.......and shows how strongly ingrained the trend is......sports which is holding the bundle together really becomes vulnerable in a Goliath media world of Discovery/Warner....Disney/ESPN....Netflix.....as a pay anything customer acquisition tool.......Dish's attempts at branching out haven't really worked.....Sling is sub-scale and is now eclipsed by YouTubeTV + other offerings that have a better chance at leveraging 1st party advertising data.........Joe Biden's infrastructure plan, if enacted, will possibly see sufficient wired (or 5G) broadband speeds for OTT streaming to become an option for Dish's captive regional customers (just when Dish itself is busy building out cellular in cities) compounding lost subs. 

Anybody seen a bull case anywhere that really believes that Dish has a bright future in this new endeavor?

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dwy000 Newbie

dwy000

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I think you summed it up very astutely!!

The only possible Hail Mary i could see here is the company being acquired by Comcast/Time Warner to be their mobile platform (and possibly roll in Direct TV to consolidate what's left of cable).  But that doesn't change the competitive dynamics against 3 massive players with existing infrastructure and the build out spend required, it just gives a customer base to market to. I'm also not sure Comcast/TW want to do a "build from scratch" in a market where they need to be competing today. 

But well summarized. 

The wild card is always Charlie Ergen and his willingness to risk the company on things whether they make long term sense or not.  As a shareholder you are just along for the ride with Charlie - and his horse is getting old and tired. 

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LearningMachine Newbie

LearningMachine

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@changegonnacome and @dwy000, insightful thoughts.

What do you think is the probability that someone like Comcast, Google, Amazon or someone else might buy them to build the fourth network? 

Looks like Apple had the biggest opportunity to do that but they decided it is not for them, and instead partnering with Verizon. 

I'm sure Alphabet gave it thought for Google Fi project, but somehow decided against it? 

I'm sure Amazon also gave it thought as part of their Amazon Wireless Plans effort and recent deal with Dish for Dish to purchase AWS services for its cloud needs, but somehow decided against it?  Wonder why Dish tried to make a bigger deal out of this transaction than it really is? 

Is everyone saying no because capital required to build a high quality fourth network will be too much when Verizon is already spending from its ~50 Billion USD cashflow per year, which will be hard to compete with? 

Edited by LearningMachine
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dwy000 Newbie

dwy000

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4 hours ago, LearningMachine said:

@changegonnacome and @dwy000, insightful thoughts.

What do you think is the probability that someone like Comcast, Google, Amazon or someone else might buy them to build the fourth network? 

Looks like Apple had the biggest opportunity to do that but they decided it is not for them, and instead partnering with Verizon. 

I'm sure Alphabet gave it thought for Google Fi project, but somehow decided against it? 

I'm sure Amazon also gave it thought as part of their Amazon Wireless Plans effort and recent deal with Dish for Dish to purchase AWS services for its cloud needs, but somehow decided against it?  Wonder why Dish tried to make a bigger deal out of this transaction than it really is? 

Is everyone saying no because capital required to build a high quality fourth network will be too much when Verizon is already spending from its ~50 Billion USD cashflow per year, which will be hard to compete with? 

I honestly doubt that Apple or Google will try to be a network provider.  The other carriers would drop promo and support for their products if they were a competitor.  Who knows with Amazon but I think this is too big for them to try - they do a great job of trying lots of things but the smartest part of Amazon is their willingness to admit they were wrong and move on.  They can't do that with a $50bn build out. And they also just went all in on content with the MGM acquisition.

I'm probably wrong but I continue to believe that the country simply can't support a 4th network.  At the rapidly falling ARPU's out there there just isn't the money to support the ongoing network maintenance costs let alone the build itself for a 4th network.  VZ and T combined spend $40bn PER YEAR on capex o. Their existing network on top of operating expenses and tower leases.  If Sprint couldn't do it with 50mn customers and an existing network how is any new network going to justify it?

Dish is painted in a corner. They spent so much on spectrum that has build out requirements to keep that they have no choice but to at least look like they are making a go of it. And the cable side funding it continues to melt away.   

The only rationale anyone ever talks about for buying Dish stock is the possibility of a buyout.  Not sure who that makes sense for. 

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LearningMachine Newbie

LearningMachine

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Posted (edited)
4 hours ago, dwy000 said:

I honestly doubt that Apple or Google will try to be a network provider.  The other carriers would drop promo and support for their products if they were a competitor.  Who knows with Amazon but I think this is too big for them to try - they do a great job of trying lots of things but the smartest part of Amazon is their willingness to admit they were wrong and move on.  They can't do that with a $50bn build out. And they also just went all in on content with the MGM acquisition.

I'm probably wrong but I continue to believe that the country simply can't support a 4th network.  At the rapidly falling ARPU's out there there just isn't the money to support the ongoing network maintenance costs let alone the build itself for a 4th network.  VZ and T combined spend $40bn PER YEAR on capex o. Their existing network on top of operating expenses and tower leases.  If Sprint couldn't do it with 50mn customers and an existing network how is any new network going to justify it?

Dish is painted in a corner. They spent so much on spectrum that has build out requirements to keep that they have no choice but to at least look like they are making a go of it. And the cable side funding it continues to melt away.   

The only rationale anyone ever talks about for buying Dish stock is the possibility of a buyout.  Not sure who that makes sense for. 

@dwy000, I agree it will be really hard to build & support a high quality fourth "consumer" network unless you have ~$20B cashflow per year for capex plus probably $10s of Billions of cashflow per year for additional spectrum purchases for now.   That said, Verizon is hinting capex will go down in the near future, but no promises made regarding spectrum purchases later this year.  

Beyond auctions coming up later this year, have you looked into how much more spectrum is remaining to be sold over time and tried to figure out a timeline for when all spectrum sales will be done? 

By rapidly falling ARPUs, did you mean in the past or other jurisdictions with many players?  Over the past few years, ARPUs have been stable here, no? After the T-Mobile-Sprint merger, looks like probability of a dumb competitor setting a low price is gone too, no?

Regarding Dish's spectrum, maybe Dish will try to continue to raise money to build a low quality "consumer" network enough to satisfy FCC, and then put its focus on building lower-cost IOT network for some scenarios and/or eventually leasing out to other operators for "consumer" traffic for an area at a time, while they work on increasing their quality.

Edited by LearningMachine
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dwy000 Newbie

dwy000

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I haven't looked into spectrum assets remaining to be sold.  I'm not technical enough to understand the nuances of who can use what. They also keep moving things around the spectrum to free things up.  The key I would think, is do the companies have enough for their build out plans, not what is available.  Verizon (and T) overspend at the last auction so they won't have to worry about spectrum for a long time and will only look to add opportunistically not because they have to. This is why Dish is flailing.  They hoarded an asset thinking everyone would beat down their door, and then the FCC and the other companies worked around them. 

By rapidly falling ARPU's i meant that you can now get 5G unlimited for $30.  Comcast has taken Sprints place as the irrationally low priced competitor in order to stabilize their customer base..  ARPU's have been stable overall but the service you get for the price has exploded.  When Charlie started hoarding people were paying like $120/month.  Prices keep coming down and won't go up again very soon.

I just don't get the end game for Dish that makes sense for shareholders. 

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LearningMachine Newbie

LearningMachine

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Posted (edited)

Thanks @dwy000 for sharing.  Good insight on the hoarding and working around it. 

Regarding Comcast 5G unlimited, it is based on their MVNO agreement with Verizon.  My understanding is that Verizon prioritizes postpaid & MVNO at lower priority access compared to their premium customers. 

Through these MVNO agreements, Visible & Tracfone, Verizon is trying to achieve price discrimination to capture low-end of the market, the one on the right of the price-demand curve.

Through premium bundles, they are trying to achieve price discrimination to capture high-end of the market, the one under the top-left corner of the price-demand curve. 

I found a video that does a better job at articulating price-discrimination to capture top-left of the market, but still misses price discrimination to capture the right-side low-end of the market.  Overall, it still does a better job than I'm doing :-):

 

Edited by LearningMachine
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LearningMachine Newbie

LearningMachine

Posted
Posted (edited)
1 hour ago, Jurgis said:

$DISH screwed up. Best case for them $CMCSA or $AMZN could buy them. Not holding stock or my breath though.

Looks like acquisition by $CMCSA or $AMZN was a huge concern of T-Mobile/Softbank/DT when divesting assets to DISH.  See https://www.nexttv.com/news/tmobile-worried-that-comcast-or-charter-will-buy-dish.  Apparently, at the time, agreement was reached that "Dish cannot sell its wireless business (or the newly acquired assets) to a third party for at least three years. That effectively prohibits a Google or a Comcast or an Amazon from quickly swallowing up everything that Dish is getting out of this deal and building out an even more formidable foe." See https://www.theverge.com/2019/7/24/20708411/dish-tmobile-sprint-carrer-merger-assets-spectrum-boost

However, when I look at the 2019 DOJ order, I see "consent not to sell its AWS-4 and 600 MHz spectrum for six years without prior DOJ and FCC approval."  Even though generally "not to sell" restriction would be transferred over with acquisition, I think in this case there is a good chance DOJ/FCC will interpret "not to sell" restriction itself to also include DISH itself not being acquired by anyone. 

Has anyone found a clearer language on the restriction to not be acquired, and the timeline on the restriction?  Has it been mentioned in any of the investor calls?

image.png.8051e79aec7d23fecb832e0fdad3ba47.png

Source: https://www.justice.gov/opa/press-release/file/1187711/download, page 27 of 26.

 

 

Edited by LearningMachine
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LearningMachine Newbie

LearningMachine

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Posted (edited)

Never mind, I found the answer:

"DISH agrees not to sell its 600 MHz [and AWS-4]  Licenses for a period of six years without prior FCC and DOJ approval (unless such sale is part of DISH selling itself; in that case, the purchaser shall be subject to the commitments and penalties herein unless the FCC and DOJ decide otherwise). For purposes of this commitment, to “sell” means (i) to transfer, assign, or dispose of the 600 MHz [and AWS-4] Licenses in any manner, either directly or indirectly; (ii) to transfer control of an entity holding the 600 MHz Licenses; or (iii) to enter into a lease arrangement or any other arrangement that results in the transfer of de jure or de facto control of the 600 MHz Licenses." See https://www.fcc.gov/sites/default/files/dish-letter-07262019.pdf

 

So, looks like they discussed this explicitly and included the possibility of sale of DISH itself as being allowed. 

Why are Amazon, Comcast or Google not jumping at the opportunity? $23B market cap + $14B debt is $37B for opportunity to launch a nationwide network?  Is it because of what @dwy000 said above regarding the annual cost of build-out and maintenance will dwarf the acquisition cost, and it will be hard to compete with other heavily-cash-flowing competitors spending ~$20B annually each on capex+maintenance alone and more on additional spectrum?

Edited by LearningMachine
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