Dish signs $5B MVNO deal with AT&T

Dish Network signed a 10-year agreement with AT&T that makes AT&T the primary network services partner for Dish MVNO customers. It’s worth at least $5 billion.

The agreement means AT&T will provide network services for Dish’s Boost Mobile, Ting Mobile and Republic Wireless customers, replacing T-Mobile as its MVNO partner. AT&T is also providing transport and roaming services as part of the agreement to support Dish’s future 5G network.

"Teaming with AT&T on this long-term partnership will allow us to better compete in the retail wireless market and quickly respond to changes in our customers' evolving connectivity needs as we build our own first-of-its kind 5G network," said John SwieringaDish COO and group president of Retail Wireless, in a statement. "The agreement provides enhanced coverage and service for our Boost, Ting and Republic customers, giving them access to the best connectivity on the market today via voice, messaging, data and nationwide roaming on AT&T's vast network, as well as Dish's 5G network." 

The press release did not say exactly when the network services agreement takes effect or how Dish’s customers will be transferred from T-Mobile’s to AT&T’s network. Dish declined to expound on that. A Dish 8-K filing disclosed the deal value and timeline. 

In addition, the agreement allows AT&T to use a portion of Dish’s spectrum in various markets. Neither party is commenting on exactly which Dish spectrum AT&T will be using.

Dish has been entangled in a very public battle with T-Mobile over the shutdown of T-Mobile’s CDMA network, so it’s assumed Dish Chairman Charlie Ergen decided enough was enough. But it has other ramifications and highlights the fact that Dish and AT&T have had trouble coming to the negotiating table in other areas, namely their satellite TV businesses.

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The wireless deal with AT&T is generally positive for both parties and negative for T-Mobile, according to Wall Street analyst assessments.

T-Mobile is set to lose at least $500 million and up to $2.5 billion a year in wholesale service revenue as a result of Dish’s deal with AT&T, according to New Street Research. Under the government’s conditional approval of the Sprint/T-Mobile merger, Dish was to act as an MVNO using T-Mobile’s network for up to seven years.

“T-Mobile always assumed they would lose the Dish MVNO revenue, and this is baked into the long-run guidance given at its Analyst Day,” wrote New Street’s Jonathan Chaplin. “Nevertheless, they are losing the revenue sooner than they or we anticipated.”

The assumption is that it will be difficult for Dish to move existing subscribers, but all new activations will be on the AT&T network. “AT&T obviously can’t support Dish’s CDMA customers, but if T-Mobile is switching off Sprint’s CDMA network at the end of the year, it doesn’t matter,” Chaplin wrote. “Undoubtedly, this deal cropped up out of the dispute between Dish and T-Mobile over the CDMA network.”

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For a long time, analysts have questioned when Dish and AT&T will get together over their respective satellite TV businesses, which are dwindling on their own but presumably could share efficiencies better together than apart.

One of the big problems, according to Chaplin, “was the fact that AT&T and Dish hated each other (or rather AT&T hates Dish). We thought inserting TPG as an intermediary would help get around it but it would still be a challenge. It is clearly not, given the deal AT&T and Dish have signed here. The second challenge is regulatory. This remains. Though we see it as a hurdle; not a barrier.”

The agreement fuels speculation about Dish’s intentions in the wireless space. As GlobalData Senior Analyst Tammy Parker points out: “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 surfaced, even before Dish agreed to build its 5G network on Amazon Web Services’ (AWS) cloud platform, about possible negotiations between Amazon and Dish regarding Amazon’s potential use of the Dish 5G network, Parker noted.

“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, U.S. cable company or ‘certain large technology companies’ taking over 50% more of the voting power or economic value of DISH,” she stated. 

Here are more highlights from analyst comments:

Raymond James analyst Ric Prentiss noted Dish’s criticism of plans by T-Mobile to turn off the Sprint 3G CMDA network on or around January 1, 2022. AT&T recently announced it will phase out its 3G GSM network by February 2022, slightly later than T-Mobile. “Our current TMUS model includes ~$300M of wholesale revenue from DISH in 3Q21 and 4Q21 dropping to ~$100M of revenue per quarter starting in 1Q22,” Prentiss wrote.

The agreement is not exclusive to either side, and at the end of the 10-year period there will be a two-year transition period in which Dish and AT&T will cooperate to allow customers to continue using service.

Interestingly, he said, “the agreement may be terminated if any ‘restricted party,’ including certain large U.S. wireless providers, certain U.S. cable companies, and certain large technology companies, take control of >=50% of the economic or voting control of DISH, or if DISH sells substantially all the wireless assets to a restricted party. And, the agreement grants AT&T the right to request to use portions of DISH’s spectrum in certain markets to support DISH customers on the AT&T network.”

Said Prentiss: “We think the inclusion of the clause regarding the potential sale of DISH wireless to a restricted party highlights the 5G ambitions of cable companies, as well the utility of DISH’s Open RAN network capabilities (e.g., network slicing and private 5G networks) to big tech companies (e.g., Amazon)… Still, we do not expect a transformative sale in the near-term as DISH remains focused on hitting [5G] coverage deadlines.”

Cowen analysts said the new deal seems to reflect some of the frustration Dish has shared of late with T-Mobile, including T-Mobile’s planned shutdown of  the CDMA network, as well as their bickering over the fate of the 12 GHz band.

“The deal also potentially further aligns AT&T/Dish, which could down the road help AT&T on two fronts: 1) potentially getting access to Dish’s trove of spectrum at favorable terms as we note the Dish 8K states it ‘provides an avenue for AT&T to deploy portions of DISH"s spectrum to support DISH customers on the AT&T network’ and 2) improving the two companies’ relationship so that in the future the two are better positioned to negotiate a deal to merge DTV and Dish’s respective satellite TV businesses,” write Cowen’s Colby Synesael.

Cowen analysts assume Dish is getting a better deal with AT&T than the anecdotal “sweetheart deal” that it had with T-Mobile, or one with similar pricing but a longer time frame and “without a contentious partner.”

To that last point, Dish’s squabble with T-Mobile “has spilled over into other issues, as T-Mobile has taken an adversarial stance over Dish’s 12 GHz spectrum with the FCC. Dish is looking to start afresh with a new wholesale partner, though will still need to migrate its ~8.8MM Boost subscribers (and many off said CDMA network.) Charlie Ergen is typically fairly transparent and candid on earnings calls, in which case, we look for more insights at that time in early August.”

Dish hasn’t announced a date for its next earnings call, but as Synesael said, it’s expected to happen in early August, when Dish management will get a chance to share more details about their plans.