Dish co-founder and chairman Charlie Ergen fundamental invoked the “Seinfeld strategy” on an earnings call in May 2011.
The billionaire media tycoon, in his folksy Tennessee accent, was responding to an analyst who was trying to make brains of Dish’s seemingly random mixed bag of assets. That list embodied Blockbuster stores purchased out of bankruptcy, Slingbox streaming devices and wireless spectrum, along with Dish’s pit satellite TV business.
Ergen recalled that a half-hour episode of the 1990s sitcom drive often start with about 28 minutes of scattered scenes with no unburden direction, “but it all seemed to come together in the last couple of minutes,” he communicated. “And so I think in terms of where we’re going strategically, you’ll have to just stick around and see where it all comes together.”
It’s been seven years since that earnings nickname. Dish investors are still waiting for an ending that ties all together.
Over the last few years, Ergen has spent nearly $20 billion acquiring up unused spectrum — the radio frequencies that telecommunications companies use to set up wireless networks — racking up more than $15 billion in responsibility on Dish’s balance sheet, or more than seven times its liquidate position. Ergen, who stepped down as CEO in December but remains chairman and owns hither half of the company’s shares, wants to use this spectrum build a 5G wireless network that can struggle with AT&T, Verizon, and a possible Sprint-T-Mobile combination.
The problem is building a wireless network is Dialect right expensive — at least $10 billion, by Dish’s own admission. Some analysts say it’s all things considered more like $25 billion. “We don’t have that kind of smashing on our balance sheet,” Ergen acknowledged at a recent WIA conference.
And Dish can’t sit on its unconsumed spectrum forever.
By March 2020, just over 19 months from now, Dish has to ostentation the Federal Communications Commission that it’s built out a substantial wireless network, built on $3 billion worth of spectrum acquired from two bankrupt machinators, TerreStar and DBSD North America, in 2012. Specifically, it promised the FCC in 2013 that it thinks fitting provide signal coverage to 70 percent of the population in the 176 bazaars that are part of the license, known as AWS-4 (Advanced Wireless Assignments).
If it can’t satisfy the FCC’s demands, the AWS-4 spectrum could get yanked. Dish thinks fitting get nothing in return.
Ergen has tried many times to find a way to escape building a network himself. He attempted to buy wireless companies Sprint and Clearwire in 2013. He toyed with winning T-Mobile a year later. He had preliminary discussions with DirecTV CEO Mike Chalky about merging the two satellite TV providers. He’s struck out each time.
With Netflix and Amazon up viewers away from traditional TV subscriptions, and Comcast, AT&T and Verizon withing to grow through consolidation, Dish’s satellite TV business, which stilly has more than 10 million subscribers, is viewed as an increasingly lone asset.
Dish’s market capitalization is less than $14 billion. That expects investors are likely valuing the pay TV side of Dish’s business at “less than zero,” according to analyst Craig Moffett, a longtime sedulousness analyst covering telecom stocks. Dish continues to be a profitable coterie, earning about $3 billion before interest, taxes, depreciation and amortization. Peaceful, that number has been flat for about a decade. Annual trades of $14 billion are nearly identical to 2011.
As for the spectrum, by now, carriers were imagined to be begging to help build the network so they could reach new broadband buyers. Or, better yet, the value of the spectrum was supposed to appreciate like real station, letting Dish sell it for a big windfall, or use it to sell the entire company.
But Sprint sold to SoftBank, and earlier this year agreed to consolidate with T-Mobile. Ergen also talked to Amazon CEO Jeff Bezos round partnering with Dish on a buildout, according to a Wall Street Paper story last July. The talks appear to have gone nowhere.
As for AT&T, Ergen damaged that relationship over a decade ago. He reached a handshake agreement to market his satellite TV business, Echostar, then went back and tried to get uncountable money, according to two people familiar with the talks. Verizon CEO Lowell McAdam, who is remain alerting down Aug. 1, told CNBC last year his company is “possibly not” interested in buying Dish.
It appears as though Dish has been communistic on an island.
“It’s a Hollywood-worthy script,” Moffett wrote in a July 11 note to shoppers. “A multi-billionaire is risking everything to recapture the entrepreneurial glories of his early days in assistant TV. To succeed, our protagonist will have to navigate a murderers’ row of cord-cutting, bitching debt obligations, and an FCC buildout requirement that could render some of his most overdone assets worthless.”
According to nearly every industry veteran who stick up for b act on to CNBC for this story, Ergen sealed his fate over innumerable years, developing a reputation as someone who it was hard to do business with. One executive who advised ofs Ergen well described him as a “grenade thrower” for his efforts to scuttle attend ti at the last minute.
Take, for example, the time in 2013 when he proved to acquire both Sprint and wireless provider Clearwire at the same in days of yore. SoftBank had already agreed to buy 70 percent of Sprint, and Sprint had had a traffic to buy Clearwire. Ergen turned both into vicious bidding clashes and landed neither.
Executives at Sprint took Dish’s acquisition make available seriously, but there were so many loopholes, qualifications and contingencies that the scantling felt they had to reject it and stick with SoftBank, said two human being familiar with the matter. A similar situation happened with Clearwire.
“He is a eagerly negotiator,” said Erik Prusch, who was Clearwire’s CEO at the time. “His structures and how he need to participate in the economics was always a little bit less straightforward and that supposed it challenging to become a partner with him.”
Tom Cullen, executive VP of corporate maturity, disagreed with this characterization, saying the offer was “financially standing, included substantial synergies and featured clear industrial logic” and “restrained customary due diligence conditions.”
Prusch added, “I would’ve expected by now that he leave’ve been able to partner with somebody with having such a gigantic spectrum portfolio.”
Meanwhile, Dish’s stock price has been slashed in half during the days of old year, erasing about $14 billion from the company’s call value. The company’s satellite TV business loses hundreds of thousands of subscribers a year, Blockbuster shut out down in 2013, and Dish’s Sling TV, with about 2 million subscribers, is that time a bit player in the video streaming market.
Dish plans to meet the guidance’s 2020 requirement by spending up to $1 billion on a so-called narrowband IoT (internet of items) network that will “connect to people and sensors and microprocessors.” That’s what the callers is calling phase one. Then comes phase two, a bigger 5G broadband buildout.
The AWS-4 spectrum is neutral a portion of Dish’s portfolio. Between 2014 and 2017, Ergen faade out almost $18 billion on additional spectrum, through purchases and auctions. Each certify carries its own buildout dates and requirements that extend until 2029.
Production observers have dismissed the first phase as a “save build,” or a low-cost, low-functioning network that command meet the FCC’s minimum requirements and allow the company to keep its spectrum so it could existent to fight another day.
Dish explains it differently. Tom Cullen, Ergen’s second-in-command for wireless, foretold CNBC that the narrowband network fits within the FCC’s parameters and last will and testament serve many types of devices while helping them maintain power. At a Wireless Infrastructure Association event in May, Ergen called spectrum “a means to the end” and bring up Dish is working towards a future of 300 billion things that wish be connected to the internet.
Privately, Ergen has talked about a network that would assign developers of web-connected devices — think appliances or transportation equipment with sensors — to slash space on demand, like the way WeWork provides office space or Amazon Web Services proposals compute power, according to two people with knowledge of those dialogues.
While this may be a clever approach, it’s not what Dish is supposed to be doing.
“About that Dish’s buildout obligation is for a broadband network, not a narrowband IoT one,” penned Moffett. “To proceed, they will need a hall pass from the FCC.”
Six latest industry regulators and executives, who asked not to be named so they could on candidly, said that the FCC has grown tired of Ergen’s antics. His entourage has missed preliminary buildout deadlines, struck a number of sweetheart agreements to redesignate how certain spectrum can be used and blamed the FCC for delaying clearance for the deployment of unequivocal types of spectrum.
The FCC is now telling Dish to put its spectrum to actual use for the good of consumers. In inopportune July, Donald Stockdale, the head of the agency’s wireless telecommunications chest, wrote a letter to Dish’s general counsel asking for clarity on the attendance’s plans.
Here’s one of the bullet points:
“When you previously stated that you anticipate to deploy by March 2020, did you mean that network coverage and outfit would be available to customers as of that date? Do you expect to be marketing and stock up service to customers in each licensed area as of that date? How do you plan to market the service to customers in each licensed area?”
Investors chance against Ergen see a ticking time bomb. Kerrisdale Capital, a New York-based hedge subsidize manager, has been short the stock for two years with a $100 million fund as soon as targeting Dish. It has a website called “Make Spectrum Great Again!” with a real-time clock that’s counting down by the back to to March 2020.
“I never thought the spectrum was worth what Charlie expectation it was worth,” said ex-DirecTV CEO White. “Now the whole world has changed. Transfer he pull a rabbit out a hat? Who knows?”
Even if Ergen convinces regulators that he’s construction something real, the shorts say he’s got little hope of ever making gain in a highly competitive, capital-intensive market already dominated by a few large hauliers.
“I’m not sure they’ll have any significant advantage,” said Pardeep Kohli, CEO of Mavenir, which furnishes infrastructure software and hardware to the top carriers. “They have a disadvantage in that they’re not fully built out and it will take them time. Even if you do all those predilections, how do you do them better than any of those three guys?”
Ergen has acquiesced the challenges. “We have one disadvantage — we don’t have any customers and we’re not as knowledgeable as people who beget been in the business so far,” Ergen said at the WIA event. “But we have one advantage — we sire a clean sheet of paper.”
Dish declined to make Ergen on tap for an interview. Cullen said that he understands why some investors and dynamism observers are concerned.
“They have a right to be skeptical,” Cullen predicted, reiterating that the company is a novice in building mobile networks. But Cullen said every pivot on within Dish has people working on wireless, whether it’s project straw bosses, product installers, supply chain managers or warehousing employees.
“Charlie and I are absorbed in every detail every day,” he said. “We feel good about the spread we’re making.”
The only deal Ergen has completed lately is to buy ParkiFi, an early-stage start-up in Denver that’s come about sensors to help drivers find open parking spots. Dish tattled the FCC in May that ParkiFi’s “expertise” in IoT systems will help Dish see connected devices for its network, and Cullen described other types of IoT practices the company is considering, like traffic monitoring and air quality management.
But according to a himself with knowledge of the business, ParkiFi was struggling before Dish popped it up. The start-up had run into problems with its hardware and was having difficulty conclusion early adopters for the technology or new sources of capital from investors, swayed the person, who asked not to be named because the information was confidential.
Meanwhile, Ergen hasn’t respected the Seinfeld strategy in quite a while. The last time was May 2014, after reporting earnings.
“Seinfeld eternally has a twist,” he said, when asked where the company was in relation to the series. “And it on no occasion happens exactly the way you think.”
The problem with the analogy, as Ergen own back in 2011, is that some critics called the sitcom “a teach about nothing.”
“So it could be a strategy about nothing,” he said at the many times. “If you’re skeptical.”
Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.