Dish loses more wireless subscribers in Q1 although its 5G build out is on track

Dish Chairman Charles Ergen has always wanted to run a wireless firm. That's why Dish spent $6.21 billion, second behind the $7.9 billion that T-Mobile spent, to acquire 600MHz low-band spectrum back in 2017. Dish ended up having an important role to play in the T-Mobile-Sprint merger helping to grease the wheels so that the merger could get FCC and Justice Department approval.

Dish continues to report net declines in wireless subscribers

To placate the FCC, which was worried about the reduction in the number of major carriers from four to three (a 25% reduction) Dish promised to replace Sprint as the nation's fourth-largest carrier. While it builds out its 5G standalone network, Dish is a mobile virtual network operator (MVNO) which means it is buying wireless service wholesale from T-Mobile and AT&T and selling it to the public at retail prices.

So far, Dish has been having problems keeping wireless subscribers. Dish Wireless started with the 9.3 million subscribers it obtained when it closed on the purchase of Sprint's prepaid businesses. That deal gave Dish 7,500 retail stores and 400 employees. But since the deal closed, that customer count has been heading south. As recently as this past February, CEO Ergen admitted that it was his fault that the company was six months behind in its 5G build-out.

"We’re six months behind, and it’s my fault," the executive said. "We just didn’t anticipate that we’d have to do as much on the technical side." And to make matters worse, the firm faces an FCC deadline to cover 20% of the country with its own 5G signals by next month.

And by June 14th, 2023, Dish must cover at least 70% of the U.S. population with wireless service equal to or greater than 35 Mbps, verified by a drive test. It also needs to have at least 15,000 5G cell sites up and running by that date. If Dish fails to meet these figures in time, it will make a "voluntary contribution" to the U.S. Treasury for as much as $2.2 billion.

During the fourth quarter of 2021, Dish reported a net decline of 245,000 wireless customers. That sounds pretty bad, but admittedly, it was an improvement over the previous year's Q4 net decline of 363,000 wireless subscribers). After the fourth quarter, Dish's wireless service was used by 8.5 million cellphone users.

Today, Dish reported that during the first quarter of 2022, the company saw more net customer losses for its wireless division with a decline of 363,000 customers. This works out to a net decline of wireless customers that was more than double the decline announced by Dish Wireless during the first quarter last year. Dish now has 8.2 million wireless subscribers and had a churn rate of 5.11% during the quarter, up from 4.44% during the same quarter last year.

Dish says that its wireless build-out is still on track

After the earnings release, during Dish's conference call, company President Erik Carlson did have some good news reporting that the build-out of the company's wireless network is on track. The executive added that during the quarter, Dish settled all outstanding issues with T-Mobile on favorable terms. At issue was the earlier than expected closing of T-Mobile's 3G CDMA service which negatively impacted the Boost Mobile customers that Dish acquired in the Sprint deal.

Carlson said during the conference call that the accelerated CDMA shutdown planned by T-Mobile negatively impacted Dish Wireless during the first quarter and hurt its ability to compete. Dish is waiting for approval from the DOJ before it can officially settle its disputes with T-Mobile which includes matters related to the CDMA shutdown. Dish remains optimistic that the DOJ will soon approve the settlement with T-Mobile.

As for the first goal of meeting the June 14th deadline of covering 20% of the nation with its 5G signal, Carlson said that Dish is well on the way to achieving this goal. Dish Network shares took a hit on Friday, declining $5.26 or 19.14% to $22.22.