DISH Network and Crown Castle today announced a 15-year lease agreement through which Crown Castle will lease DISH space on up to 20k of its 40.1k tower sites, across the United States. Additionally, DISH will also receive certain fiber transport services on Crown Castle’s 80k fiber route mile network. Finally, Crown Castle currently has ~48k small cells on-air, however, small cells are not part of the agreement with DISH.
Benefits for DISH Network
Overall, DISH intends to build a “real” 5G network, which will be powered by 50k tower cell sites. Further, DISH estimates that it will cost $10bn to build-out its greenfield 5G wireless network. The company’s agreement with Crown Castle helps DISH facilitate a portion of this build-out. Furthermore, its advances DISH’s strategy to build the first open, standalone, and virtualized 5G network in the United States.
Spectrum Held by DISH Network
Since 2008, DISH has amassed a vast amount of spectrum, which was valued at $26.7bn by the company as of September 30, 2020. Overall, DISH has 97 MHz of depth in sub-6 GHz spectrum and 1,025 MHz of depth in high-band (millimeter wave) spectrum, which makes it the fourth largest spectrum holder in the United States.
Spectrum Build-Out Commitments of DISH Network
As part of DISH’s 5G network build-out, the company made a number of commitments to the Federal Communications Commission (FCC). Specifically, these commitments include:
- Build a 5G network that covers 20% of the United States population by June 2022
- Build a 5G network that covers 70% of the United States population by June 2023
DISH has publicly-stated that its medium-term target for its 5G network build-out is to have deployments on more than 15k towers. Therefore, the Crown Castle agreement largely solves for DISH Network’s medium-term plan.
Additionally, DISH has a right of first refusal, for a period of 5 years, on 20k tower sites made available by T-Mobile. This is because T-Mobile is decommissioning these tower sites, following its acquisition of Sprint.
Other Notable 5G Milestones by DISH Network
Importantly, Crown Castle is the first digital infrastructure partnership that DISH has announced. However, DISH has recently been making several wireless vendor announcements, as it relates to its 5G network build-out. Specifically, DISH has announced partnerships with Fujitsu for 5G radio units, Mavenir and Altiostar for virtualized RAN software, VMware for its cloud-native 5G network, and Nokia for its 5G standalone core network.
Overall, these agreements, combined with Crown Castle’s digital infrastructure provide DISH more clarity as it continues to roll-out its 5G network.
Crown Castle’s Towers are Optimal for DISH Network
Crown Castle has the highest percentage of suburban and urban towers, relative to peers American Tower and SBA Communications. This is particularly important for DISH, because the company will initially build-out its network in urban environments, in order to meet its population coverage commitments with the FCC.
Specifically, 50% of Crown Castle’s towers are located in urban and suburban environments. Whereas American Tower and SBA Communications only have 34% and 32%, respectively, of their towers in urban and suburban environments.
Furthermore, Crown Castle’s towers are in areas with much higher population density, as compared to its peers. Crown Castle’s towers cover a population density of 2.9k people per square mile. In contrast, American Tower and SBA Communications only cover a population density of 2.2k people and 1.6k people per square mile, respectively.
Benefits for Crown Castle
The advantages of Crown Castle’s convergence strategy are increasingly evident after this agreement with DISH. Indeed, Crown Castle is able to lease the same customer, DISH Network, multiple components of its digital infrastructure, namely towers and fiber. Both American Tower and SBA Communications would not be able to provide the same comprehensive solution to DISH Network, across the United States.
Beyond an increase to its revenue base, that the DISH agreement provides, Crown Castle is benefitting in additional ways:
Revenue Diversification for Crown Castle
For the nine months ended September 30, 2020, 76% of Crown Castle’s site rental revenues were derived from T-Mobile, AT&T and Verizon. Therefore, as DISH scales its relationship with Crown Castle, it can become a meaningful fourth tenant for the company. In turn, this helps to improve Crown Castle’s revenue diversification. Specifically, DISH can lease space on up to 20k of Crown Castle’s 40.1k tower sites across the United States.
DISH will use Crown Castle’s 80k fiber route mile network for fiber transport services. This is important to connect tower sites for backhaul purposes and to move data around. As more data is produced with DISH’s 5G network, more fiber is needed. This is because every part of digital infrastructure uses these fiber “railroads” to move data around.
As it relates to its Fiber business, Crown Castle has also come under recent pressure from activist investor Elliott Management. Elliott took a $1bn economic interest in the company, targeting Crown Castle’s capital allocation strategy. Specifically, Elliott called-out that fiber is the reason for Crown Castle’s stock market underperformance, compared to peers.
Therefore, Crown Castle’s fiber agreement with DISH may help to assuage some of Elliott’s concerns on the fiber business. Specifically, if the agreement can help increase the company’s Return on Invested Capital (ROIC) for the fiber business.