Even after DISH Network Corp.'s recent $2 billion debt offering, the company's expensive 5G network buildout and looming maturities mean it will need to raise more capital in the next year or two.
DISH in November finalized an offering of $2 billion aggregate principal amount of its 11.75% senior secured notes due 2027. This offering has the highest coupon rate of any of DISH's upcoming maturities. According to the company, the net proceeds of the offering will be used for general corporate purposes, including the buildout of wireless infrastructure.
While $2 billion is a hefty sum, it will not be enough to cover both the costs of DISH's ongoing network deployment or its debt obligations, credit analysts said.
"They are starting to reach peak capital spending on that network deployment. Under our forecast, we have them spending about $2.7 billion in 2023 and $2.2 billion in 2024,"S&P Global Ratings Director Chris Mooney said.
To keep key spectrum licenses, DISH needs to cover 70% of the population in each license area with 5G service by June 14, 2023. Alternatively, if its 5G network covers 50% of the entire U.S. population by June 2023, DISH will have two more years to reach the 70% threshold in its license areas.
"They're stuck between a rock and a hard place because they invested close to $30 billion on these spectrum licenses," Mooney said. "The penalties for not meeting these buildout requirements are just too steep — you have not only fines from the [Federal Communications Commission] but also forfeiture of the licenses where you fail to build it out."
DISH Chairman Charlie Ergen previously estimated it would cost $10 billion in total to build the 5G network.
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* See DISH's detailed offerings.
In addition to buildout costs, DISH also faces a number of debt maturities.
"While the $2 billion raised helps a lot with the buildout, there are about $3 billion in maturities in the next year and a half," Moody's credit analyst Neil Begley said. Begley noted that DISH's free cash flow from its shrinking satellite video business will not be enough to cover those maturities, "so they will need to tap the debt market or raise equity."
Ratings estimated after the $2 billion debt offering that DISH would need to raise an additional $4.0 billion to $5.0 billion by the end of 2024 to fund debt maturities.
DISH ended the third quarter with total debt of $22.11 billion, up 54.72% from the first quarter of 2020. During the same period, its debt-to-EBITDA ratio rose 52.69%. Mooney expects DISH's EBITDA to continue dropping as its pay-TV business declines further in 2023's recessionary environment.
Mooney would like to see DISH pay down some of its debt to keep up with its declining EBITDA.
"I think if DISH continues to fund their capital requirements with debt at high rates, it really calls into question its ability to successfully refinance longer term," Mooney said.
Because DISH's wireless business model is more enterprise-focused than consumer-focused, Mooney said the company's financial position could be improved through new enterprise relationships.
"I think there are some logical partners that have deep pockets that could potentially be enterprise customers and partners, but that's something that's been talked about ... for a long time, and it still hasn't materialized yet," Mooney said.
In April 2021, DISH signed a deal with Amazon Web Services Inc. under which AWS became the preferred cloud provider for DISH's 5G network.