Dish Network’s move earlier this month to back out of plans to buy valuable low-band spectrum from T-Mobile US is just the tip of the nascent carrier’s ongoing financial and operational challenges that could doom its long-term future and potentially impact the still-growing cloud-based 5G ecosystem.

Dish Network – and new parent company EchoStar – continue to sit on an option that would allow it to purchase 14 megahertz of nationwide spectrum in the 800 MHz band for $3.6 billion that T-Mobile was required to offer to Dish Network as part of T-Mobile gaining approval for its purchase of Sprint. EchoStar, as part of its most recent earnings call, said it was unlikely to move forward on that option and instead will forfeit a $100 million deposit it gave T-Mobile last year tied to postponing the decision.

In addition to losing that $100 million, EchoStar also took a $1.6 billion impairment charge for the fourth quarter of last year tied to removing the potential value of that spectrum from its books.

T-Mobile CFO Peter Osvaldik told attendees at a recent investor conference that Dish Network still had until April 1 to make an official call on the spectrum, but added that should it pass on the purchase, T-Mobile would be able to auction the spectrum to the highest bidder with a “floor price of just under $3.6 billion.”

“We haven’t commenced that auction yet, but should they choose not to exercise it, that’ll be the next step for us,” Osvaldik said.

Dish Network is already sitting on a substantial pile of spectrum that it has acquired through various auctions over the years and is using some of it to power its cloud-native 5G network. However, Daryl Schoolar, analyst and director at Recon Analytics, told SDxCentral in an interview that operators basically never turn down the opportunity to acquire new spectrum as it’s the lifeblood for mobile services, which underscores the carrier’s financial position.

“I've never seen operators not need capacity, and that's something of a mainstream band,” Schoolar said. “Even though it wasn't massive, they could still aggregate it with other spectrum assets if they were thinking about growth.”

“Every time I do research and talk to carriers about what they want from 5G, what they want from 5G-Advanced, what are the benefits of 6G, it always comes back to capacity,” he added. “If you have a network and you're growing on it, the traffic is growing on it, you're going to need more capacity.”

Fortunately – or unfortunately – for Dish Network, it’s not growing. The carrier lost 123,000 wireless customers during the fourth quarter of last year, which was nearly five times the amount it lost for the same quarter of 2022. More profoundly, the carrier lost 617,000 total wireless customers last year, which was on top of the 576,000 wireless customers it lost in 2022.

That lack of growth will make it more difficult for the carrier to expand its market presence.

“They've already taken the low-hanging fruit and now they're going to have to move on to the rural areas, which can be more capital intensive,” Schoolar said.

Dish Network and EchoStar management noted repeatedly that one of the main benefits to it being acquired by EchoStar would be easier access to new funding. However, that has proven to be an early challenge.

The company earlier this year offered up a pair of exchange offers to investors in an attempt to gain more long-term financial stability. Both of those offers were denied, which has placed increased pressure on EchoStar’s near-term financial obligations.

Those include a debt maturity due this week that EchoStar Principal Financial Officer Paul Orban told investors it would pay out of the $2.4 billion in cash and marketable securities the company had on hand. The more pressing matter is a $2 billion debt maturity that is set to come due in November, which Orban said would require new financing.

“We are in active discussions with numerous parties to secure committed financing to meet our future obligations and have received significant inbound interest from reputable counterparties looking to provide such financing in various forms and had various positions in our capital structure, all of which we are carefully evaluating,” Orban said. “If sufficient financing is committed, the going concern qualification will be alleviated.”

“While discussions with some stakeholders are ongoing,” CEO Hamid Akhavan added, “we are prepared to continue good-faith discussions with all of our stakeholders and arrive at solutions that are in the best interest of the company and all involved parties.”

In the meantime, EchoStar is looking to reduce operating expenses by $1 billion this year. The company also noted financial opportunities tied to the possible sale of some of its spectrum holdings or the ability to secure financing options tied to the value of its pay-TV customer base.

Dish Network has maintained that its unique cloud-native and open radio access network (open RAN) architecture allows it to more cost-effectively scale its network to meet demand, which is now being put to the test.

“They're getting all the engineering awards,” Roger Entner, founder of Recon Analytics, said in a recent podcast before pointing specifically to Dish Network’s headway in rolling out its 5G-based voice over new radio (VoNR) service. “All people in the United States say, ‘ooh, wow, I can talk to somebody on my cell phone. I haven't seen that before.’ They don’t care if its 5G standalone open RAN or if it runs on smoke signals. That's the fundamental problem.”

“This is a reminder why there's so few greenfield networks,” Schoolar added. “You can bring out the newest, shiniest technologies, open RAN, cloud RAN and all that, but that doesn't fundamentally change some of those basics of the business, which is actually selling the service, because end users don't care. They don't care what it runs on, they just want the coverage. They want the price.”

Dish Network’s financial struggles could also bleed into the ongoing development of this cloud-native network ecosystem. Schoolar said that while the broader ecosystem has strong momentum toward this cloud-native and open ecosystem, Dish Network’s struggles could cause a short-term impact.

“The companies involved are going to take a short-term hit on the revenues. It might pause some operators, especially smaller operators with less scale and more limited resources, to put a pause on plans until the market is more mature,” Schoolar said. “But this is more of a short-term interruption than long term.”

Schoolar pointed to ongoing and aggressive moves by operators like Vodafone, Verizon and AT&T, which are all moving on plans to install open RAN and cloud RAN equipment into their networks.

“My research, when I did my survey of mobile operators on what they want out of 6G, having open RAN natively built into the standard was one of their highest requirements,” Schoolar said.

In the meantime, Dish Network will continue threading a fine operational and financial needle its Chairman Charlie Ergen has repeatedly cited as an ongoing challenge and risk for the carrier.

“We have a narrow path, but there is a path for us to achieve financial stability and make sure we meet our commitments,” Ergen said during Dish Network’s Q3 2023 earnings call. “Having been through this for a long time, we’ve had narrow paths before and it’s a sharp focus for our management and necessity sometimes is the mother invention.”

Ergen did add that if that path continues to narrow, Dish Network could be a valuable target.

“A retail wireless company that has seven-and-a-half-million subscribers and now has an online presence is probably a valuable company,” Ergen said. “We could argue whether we managed it as well as we should, but the fact is that that’s a very valuable property. So obviously there could be ways from an investment point of view, there may be people that are interested in that sort of thing.”

Ergen’s gambler mentality has made him a very wealthy individual, though analysts note the Dish Network situation could prove to be his biggest bet.

“(Ergen) is pulling aces out of his sleeves, and we'll see when he runs out of aces or when somebody slaps his hand,” Entner said. “Dish needs to do something radically different. It hasn't done that yet. I just think they have nothing to lose.”