DISH Network Q3 2022 Earnings Call Transcript

Quartr
Provided by Quartr
November 2, 2022

There are 14 speakers on the call.

Operator

Good day, and welcome to the DISH Network Corporation Q3 20 22 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Tim Messner. Please go ahead.

Speaker 1

Eighteen. All right. Thanks, Justin. Good morning, everyone. Thanks for joining us.

Speaker 1

We are joined on the call this morning by Charlie Ergen, our Chairman Eric Carlson, our CEO eighteen. Paul Orban, our CFO and on the wireless side, we have Tom Cullen, our EVP of Corporate Development John Sawaringa, the President and COO of Wireless eighteen and Stephen Bai, EVP and Chief Commercial Officer. Before we start, I need to remind you of our safe harbors. During this call, we will make forward looking statements, which are subject to risks, and other factors that could cause our actual results to differ materially from historical results or from our forecasts. We assume no responsibility for updating forward looking statements.

Speaker 1

And Q3, 2020. That's it. We do not have any opening remarks eighteen. This morning, so operator, we'll open it up to questions starting with the analysts, please.

Operator

Thank you. To reach our equipment. You'll hear a tone indicating when your line is open. At that point, if you would please state your name and company name. We'll go ahead and take the first caller.

Speaker 2

Nineteen. Hey guys, it's David Barden from Bank of America. Thanks for eighteen. Lots to go through today, so I'll let other people kind of touch on a lot of stuff. First would be, Could we talk about the spectrum secured bond that's in the market right now?

Speaker 2

And I think I'm most interested in understanding kind of how you think about loan to value collateralization And what this exercise will tell us about using Spectrum as a funding vehicle On a go forward basis for the business. I guess the second thing I'd like

Speaker 3

to talk

Speaker 2

about, if Jason is on the line or Charlie, With respect to the SPAC and the process that you were maybe investigating with respect to the prepaid 1,000 business sale. I guess I understand that the SPAC is likely to unwind for the most part based on the shareholder vote on the 31st, is the prepaid business still for sale? And if you could kind of describe a little bit about the thought process on why it might be or it might not be? Thank you so much.

Speaker 3

David, this is Charlie. Unfortunately, I'm not going to be able to answer a lot of what you asked. Those are good questions for legal reasons when you have an offering in But let me just take a chance to maybe reset some things and then try to address what I can say about the questions that you asked. The It was another really good quarter for us in terms of us doing a lot of things in a relatively Sure period of time. As we said last quarter, one of our goals was to stabilize the retail wireless business.

Speaker 3

And while from From an EBITDA perspective, we didn't do as well as we'd like to. We needed to stabilize that business and we were successful in doing that and going from Instead of losing over 100,000 subscribers each quarter to a very, very small gain and that doesn't count The 139,000 customers we got from T Mobile. So that was important for us to get our process in place To do that. We actually did have a bit unexpectedly with some growth in linear TV, which is certainly led by Sling, but 1 of the few companies in linear TV, maybe the only company that actually had growth. Importantly to a lot of people in this call, we had we continued our build out success to get with over 10,000 towers now constructed that can reach over 35% of the population.

Speaker 3

So we're still continuing to focus on that on the next milestone 70%. And I think one thing that's not quite understood by everybody is we're building 600 megahertz out. It includes all our frequencies When we're building these towers out. So we're and a half. Pretty far down the path on 600 megahertz towards the final milestone of 75%, which only which affects the 600 megahertz milestone.

Speaker 3

So I mean 600 megahertz frequency. So that we continue and we continue on that 1,000 approximately 1,000 tower pace per month. The we're now poised for we are we've launched Boost Infinite internally eighteen. And we still have a lot of operational issues to make sure we're buttoned up on and you only get one chance to do it right for the consumer. But for our customers that we've launched internally, it's still a pretty good experience.

Speaker 3

We've got some work to do. So that's going to launch, but we're poised now to launch that in the Q1 And launching that on and John maybe talk about this in a minute, but we're launching that on our own OSS, BSS system. So Today, we're on T Mobile's system. And so that's misunderstood how important it is to get on to your own system there. And finally, we're in the market to your question, we're in the market for funding today for the network.

Speaker 3

It's a $2,000,000,000 offering and Because that is limited to qualified investors, I can't go into details about that. But it obviously This funding for the network going forward. On the SPAC, can't say a lot about that, but The I think it would the SPAC did have high redemptions, but is still intact and and still a public company and still capable of doing nothing has really changed strategically there Because in the SPAC world today, you're going to have to have a pipe and no matter what you do, you're going to have to Other secured funding, so it may be a different set of shareholders, but there's still opportunity. One of those opportunities, it's public, is that there have been preliminary discussions with DISH. Let me take the SPAC cat off and talk about DISH.

Speaker 3

Obviously, one of the things we've talked about is we'd like 18. Each sector of our business to be a self funding as it possibly can be. DBS obviously has been self funding We're in the marketplace for network to move that move in that direction. And we think that retail Wireless is in a unique position to do that as well as we enter the more lucrative postpaid business, because it doesn't have any debt, it doesn't have any CapEx, And it's got 8,000,000 subscribers. So it's a pretty interesting business and one that's got a lot of growth ahead of it.

Speaker 3

So I know I didn't answer everything that you wanted, but that maybe gives you kind of a reset of big picture.

Speaker 4

Nineteen. Thanks, Charlie, for that. Appreciate it.

Operator

And we'll take the next question.

Speaker 5

Great. Thanks. It's John Hodulik from UBS. I guess just some thoughts on David's question. First, Charlie, anything you'd say about the Boost sale in terms of timing or the process that we have from here?

Speaker 5

And then following up on the comments on Boost Infinite, just eighteen. Any additional details on the timing of the launch? Maybe you could say about pricing or distribution or what some of those issues are that you guys are Trying to get over to launch on your own OSS and BSS. Great. Thanks.

Speaker 5

Okay.

Speaker 3

I'm going to let John answer Boost Infinite and I Didn't quite catch the first part. It was about is boost something about boost for sale or boost

Speaker 5

Yes, just the prepaid sale and then the SPAC and just Sort of timing or the process you guys got to go through?

Speaker 3

No. That I guess the press kind of got that one wrong. There's some preliminary discussions between percent of the SPAC and DISH Retail Wireless that would be a potentially would be a sale of a very small portion of The retail wireless business. We think at DISH that retail wireless belongs in what we're doing, right? We think It's not impossible that you could sell a company, but today it would be more likely that you would sell a portion of the company.

Speaker 3

It certainly wouldn't be limited. The Board of Directors is going to look at everything. And then when they look at retail wireless, they've had some preliminary Discussions with the SPAC, but they've also looked at a lot of other things that they could do with retail wireless. So and it's a pretty Clean company doesn't have huge financing needs, but it certainly has a clean balance sheet and a real business. That's kind of I think everybody has their skis On maybe the SPAC discussions.

Speaker 3

But with that, I'll turn it over to John.

Speaker 4

Eighteen? Yes. Hi, John. It's John Swaringa. Regarding Boost Infinite, we've been sharing all along that we Yes, plan to move into postpaid.

Speaker 4

We want to move our retail wireless business upmarket. We have Gone ahead and launched Boost Infinite here internally. It's a full postpaid business with Retail credit qualifications, device financing, full assortment of iconic down to mid tier devices. You'll see us come out eighteen. After some of the holiday rush with the competition and being market in the Q1, you'll see us largely focus on a transition initially Into digital and then later you'll see us in the national retail and pockets of branded distribution.

Speaker 4

But big focus on that business and $1,000,000 here. We believe that's a great path to building enterprise value for the retail segment. Underpinning that, there has been a lot of work to get our own sort of operational and technology shops in order. We're in the process now of transitioning off of the T Mobile transition services agreements Not only for Boost, but we're launching Boost Infinite at the same time. As everybody sees, there's a little bit of OIBDA pressure in the quarter.

Speaker 4

A lot of that can be attributed to steps we're taking to get Boost Infinite ready to roll and also the transition activities and $1,000,000 for Boost Mobile, which are fairly significant.

Speaker 3

Just to add to what John, this is Charlie. Eighteen. I've said this on conference call after conference call, but the wireless business as an outsider coming in looking at it, the Postpaid customer is way more profitable than prepaid customer. And the pre k customers actually getting a much better deal. United States is really the only Mark that I know of where prepaid is cheaper than postpaid.

Speaker 3

And You can be really, really, really good in the prepaid business as an MVNO. And you're talking about 10% margins and That kind of thing. And obviously, we know in the postpaid business people are north of 50% margin. So you can get a feel for the investment in the postpaid customers, You're going to get a much better return and we haven't had that luxury to do that. So and the Competitively, the postpaid business is not nearly as competitive as the prepaid business.

Speaker 3

It's not even close. And so there's just a bigger opportunity there. And we I wish we could have started 6 months ago, but we're excited To get going and we're going to have a great product and with great network partners on our own network. So we're uniquely positioned for coverage eighteen. In terms of nobody really could match our coverage as we use multiple networks and we'll be competitive.

Speaker 3

As a new entrant, you're going to have to be a lower price, but a lower price with a better service is a good business. And We found that out in DBS, right? We had a better product and we had lower price. And if you can do both those things, you can be successful.

Speaker 5

Nineteen. Thanks guys.

Operator

And moving on to the next question.

Speaker 6

18. It's Phil Cusick. So two things here. 1, can you talk about maybe John the better prepaid churn in wireless that you saw this quarter? And the I assume that new handsets you'll be launching on Boost Infinite will all roam to AT and T.

Speaker 6

What's the path of moving existing subs over To AT and T. And then second of all, Charlie, maybe talk about the DIRECTV combination. You sort of talked about this a couple of times and 2,000. In the past, you talked about it as being inevitable. Do you think that a political environment will let that go through?

Speaker 6

And with the linear market accelerating to the downside, what are the synergies look like of doing something like that going forward? Thanks very much.

Speaker 4

Nineteen? Thanks, Phil. It's John. I'll take the first part. So, with respect to Boost Infinite, you will see us, launch that business as an MVNO with AT and T.

Speaker 4

You will however also start to see Band 70 devices in that portfolio as well as with Boost Mobile. And certainly we'll be in a position as we and more. We're going to launch Vonner commercially in our deployed cities. You'll start to see us activate a mix and a half of the devices on to our own MNO. That will be the same for Boost Mobile as well.

Speaker 4

So devices that are fielded, I eighteen? I mean certainly, as you all know, we have some experience now with network transitions. We feel like we have a pretty good playbook to move our customers across as we feel confident in doing so. And then as Charlie pointed out, I'll just double click on it. Once we're on our MNO, we've got access to 3 networks, our own DISH 5 gs network as well as 2 partner networks.

Speaker 4

So we obviously we can do some things there to make sure we're providing a great customer experience and it's also eighteen. A good setup for us to be competitive. On the prepaid churn part that you asked about, we certainly expected that number to go down a little bit and it has. Still a very competitive marketplace in prepaid as Charlie mentioned. We're doing what we can there.

Speaker 4

And a lot of focus on continuing to get the right handsets into our customers' hands and we're now in the business of doing that with band 17 devices as we start to sort of preload Band 70 Von or capable devices into our base. 3. And that's going to be a big effort as we head into 2023.

Speaker 3

Yes. And I think this is Charlie. And just to add that There's not a necessity to move those prepaid customers to AT and T, some will, but That's not a big conversion thing like the CDMA shutoff was. It's more the more interesting part is when you move Boost Customer prepaid to our network. And then obviously you get owner economics.

Speaker 3

So that's a more logical path in terms of your thing, Because T Mobile network works great. And people that are on the T Mobile network are happy and there's not a need to move Except from economic point of view, and that's the biggest economics would be when we have our own network. On the question about DIRECTV, I think, I've got a couple of things. Eighteen? I think politically, obviously there's 3 parties.

Speaker 3

I can't speak for anybody else. I've always said I thought it was inevitable. I haven't changed my opinion On that, I do think the political environment when an election is going on, you don't really want eighteen. You're hesitant to be a political punt, a football for somebody to complain about big companies Whatever in an election cycle, but that election cycle is over next week. And then you have a window where I think all companies are looking in M and A.

Speaker 3

You're probably going to see some increased activity in that sense. And you're not really in the political arena from an election point of view for another 15 months or so. So, if there was a timing if the timing was right, it would be in the near term, not the longer term. There's still material synergies, there's significant synergies. I won't go into detail of what we believe those are, but we believe that those are still material.

Speaker 3

They're not what they were 5 years ago or 2 years ago, but they're still material. And certainly in a declining industry, taking advantage of synergies eighteen is a rational strategy. So, and I think the political on the political side in terms of eighteen. A legal objection to a merger that's been diminished by time and obviously degradation of the linear TV business and competition From dozens of companies in the OTT business and the proliferation of broadband today. So there's not a home in America today that can't get broadband, Not one, if you want to buy space SpaceX or provides that or fuse, right?

Speaker 3

So there's not anybody that can't get broadband And the government spending, I think now up to $80,000,000,000 to enhance broadband. So they're going to cover unless they just Unless the government waste the money, they're going to cover every man, woman and child with broadband in the next several years.

Speaker 6

Charlie, can I follow-up on the wireless side? Just one thing. Are you able to move a Boost customer with a T Mobile handset to look at your network, for example, in Vegas, where that exists already? Or is that something we have to wait until you sort of swap those handsets out? Thank you.

Speaker 3

Nineteen? You could, but you wouldn't have band 70. And so the more rational approach would be that, that particular customer It's you would move and upgrade them, which you'd have a little bit of cost to do that, but you'd also have the benefit of a lot you would do that for longer term customers, You would do that with customers that were in an upgrade cycle anyway and you do that with customers that had band 70 so that you get owner economics, which would More than pay for the cost to do that. But there certainly is a portion of your current customer eighteen. Today that you're just not going to move, you're going to lose them from churn and you're going to lose them because they don't have any handset that's upgradable.

Speaker 3

I don't know, John, did I get that right? I hesitate to say.

Speaker 7

Yes, I think you got it

Speaker 4

right, Charlie. I mean there's really 2 components. There's The spectrum bands and the device and then in some cases, phones are unable to operate and 5 gs standalone. 2. Yes.

Speaker 3

So the 5 gs voice boner was the other piece of it. So that would be the reason you wouldn't do it. Eighteen? So you can look at like anything else, the boost transition is probably a 2 or 3 year transition. Nineteen.

Operator

And our next question will come from Rick Prentiss with Raymond James.

Speaker 5

I appreciate some of the clarity. Eighteen. Thanks. Rick Prentiss, Raymond James. I appreciate some of the clarity on the Connex transaction, but just want to clarify Some of the other folks keep calling it a prepaid.

Speaker 5

Charlie, you keep referring to it as maybe a portion of retail. Should we assume boost prepaid and boost infinite postpaid

Speaker 3

eighteen? I think you should assume that retail wireless at Boost includes both prepaid and postpaid. And makes sense. Because there's not really that much difference between prepaid and postpaid. 1 customer has credit and they get billed and a prepaid customer gets billed, usually doesn't pass a qualifying credit, maybe doesn't have a bank account, maybe doesn't have a credit card, And they pay at the time of activation.

Speaker 3

That's the difference. In the marketplace, there's a difference because typically a prepaid customer Get a subsidized phone, doesn't have a contract, doesn't necessarily have a monthly fee on their phone, and And the churn is higher. So you can you guys are smart running net present values on That's a lower return on investment customer. It's still a positive return, but a lower return on investment. And Incumbents you see incumbents doing a couple of things.

Speaker 3

They have extra bandwidth. So they would enter the prepaid business for that group of customers because not Every customer has credit, so there's no reason to not play in that field. And now they're doing some stuff with fixed wireless where they actually take excess capacity and compete against cable on the fixed wireless side, right? Both of those are relatively are good uses of the network because they're and a half. They've got excess capacity.

Speaker 3

So if they don't use it, they lose it, but they're not huge returns on investment, I don't believe. I'm not privy to all Fixed wireless stuff, but they're not as big of returns as the postpaid business.

Speaker 5

Right. And that kind of begs the question retail wireless, eighteen. Will you someday expect to report enterprise wholesale as a business segment? And how is that going with what Stephen Vai is working on?

Speaker 3

Eighteen? Yes. We'll let Steven answer that. I mean, I think when the segment gets big enough, Paul, you report them as a segment. Yes.

Speaker 5

Is

Speaker 3

that fair? Yes. That's fair. And I expect it will get big enough that that will happen, but perhaps that's a good opening for Stephen to bring us up to date on enterprise.

Speaker 7

Thanks, Charlie, and thanks, Rick, for the question. As we talked about in the Analyst Day, we started out with sort of private 5 gs and we're sort of evolving that product Into a private 5 gs as a service solution. We talked about the early success we had with DoD. We continue to win more projects and Take on more opportunity with the Department of Defense, which are very exciting projects. Unfortunately, I can't go into a lot of detail specifically about those projects.

Speaker 7

But we're also very active in several other verticals and industry sectors, not the least of which includes hospitality, given the DISH business From the video side of the business, we are actively engaged with different hotel groups for private networks, Also industrial manufacturing responding to more and more RFPs in that space as companies are looking at how do they invest in More sophisticated solutions to take cost out of the manufacturing facility in the plant. So we're actively engaged in responding to a number of RFPs there and we're seeing more and more RFP flow. Into a number of RFPs there and we're seeing more and more RFP flow coming to us, which is very encouraging. And then we're also active with utilities and You've seen different stuff being published recently about utilities and their activity in sort of the private space. 2,000.

Speaker 7

And we see movement there in a very positive direction and we're actively engaged in those conversations. I think the 2,000. Point that I would leave you with is we've got some really strong proof points in 2022. We're seeing growing momentum as we step into 3. We expect that deal flow to continue to grow, and we're excited about that opportunity.

Speaker 7

I think on the projects we have won, We're very focused on the execution against those projects. It's very important for us to deliver against those commitments. Execution is key. As we've done on the macro network, we're shifting that focus on to the enterprise side. As it relates to differentiation, This is really not as competitive as other spaces.

Speaker 7

And the point that I want to get across here is, In order to build these networks, it is absolutely vital to have access to license spectrum. We're running into Different players in the space who are offering CBRS solutions using GAA or WiFi. And what we're hearing more and more from customers is that Doesn't cut the grade. They need to access the license spectrum and it's not sufficient to have one band. It's actually very important to have access 2, a combination of 3, 5 using our PALs, but also low band spectrum is a vital ingredient and a half.

Speaker 7

But that also limits sort of the competitive playing field to those who have access to that kind of spectrum. We continue to work with our partners. We have very good partners That are working with us on the technology side, both on the network side, but also in the private 5 gs space. We've talked about Dell and Cisco, JMA. 1,000.

Speaker 7

We work very closely with Hughes as a sister company as we work with the Department of Defense. And we continue to work on those RFPs. So 3. It's a good business to be in and we expect that momentum to pick up as we go into 2023. Yes.

Speaker 7

And this is Charlie.

Speaker 3

And I know it's a bit frustrating because It's a kind of a new concept for private networks and it's really everybody has a different definition about it, but And obviously take the sales cycles a little bit longer, but it's a long term customer, you're going to have virtually no churn in it and it's big contracts. A lot of them will be big contracts when you win them. So it's going to be a big part of our business. Our business was designed to be an open wholesale network Where if you could if you're in the private enterprise business and you can think of a need that you have because we're software based and we're in the cloud, you can write an API, you can You can write code that can do that for you and it's a big differentiator between legacy networks. Having said that, you You can argue whether the business is $30,000,000,000 business or $100,000,000,000 business, whatever it is.

Speaker 3

But it's unquestionable that there's really only 4 companies that can participate In a large degree in the private network business that have spectrum private spectrum, license spectrum portfolios, eighteen? We think everybody is at the same starting line. We think the incumbents are going to get a lot of business there. They're going to get Their fair share of that business, but it would be realistic that with a better network and something that's architected nineteen. That we have an ability to get 25% of that business.

Speaker 3

And that's going to be a very profitable and we get it 2 ways, right? We get one way that where we're the integrator and that's we're going to go to places in rural America where we're strong. We're going to go to places Like a hospitality where we're strong and already have relationships, but then working with our partners, integrator partners where they They may go in and do the integration. We may just be we just may be a network supplier spectrum or some connectivity. And that's just 18.

Speaker 3

At lease of spectrum, so to speak. And while the revenue is not as high, It's not a lot of work on our part. It monetizes our spectrum in a way that's not visible today, and it's obviously very profitable.

Speaker 5

Eighteen. Thanks guys.

Operator

And our next question will come from Kannan Venkateshwar with Barclays.

Speaker 8

Nineteen. Thank you. Charlie, I mean,

Speaker 9

I think you implied that part of the wireless business, if you contemplate that transaction would move to Connex. But I I want to understand, I mean, is there any constraint under the DOJ consent decree for you to have wireless move completely away in theory, outside of DISH and run an independent wholesale business. And if that is possible, then why not go down that path And keep a capital light model at DISH versus a more retail model at another entity?

Speaker 3

Yes. The DOJ question, eighteen? I don't know the answer if you could do what you're saying. That really hasn't been contemplated. So I don't know The answer to that, but obviously the DOJ there's a consent decree, but everything is everything You would go to everything as whether it was competitive or not competitive.

Speaker 3

And the well financed retail business would be more competitive, people will probably look at that. But The retail business is relatively capital wide. So I'm not sure you gain anything by that. So But that's our Board looks at that. We've got a talented Board.

Speaker 3

We've got all people that have a lot of experience in this. And all I can say is that strategically, We'd like DBS to fund DBS. We'd like network to fund network and we'd like retail to fund retail. And we think that that's doable. And Ken, just to clarify, In the scenarios that we're looking at, DISH would always retain control of the entity.

Speaker 3

It would just be looking at vehicles that would attract growth capital into the retail wireless segment.

Speaker 9

Got it.

Speaker 3

Eighteen. I'm unaware of anybody in the retail wireless segment that's got a debt free Balance sheet like Boost does today. So there might be, but I'm unaware.

Speaker 9

Yes. If I could just follow-up on the capital question. I guess you do have the debt issue in the market right now. But then as the wireless retail business scales, there's probably going to be some working capital needs as well. Eighteen.

Speaker 9

And the degree to which you can scale the wireless business in some ways becomes a function of that working capital nineteen. So if you could just help us think through beyond this debt issue, how you're thinking about capital raise cadence, Because that in some ways would inform how fast you plan to scale the business as well. Thanks.

Speaker 3

Yes. I think that's a Valid questionpoint. We went through this with DBS where eighteen. We had this great product and a great competitive price, but we had to scale the business. It did take some working capital, not as much as people would have thought, Because we were pretty good stewards of capital and we were able to do some things to lessen those needs.

Speaker 3

Obviously, the more In postpaid, the customers are so profitable that you probably want to grow as fast as you could without But obviously without being without just trying to gain market share for the sake of market share. And so that might take some working capital, but I think Debt free retail wireless business today is probably capable of raising that capital. And obviously the Board of DISH Looking at multiple areas, the only one that's public is that they had some preliminary discussions with the spec. But you can assume that that's not all they would look at.

Speaker 9

Nineteen. Thanks, John.

Operator

And our next question will come from Michael Rollins with Citi.

Speaker 10

Thanks and good morning. Two questions if

Speaker 6

I could. First,

Speaker 10

Back on their network, the 10 Q referenced $2,000,000,000 needed to hit the 70% target mid of next year for population coverage. Is that premised on this Ongoing 1,000 sites per month ramp, so you'd be ahead of the 15,000 that is also being discussed. Eighteen. And are there some other things in that $2,000,000,000 that we should be mindful of? And then just separately on the video performance, can you talk a little bit about the strength of Sling net adds and if there's a more deliberate effort to try to migrate and the satellite subscriptions to streaming over time?

Speaker 10

Thanks.

Speaker 3

Eric, you take the sonic. You take the network.

Speaker 11

Got you. Yes, Michael, this is Eric. So a couple of things there and we've talked a little bit about it in the past. I mean obviously Sling had a Pay TV had a strong quarter driven by some of the seasonality in Sling with college football and NFL. Eighteen.

Speaker 11

You've seen that kind of year over year. And I think that we showed up in the right place to take advantage In a disciplined manner of customers that we think not only will be profitable there, but also longer term, right? I mean it's As you see the OTT landscape, obviously, churn can be spiky and engagement can be spiky. And so We have to have a product that meets the customers' needs and keep customers and not invest too much in customers That want kind of a seasonal type product, which by the way Sling is very good for to complement other SVOD type services. As we've talked about over the past many years, on the DISH side, we've really been focused on a more rural profile, a whole home type solution and an older demographic.

Speaker 11

Now where customers have a need for SVOD or OTT type products, we meet them halfway or all the way there with our Hopper platform In having apps like Netflix, Amazon and YouTube right in the interface and along with launching our Android TV product. But your question is a eighteen. And it's one that we look at, where customers that have a need to transition kind of away from a more traditional linear service into an OTT service. We're obviously opportunistic with that customer relationship that we have with DISH and how else we can monetize or keep that customer within the overall DISH ecosystem. And that could be A Sling product that could obviously be a Boost Infinite Boost product.

Speaker 11

Obviously, Boost and DISH don't go as well together. Eighteen. But you'll see us start to monetize our customer relationships and retain them in a strategic way. Hence your question about a roll off from DISH to Sling.

Speaker 3

Yes. So I mean, the short answer is nineteen. There is not a lot of roll from DISH to Sling other than adding apps to our platform, which they can do and then they get it in the guide and You can search for it and so forth and so on. And so it becomes a whole home experience for people that want to add Netflix to Or prime to DISH.

Speaker 11

And I think the big difference there, Charlie and Michael is obviously Sling is very light on broadcast locals. And is that as the viewership on broadcast continues to decline, Sling's a really good choice to match up with a Peacock or a Paramount and a Netflix, depending when you need that, if you just need it for a free trial or If you need it for a couple of months, I mean, the in and outs of SVOD and the pay TV ecosystem with OTT are changing. Our DISH customers definitely like broadcast TV. It's one of the reasons they choose DISH along with kind of all the additional features and functions that the Hopper platform brings.

Speaker 3

And then on the network side, the $2,000,000,000 Our $2,000,000,000 would bring DISH to 70% from a capital expenditure would bring us deployment perspective would bring us over 70% nineteen. Of deployment, to meet our milestone, the next FCC milestone. But in addition to that, Which we haven't articulated very well, so I'll take an opportunity to do that. Because we're building 600 megahertz at the same time, eighteen. Also get you and because we are more urban based and we actually go into the 80% to 90% coverage in urban areas to meet the 70% population.

Speaker 3

In fact, as part of that, we go a long way, not all the way, but we go a long way to the 75% 20 25 milestone for 600 megahertz. So we'll be within spinning distance of that milestone eighteen. And in many cases, way early, maybe even a couple of years early on some of those milestones As well. So that's a huge positive that we we haven't articulated very well, but that's a huge positive in terms of the build out schedule. And then what happens and You didn't ask this question, but I'll reiterate this one.

Speaker 3

Then what happens is you start building, you do what I call success based Capital deployment. So because you have roaming arrangements with 2 of the big providers, you Look at every tower and when you pay more for roaming, then you could have for the owner economics, you would build that tower. But to the extent that roaming is less expensive, You wouldn't have to build that tower. And of course, a great example might be that I think Dave, eighteen. Who's traveling today, Gabe, is a stadium where you might have a 100 customers in the stands are using it 6 times a year or 8 times a year, doesn't make sense to spend tens of 1,000,000 of dollars to deploy capital in that stadium when the customers can roam.

Speaker 3

And so it's just a math exercise. So it's a unique position for us Where I think people are going to get more confident in our total build out of $10,000,000,000 which includes a lot of success based capital, by the way. But The latter half of that is success based capital. I think that starts to be people start to get their arms around it. That's a realistic number where I think people Didn't think that was a realistic number early on.

Speaker 3

So we have a lot of advantages in what we're doing. We have to go ahead and prove it. We have to go ahead and show it. It will start showing up in the numbers. It Start showing up in the margins.

Speaker 3

You'll start to see those kind of things.

Speaker 10

Thanks for all those details.

Operator

Eighteen. And our next question will come from Craig Moffett with MoffettNathanson.

Speaker 12

Nineteen. Hi, thank you. Maybe I could stay with that same Line of discussion, Charlie. It sounds like you really are describing More of a hybrid MVNO, MNO network than a pure MNO network, which is maybe a little different than the way you've described it in the past. How do you think about the amount of traffic with the number of cell sites that you'll have sort of 10 going to, call it, 20 versus say a Verizon or the peers that would have 80 or so 1,000 towers.

Speaker 12

How do you think about percent. What percentage of traffic you think you can send over your own network versus over the MVNO agreement? And how does that sort of shape the product that you're offering where you've talked about some of the advantages of a native O RAN 5 gs network that obviously won't be Ubiquitous in the hybrid network that you're describing.

Speaker 3

Eighteen? We look at it from a financial point of view, right? So just to frame it, maybe your percent. 70% of our network gets built and the last 30% cost as much as the first 70% To give you just it might even be more than that. So it might even be more than double that.

Speaker 3

So a lot of towers are non profitable for nineteen for the current incumbents. In other words, that tower never ever even generates enough revenue to pay for the investment in the tower. We don't have to make that investment. And while that we may roam on their 5 gs versus our 5 gs, you're You're not going to lose some of the benefits because you're coming back to our core. Steve, I'm going to look at Steven here because he knows this a lot better than I do, but you're coming back to our standalone core.

Speaker 3

And once you're into our core, we can We can control that service. So for the most part, and there's probably some corner cases where there might be something we want to do that we can't do when we're roaming As opposed to our own network, for the most part, we can offer that ubiquitous experience. So it eighteen. We deal with this every day and this would take me the rest of the month to explain in detail because we've been looking for years. But the economic advantage that DISH has 18 is immense.

Speaker 3

And of course, that shows up in ability to pass along some of those savings to the customers, which gets you more competitive, which when you look around the world eighteen. And you see people who have not been in as good a position as we have, they typically get low double digit kind of market share, which is why We're well above breakeven on our CapEx and then our OpEx and everything else that we do in our network. So But it's just math. And I guess I turned the question around, why would you build 80,000 towers if you didn't have to and lose money on 40,000 of them? It doesn't make any sense.

Speaker 3

And our That's why the CapEx is so incredibly expensive for the incumbents. It's not all bad news for the incumbents because obviously when we ride Their network, they're getting free money for an investment they've already made. And so it's actually ironically In some ways, it's a good thing. And this is just I personally see when you look at the marketplace, T Mobile is running away with the market. They're just they're going 90 miles an hour and they're running away with things.

Speaker 3

And somebody has correctly pointed out, they have a higher market cap than Verizon And AT and T now. So they started out, I think they were number 4 when we first started talking with T Mobile years ago. They're now number 1 and they're not even close. I mean, they're and they continue to gain momentum in the marketplace. You got 2 choices in management.

Speaker 3

You can let them run away at the market or you got to figure out another way to compete with them. And one of the ways that people around the world compete is you start Sharing resources, you start sharing CapEx and you start sharing spectrum and the technology is getting better and better and better to do that. And so you There's going to be opportunities for all the players in this market, but there's going to be good opportunities for us. That's big high level stuff. We run that math there every day.

Speaker 3

You don't have you don't privy to our agreement, so it's difficult for you to run that math, but it's you'll see it in the results over time. Operator, we'll have we'll take one more question from the analyst community.

Operator

Thank you. Nineteen. We will now take our final question from the analyst community. Members of the media on the call, please press star 1 and we will begin the media portion of this call following the answer to this final analyst question. Eighteen.

Operator

And we'll go to Jonathan Chaplin with New Street.

Speaker 5

Thanks for taking my question, guys. Since it's the last one, I'll make it an easy one. 2, do you still need to do funding at DBS to meet the March 23 maturity? Or will you have enough cash flow between now and then at DBS to meet that maturity? Or is there the potential for some of the funding that you're doing at networks 1,000 to go down to DBF to pay off some of the intercompany loan there?

Speaker 5

And then just a quick one for John. I'm wondering if you can help percent. I'll take that one more time. I'll take that one more time. I'll take that one more time.

Speaker 5

Okay. And then Off of the TSA. Thanks.

Speaker 3

Want to take that one first?

Speaker 4

Yes, I'll take that one first. So we've had our share of sort of large headwinds since buying boost. The big one in front of us now is migrating off of all the legacy T Mobile and Sprint systems. There's a few 100 people working on that. I think each month it's $1,000,000 somewhere between $5,000,000 to $10,000,000 a month of incremental drag right now just based upon funding that program which will and then we'll have sort of our own singular platform from which We can operate all of our retail wireless businesses.

Speaker 4

In a funny way, it really kind of pays for itself, because eighteen, we'll be able to jettison more higher price transition services. So it's a good use of our dollars to do it, but there is a bit

Speaker 3

of a short term impact. Eighteen? I mean the bottom line, Jonathan, is we're paying twice for services today. And obviously, 1 is for our own that we're building and one for somebody that we're using. So, but we get speed and flexibility and and the ability to wholesale to other customers to anybody on our network through our OSS, BSS, which we just don't have Through T Mobile or AT and T.

Speaker 3

So, and on your other question, the we don't With the funding in the marketplace today, we would not need to Raise additional capital at DBS, right? You never know what the marketplace will offer. You never know It's opportunistic, but we wouldn't necessarily need to do that.

Speaker 5

And tell me is that because there's enough cash flow TBA?

Speaker 3

I will point out that's a little bit different. When you read the 10 Q, it's a little bit different because we wrote the 10 Q as of as the end of the quarter, which we didn't have an offering in marketplace. So that there's a little it's a little bit confusing. So your question is well taken.

Speaker 5

And Charlie, is it Because you will have enough cash flow at DBS to pay off the 1.5 or because you'd use some of this and push it down to DBS?

Speaker 3

We have enough cash at DBS, assuming we're not funding the network added, Which is what obviously we've told The Street would be our preference.

Speaker 5

Got it. That's great news. Thanks, Charlie. I really appreciate it.

Operator

18. Thank you. We will now take questions from members of the Media. Nineteen. And we'll go to Scott Moartz with Bloomberg.

Speaker 8

Great. Charlie, question, I wanted to just check-in with you on the network build out. When you first announced the opportunity, it was this first mover advantage, you'd have a cloud based low latency kind of 5 gs network. Since then, we've seen the incumbents come in with kind of their plan cloud based, Virtual RAN, although I was just curious, does DISH still have an edge that it used to have? Has the opportunity changed since then?

Speaker 7

Yes. So Scott, this is Steven. I'll respond first. I think they may put some, say, paint on the outside of the house, but it's still fundamentally not a cloud native 5 gs network. We don't have any of the legacy infrastructure that they have.

Speaker 7

I like to sort of draw an analogy It's like adding an extension to the house and calling it sort of a 5 gs network, but it's really you're still stuck with the rest of the house. What we have is unique. It is the only cloud native 5 gs open network that has been deployed at this scale anywhere in the world. And there are a lot of capabilities that we have with that infrastructure. The other thing which I would add is As it relates to sort of the OSSBSS, while we don't talk a lot about that, what we have is a next generation OSSBSS system.

Speaker 7

And so we're not bringing the legacy of those systems along with us. We had the opportunity to rebuild that. And in fact, that's the platform that we're moving our retail business to. But As Charlie alluded to, in his earlier remarks, it also allows us to be able to bring enterprise and wholesale customers through that stack onto the network. And so we're already exposing APIs within that platform through the cloud that allow enterprises to be able to build applications into that space.

Speaker 7

Yes. While the other guys who we're competing with are talking about it, we actually have built it and it's actually operational and now we're sort of optimizing that and scaling it up. So we still have a what we believe is a significant advantage from an architecture perspective and I think it will be some time that we maintain that advantage.

Operator

Nineteen. And our next question will come from John Silentano with Incyte Towers.

Speaker 13

Thanks for taking the question. Hi, thanks for taking the question. I saw an entry on the 10 Q Referring to a cost setting called 3rd party integration. Can you elaborate on that a little bit? What is that?

Speaker 13

And who are the 3rd party integrators that are involved?

Speaker 3

Nineteen? I don't think I'm looking at it. We don't we got to be more specific about that. Where in the queue are you seeing that? Cost side, 3rd party integrators.

Speaker 3

We use 3rd party integrators both on the revenue side and the Cost side, obviously, but you'd have to read that paragraph to us. I don't know the answer to that off the top of my head.

Speaker 13

I think the reference was to the 5 gs build.

Speaker 7

So maybe I'll just add some color. I mean we work with a number of different partners as As we put this infrastructure together, but we've often been asked like who is the systems integrator and it's DISH. We are the considered as the Uber integrator of this infrastructure, but we do work with a lot of different third parties that essentially subcontractors to us That are each responsible for their domain expertise. But overall, we're the systems integrator. So

Speaker 3

eighteen. I don't know that we answered your question. So, we'll get back to you because I don't think we answered your question That's the first time I've been stumped. Exactly. Long question.

Speaker 13

I'm honored. Well, thanks. I look forward to a response.

Speaker 7

Eighteen.

Speaker 3

Yes. All right. Operator, I think that's the last one in queue. So thank you everyone for joining us and we'll talk to you again next quarter.

Operator

Nineteen. Thank you. And that does conclude today's conference. We do thank you for your participation. Have an excellent

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Earnings Conference Call
DISH Network Q3 2022
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