DISH Network Q3 2021 Earnings Call Transcript

There are 19 speakers on the call.

Operator

Good day, everyone, and welcome to the DISH Network Corporation Q3 2021 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Brandon Earhart. Please go ahead, sir.

Speaker 1

Thanks, Alan. Good morning, everyone. Thanks for joining us. We're joined on the call today by Charlie Ergen, our Chairman Eric Carlson, our CEO Brian Nealon, our EVP and Group President, Pay TV Michael Schwimmer, our EVP and Group President, Sling TV and Paul Orban, our CFO. And on the wireless side, We've got Steve Abay, our Chief Commercial Officer Dave Mayo, our EVP of Network Deployment and John Saringa, our EVP and Group President, Retail Wireless and the DISH COO.

Speaker 1

We're not going to be making any opening remarks today, but we will start with the same safe harbors. Statements that we make during this call that are not statements of historical fact constitute forward looking statements that are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and or from our Forecast. We assume no responsibility for updating forward looking statements. For more information, please refer to the risks, Uncertainties and other factors discussed in our SEC filings. Also as part of the process for FCC Auction 1 100 and 10, we filed an application to Earhart.

Speaker 1

Because of the FCC's anti collusion rules, we're not able to discuss that auction and we will not be taking questions on that during today's That's it. And with that, Alan, let's open it up to questions and let's start with the analysts first.

Operator

Thank you, sir. Signature Research Earhart. We'll take our first analyst question from David Barden with Bank of America. Please go ahead.

Speaker 2

Hey, guys. Thanks so much for taking the questions. I appreciate it. So I guess the obvious questions are, number 1, how is Vegas coming along? When are we expecting the launch?

Speaker 2

Earhart. How are the pieces of the network working together? And what's the game plan when we do get Earhart. To market. And I guess the second question would be, I just noticed in your filing today, Earhart.

Speaker 2

The work in progress CapEx is now about $820,000,000 that's up $400,000,000 sequentially for about a $1,600,000,000 Earhart. Annualized run rate up from about $250,000,000 of CapEx year to date in the wireless business. Could you kind of Elaborate a little bit on where that's going? Is that run rate going to persist? And anything you could tell us about what's happening in wireless would be great.

Speaker 2

Thank you.

Speaker 3

Earhart. So thanks for the question, David. So I think I'll start off talking about Vegas a little bit. Earhart. We're actually in a beta test mode.

Speaker 3

We've got friendly users Earhart. Working and testing helping us test the network. We were a little delayed as a consequence of Earhart. Frankly, the Vegas network was I think about it as a preproduction environment or a development environment Until fairly recently. Just getting and the a little more color is just getting the radio software and And the Core Network software to work well together and be reliable.

Speaker 3

We're still working through T Mobile roaming and Earhart. So Vegas is, I'd say, coming along. We're in the beta test mode And we'll progress that over the course of the next 90 days and look forward to launching Vegas sometime Earhart. In the Q1 of 2022. As it relates more broadly To the development process, we're making great strides and great progress around the leasing and permitting activities associated with the 70% Milestone for 2023 and as it relates to the 20% threshold or pop Requirement for 2022.

Speaker 3

As you probably saw, we've in the Q, we started 35 markets Earhart. When we filed or when we at the end of the quarter, we're now up to 42 markets Earhart. That have construction activity. And as it relates to the sites that are required to meet the 2022 Earhart. We have building permits on 2 thirds of them, which I feel really good about that.

Speaker 3

We're Earhart. Yes, months away from the deadline and we've got building permits on 2 thirds. We started construction on well over 30% of the sites required for 2022. The build is very focused. I mean, we're really just building in markets that we plan to launch in 2022 and we'll start the build activity on markets for 2023 in the New Year.

Speaker 3

Earhart.

Speaker 4

The dollars.

Speaker 3

Yes. And from a dollars perspective, you're right. The CapEx Earhart. As you would expect, it's going to continue to ramp over the course of the Q1 and probably reach Earhart. Kind of a steady state until we finish the 70% in 2023 over the course of Earhart.

Speaker 3

The 4 quarters of 2022. So Q1 will ramp up some more and then we'll flatten out just because From a build perspective, we've tried to level the load to the fullest extent we can only because Earhart. It's really hard to build. We don't want the sawtooth effect because it's difficult for GCs. It's just difficult to manage.

Speaker 3

So We're on a ramp. I'll give you some color. We had Last week, almost 300 construction starts and that number will continue to grow as we move Earhart. Into the Q1 and then we'll stabilize that midway through the Q1 and it will run Earhart. Throughout the balance of 2022 at that level.

Speaker 2

Earhart. Perfect. Thank you so much for that color. If I could just ask one follow-up. The big debate has been, Charlie, maybe How you want to come to market?

Speaker 2

Does DISH want to be the last to market consumer smartphone broadband player? Earhart. Or does it want to be a first to market wholesale provider or enterprise service provider? Any color you could share about how you're thinking there would be

Speaker 5

great. Earhart.

Speaker 4

Yes. No, I think we're going to do both. I mean, so on the as a 4th player, we're not going to dominate the retail Handset business and I know a lot of analysts are going to look at us as this retail handset, but we'll get our fair share of that business Earhart. And that will be a very profitable business for us. But obviously, the network and the amount of spectrum that we have from a wholesale perspective, we're willing Earhart.

Speaker 4

To wholesale some of the spectrum and particularly on the enterprise side, where that's kind of a jump off. In other words, I think all the carriers are going Earhart. We're going to do well in enterprise. It's a new market segment. It's a market segment Earhart.

Speaker 4

They can rival the kind of demand you see for consumers because on the enterprise side, when they have When they can have their own private network, so to speak, a slice of a network, they're going to be able to build their products safer, cheaper, Earhart. Better and gain on the competition. So it's going to be a big market. We're well positioned for that because our opinion is that you need Cloud based and you need to be automated to do it to slice your network. So we're going to have an advantage there, but the incumbents have an advantage of incumbency And brand recognition and that kind of stuff.

Speaker 4

So I think everybody is going to do pretty well, but I feel like that's a place where we can get more market share than we will in the handset business. Earhart. Steven, do you want to add anything? Steven runs that side of

Speaker 6

it for us. I think, Charlie, you characterized it very well. And I think what's interesting in In sort of the enterprise space, sort of the move to sort of Industrial 4.0 and sort of the opportunity that that presents for enterprise customers to build a more efficient operating model. So with our platform, we do have some capabilities in that environment with the cloud native architecture that we're deploying It gives us the opportunity to differentiate more and actually provides more degrees of freedom for an enterprise customer as well than what you would have with a traditional network. So we We do think we have some inherent advantages there, but it's certainly going to be a good business for everybody.

Speaker 5

Thank you guys so much.

Operator

All right. Next question will be from Jonathan Chaplin with New Street Research.

Speaker 7

Earhart. Thanks, guys. Two quick ones. I'm wondering if just as a housekeeping matter, you can give us an idea of how many subs you've still got left on the mobile network. And if you had your choice, how much time you would need in order to switch those over?

Speaker 7

And then more interestingly, I'm I'm wondering if you can give us a sense, Charlie, of how the market splits or maybe this is a question for Stephen between you, the enterprise market Earhart. Split between you and the cloud service providers. You're obviously going to market with the likes of Amazon, AWS as partners. How does the enterprises spend on communication services get split between you and them in those kind of deals? Earhart.

Speaker 4

Yes. This is Charlie. I'll take the first part about CDMA and stuff and Stephen maybe take Earhart. The business side question, the CDMA shut off. And obviously, we have Earhart.

Speaker 4

Since it's now extended March 31, we'll still have well over a 1000000 customers on the CDMA network. And if T Mobile has their way, those customers Earhart. We'll lose service on March 31. And in fact, they won't even based on T Mobile's testimony in California, They won't even be many won't be able to make 911 calls. So we look at it a little bit different than T Mobile.

Speaker 4

We look at it for consumer first And say why in the world do you want to disenfranchise customers. We realize we're a for profit company. We realize that T Mobile is a for profit company. But Earhart. We played the long game and we want to make sure that we're taking care of consumers.

Speaker 4

And there's not Despite our best efforts and aggressive efforts, we know that we're not going to that aren't that Too many people will be disenfranchised. And these are more economically challenged customers for the most part, which is why we're not able Earhart. To convert them and it just seems like the wrong thing to do and I get that and despite and There's other headwinds such as supply chain and they didn't have enough units to do it. I would have preferred to work With T Mobile and we're there for them. They want to work with us and work together so that we can make sure we have enough units Earhart.

Speaker 4

For customers and we a better way is to work together to convert to customers. We want we would love to see We're not against the CDMA shutdown. We believe technology needs to advance, but you have to do it. You can't do it in the back Earhart. And so

Speaker 8

that's something they'll have

Speaker 4

to live with their whole life. They're going to have to live with the fact that they're anti consumer and To the extent of profits and that's something that they're going to live with and we've taken the other approach and we spent Earhart. A lot of money, some headwinds in this quarter that you see. We spent a lot of money to upgrade people for the false deadline of January 1, And now we've got maybe another false deadline there. So we'll continue to go as fast as we can.

Speaker 4

But it's disappointing. Earhart. I'm disappointed in T Mobile and I wish they had taken a little bit longer term approach to it, maybe a little bit higher end consumer approach to it. But Earhart. We're here to work with them to make sure that consumers aren't disenfranchised.

Speaker 4

With that, I'll turn

Speaker 6

it over to Stephen. Yes. So just on the question as it relates to AWS, We do have a very good partnership with AWS. It's obviously very strategic, and we are working with them on enterprise opportunities. I want to comment sort of how the split works in terms of how we do that.

Speaker 6

Each deal is generally a custom deal, As you would expect, depending on the enterprise requirements, the other point to probably highlight is the arrangement with AWS is non exclusive. So we do have customers that have different requirements with And different partnerships with other cloud providers as well. And so we'll work with them and complement that solution. We also work with multiple systems integrators And we partner on different opportunities across different verticals based on kind of the solution that those customers are looking for. And I guess my earlier comment about the degrees of freedom we have and Earhart.

Speaker 6

The platform that we have allows us to be able to integrate that in different ways depending on what the customer requirement is. So, and just as an example, Earhart. And some opportunities we're partnering with our sister company, EchoStar and Hughes, on certain opportunities that they're in segments that complement what we're doing on the terrestrial side as well. So it's a good partnership with AWS. They're a very important partner, both in our network build as well as in the enterprise opportunities that we're exploring.

Speaker 6

But we are also working with many other SIs as we pursue this market opportunity as well.

Speaker 4

Yes. This is Charlie. Let me jump into this. When you look at it from a big picture perspective and this is it's hard to model now because we're certainly in the infancy of this, but we do The way we look at it from a network perspective, where do we get the highest profitability per bit, right? Earhart.

Speaker 4

And we don't for the enterprise customers, you don't have some of the customer service to consumers, you don't have the retail stores, you have a lot of cost you bring out of that. And because those bids are so valuable in terms of them being able to make their products better, we think that the enterprise business It has more profitability probably, that's our guess, has a lot more profitability than kind of a very competitive retail wireless business where everybody is selling the same thing. Earhart. We're the best 5 gs, we're the fastest 5 gs. We can differentiate a lot more on the enterprise business where we can say we're in the I don't think a business survives the next decade.

Speaker 4

If you don't have automation and you don't have you're not using artificial intelligence and you're not cloud based, I just don't think you, sir. With the rare exception, some old school industries maybe do, but you're just not going to survive. And we're on the leading edge of that. Earhart. And so we think that we move people there in a way that our help move them there in a way with our partners In a way that they couldn't otherwise get there with the other carriers.

Speaker 7

Got it. Thanks, guys.

Operator

All right. Next question will come from Walter Piecyk with Light Shed.

Speaker 9

Thanks. Charlie, can you tell us what exactly does consumer beta service mean? Like what does that look like? And I think Related to that, Dave, in his comments, talked about working through some issues with T Mobile roaming. Earhart.

Speaker 9

Are you hooked up with AT and T yet in terms of roaming or using their network? I was in Vegas last week. I didn't really see much of anything there, but In the stadium, T Mobile didn't even work. So I'm just curious where you are with AT and T?

Speaker 4

We don't have roaming with AT and T yet Earhart. And T Mobile is first up for us. They remain a very important partner for us and the roaming Commitments that they've made are we can't launch commercial service without T Mobile roaming. So, if you can't I don't think you have a commercial service Earhart. If you drive outside Las Vegas, you don't have any service.

Speaker 4

So we have to get that done. And Earhart. We're working through those issues, but it's not a secret that our relationship is not the greatest. So that's difficult, but they've made commitments to

Speaker 9

So why not prioritize AT and T and just use them instead?

Speaker 4

The regulators And we will get through that with them and make sure we can get it and then what AT and T will come later. And then In terms of what our beta test today looks like, it looks like our employees, some people who've signed up on our Earhart. System are signed up to be a beta tester and then required to give us information and then every day we go through all the Earhart. Tickets of the stuff that doesn't work and there's stuff that doesn't work and then we go fix that and then we'll continue to Add more and more people to load more and more system as we get it more stable. Earhart.

Speaker 4

But Walt, if you come to Vegas and you want to go test it out, we'll be able To do that for you. The next kind of big thing for us is end of November when AWS has their re:Invent conference It's around the 1st December or something like that. And I think people will probably try to get to experience a part of our network then.

Speaker 9

Okay. Maybe I'll come after that. So on the second topic, there's been some breaking news. Apparently, the FCC is back Earhart. And C band is now delayed.

Speaker 9

They're claiming a month, but obviously we've seen with Legado that these things can drag on much longer than that. Earhart. You have you're building in a couple of markets, but you have this depth of spectrum that is leasable to AT and T and or Verizon. Is that something that you would consider or are you just going to hold all that spectrum back and because it's going to take you a while, I think, Earhart. To build that, who knows, maybe this 1 month delay becomes 9 months and you can make some money in 9 months by leasing the Spectrum.

Speaker 9

So is that an option that you'd consider? Earhart.

Speaker 4

The answer is yes. We have been very public that we're wholesale. And so we know it's Earhart. We are leasing capacity to T Mobile today. And we do think there are other interested parties in Earhart.

Speaker 4

Leasing capacity, and so I'm looking at Dave here because Dave is in a situation as he looked at his build out, where does he have pockets. But I think that that's certainly something that we would consider and there are a number of parties that They've asked about the ability to lease capacity for in the short term. And obviously, I hadn't seen the news on C band, but obviously Earhart. That would if any delay in C band, particularly for Verizon probably where they really spend a lot of money on it would not be Earhart. It would be positive for T Mobile probably, but not positive for the other guys.

Speaker 10

Charlie, it's Rich Greenfield. Just wanted to jump in and Earhart. You're always so thoughtful on sort of the big picture of the video industry. And I know you're sort of now you're sort of in a blackout situation with TEGNA, Earhart. The Sinclair RSNs are obviously still dark, Major League Baseball and the NBA are sort of talking about doing their own over the top RSN service or sorry, streaming Local Sports Service.

Speaker 10

In every media company I've just listened to over the last week, all they talk about is their streaming services and not their linear networks that you pay a lot of money for. I'm just wondering sort of how you think about like are we getting closer to the point where rates for channels actually start coming down? Like do you think anyone's learning Earhart. That they can't charge more every year, as viewership goes down and they don't even care about the assets versus the streaming services and how does that affect how you negotiate Earhart. You retrans programming etcetera.

Speaker 4

Yes, I mean I don't think it doesn't really change anything. Earhart. I mean, it does change stuff because as something is available through streaming, your product becomes less valuable on a linear basis because people have another way to get there. So it relates to retrans. Now that the biggest really retrans today is an NFL season ticket to your local teams, right?

Speaker 4

That's the Earhart. In absent NFL, I don't know if they have a show in the top 100 that gets there, right? So maybe the Oscars or Earhart. But there's not much there based on what we see. So viewership, we've seen viewership decline 15 years in a row Earhart.

Speaker 4

On the networks and retrans go up by 1,000 percent. That's not sustainable, but we look at it for math And we know we'll lose customers. So we know we'll lose TEGNA customers if they're not up and we are losing some customers, But not as dramatic as it might have been in the past. And once you do football season and once people find a way to get football next year, Earhart. That's going to be a permanent loss of viewers for TEGNA and of course people also can go get it from the networks, they can get Peacock from NBC Directly.

Speaker 4

And maybe TEGNA gets revenue from that, maybe they get more revenue than they do from us and maybe that makes sense for them. But Earhart. We look at it economically. Sinclair is bigger than TEGNA and we've had a long term Earhart. There's more conversation around that than there is and they're bigger and Earhart.

Speaker 4

We'd probably have a little bit more clout and scale in the marketplace. But I said it last time, I think the moves in retrans are down, not up. Earhart. And I don't know what that does to valuations, but I saw Gray publicly said 50% of their revenues are Yes. And I think that's going to come under pressure.

Speaker 10

But just to be clear, there hasn't been a decent sign yet from anyone

Speaker 4

The end result of this is networks. Earhart. If you fast forward a decade, I don't think I think most things will I don't know that networks exist, maybe for local news, Earhart. Because they're pricing themselves out of the market.

Speaker 10

Just to be clear, no deals have been done at a down level yet, but that's where you think it's going?

Speaker 4

Earhart. We don't have well, TEGNA is down and there is no deal done there. So Sinclair is still up and obviously we've had several extensions that are public and beyond that we just wouldn't Talked about the current negotiation that where the company is still up. Did you want to say something Eric?

Speaker 11

No, I mean, Rich, I mean, and you're right. I mean, retrans is still going up. Viewership is still declining. So this is Charlie spot on there. I mean, generally, I mean, you're looking at retrans as just being a tax on the American consumer right now.

Speaker 11

Earhart. What is it? It's up to like $12,000,000,000 or something like that. And viewership continues to decline. And so that obviously puts pressure on our margins and it Earhart.

Speaker 11

There's pressure on our consumers' willingness to pay. So we've got to be better at customer experience and A bunch of other things in order to combat the tax.

Speaker 4

But I don't know why you want to drive your customers to watch Netflix and Hulu. And I don't know why you want to do that, but they're doing it. But they have their own I'm not in their shoes. So they have their own they have a reverse retrans and they have their own I'm somewhat empathetic to their plight because They don't have a real place to go, absent some fundamental changes.

Speaker 10

Thank you very much.

Operator

Earhart. All right. Our next analyst question will come from Ric Prentiss with Raymond James.

Speaker 12

Yes, thanks. Earhart. Thanks. Couple of questions. 1 on the Las Vegas consumer trial.

Speaker 12

Do you anticipate having a wholesale enterprise trial Strictly to Vegas or do you need more footprint before you could actually do a wholesale enterprise trial?

Speaker 6

Earhart. Yes, Rick, it's a very good question. And in fact, we do have both wholesale and enterprise Earhart. We're very focused on the consumer trial right now. And at the appropriate time, we'll talk more about what we're doing there on the wholesale side.

Speaker 6

And What's actually exciting about the wholesale opportunity is, a lot of pundits would suspect that you need to have a nationwide footprint to support Earhart. That segment, there are a lot of opportunities there to serve customers with very niche products and capabilities that are at local or even a regional Earhart. And we're working with companies to do that. And we will announce at a later day some further details on what we're doing there.

Speaker 12

Makes sense. I think, Stephen, you also talked about satellite companies. We've seen OneWeb with AT and T, Project Kuiper with Verizon, you mentioned sister company, EchoStar. Maybe broadly, Charlie and Steven, how do you see satellites fitting into unintended space here for you?

Speaker 4

Earhart. Yes. IC satellite is part of connectivity. We're a connectivity company. We are pretty through our history And through our EchoStar relationship, we're fairly knowledgeable about satellite.

Speaker 4

And I think you're going to see Earhart. Geos, Leos and Meals play a part in the products that you can bring to market Earhart. And how you can differentiate yourself whether it be on the enterprise or consumer basis. And I think we're well positioned in that. In a funny sort of way, video is most of your traffic And we're pretty good at video and satellite is a part of your connectivity and we're pretty good at that.

Speaker 4

And so Earhart. I think we're able to differentiate in ways there and you just have to stay tuned as we move through Earhart. Those issues and see where everything lands, because a lot of it depends on where the I mean ideally, ideally it would be a standard and people would all deal Standard, it wouldn't be a sandbox, individual sandbox for everybody else. But like most things in wireless, everybody seems to want their own sandbox and we're probably the only guys that Earhart. So it might make sense from a CapEx perspective to have a standard and play in the same sandbox, but we'll see.

Speaker 12

Just one quick housekeeping question, if I could. On Pay TV, SG and A was somewhat higher than we were expecting in Q3. Is there anything out of period in there? Is this a good run rate or was first half of this year a better run rate? Anything unusual in pay TV SG and A?

Speaker 13

Yes. This is Paul. Yes, there's no one timers in there this year. However, last year though had the benefit of COVID and everyone kind of hunkering down on costs. So going forward though, I think it is probably a pretty good run rate to look at.

Speaker 11

I think Rick, this is Eric. I'd also say, look, there's just generally you're hearing about inflationary pressures and there's some of that baked into that. We'll see what happens with that on the run rate. And then obviously we've had, as Charlie alluded to already on the call, Just with the fall January 1 CDMA deadline, we've had some additional expense along with Converting customers. So we'll see where that ends up over the next few quarters.

Speaker 11

But we'll keep you posted on that.

Speaker 12

All right. Stay well. Earhart.

Operator

Okay. Next question will come from Michael Rollins with Citi.

Speaker 14

Earhart. Hi, good morning. Two questions, if I could. First, I'm curious with the Vegas launch and the other markets that you're deploying. Earhart.

Speaker 14

Are those radios capable of using the 800 megahertz spectrum that you have an option to buy from T Mobile? And just curious what the what your thoughts are in terms of fully acquiring that spectrum van? And then secondly, You shared your thoughts in the past about the possibilities of satellite video mergers. Just curious your current thoughts, how the industrial logic for that type of merger Earhart. Is evolving and is there an urgency to try to get that done?

Speaker 6

So I'll take the first question there Michael. In terms of the radios We are deploying it. It does support all our current bands, and the radios from a hardware perspective and even a software perspective have the ability to turn on the 800 megahertz. So We decided to ensure that as we did the deployment, we would not have to come back and add an additional radio in the event that we decide to exercise that option. So All the plumbing is in place, all the hardware is in place, the software is there.

Speaker 6

All we have to do is really activate those radios. And beyond that, even all the carrier Earhart. Aggregation combinations are already being designed into be able to support that depending on what we do with that option.

Speaker 4

And then on the Earhart. I think you talked about the industrial logic of putting the 2 video companies together. Again, I've said it many times, inevitable. I I think that there's been a change of control there in terms of from AT and T to TPG and Earhart. The question is probably, I don't know there, I assume that they see the logic there as well, Earhart.

Speaker 4

But that's probably a better question for them. I think the big thing would be regulatory and I think Earhart. It's prudent for anybody to wait until we have our antitrust team the government has antitrust team in place, which could happen Maybe in the next month or 2, and see kind of how they're looking at mergers and seeing kind of what they're focused on and what they're not focused on. But obviously industrial logic is, it's not there's not 3 competitors in the video business anymore or 4 Earhart. There's dozens of competitors and all with large scale and Earhart.

Speaker 4

The technology has changed the economic equation and you run the if you want consumers to have a choice of satellite television, Earhart. It will have a much longer runway and choice pattern if there's a combination than if there's not.

Speaker 14

Earhart. Thank you.

Operator

Okay. We'll move on to our next question from John Hodulik with UBS.

Speaker 15

Okay. Thanks guys. Maybe back to the wireless Earhart. Network Build, thanks for the color on I guess 42 markets. I mean how many markets do you guys expect To build into to hit both the 'twenty two and the 'twenty three mandates.

Speaker 15

And then from a sort of breadth versus depth standpoint, Anything you can tell us about the build in each market? Is it just sort of the downtown urban areas or sort of how deep into the suburbs you go? I don't know if you can give us a sort of towers and nodes per market standpoint? And Has that view or that balance shifted at all with the AT and T deal? Does it make your build out more efficient?

Speaker 15

Or do you Earhart. You changed how you think about deploying infrastructure because of that roaming deal? Thanks.

Speaker 3

Yes, sure. Thanks, Jonathan. This is Dave. So I'll start off with the AT and T question. What we're doing hasn't changed a bit as a consequence of the AT and T roaming deal.

Speaker 3

And when I think about what we're building, it's really the metropolitan areas in any of the given markets. I mean, we built and we designed Earhart. The footprint sufficiently large to minimize the handovers to other networks. So we put the networks were built such that The handover back to T Mobile would be on an interstate outside of town. So that would imply that all of the key suburban areas Earhart.

Speaker 3

All of the geographies will be covered. If I think about your question was can you help dimension Earhart. The 20% and the 70%. And I'd say that with respect to The 70%, that encompasses all of the major metropolitan areas across the country. And if you think about Earhart.

Speaker 3

Cities over 500,000, they're going to be in the Continental U. S, if it's over 500,000 POPs, it's going to be in the footprint, right? And I'd say if I roll the clock back to the 20%, Earhart. Similarly, it will be metropolitan areas where They're relatively easy to build. So for example, California that's intrinsically more difficult is not high on the list in the 20% Earhart.

Speaker 3

The Northeast, although there are some areas in the Northeast, it's primarily the middle of the country where co location is prevalent Earhart. And we can move very quickly. So I mean, I think that's probably what we're trying to do in Earhart. The 2022 timeframe, we will attack and address the more difficult areas in the Earhart. To meet the 2023 build objective.

Speaker 4

Yes. This is Charles. I'd just add to it. We're already building for 2023, Right. It just takes longer because there's more rooftops and more permitting and things like that.

Speaker 4

Yes,

Speaker 3

we do have the site act and the soft cost.

Speaker 4

And Earhart. You think Texas and Ohio and North Carolina, Dave knows this better than Florida. Earhart. Those are the markets that and we'll give you more color on the markets as we we have internal competition here and we don't want to pick Earhart. Nobody's getting the yellow jersey yet.

Speaker 4

And so we're seeing who kind of gets there. We're having a little bit of fun with that. And then we'll as we start seeing some of our 36 reach what do you got, 36?

Speaker 3

Yes, 36 market 36 Market organization.

Speaker 4

Some of those guys are going to get the L Jersey and then we'll be announcing.

Speaker 6

Thanks guys.

Speaker 4

Bill is going really well. I would say deployment is Every day, I think we spend most of the time and team other than Dave, deployments going we're on track for the 20%. So Earhart. It's really the execution of how you get all our vendors and all our software and all our radios to work together, because it hasn't been done before in the cloud, A little bit easier to make it work traditionally, but we don't need to build Earhart. Last generations network, we've got to build where things are going and it's more difficult.

Speaker 4

So the execution risk is still there for us, but Earhart. The teams and external vendors are putting extraordinary efforts into getting there and we're excited to finally have Vegas making calls.

Speaker 7

Thank you.

Operator

Next, we'll go to Kunal Venkat with Barclays.

Speaker 5

Thank you. Charlie, maybe on the retail side, when you think about the go to market strategy, It looks like you're thinking of some kind of a self branded device and that will obviously help you manage working capital. But is that some kind of a template we You should think about as you enter the market more widely, as you go into next year. And then just from a Working capital perspective, as you head into next year, I mean, the current free cash flow run rate of roughly about $2,000,000,000 a year, Has that changed materially either because of maybe working capital step ups or the capital intensity, Earhart. As you indicated, I guess, it steps up the next couple of quarters and stabilizes.

Speaker 5

But then you also have pay TV costs potentially stepping up post COVID. So How should we think about the run rate for free cash flow as we head into next year? Earhart.

Speaker 4

Yes. Paul, do you want to take a free cash flow? Yes. John take a free

Speaker 13

cash flow. Yes. Going forward, you're going to see a drag on free cash flow as it relates to our 5 gs deployment as Dave spoke about earlier that CapEx number will continue to grow And that will drag down the historical free cash flow amounts that you've seen.

Speaker 4

Yes. I think the way to really look at it is Earhart. Absent the CapEx expense, right, we're still in a strong free cash flow perspective, but CapEx will drag it down.

Speaker 16

Dan, hi. This is John on the handset side. We're working with all major OEMs and partners. It's incumbent upon us to Build out the partner ecosystem on the device side for our own network and also to secure devices

Speaker 2

that are compatible with the

Speaker 16

T Mobile and AT and T Networks. Earhart. I think it's been a pretty common theme. There are supply shortages in the low and mid tier Android space. Earhart.

Speaker 16

So we don't really have scale. So we are on allocation with some partners now, which impacted us in the quarter. When you think about going forward, we do want to take a broad approach to having the right consumer offers in the right segments. And Yes. We did launch the Solero 5 gs this week and we think it's going to do well for us.

Speaker 16

And we're going to focus on bringing in the right products based On the consumer segment, that's a device will primarily be distributed through Boost at branded retail, national retail and digitally. And we've been happy with it so far and a lot of work next year as we bring in devices for our own network and certainly with Band 70 support and the like. Earhart.

Speaker 5

Got it. Can I just follow-up on the cash flow question? Broadly as you go into next year, Earhart. At some point, I guess, when before your revenue starts scaling, this potentially fits into a negative territory. Earhart.

Speaker 5

And so is there any thought in terms of how to finance some of the cash burn initially as your revenues Earhart. Scale and should we expect that maybe over the course of the next 12 months or so?

Speaker 4

Yes, I think we always look at the Earhart. Place opportunistically and if there's it depends on a lot of Earhart. The factors, but we obviously expect we're going to grow our business, particularly in the retail wireless business. And we do think that our spectrum We think we can monetize a little more spectrum, but yes, there could be cases where we go to market as well.

Speaker 5

All right. Thank you so much.

Operator

Next, we'll go to Doug Mitchelson with Credit Suisse.

Speaker 8

Earhart. Thanks so much. A few clarifications and a question. I guess the first three hundred construction charts This last week and that's going to ramp. So if you end up doing sort of 5,000 a quarter or so, I thought at some point there was a mention that maybe about 17,000 sites would get you to where you need to be.

Speaker 8

And And it seems like you might be running well ahead of that. So I'll just ask them 1 by 1. Any thoughts on that?

Speaker 4

Earhart. Yes. I don't think we've disclosed number of sites that we need, but We have a commitment to the FCC of 15,000 sites at certain speeds by June of 2023. Now, We believe the number will be higher than that, obviously, but the 20% number doesn't require that kind of scale.

Speaker 3

Earhart. Okay. Sorry, Charlie.

Speaker 8

I thought at one point you had told us sort of just over $15,000,000 but maybe just tied to that FCC commitment. Earhart. How should we think about the transition to AT and T Amido? I know it was sort of asked earlier, but is there like a percentage of 2022 traffic that we can expect that would be shifted over to AT and T rather than T Mobile. It's just sort of interesting, I think, for everybody watching DISH, Earhart.

Speaker 8

How that relationship with T Mobile evolves? Yes.

Speaker 4

I mean, I think it's a lot depends on T Mobile. Earhart. If they're not interested in a relationship, it's a little bit that they view it as a shotgun marriage by the Justice Department, I guess. I mean, and If they're not interested in a relationship that obviously that we see T Mobile as being very fundamental to what we're doing, but to the extent Earhart. But they're not interested in more traffic, we'll move to AT and T.

Speaker 4

Earhart. Our experience has been that the AT and T network is superior from a coverage perspective. I think that when you look at 600 megahertz and 5 gs, I think T Mobile has done more in getting Earhart. The 5 gs output on their low band spectrum. Having said that, you don't as a consumer forget all the marketing Earhart.

Speaker 4

For our consumers and we've done the test, if you did a blind test, our customers would It would be a pretty big discrepancy. They would prefer the AT and T network. If you get into the marketing of it and things like that and you look at 5 gs and 600, I think T Mobile has an advantage there. Earhart. But that's a for our customers that's a bit more that size of the marketing is not as important.

Speaker 4

It's really coverage and dependability and no one, Particularly as you get into rural America where a lot of our customers are on the video side. T Mobile is still Earhart. Got

Speaker 8

it. And then last couple. The $10,000,000,000 of CapEx that was reaffirmed in the 10 Q for 5 gs network build out. Are you able to give us a sense of timeframe? Is this 2023 timeframe Earhart.

Speaker 8

Sort of cover that entire $10,000,000,000 or is that over an extended period of time?

Speaker 4

No, that's over an extended period of time. So that goes through at least 2025 Earhart. We have continued build out requirements beyond 2023. And Dave can speak, but as you get into smaller markets, Earhart. Your costs are higher or pop, obviously it's less pop, but that's over Earhart.

Speaker 4

End of period time through 2025. And there is some confusion out there because our commitment number went up this Earhart. Right. And those commitments are really OpEx, right? So our tower leases are over Earhart.

Speaker 4

On average 20 years or greater, we have a commitment now to AT and T, which has been publicly disclosed, Earhart. $5,000,000,000 that's all OpEx and obviously there's revenue associated with for sure AT and T there's offsetting revenue Materially higher than that. So that's not in our $10,000,000,000 that's OpEx. But The actual CapEx, we're still on track to be $10,000,000,000 or better or an extended free time. So not by it'd be less than that in 2023.

Speaker 8

And last one, your comments on consumer versus wholesale are always interesting Earhart. And versus Enterprise, I was hoping you could help us understand timeframe a little bit for the enterprise opportunity. So you've talked about it being a big opportunity, But it's one that might take a while to emerge. Like what's a good timeframe for investors to think about when enterprise becomes a really big business for DISH? And I'm just curious the capital intensity of that business versus consumer.

Speaker 8

Are there big upfront cost to help enterprises activate that service through the thought that enterprises will bear those costs. Thanks.

Speaker 6

Yes. So on the enterprise, Earhart. We're actually we have traction now in the Enterprise segment, but the revenue is still fairly small. Obviously, that business scales as we grow the So we already have some really positive traction right now. That will grow as we go into 2022, but I don't anticipate that to become material until we get into 20 Earhart.

Speaker 6

And so we'll continue to grow that business scale out. We can grow that while Dave is building the network, because it's not constrained by geography. And so we can actually and we are pursuing opportunities that aren't limited by the geography of the footprint we're deploying. But as we build that footprint out, then it expands the market opportunity for us. So We'll see that sort of begin to pick up as we go through 2022, but really not having a material impact until we get into 2023.

Speaker 6

So that's kind of where we see the enterprise.

Speaker 4

Earhart. And I don't think we see a lot of CapEx for that business beyond what we do for our macro network.

Speaker 6

And it's very success driven CapEx. We don't spend the CapEx in anticipation. It's really tied to the opportunity each one, 1 by 1.

Operator

Earhart. Great.

Speaker 4

Thank you for all the questions.

Operator

All right. Your next question comes from the line of Craig Moffett with MoffettNathanson.

Speaker 11

Earhart. Yes. Hi. Two questions, if I could. First, when you talk about the Enterprise segment, what are the Specific applications, if you could just drill down a bit that you're targeting, is it mobile edge compute?

Speaker 11

Is it more IoT types of things? Is it something where latency is the real advantage? It would seem like all of those things have somewhat different Implications for the network. And then if I could just return to the comments you made about financing, Charlie. Can you just talk about as you think about going to the capital markets for financing, How do you prioritize between debt and equity?

Speaker 11

And if it's debt, would you be willing to secure any new debt against Spectrum or would you only look at unsecured?

Speaker 4

Greg, I'll take the last part of the second part Earhart. We look at the market we don't have a religion and we look at the marketplace in terms of Earhart. Where you can get efficient execution Earhart. And obviously, that could be secured, unsecured, could be equity, could be some combination of those kind of things. You've seen we've done Earhart.

Speaker 4

Virtually everything in the past over time. So we're just looking at where the marketplace and what's available and where Earhart. And what makes sense from our capital structure long term. Yes. And in terms of

Speaker 6

the question on the enterprise, Craig, Earhart. It's really all of the above. There isn't a single application that one could point to and say that that dictates sort of the enterprise opportunity for us. It really depends on the vertical. And really, I would say that if there's a common Earhart.

Speaker 6

A theme that runs across each of the verticals, it's really about how do they drive their operating efficiency as a business, using the Technology to facilitate that. And so depending on what vertical it is, depending on what solutions they're trying to deploy, what systems they have in place, Earhart. It drives different requirements. There are requirements in some opportunities for very low latency depending on what they're doing in terms of the control systems and there are others that don't And that same criteria. So each one of these, and that goes to my earlier comment about degrees of freedom, you have to have the degrees of freedom Within the platform and the architecture to support those different solutions based on what that enterprise need is.

Speaker 6

So there's no silver bullet and Earhart. One application isn't going to win the opportunity here. It's the ability to put it all together on a common platform.

Speaker 11

Earhart. That's helpful. Thank you.

Speaker 10

We'll take one more

Speaker 13

analyst call before we go to media.

Speaker 8

Earhart. All

Operator

right, certainly. So our final analyst question comes from the line of Ben Swinburne with Morgan Stanley.

Speaker 17

Earhart. Hi, good morning. One on wireless and one on the video business, please. Charlie, we've heard from lots of Earhart. Companies this quarter, I'm sure you know there's tons of supply chain stress out there.

Speaker 17

And I'm just wondering If you think there's an opportunity to work with the FCC to get more time, it would seem like that would be a reasonable request just given all we're hearing on the equipment front. Earhart. So that's the first one. And then on the video side, churn has been unbelievably strong at DBS Since COVID began, it feels like part of that is sort of nobody is moving, and there's just sort of depressed activity. I'm wondering if you guys have a view as To what, when or if and how that normalizes and what you guys are doing to make sure you keep it below where it was kind of pre COVID.

Speaker 17

Earhart. Thank you.

Speaker 4

Hey, Ben, it's Eric.

Speaker 11

I'll take that second one first and then I'll turn it over to Charlie or John on the Supply chain item, I think, Charlie. But look, I mean, we've been talking on the call for quite some time about a bit of a pivot strategy In DBS. And so we have been focused really kind of on acquisition and retention of profitable customers in rural America. There's no doubt, I think COVID had a unique inflection point where you're seeing a bit less switching. Some of that is obviously impacting our acquisition and we're managing our spend on acquisition based on kind of The response rates we're seeing and some of it's benefiting obviously subscribers on the retention side.

Speaker 11

But I'll tell you, our strategy really over the past Several years focusing in on attracting and retaining the right customer is starting to pay dividends and we're starting to pay dividends before COVID. Earhart. So when that changes, I mean, look, there's just a lot of variables, right? You still got COVID, you've got some of our Strongest and longest term partners now competing on the DTC side. Obviously, there's a piece of A lot of the customers that we reach are in rural America and as broadband densifies, obviously, Customers will have more choice.

Speaker 11

And so there's just there's a lot of variables to try to forecast what's going to happen. But we're still focused in on Earhart. Profitability, providing customers great customer experience. Our 4th J. D.

Speaker 11

Power win last quarter was great for the team in order to celebrate and a great testament Earhart. To the efforts we put in on the customer experience side. So I'll turn it over to Charlie on supply chain.

Speaker 4

On supply chain, Supply chain, I mean, there's no doubt there are supply chain issues, but there's a lot of issues, COVID, the fact that People had to work at home and a lot of our vendors work at home and just a lot of disruption out there. But we focus on it every day, which is Earhart. You're always going to have challenges and we just have to overcome those challenges and we are a company that has been in the office since May of last Earhart. Of 2020. So we're working as a team and manage Earhart.

Speaker 4

And Dave and his team have managed through the deployment issues and we're still on track. We're not yes, the FCC Earhart. In our agreement, you do have supply chain issues as a reason you could be late, but that had to be a real reason. I mean, you wouldn't make that up. Earhart.

Speaker 4

And so we're just going to get there. That's just the way we're going to do it. On the handset, there's 2 other areas, labor is an issue that Earhart. Our teams have to work extraordinarily hard because people are there's not enough supply Earhart. Of labor out there today, and the handset issue is probably the biggest because, we had headwinds And this January 1 shutoff for CDMA, so we had to take handsets and give it to existing customers that would have been a new customer.

Speaker 4

Earhart. And so, absent supply chain issues on the handset side, where we're getting a fraction of what we've ordered, Earhart. We would have been we would have had growth that we had a lot more growth there. So and we don't have the scale that the incumbents have with the vendors. Earhart.

Speaker 4

So I don't know that we get our fair share of handsets. And so we worked extraordinarily hard to make sure that we're on their Earhart. People's radar screen and our customers aren't primarily aren't buying the $1,000 phones, they're more economically challenged. But as we get into postpaid and as we get into Earhart. Owner Economics, that changes for us in a very positive way.

Speaker 4

John, you want to talk about we really have Retail is important because it's a really positive story for us and maybe John can talk about it in a second.

Speaker 16

Yes, of course. Thanks, Charlie. We're We're definitely building capabilities to return the business to profitable growth. We see it as a situation where we would have grown in the Q3, if not for some of the supply chain issues as well as some of the headwinds from CDMA that have been covered. We're definitely ramping up our team across retail, national retail and digital, to take the business to growth.

Speaker 16

We're taking a segmented approach Earhart. To the different opportunities we see and access to handsets is a key thing going forward. And as Charlie said, we're definitely Earhart.

Speaker 4

And we would anticipate

Speaker 16

seeing these situations clean up for us Earhart. We're not quite sure about Q1, Q2 yet, but we're focused on supply and also making sure that the devices that We do have go towards the most profitable activities. And we talked about it earlier with respect to CDMA, we see there being over 1,000,000 customers Still on the CDMA network, if the network were to shut off on March 31. So, additional handsets is something that we're definitely focused on Earhart. And we'd love to be able to partner with T Mobile on that as Charlie alluded to earlier.

Speaker 16

And it's the daily focus here to make sure that Earhart. We can keep our partners supplied and move the business forward.

Speaker 10

Got it. Thank you.

Speaker 4

Earhart. Yes, operator, we're ready for

Speaker 11

a few calls from the media now.

Operator

Earhart. Thank you, sir. And again, we will now take questions from members of the media. If you're a member of the media and you'd like to ask questions, just as a reminder, Earhart. Earhart.

Operator

For just a moment. Earhart. Earhart. All right. We'll take our first question from Scott Mertz with Bloomberg.

Speaker 6

Great. Thanks. Charlie, the stock's taken a big hit today. I think people are hearing Earhart. From all this that the 5 gs network costs are creeping up, that the commercial launch might be slipping out a little further.

Speaker 6

Earhart. Doubters are probably saying I told you so. How would you address these concerns?

Speaker 4

Earhart. Well, I don't think there shouldn't be a surprise that the capital expenditures are where they are since Earhart. That's what it takes to build a network and we're doing it infinitely less expensive than anybody's ever done it before. Earhart. And obviously, the I think we're doing I think we should We should have been a little faster on rollout in Las Vegas.

Speaker 4

I mean, I think that's fair. But I think other than that, most everything else we're doing is We're doing probably better than we anticipated on and we're Not exactly understood by the industry that much and part of it is because we don't spend a lot of time going through strategically what we're doing. And we spent a little bit more time on just it's a complicated story and it's a little bit easy for us just to do it and then show people Earhart. And as opposed to try to explain it. And just a simple example is we're about more than just a handset business.

Speaker 4

Earhart. Yes. The people who follow us and stuff are in that and we're basically a cloud IT network that we're building and it's a little bit Earhart. Thought process on what that looks like than traditional networks. And Earhart.

Speaker 4

We have to do a better job of explaining our story and we have to execute it in our markets between now June of 2022. So I think that's the stuff we'll focus on and the marketplace, they They don't always get it right in the short term, but don't get it right in the long term. And we're one of the few companies that has the ability to be able to think long term. Earhart. Mark, if we had thought short term, we would be trying to get DBS ups 5 years ago because that's what people wanted us to do.

Speaker 4

Earhart. And so I think we know where it's going. We know how the power of this network. We know how special this network is going to be and we know the opportunity. Earhart.

Speaker 4

So, it's on us to execute and then give people the roadmap to see why their investment Earhart. And DISH is a smart investment and we have certainly work to do there. But we're focused on making sure we get our network up and operate and then we'll talk about it. And there'll be a little bit in AWS. I think there'll be a little bit in Las Vegas and at AWS reinvent stuff.

Speaker 4

I think people will start to see it there and start to understand And a little bit better because those are the people that actually the developers and the people in the cloud, they'll have a better feel for it. I mean, last year this time people didn't say we weren't going to build the network. Now I think it shifted to okay, we get it through I think most people believe we're building the network now. Can you make it can you stay under your $10,000,000,000 long term and can you make it profitable? That we have to show.

Speaker 4

Okay, operator. We'll take one more from the media. Earhart.

Operator

All right, certainly, sir. We'll take our last question from Amy MacLean with Chabotaxis.

Speaker 18

Earhart. Hi, there. Thanks for taking my question. I just wanted to check-in, your comment earlier about TEGNA did not sound very Earhart. Dick, and I know you filed a good faith complaint.

Speaker 18

Are there negotiations going on still between the 2 of you?

Speaker 4

Earhart. This is Charlie. I don't think there's serious negotiation going on really. I mean, Earhart. I think we remain far apart.

Speaker 4

Then we've got 8 weeks of football left and Earhart. We'll have lost the customers who can't find football somewhere else and Earhart. It remains such a huge tax that we know where that ends up. So having said that, we remain available to have Earhart. An honest conversation about where things go.

Speaker 4

We know what the prices we pay everybody else's. We know the prices in the marketplace. We know the ratings. So we know Earhart. The economic value, we always pay more than the economic value because we have to factor in the customers that we lose.

Speaker 4

But the economic value to us is going down, not up right Earhart. Because we've probably lost and it's not a tidal wave by any means in terms of customer Earhart. So they find another place to watch the news and they found another place to watch football. So Earhart. And they can save money.

Speaker 4

We give them a credit when they don't have TEGNA, so we give them a credit, so they save money. So It's a bit of a balance, but we prefer to be up. We TEGNA has been a good partner. We prefer to have it up. We prefer to have an honest negotiation, but Earhart.

Speaker 4

We're just apart.

Speaker 18

Thanks.

Speaker 11

All right, operator and everyone. Thank you. We'll talk to you next quarter.

Operator

And And that does conclude today's conference. We thank everyone again for their participation. You may now disconnect.

Earnings Conference Call
DISH Network Q3 2021
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