DISH Network Q4 2021 Earnings Call Transcript

Quartr
Provided by Quartr
February 24, 2022

There are 16 speakers on the call.

Operator

Good day, and welcome to the DISH Network Corporation Q4 and Year End 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Tim Messner. Please go ahead, sir.

Speaker 1

Thanks, John. Good morning, everyone. Thanks for joining us. We are joined on the call today by Charlie Oregon, our Chairman Eric Carlson, our CEO Brian Kneeland, EVP and Group President of DISH TV Paul Orban, our CFO and on the wireless side, we've got Tom Cullen, EVP of Corporate Development Stephen Bai, our Chief Commercial Officer Dave Mayo, our EVP of Network Development John Swaringa, President and COO of Wireless And Mark Ruwan, our Chief Network Officer. Before we start, I need to remind you of our safe harbors.

Speaker 1

During this call, we may make forward looking statements, which are subject to risks, uncertainties 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. For more information, please refer to our SEC filings. And with that, I'd like to turn it over our CEO, Eric Carlson for opening remarks. Eric?

Speaker 2

Well, thank you, Tim, and welcome everyone. Thanks for being here today. I'm going to start off with a few brief comments And then turn it over to Charlie for a few additional remarks. When Charlie is done, we'll open it up to your questions. During the call today, we have a few slides that are available that we'll refer to on our investor site at ir.dish.com.

Speaker 2

Before I dive in, I want to start with saying that our thoughts are with the people of the Ukraine and our team members. We have a small development shop there and so this really fits close to home and we wish them obviously safety and good health. Getting into details. On the whole, we executed with financial discipline and reported strong revenue and free cash flow numbers for the year. Look, we need to do a better job with our subscriber targets for DISH, Sling and retail wireless and we've removed some headwinds in order to execute this year.

Speaker 2

In addition, we have accelerated our wireless network build and are excited to share more about this in a few minutes. With regard to the Q4, DISH lost roughly 200,000 subscribers and this was driven by several factors. The most significant being our local programming dispute with TEGNA for the majority of the football season. Now I'm pleased to report that we were able to come to terms and sign a new agreement with them earlier this month. In addition, we had a price increase in November that did have an impact on our subscriber numbers, but we'll make a positive impact on the bottom line this year.

Speaker 2

We kept DISH TV very profitable with a discipline in smart marketing expenditures. We managed to focus on acquiring and retaining long term profitable customers. Look, we played where we're strongest in rural America with higher credit quality customers. Turning to Sling TV, in the quarter we lost approximately 70,000 Simply put, we didn't execute operationally in the Q4 to the level that we expect to ourselves. But as we talked about before, we needed to reengineer and validated by other third parties.

Speaker 2

Flixin is a profitable business that will grow. It's going to require a little patience, but with the platform overhaul last year, We're now positioned to be able to innovate and enhance the customer experience with new features and differentiated offerings. Fling is still the best overall value in regard to other OTT services due to the service, reliability, live TV offerings, watch party capabilities and its value price position. So it's imperative that we execute on our plans on time and as intended. On Pay TV, we remain focused on acquiring and retaining profitable customers and delivering a great experience for both DISH and Sling.

Speaker 2

Switching gears a bit, our wireless business is poised to take off in 2022. Our retail wireless business is set to chart a new course And while we lost approximately 245,000 subs in the quarter, our disciplined operational approach continues to pay off as we've driven profitability into that business. We built an operational foundation upon which to grow our retail wireless business. We had headwinds that impacted us such as supply chain disruptions, specifically significant cell phone shortages and the burden of the CDMA shutdown. We've worked with our vendors to mitigate many of these issues and we'll continue to make progress that we'll build upon in 2022.

Speaker 2

Our wireless network team has made significant progress over the past quarter and recent weeks. We'll begin opening up access to customers in numerous markets over the coming months. And at a high level, we'll hit our June milestone with 20% of the population covered. We currently have over 25 major metro markets ready to be deployed Before the deadline including around 100 smaller cities across the country and look we're excited about the coming months and the deployment plan for the rest of 2022 And we have the necessary capital to execute our plans this year. Las Vegas is already up and running.

Speaker 2

We've had friends and families using the network. We're about to expand it to additional customers in the coming weeks through Project Genesis. In addition, we're pleased with our results from the 110 spectrum auction where we acquired bands that align well with our current C band and CBRS holdings. I want to tell you more about that in just a minute. We'll bring it all together in 2022.

Speaker 2

It's shaping up to be just a remarkable year for DISH. We've got a lot to share as we evolve our business operations and our products and services and make deep inroads in the wireless space. It's going to be a year of execution and I'm excited about our opportunities. Our best days here are truly ahead of us. Now I'd like to turn it over to Charlie for some opening remarks.

Speaker 3

Yes. Thank you, Eric. Just a couple of things to maybe frame some of the questions that we may have time to get to today. 2 big developments really since last quarter's call and one potentially Very positive development. First, the auction results, one analyst Kind of figured it out, to some degree, but strategically, we were able to Wind spectrum in CBRS and then ultimately wind and high power C band frequencies that are together that actually Are adjacent to each other and that's important because of where we think not only our consumer network is going, but also where we think the private Enterprise Business is going.

Speaker 3

So that was kind of a double bank shot. We had to have we had assignment rounds in both of those Auctions, so we didn't know that we could be we weren't sure that we could be adjacent to each other, but it was critical that we were that we could do that and we're able to do that. So That was a big positive. The second positive is that our network in Vegas, We actually have operational now a 5 gs standalone network that operates in ORAM with ORAM principles. It's cloud native In the AWS cloud with Vonner voice.

Speaker 3

So that is the most advanced network In the world, we probably ended up doing a lot more development than we thought in some of the technologies with our vendors. But that is up and operational when it and when it works, it works pretty well. Doesn't always we still have work to do. We're not ready to spike the football. We have work to do to develop it through all the cities And to optimize the network, but the technical challenge Has been resolved for some of the core things that we needed to do.

Speaker 3

And the final potential positive is that we have reached An agreement with T Mobile to really that resolves all the disputes that we have together today that have taken up an inordinate amount of their time and our time. We have an agreement that's in front of the FCC and the DOJ. So, won't be able to go into any great detail about that because they have to approve that. But the one thing that we can talk about that we've agreed is that we will support the March 31 CDMA shutoff That we're working together both on communications, on handset supplies, on incentives To get that done, there's some short that's some short term pain for us, but we've already experienced a lot of pain with that with the uncertainty and the changing dates. And long term, our relationship will be able to be much broader and positive for both companies.

Speaker 3

Having said that, AT and T will still remain our primary vendor and the one that we work with on a day to day basis. So With that, maybe we open it up to questions.

Operator

Thank you, sir. We'll take our first question from Doug Mitchelson of Credit Suisse. Please go ahead. Your line is open.

Speaker 4

Thanks so much. I guess really just two questions. Charlie, you already started on this path, but when you cycle back to last summer, where I think you're optimistic you could have A market launch in Las Vegas in December, I know you've gone through the technical challenges, but I'm just curious sort of what have you learned over the last 6, 7 months? What needed to be accomplished that was a little bit harder than you thought and what's going better than you thought? And separately, you've talked about the $10,000,000,000 number for few years now and sort of pleasantly surprised by the $2,500,000,000 CapEx number for this year and the $1,000,000,000 last year.

Speaker 4

That means you're sort of $3,500,000,000 in plus a little bit of OpEx and some previous year development costs, but you're trying to be pretty far below the $10,000,000,000 So I'm just curious sort of what's getting built To get to this 20% in all these markets relative to ultimately your 70% target, is this just a thin layer of sell sites to start? Or when you build out Vegas, did you build out Vegas as you would to get to 70% and there's just some other spending that has to come down the line? Anything on that would be helpful. Thank you.

Speaker 3

Yes. Doug, thanks. First of all, we're 6 months behind And where we thought we'd be, it's my fault. We just didn't maybe anticipate that We would have to do as much on the technical side. The voice, the Bonner voice, the other people around the world, China already has it.

Speaker 3

Other people are working on it. They've had issues too. We had hoped to ride a little bit more on their back and We're actually part of the development there in a place maybe we didn't think we were going to have to be. Second thing is within the company, just the management company, John Surenga, you saw is now the President and COO. And really a lot of what we're doing, we're building more of an IT network.

Speaker 3

Our wireless network looks more like an IT network than a traditional wireless network with cloud principles and No RAM Principles. So John has been our has worked his way over the last 14 years in our organization up there and been our CIO at one time and Our COO for the company and is the right guy day to day to drive that process. And so we've made improvements in terms of how we're structured. We probably carry I think that ultimately we found that we had to become the system integrator. It wasn't a role that we thought we're going to take on, but we're with all the vendors At some point, it's going to be the middleman between there and the glue that holds them together and we're much more involved in that than maybe we thought we're going to be.

Speaker 3

So A lot of lessons learned there, but we're certainly moving at a very fast pace. Now we probably squandered some time, but that's my fault. The CapEx, a lot of reasons why that $10,000,000,000 number is a real number. First of all, our network build is very simple compared to our competitors. Because it's a greenfield, we're able to go in And we're able to RFP, for example, the tower leases.

Speaker 3

So we got real competition on tower leases, Because obviously the numbers were going to be great for us. The second, it's one set of antennas, it's one low band radio, one Hi, Ben, radio. And then most of our cost is in the cloud. It's not at the base of the tower. So, where we really just have a server And some batteries.

Speaker 3

So that gives you a feel for 20 by the way, at the end of this year, it's with 3,500,000,000 Dollars of CapEx will obviously be way more than 20% of the population. So it gives you a feel for how we're able to do that. We were able because we're in the cloud, we can automate and do things and provision and other things that people can't do. So our labor cost is less. And there's just a lot of reasons The reasons why we can do that.

Speaker 3

The second thing is probably not as not quite well as known, but in the auction By acquiring while we spent CapEx for the our investment in C band and CBRS, We are able to use C band and CBRS for some for fill in where we will have some gaps in coverage. So we know when we build Denver, we're going to have Some shadowing in some part of Denver that to build a macro tower to try to be very expensive or expensive rooftop To try to get the coverage there, obviously with a new set of frequencies and we're able to do that on actually save us money In a funny sort of way. So part of our investment in C band and CBRS actually pays dividends for us in saving build out costs for us on the back end. So I hope that answered the question.

Speaker 4

Yes. Thank you. Just to be clear, Charlie, it's sort of it's strange asking the question this way, but it was actually the other way. It's like the $10,000,000,000 is looking low given Only $2,500,000,000 of CapEx this year and $1,000,000,000 last year. So I'm just getting I'm wondering when the bulk of that $10,000,000,000 hits?

Speaker 3

Yes. It goes out through 2025, right, where we have 75% of every county in the United States or every I forget the exact maybe CDMA, I don't remember exactly what it is in terms of the geographic region. So We're on a cadence for Dave can speak to this a bit more, but we're on a cadence of so many towers per month and that's just going to go on for the next 3 years. And then inflation is going to probably be a factor in there and then we got some unknowns that we don't know and then we got some of the small cells That we don't know about. So but I think there's a lot of skepticism around the $10,000,000,000 and I think that disclosure should give you some confidence and then as you But I think we're going to spend the $10,000,000,000 at the end of the day.

Speaker 3

We're coming pretty close to it.

Speaker 2

Yes. This is Dave Maio. It's not only the progress Relative to the 20% that will hit this year's CapEx, but we'll also be advanced spending on markets to hit the 70% next year, is probably the gap.

Operator

All right. Thank you all. We will now move to our next question from Ric Prentiss of Raymond James. Please go ahead. Your line is open.

Speaker 5

Thanks. Question on fixed wireless access, some of the other operators in the wireless world have seen that as an interesting opportunity. How do you guys view your fellow spectrum position being put to work as far as is that an interesting business case to you all to go after not just mobility, but a fixed wireless Access Products.

Speaker 3

The answer is potentially, in fact, first of all, it makes sense for them to do it, right. One of the things That all the wireless providers, but some that we've architected in is that the real key to economics in this business is to use all your bandwidth, To use your bandwidth use the capacity that you actually have more use a bigger percentage of that. So while And you see both Verizon and T Mobile do that. They get an extra $50 they use an inordinate amount of their capacity to do it to get $50 but it's $50 that they get for capacity that otherwise would life fallow. So it makes sense to us and that's point A.

Speaker 3

Point B is the other way to do fixed wireless is actually to not have a mobility portion of it and actually just do fixed wireless. So you can propagate You can build a lot cheaper. And that's also a place to use your frequency, but you don't have the mobility. You don't have mobility. You just have fixed when you use your frequency.

Speaker 3

And that's another way that least in some portions of the United States, I think that might be a better way to go. And then the third factor is, we see Probably a better use case from an economic point of view is private networks. So utilizing People giving people ability to run their business in their cloud or public cloud if they want to And actually use some of our frequencies in a private way and make sure that they have access to the data. So that way they can build and they actually can build a cheaper product, they can build Safer product, they can monetize their data. So we think that's going to be another place.

Speaker 3

And private networks may use the data 24 hours a day as opposed to consumers. So that's another way to get your capacity usage up on the network. And The math when you start running the math on your economic models of networks that maybe are using 25% of their available capacity today and you start moving that to 26 27%, maybe get to 33%, 34%, 35% for all the wireless providers that is huge incremental revenue potential.

Speaker 5

A couple of follow ups on that then. So the fixed wireless where you maybe don't need mobility, would that be more of the rural areas?

Speaker 3

Well, it remains to be seen. I think the rural areas is a more logical place to start. And you see some people doing that with some of the government money and things like that. I think it's a we've looked at it technically both ways. And it's not clear exactly to me yet, which is the right way to go.

Speaker 3

But we're pretty well positioned. We have installation and service network around the country. We know You certainly improved your fixed wireless access to the extent you could put something on the outside of the house, which is something that the guys today are not doing. But you need to be able to go on a rooftop or have a ladder or have safety precautions or dispatch systems, which we have in place today. I think it's a place to play and I think that there's an opportunity to share spectrum there, where If you become successful, then you're going to run out of you have limitations on how many fixed wireless customers you can get.

Speaker 3

And You can see there could be economies of scale there where you're going into a new market where you're not competing in traditional handsets, but you're competing against cable For fixed wireless. And I think that's a place where our industry might see some sharing agreements in the future.

Speaker 5

On the private network side, do we expect to have some trials and maybe even usage announcements this year then with the network launching?

Speaker 6

Yes. Rick, this is Stephen. Stephen Baie. Yes, we're already active in that space. And you may have seen one announcement Lockheed Martin, we're partnering on a project with them with the DoD at Camp Pendleton.

Speaker 6

But we have other projects that are Currently underway and we expect more announcements coming in the future on this space. But it's an exciting space and we're seeing momentum pick up. But it's not going to be material in 2022. We see that coming in as we pick up momentum into 2023.

Speaker 3

So The private networks is an interesting spot because some of our providers are very big in that space today, whether it be Amazon or Cisco or Dell, those are 3 of the bigger players and potentially there. And Hopefully, we'll be working with 1 or more of those folks to make sure that we have the right product at the right time.

Speaker 5

Makes sense. Thanks.

Operator

We will now move to our next question from Philip Cusick of JPMorgan. Please go ahead. Your line is open.

Speaker 7

Hi, thank you. It's great that Vegas is working. Charlie, can you give us some insight into what else has to happen before you can do commercial launch and what that might look like?

Speaker 3

Well, first of all, we've got to optimize the network. So Once you build the network, then you got to optimize it. So that's we're in the process of doing that today. And so that's one thing. The second, we have some regulatory Issues such as E911, which we have to be able to overcome, which we have not yet, before we can launch commercial service, but we're certainly Well done that Pat, but we do use 3rd party for that.

Speaker 3

So we don't quite control that as much as we'd like to do. And then we've got to work with the handset manufacturers to make sure That Bonner works and our frequencies are in the handset. So those are all the three things. And then we have to have a marketing plan, Right, in terms of how we approach the market. So none of these things are In and by themselves difficult, but you have to do them all and you have to do them all kind of come together at the same time.

Speaker 7

Maybe to that point, post the 4Q debt raise and the spectrum auction, where are you on funding for wireless? You've outlined the cost of the network, but should we look for a big subscriber acquisition cost component as well? Thank you.

Speaker 3

Well, I think there's obviously, we're we would think that from a retail wire perspective, you certainly You certainly have SAC, right? But it's not nothing like it is in the satellite television business. And so and we have ways to dial that up and down. And obviously, There's many ways to attack that side of the market. From a funding point of view, we're funded We're funded through the next year at this point in time.

Speaker 3

I will say that obviously, we certainly would We'll probably need to raise capital sometime next year, right? And we think there's a number of ways that we can do that. But we think that's a better to come to market when everything's working Than us saying, well, we're going to do it. It's better to say we did it.

Speaker 7

Thanks, Charlie.

Operator

We will now move on to our next question from Walter Piecyk of LightShed. Please go ahead. Your line is open.

Speaker 8

Hey, Charlie, you've got Rich Greenfield because Walt is somewhere in Rome right now. But the question Walt wanted to ask was Whether the new T Mobile deal substantially replicates the technical and pricing terms that you signed with AT and T? And then I've got a follow-up on retrans.

Speaker 3

I would say that I guess I wouldn't answer it quite that way. I would say it's certainly Improved economics, it's certainly there's certainly settling disputes that have been out there and Involving the government it is not in my experience, it's better to resolve things between companies rather than look at regulators To do it and I'm really pleased that the companies are working together really well and there's adults in the room To make sure those things happen and it's improved economics from a business perspective for us that it's improved Integration into how the networks work together. And there's a good spirit cooperation Between the teams. So that's it's going to be it's a win win for both companies and although it's a short term, We'll have increased churn and as we turn the network off, as they turn the network off, those people have to go somewhere. We just can't reach them all.

Speaker 3

So we had to be prepared for them to prepare for some people who don't reach out to us and go someplace else. So John, you may want to talk about that.

Speaker 9

Yes. Thanks, Charlie. It's John. We've been working through this really since we bought Boost, right? This has been A situation where we've been on defense, we've got the first half of this year in front of us to get through and then we can shift to offense.

Speaker 9

So strong cooperation with us and T Mobile to move the remaining subscribers And it will be a busy quarter, but as Charlie pointed out, we're able to sort of close this chapter and move forward and get

Speaker 3

to growth. The strategic thing is DISH has its own owner economics as we build out our network city by city. We have the ability to use both the AT and T network as our primary network and to supplement that with T Mobile's network, where we have a lot of customers already on T Mobile that we don't have to move off In the short term, so that's a pretty good place to be. And obviously, We can't share the economics of that with you per se, but that models I think you could figure that out.

Speaker 8

And then the follow-up, Charlie, you've obviously been very outspoken about retrans and sort of the shift of content off of Linear broadcast TV and how it's less and less important as ratings have declined. Obviously, not having stations up was problematic for your subscriber numbers. Was this a win win? I mean, I'm sorry, was this a win for DISH, a loss for DISH? Like how do you think about how you fight The rising tide of retrans costs against the dramatically falling ratings and viewership of broadcast TV, it seems like a Very challenging quandary for you.

Speaker 3

Well, I mean, it's I assume you're talking about TEGNA. I've always felt That anytime you get to a program dispute, it's a lose lose situation. It's never a win situation for one guy or the other. It's always a lose lose situation. TEGNA lost a fair amount of capital from us.

Speaker 3

They probably sold their company a little bit cheaper than they otherwise would have. We obviously lost customers during I mean, obviously, we proved that you can go to a football season without a network. So as the NFL is more widely available Other places, but we did lose some customers who occasionally who watch the networks and Didn't felt they were important. So I've said this before, the value of retrans is going down, not up, for all the reasons you just stated. The place you could find it is, I mean, one place is consolidation in the industry because then it gets to be a little bit fairer Today, the broadcasters are monopolies, yet nobody in the video business is anywhere close to that.

Speaker 3

So that's one place you'll find it. The second place is it will die a death on its own if people try to overcharge for the product. We've seen that with other programmers who just refused to see where things were going and at some point they self destruct.

Speaker 8

But it hasn't fundamentally changed your approach to retrans going forward?

Speaker 3

Well, I mean, again, I'll say this for the 100th time is We're unique maybe as a company, but we do look at the value of the programming to our customers. We have real time data. We know who we know how many people watch it, we know how long they watch it. We can use an algorithm to come up with a pretty good range of where we think the value of the programming is. We always then will overpay.

Speaker 3

We always will overpay because we have to value the customers that we lose, right? And then we have a number. And if we're at X and somebody is at 2x, we're not going to carry it because it's more beneficial for us not to pay the money. If they get to x, We'll do a deal. If they're X plus 1, we won't do a deal.

Speaker 3

TEGNA was 2X, didn't happen, right? We lost subs, they lost revenue. When football season was over, it was they didn't have where was the leverage, right? So I mean, that's just the way it goes unfortunately. And it's too our customers like us, we get high scores in our industry.

Speaker 3

They hung in there with us. They the fair more than you would think if our customers agree that they don't want their costs going up and They appreciate the fact that we're willing to they're not willing to not roll over and play dead in negotiations. And At the end of the day, we got to a fair deal with TEGNA that's beneficial to both parties and beneficial to our consumers, so we don't to raise the price as much as everybody else is going to have to raise prices.

Speaker 8

Thank you very much, Charlie.

Speaker 10

We will

Operator

now take our next question from John Hululek of UBS. Please go ahead. Your line is open.

Speaker 7

Great. Thank you. Maybe for Charlie, just are there any early indications of how the network in Las Vegas is performing in terms of Signal quality or speeds or capacity. And you mentioned that you said it's performing well when it's working, I mean, I guess without getting too technical, can you explain sort of why it doesn't work when it doesn't and your efforts to overcome Those roadblocks. And then secondly, you mentioned the wholesale agreement with AT and T.

Speaker 7

Are you guys loading traffic under the AT and T network now? Is it sort of like all new Gross adds on the prepaid side are going on to the AT and T network. And is there any room beyond what you guys have announced to cooperate on the network deployment side sort of more holistically with AT and T? Thanks.

Speaker 3

Yes. I'll let John take the second part. I was in Las Vegas I've been I go to Las Vegas every month, so I could see kind of the progress, but I was there yesterday. And so Where we've optimized the network, the speeds are good and it works well. We haven't optimized the whole city.

Speaker 3

And so Just fun fact just for you guys, but obviously your team takes you to the places where they've optimized the network. But obviously before we got we left, we went we decided to go to the rest of the places where they hadn't optimized and we had some issues there. So the good news is we know when we get to optimize and we make it work. And again, For me personally, it's one of the greatest achievements this company has ever had. I mean, it just there's nobody And I can't tell you how important network running truly running in the cloud and O RAN principles, I can't tell you how important that's going to be and where this industry is going to And how this the United States can suddenly get some leadership back that they gave away years ago, and how It brings a whole set of people in that are creative.

Speaker 3

It's like developers come in. We get a whole lot of people creative who've been locked out because Today networks are really primarily Nokia and Ericsson and there's a whole set of people that like to come into the network and have things to offer And techniques and technology to do so. It was beyond impressive to me To see it work. Having said that, we have I'd only caution you that it's that we have a lot of work to do To make it work everywhere and to light up 25 cities in the next 100 days, major that's a lot of work. So The good news is we're going to get there.

Speaker 3

The bad news is we're not there yet.

Speaker 9

And this is John on the second half of the question regarding AT and T. So this quarter we are loading a substantial portion of our Boost Mobile customers onto the AT and T network. We've been working closely with AT and T to flow water through the pipes make sure that everything is working well, so that we can provide a great customer experience. We're also enabling Republic Wireless and some of our other brands To load on to AT and T, so you'll see us pick up our activities and our efforts there. It is on a new technology stack.

Speaker 9

We're building new technology not only for the network but for our retail business and we're pleased with our progress there and will be great capabilities as we turn to growth.

Speaker 3

Yes. And you had a question about network sharing. I apologize, I didn't answer. But there's lots of potential for that Is what I would say with any of the vendors, any between any of the incumbents in the industry, You start to see some you saw some network sharing announcements in Australia between I think Telstra and TPG with Telcom. I think you have network sharing in Canada today, you got some in the UK.

Speaker 3

It only given the new builds that people are doing, given maybe where people have adjacent spectrum, You can see where that could make some sense, right? And certainly, I think all the operators will probably look at that. We probably look at it more than anybody else because we haven't built out our network yet everywhere. So we're a little bit cleaner sheet of paper, But we also have a different technology. We don't want to go back to last decades network.

Speaker 3

We want to go where things are going and make sure that we don't have to carry a bunch of legacy around.

Speaker 10

Thanks guys.

Operator

We will now move on to our next question from Jonathan Chaplin of New Street Research. Please go ahead, sir. Your line is open.

Speaker 10

Thanks. Two quick questions, if I may. Actually, I've got 9 questions, but I'm going to narrow it down To 2 important ones. On the CBRS and the 3.45 gigahertz spectrum, You've got, as you mentioned at the beginning, Charlie, a really nice 50 megahertz block of spectrum. What needs to happen for you to be able to use that As a 50 megahertz channel, do you need power limits between the two bands to be normalized by the SEC?

Speaker 10

Do the bands need to be consolidated into a single 3 gs PP band or can you use it as is, as a single channel? And then just following up on the last question, You've got 50 megahertz that's contiguous. AT and T is right next to you with another 40 megahertz in the 3.45 band. Neither of you have deployed that band yet. Is that a band is that an example of A situation where it might make sense for you guys to deploy the band together and share equipment and deployment costs on that band specifically?

Speaker 3

Yes, Jonathan, you're always ahead of your time, and you should come do strategic planning for us. The first question is If you look at Page 4, people who have access to maybe look at Page 4, it's a very simple chart that kind of shows you That we think CBRS band is going to be the primary band for private networks, primarily because a lot of it's free And there's equipment available today and it's in phones today, so you can start deploying CBRS. And it's kind of Licensed because of SaaS, it's kind of it's not quite, but it's kind of licensed, unlicensed spectrum. But as you deploy it, you're always going to want to have some priorities. We're the only company with priority licenses across the country.

Speaker 3

And then you're also going to want super Right. So licensed spectrum, which is C band, and of course, in this case, it has the added advantage of being full power. If I were In charge of spectrum policy in the United States, I would without doubt take a real hard look at increasing the power levels in CBRS. The C band Spectrum across the world is everybody in the world is at high power. So nobody we have to compete against other countries And they don't have this band in the middle that's lower power, which causes which has good news Good news, bad news, but it's more bad news than good news, I guess, is what I'd say.

Speaker 3

So I think there's a realistic chance That regulators will at least look at it to say, can we if we're going to compete against the world, should we rethink that? We've done analysis just to That you can have your cake into 2 that mid power CBRS and high power CBRS can coexist. We're unique in that we're in both bands. And so maybe Stephen you want to take this because I'm not maybe technical enough to explain it, but to make there's interference between the C band and CBRS, But because we're adjacent to each other, there's some advantages there, but I'll let Stephen maybe give you a brief tutorial.

Speaker 6

Yes. Thanks, Charlie. And Charlie is right. We definitely are looking at how do we find a path to increase the power level on CBRS. But notwithstanding that, we can still operate Given the current standards on CBRS and the adjacency with the C band spectrum, and so there are technologies that allow us to be able to manage that interference between the 2 different bands to be able to leverage that spectrum in a common deployment model.

Speaker 6

So we have the ability to do that because of the adjacency. We can coordinate that in a way that allows us to utilization of that spectrum.

Speaker 3

Jonathan, as you correctly point, we paid over $400,000,000 to get adjacent, right? That was a bigger percentage than historically Has been done, but it certainly puts us in a better strategic position. And then the last part of your question was about AT and T for the vast majority of the country is adjacent to us In C band with 40 megahertz. Obviously, given that our relationship is They're both they're a partner to us in terms of their network today from a roaming perspective. They're certainly we are open to they may have they may know everything they need do and they may have no interest, but certainly, from an economic point of view, we think there may be things you could that you could do together there between C band and or CBRS, given our position there.

Speaker 10

Awesome. Thanks, Charlie. Thanks, Steve.

Operator

We'll now move on to our next question from Brett Feldman of Goldman Sachs. Please go ahead. Your line is open.

Speaker 11

Yes. Thanks for taking the question. So you guys for a long time have said that as you build out a wireless network built on cloud technology that you'll inevitably have A cost advantage, I think conceptually that's always made sense. As you've noted, you are now actually operating a network on this technology that sometimes works the way you want it to. So You haven't scaled it yet, but can you start to maybe give us some insight as to what you think that sustainable operating cost advantage It's going to be now that you have some evidence as to what you've been able to do in the field.

Speaker 11

And then just as a follow-up to that, I think we all anticipate that you launch and go to market, you're going to be offering consumers a really great value for the quality of service that you're delivering as you sort of flow through some of those Cost savings to the consumer, but I'm wondering if the architecture that you've chosen is also going to allow you to deliver features and functionalities that might be a competitive advantage we're not

Speaker 12

In the cloud now, of something that is pretty costly for existing operators, which is to test new software And to embark new innovation. And we have a speed and capability to do that, that is truly comparable to the cloud And we have much more automation. So we require much smaller people. And when we scale, we think that will give us Both benefits of speed and innovation, but also of costs. We are also seeing With the Open RAN, the Open RAN today is working in Vegas and in other markets.

Speaker 12

But we are starting to see a lot of new ideas and benefits From the Open RAN observability, which means you can see things. You can see how the quality of service is evolving. You can see How the benefits of your footprint, you can see if you need new small cells or not in a way that was hidden inside Nokia and Ericsson In the past, so that gives us a huge benefit over time to optimize the network and the return on the network in a way that nobody has done. And we're starting to capture that data. For engineers like me, it's pretty much incredible what we can see.

Speaker 12

So yes, we're starting to see the benefits. It's going to be a journey. I think we have the baseline now and we're going to exploit that in the coming quarters.

Speaker 3

And the other thing is on the private networks, I can't imagine I can't imagine an omniscient private network operator or somebody who wants to do it not going with O RAN principles, Right. And so I think that we're because you just got to get the cost down and you don't need a sophisticated core, you don't need some sophistication private networks that you kind of get and pay for given where the incumbents are. So I think that's another place that we have Huge advantage. And then into features that the cloud and our architecture will give you, the answer is yes, there are some there are Any number of them, we can't even predict probably some of them that will be there, but there are certain things that we'll be able to do in our network for consumers That I think may be more difficult or we can do more efficiently for our consumers and others and we're looking at a number of those things. And As we go on as we're able to go on offense, we may perhaps be able to roll some of those things out.

Speaker 3

Maybe not maybe it's a 2023 Vince, but I only gave you history. In DBS, the main architecture development was digital. And the first thing we rolled out was interactive guide. That was a big difference in a scrolling guide in the analog world. We gave a better picture, Right.

Speaker 3

But then because we're digital, we could do the DVR. And we don't quite get the history of credit for helping to invent the DVR, but we were The key player with the DVR. And then once you had a DVR, of course, you could skip commercials, which I don't know that I could watch TV if I had to watch all the commercials. So One innovation leads to another and I think that's going to happen here too.

Speaker 10

Okay. Thank you.

Operator

We'll move on to our next question from Bryan Kraft of Deutsche Bank. Please go ahead. Your line is now open.

Speaker 13

Hi. Thanks for taking the question. Just had two quick ones. First, can you just give us a sense for the timing of the $250,000,000 that you've incurred related to the CDMA shutdown? And how much more you might You might be committing to that effort, just as we build our models.

Speaker 13

And then secondly, any update on the supply chain issues and or labor constraints as it relates your ability to construct the network. It sounds like you've accelerated the plan, which is great, despite those issues. I'd just love to understand How you've been able to do that and how much of a concern supply chain is at this point going forward? Thanks.

Speaker 7

Hey, this is Paul. I'll take the first part

Speaker 1

of that question. Yes, the $250,000,000 the majority of that happened in the second half of the year as we were trying to meet the twelvethirty one deadline. And then John, do you want to take a look at the future?

Speaker 9

Yes. We're in a similar situation sort of as we work through the first half of this year with respect to Customers that we're serving, we sort of need to re stack them, right? There's a step put new handsets in their hands, to swap SIM cards and to incentivize them to come into our locations and work with us. And so we'll be continuing to see that through the first half of this year, as a headwind, but then we'll work through that, as we get into the second half of the year. As Charlie said earlier, we'll have 2 competitive networks as well as our own coming online.

Speaker 9

And as we are able to bring in more handsets To compete and to grow our business, we'll be more competitive with the CDMA shutdown behind us.

Speaker 3

And then as far as you never know where supply stuff, but certainly labor is an issue. There's certainly inflation In wages, there's certainly a fight for talent and some of the key talent we need and some of the technologies. There's big companies That scoop up a lot of that, but a lot of people want to come to work here. We have some we're doing something a little bit we're doing something very interesting and engineering perspective to build the kind of network we're building is very attractive to people. Supply chain, we certainly Keep our eye on it because it's worrisome.

Speaker 3

We're not far enough along into next to the next development To know whether it's going to come up and bite us, but to the credit of the team, we managed through some incredibly Difficult times to get to the 1st milestone. We battled through incredibly tough times to build a network When people weren't coming to work, at DISH they were coming to work, but all the people that were a lot of our vendors, people were in Zoom calls and you just don't solve problems on Zoom calls Speed that you do when you got a whiteboard and you're all together. So, we don't have a lot we don't allow excuses here. So we're just going to make it. I guess, I don't know how to say it any other way.

Speaker 3

I mean, we internally sometimes crying our beer about Something not going right for us, but at least externally, we don't have excuses. We're just going to make it.

Speaker 1

Operator, we have time for one more from the analyst community.

Operator

We will now take our final question from the analyst community. We'll begin the media portion of this call following the answer to this final analyst question comes from Craig Moffett of MoffettNathanson. Please go ahead. Your line is open.

Speaker 14

Thank you. Two questions, if I could squeeze in at the end here. One is that Charlie, at the NAT conference, you talked about a bid that you got for your spectrum. I'm wondering if you could just put any meat on the bones about that. And then Separately, this past quarter, there were renewed reports of the prospects of a merger with DIRECTV.

Speaker 14

I'm wondering if you could provide your latest Thinking on the prospects for that actually happening regulatory And in terms of being able to strike a reasonable deal?

Speaker 3

To answer your first question, obviously, we didn't own the last $7,000,000,000 of spectrum, so let me just put that aside. But from time to time, we certainly have seen interest and bids from people for the company And we certainly said from time to time interest to a particular piece of spectrum. History will show whether right or wrong, but we've always felt like The best use was to build a new company and was to build a company around it and that the best use of it was for us To manage that, we have a long term view. We realize everybody in this call does not, but we had a long term view. It's certainly taken longer than we thought Because we weren't able to get going in LTE 4 gs.

Speaker 3

So we had to wait for the next paradigm shift. The Obviously, I've said it's I think it's inevitable that DISH and DIRECTV go together. Otherwise, both companies will just melt away and there'll be no So, I can't from a timing perspective, I don't I think it's inevitable. I don't know the timing of it, I guess is what I'd say. And you know what, this is a little bit of obsessions, this was last question, but for the analysts on the call, I realized that we haven't been The company that talks a lot to analysts and we don't always share our strategies in part Because we don't want our competition in our strategies, but our strategy is pretty well in place now.

Speaker 3

We had to get through this kind of double bank shot in the last two auctions and we didn't really Talk about where that might lead, but now we pretty much we pretty much we have in place All the strategic things that we need to be a very big successful company. So we are going to do an Analyst Day. I don't think we've done 1 in 15 years, We are going to do an Analyst Day in Las Vegas on May 10. So put that on your calendars, you And experience the network and but we're also going to share a lot more with you in terms of where we're trying to go. And I hope that we'll be able to give you enough information to improve your models.

Speaker 3

And I think you're going to see the company being a lot more responsive in terms of Let you know a little bit about where we're going to be going because we're excited about the fact that we get the pieces in place now. So Mark, that in your calendar, we look forward to seeing people there and getting feedback on that. So with that, may we take media calls.

Operator

We We'll now take questions from the members of the media. And our first question from the media comes from Scott Mortise of Bloomberg. Please go ahead. Your line is open.

Speaker 15

Great, thanks. Hey, Charlie, you mentioned private networks seems to be a pretty hot topic, especially this week among Looking for an opportunity in 5 gs. I wonder if you could help me and

Speaker 12

I hate to put you on

Speaker 15

the spot to explain it to the entire industry, but What do you how would you describe the revenue model, the business model, the business case for Private Networks and 5 gs?

Speaker 3

This is a broad question. The biggest revenue Model is I think pretty good for a lot of the people we're working with today. So if your company and you had a private network, the reason you'd want to do that is because you want it's very similar to why ESPN wants to go direct to consumer. You don't want a middleman in the middle and you want the data so you can make your product better and you don't need a middleman in the middle. For companies that have a campus or manufacturing or city or a fleet of vehicles or you name it, If you have a private network, you now can get the data on you can if you're John Deere, you get the data on all your tractors, You make a better product and you can be having more efficient product.

Speaker 3

And so and you also know mechanically when you have a problem before you have a problem. So customers love it because you have a better product and it's less expensive and it's better and safer. So the CIOs of companies are immediately going to they kind of figured that out. So the revenue model then is for the things they need for private networks, they need Wi Fi, Right. So think Cisco in my head.

Speaker 3

I think Cisco, right? They need cloud, think Microsoft, Amazon, Google and others, Right. They need unlicensed spectrum, think CBRS, but they need licensed spectrum, think 1 of the 4 incumbents, particularly DISH. They need core. I think people like some people like Nokia or think about people who build Smaller cores, right, or open cores that people can add on to, right?

Speaker 3

And so you can you think transport and think about towers and tower builders and the people that I saw with Nate yesterday, right? All those things kind of come together and how do you do that and who puts that together. So for us, the revenue model is kind of the goalpost or kind of on the one end, what I would call CapEx light where somebody just leases our capacity. That's really all they do. We don't spend any capital.

Speaker 3

They lease capacity. They're just a really big customer. They're like 1,000 of handset customers, right? But there's just one customer and then or tens of thousands or hundreds of thousands Of customers. And on the other side, somebody may want a private network and they may get a contract, then you have a long term contract, but you spend the money to build it out or your partners do or some combination of that.

Speaker 3

So that's the revenue, but I'd be shocked if the Fortune 500 companies, sat here 5 years from now, the majority of the Fortune 500 companies didn't have private networks.

Speaker 15

That's very helpful. Thanks.

Operator

And it appears we have no further questions over the audio. I'd like to turn the conference back for any additional remarks.

Speaker 3

I think May 10, we might even do our earnings call May 10, but we certainly will hopefully But, see a lot of folks on the call in Las Vegas.

Speaker 1

Thanks for your time. Thank you, operator.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
DISH Network Q4 2021
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