DISH Network Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2023

There are 17 speakers on the call.

Operator

Welcome to the DISH Network Corporation First Quarter 2023 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tim Messner. Please go ahead.

Speaker 1

All right. Thanks, Rachel. Good morning, everyone. Thanks for joining us. On the call And CEO of Wireless and Dave Mayo, EVP of Network Development.

Speaker 1

Before we start, I need to remind you of our safe harbors as usual. During this call, we may make We assume no responsibility for updating forward looking statements. For more information on factors that may affect our future results, please refer to our SEC filings. And with that, I'd like to turn it over to Eric for opening remarks.

Speaker 2

Thank you, Tim, and welcome everyone, and thank you for being here today. Want to begin with a few brief comments before opening it up to your questions. As most of you are aware, it's been a busy few months, some planned and some not. On our last earnings call, we announced we had experienced a network outage that affected our incident response and business continuity plans. Once we determined the outage was due to a cyber security incident, we promptly notified the appropriate law enforcement authorities.

Speaker 2

On February 28, we further disclosed that certain data had been extracted from our IT systems as part of the incident. Our investigation to the extent of the incident is now substantially complete and we have determined that our customer databases were not accessed in this incident. However, we have confirmed that certain employee related records and a limited number of other records containing personal information were among the data extracted. We've taken steps to protect the affected records and personal information and we have received confirmation that the extracted data has been deleted. While we have no evidence this data has been misused, we have started the process of notifying individuals whose data was extracted.

Speaker 2

We restored the systems affected by the cybersecurity incident. Our websites, customer care functions, self-service applications and payment systems are operational and have been since March. Our customer care operations are up and running and service times have normalized. Our DISH TV, Sling TV, Boost Mobile and Wireless Services all remained up and running throughout the duration of the incident. We sincerely regret the inconvenience to our customers and team members and certainly appreciate their patience while we work to restore systems and return our customer care operations to normal.

Speaker 2

Data security is extremely important to us. Our team including third party cybersecurity experts has been working to enhance our cyber defenses And overall security posture. We've upgraded our endpoint detection response system and we've taken other measures to further secure our data and systems. We've also refined and will continuously improve our business continuity and system restoration processes. Now with respect to the financial impact of the incident, we disclosed in our 10 Q We incurred about $30,000,000 of expenses, mainly related to remediation, additional customer support and consulting and IG costs.

Speaker 2

This amount is included in cost of sales in our financial statements. We also disclosed that the outages related to the incident negatively impacted our disconnects And churn for DISH TV. The outages did not materially affect our Boost Mobile or Sling TV subscribers. During the incident, we undertook extensive efforts to support and protect our customers and employees and to further enhance our cybersecurity practices. Due to the commendable efforts by our team at DISH, we do not expect any additional material future costs or further impacts to our subscriber base Look, I want to thank our customers, employees, partners, suppliers and vendors for their support, patience and understanding.

Speaker 2

And with that, I'm going to hand it back to the operator to start taking questions from the analyst community. Operator, please open the phone lines.

Operator

Thank

Speaker 3

Our first question comes from the

Operator

line of David Barden with Bank Americas Securities. Please go ahead.

Speaker 4

Hi. This is Marlene Pereiro on for David Barden at Bank of America Securities. I wanted to start out the questions regarding CapEx. Can you talk about the run rate CapEx post the June 2023 build out? And then if possible provide what potentially could be a new run rate, when that run rate would start and then potentially when CapEx would

Speaker 5

Hi, this is Paul Hale. I'll jump in. That's a good question. I think we'll come in slightly lower than last year's CapEx, but unlike last year, it will be front end loaded with it dropping off after we hit our June milestone. But other than giving future CapEx guidance, we're not going to we don't provide that.

Speaker 3

Got it.

Speaker 6

This is Charlie. I think to add a little more color to that, I think that obviously we had 2 back to back milestones in 2022 and 2023 With the vast majority of the population, you have 70% of the population. So you can look for us to be able The 2 things that we really would do from a CapEx perspective. 1 is we can go we certainly will be able to take a little bit of a pause in terms of some of the new markets, But we'll continue some CapEx to densify the current markets that we have. Once we're with customers, you always find you have some gaps and things.

Speaker 6

So we have we will have CapEx on current markets, but future markets, we'll be able to take a bit of a pause until the 2000 Really late 2024 or early 2025 timeframe.

Speaker 4

Got it. And then as you build out the licenses to meet the mid 23 requirements. Is it possible to give any update on the build of the 600 megahertz that you might be building out concurrently with the other licenses?

Speaker 7

So, yes, hi, this is Dave Mayo. We've started construction on about 18,000 sites As of the end of the Q1, it will take approximately 16,000 sites for us to Meet the objective and those sites will have to be fully fiber and powered and we're well on our way to achieving that.

Speaker 6

Yes. I think on the second part of that question, the 700 megahertz is in those numbers, But additional more excuse me, 600 is in those numbers. But in terms of new cities for 600, That's something that we'll take on a kind of case by case basis as you find that you have more roaming charges than you could do By putting something on your own network, you'll make that you'll build for success. Ultimately, you'll build for the FCC. We're well underway.

Speaker 6

In addition Yes, we're well on

Speaker 7

our way to meeting the 70% with respect to the 600 megahertz licenses.

Speaker 4

Got it. Thank you. And then once you do hit the mid June requirements, is it possible to give us a sense of How much this will make in terms of business operations and your go to market strategy? It was 20% last year, 70% this year. So just trying to think about the impact it could have on the business now with a much broader offering.

Speaker 8

Good morning. It's John Swearing. I'll take that part of the question. So as the end of the first quarter, we're now serving 70,000,000 people with commercial bond on the DISH 5 gs network through Goose Mobile. That's a little bit more than 50 cities.

Speaker 8

So as we build out 5 gs broadband, we then come in And optimize the network, densify it, and move those markets towards commercial launch. So we would expect that By the end of the year, we'll be serving the majority of the U. S. Population with commercial banner and Loading retail customers onto that network. We're making steady progress with getting Vonor and Band 70 devices into our distribution and our supply chain and we expect that to pick up as the year continues.

Speaker 4

Got it. And then just turning to your cost of capital, just given the current cost of capital, Can you walk us through maybe what some of the levers are that you could pull to address 1, upcoming maturities and To other funding needs including additional CapEx?

Speaker 6

Yes. This is Charlie. Well, obviously, We focus on our maturities with obviously the next one coming up in March of next year. So For $1,000,000,000 and that's a convert. So we look at the levers there and so that needs to that idea would be equity or equity like In terms of nature, because it's kind of equity like today.

Speaker 6

And we think there's a number of levers. Obviously, we're Liquidity poor in the sense that the markets probably from a debt perspective just really aren't open to us and but we're asset rich. And so We look at all the different levers we have. I'm not going to give you those on the call. But over the years, we've been a good steward of capital and we think that There are many things that we can do, and some that we can do to meet those maturities.

Speaker 6

And so We're focused on 2 things. 1 is the operations of our business and obviously to the extent that we operate our business efficiently start putting people on our network and start competing in a little bit stronger way with postpaid, which is a more profitable customer on our network. Liquidity becomes a little bit easier to attack because people will see the growth and the profitability of what you're doing. If you're not able to do that then That's a different story. And obviously, we have to wait and see where the markets are next year With debt with even the government having a debt crisis, so obviously, there's market there is money available today out there There is a fair amount of capital in the marketplace.

Speaker 6

We hope that doesn't change, but we're like everybody else. We don't control You know where the economy goes.

Speaker 4

Thank you. And then one final one if I could. Can you provide any update on the 800 megahertz Is there anything there that you could share in terms of timing or potentially what you'll do with that?

Speaker 6

I think I can repeat what the CEO of T Mobile said. We did get an extension of 60 days On that and at a minimum and we think it's 600 megahertz is Extremely important for us to be able to compete. And so obviously, capital wise, we're Challenge to be able to do that transaction today, but we think that there's ways that we can make that transaction happen. And we think it would be From a competitive point of view, that's important low band, particularly uplink spectrum.

Speaker 4

Great. I'll leave it there and pass it on. Thank you.

Operator

Our next question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Speaker 9

Thanks. Can you hear me okay?

Speaker 6

We can, Rick.

Speaker 10

Okay. I want

Speaker 9

to follow-up on that if I could. With the 800 megahertz spectrum, are you required is there a regulatory requirements to build that? Is it possible to resell it? Also the spectrum securitization market typically what lends at about 35%, 40% of value. Just wondering if you could elaborate a little further on what the requirements are with that 800?

Speaker 6

The requirement is to build it, but we have built it. So part of what Dave and his team have done is to build 800 megahertz. And it's my understanding that T Mobile has turned that network down for the most part. There's still some statutory requirements that they keep a couple of towers up, but they pretty much turned that network down. So we basically have a functioning 800 megahertz From a transmission point of view, it will be 70% of the population in a few weeks.

Speaker 6

So We wouldn't have a regulatory problem for meeting the commitment to for build out. If for some reason we weren't able to exercise the option, we would have a penalty of $72,000,000 to T Mobile. That's the other piece of it.

Speaker 9

Were you able to take over any of those old Nextel antenna sites then to help with the transmission?

Speaker 6

We did not take over Dave,

Speaker 2

did we take over?

Speaker 7

We've taken some sites, Rick, but not a So I wouldn't call it a significant number, but it's not the Nextel radio gear that

Speaker 11

we would use. The 800 megahertz frequencies

Speaker 7

are in the These are in the radios that we've deployed, the low band radios that we've deployed.

Speaker 6

Put that in perspective, If you were to do a new build of 800 megahertz, you're talking several $1,000,000,000 to do a if you were to go out on your own and build 800 megahertz To the extent that we have, that would certainly be that would potentially be a multi $1,000,000,000 build. It will cost you almost as much to build As we've had to build for all our frequencies. I leave it up to the analyst on here to figure out if that's positive or negative, but I think that's a big positive for an asset we have that people just don't recognize. Sure.

Speaker 9

Last one for me is on the private network side. I think you said several times that the best use of the network might be for wholesale business enterprise kind of private network type Applications, updates as far as what you're seeing in the marketplace. I know it's a long sales cycle. How is the team performing there? What are the hurdles in pulling that Revenue stream and are there any opportunities for financing with potential strategic partners in that area?

Speaker 6

I think you're talking about the enterprise side of the business?

Speaker 9

Exactly.

Speaker 6

Yes. We haven't made substantial progress in terms of the enterprise business In terms of announcements, we're behind the scenes, obviously, there are really, and you mentioned it a couple of ways that we would approach the market. One would be, we'd actually build it out and Lease it, which would take CapEx, that obviously is a bit less attractive to us. The second is people just pay for it from the get go, so it's cash positive from Day 1. And the third is that some of our partners in our build, whether it be Cisco or Dell or AWS come to mind where they already have a big enterprise business, that they just add our Spectrum into their thinking about how they would design private networks.

Speaker 6

And at that point, we would be more of a wholesale Provider of spectrum. So any of those three things are possibilities of how you would go ahead and build an enterprise business. But It's going to be a huge market for all the players. I just think we're a little bit better positioned because I think the kind of network we It's the kind of network that companies when they really become omniscient about what a private network can do for you and what it should do for you. The architecture of what we It's just without the legacy, it's just a better if you're going to build it new, you should build it right.

Speaker 9

Any idea when we can look for it formally announced, so we can see it on our side of the fence?

Speaker 6

Don't have a timeframe for you. I mean, we said before that we think you'll see it's a 2024 event for us.

Speaker 9

Great. Thanks a lot guys.

Speaker 3

Your next question comes from

Operator

the line of Michael Rollins with Citi. Please go ahead.

Speaker 12

Thanks. A couple of questions. The first one is, I'm just reading the 10 Q this morning. There was a comment In there, the DISH plans to implement 1 or more of the following options, raise additional capital, pursue strategic transactions And or advanced additional cost reduction initiatives. Just curious if you can unpack that a little bit more and what investors Should expect over the next number of months from that?

Speaker 6

Well, I mean, I think we're good stewards of capital and we obviously realize That we're more of a right now, we're more of a liquidity story than anything in the market. And obviously, we have to address that. And I think there's 2 ways. I don't know what else I can say about the options out there. But Obviously, the first thing we do is focus.

Speaker 6

And I've really focused the team on executing To build the best network in the world and enter the postpaid business, which is more profitable And to make sure we get more devices that we can put on our network, because that makes liquidity that much easier because obviously you're proving you And we really haven't proven that yet. So that's kind of number 1. The second thing is that to meet our milestone with the FCC, we just have to do that. And the third thing, which is a little maybe a bit more nuanced for people on this call, but We've been on the TSA agreement with T Mobile since the inception, which is basically our billing and Provisioning and all our back office functions and we have to be off of that by the end of this quarter. So those are big things that we need to do.

Speaker 6

And if we do that, then we're successful with that, Then you start to see the growth that everybody's been hoping for and expecting probably a year earlier than this. And then that obviously helps you in your liquidity side of it, because you're showing you could compete. John, there's one other thing we need to do this quarter, which we actually have done. There was 2 things. 1 was get the cybersecurity Behind us and that was a massive effort and I wouldn't say it was record time based on, but certainly for us it was, I think Right up there at best in class and how you recover from an incident, and a lot of Real solid effort on our team and it gives you a lot of confidence going forward that your team can when under pressure can operate.

Speaker 6

And the other part maybe John can talk about.

Speaker 2

Well, there's been a lot

Speaker 8

of focus on getting Boost Infinite ready to go and we've made a lot of progress there. You'll see us ramping up marketing later in the year as well as distribution. And one of the big things there that's been a focus for us is Bringing the iPhone to Boost Infinite and you'll see it come later this year. Big effort there across the teams to make sure we're ready to go and postpaid.

Speaker 6

Yes. And I think that iPhone is important because it's obviously a big part of the market share out there. And I think it'd be very difficult to be successful in the post Business without it and so we're pleased that we have that we will be able to bring the iPhone to the market Actually within the next few months. So we've done a couple of things already this quarter that we needed to do and we got 2 more things to do and then I think We get to go a bit more on offense and it's been a little bit frustrating to play defense as long as we have.

Speaker 4

And then just shifting gears

Speaker 12

to the video side, I also read that you entered into a contract to build and launch Another satellite, can you share a little bit more details on the cost and just the thoughts around continuing with The satellite side, if there is an opportunity at some point to maybe take these customers and leverage the Sling product and accelerate Migration to streaming.

Speaker 2

Yes, Michael, this is Eric. I'll take that and maybe Charlie has a few comments. But We did enter into an agreement to build what we would call EchoStar 25, So our 25th satellite, and we entered into that agreement with Maxar. We fly Maxar satellites today, and so we're a Satellite that we're familiar with. Obviously, as we've been talking about on the call for quite some time, From a DISH TV perspective, we've really been focused on adding profitable subscribers in rural America.

Speaker 2

And we've had some success there and we've had decent success in retaining some of those customers. And so as our fleet continues to age, we're in a position Where we need to add a satellite in order for us to continue to operate The service with appropriate backups within the latter half of this decade. And so that satellite is under construction now. We're under contract with Maxar and we would expect to launch that Somewhere in the neighborhood of 2026. 26.

Speaker 2

26.

Speaker 13

Yes.

Speaker 12

Thanks. The only

Speaker 6

thing I'd add to that, we don't think that the DBS business is going away. It's still a preferred choice for a lot of Americans in terms of an efficient way to watch TV. And obviously, there's been Obviously, we're able to add apps and things to the set top box for a seamless experience. So really good business going away. We just want to make sure That we have the right facilities in place for our customers and to some extent Some of these satellites you have to have a satellite for insurance policies insurance purposes too.

Speaker 6

So that's the reason.

Speaker 12

Is there a rough cost that we should just keep in mind for this?

Speaker 5

We don't disclose that. But if you take a look at the capital commitments footnote in the queue, It's included in there.

Speaker 6

So what is it? Don't make them read. Just tell them what it is.

Speaker 5

No, we don't disclose it. Oh,

Speaker 6

you don't disclose it in the total. Oh, it's

Speaker 13

included in total. Okay. And then

Speaker 14

it's stable.

Speaker 13

I got you.

Speaker 12

Thanks.

Speaker 3

Our next question comes from

Operator

the line of Walter Piecyk with Light Please go ahead.

Speaker 15

Thanks. Charlie, when you look at the sub losses in DBS and Boost, What would they have been if you hadn't had the cybersecurity event? And then similarly, To the extent there wasn't collected revenue, how do you account for that? Does it show up in ARPU and then like Receivables that gets written off, did you just not report in revenue? And then kind of a third part to the same question, which is What's been the impact?

Speaker 15

I know you said as of March, it's been the systems have been repaired. But given the impact it had on customers, what have you seen in April early May in terms of any lingering impacts To subscriber churn or usage or anything?

Speaker 6

All right. Let's unpack that. Probably a couple of different people here to answer that. I'll take the Boost in really quick. Not a material impact on Boost Mobile.

Speaker 6

We're in a situation, Walt, as you might expect, where We realize we're entering the postpaid business now, as we bring up our network. And postpaid customer is just a lot more profitable than prepaid customer. So if You have limited capital. You're going to spend your capital on the most profitable customers. And so we haven't been Perhaps as aggressive and boost as just knowing that we got better things coming, better economics coming.

Speaker 6

So a dollar spent today That makes a small return. You're better off waiting till next quarter to spend that money where you have a much better return. At least that's our theory. And then for Boost Mobile, we also know that there's another benefit of putting those people on our network and that's starting to happen now too. So That's a I wouldn't read too much into Boost.

Speaker 6

As it relates to The accounting question about revenue, you take that.

Speaker 2

Can you take that?

Speaker 13

Yes, I'll jump in.

Speaker 5

This is Paul. The revenue impact It was really immaterial. And you are seeing it, the immaterial amount show up in ARPU to answer your question.

Speaker 2

Hey, Walt, this is Barry.

Speaker 15

How is that possible? Because I mean if you weren't able to collect Revenue from customers and there's reports that people have like go to stores and bring cash to stores. How is that possible? Did you go back

Speaker 13

and let people that weren't able

Speaker 15

to collect 1 you did collect?

Speaker 6

A lot of that a lot of the press stuff is exaggerated. It's just really hard to

Speaker 10

Okay.

Speaker 6

It's really hard to comment on every exaggeration that's out there. But it's a case that I think the more cases maybe you didn't collect a late fee or something like that. I think there's a little bit of that maybe Paul you can maybe Yes.

Speaker 5

No, we were up and running collecting all amounts by the end of the quarter. So that did get all caught up. So you would have seen it to answer your specific question, it would have been sitting in AR, but as you can see our AR balances are down from year end.

Speaker 6

But there might we might have waived the late fee. You're probably a little down on the margin because you waived the late fee.

Speaker 15

Are

Speaker 6

you extended somebody 3 more days than you would have because you knew you'd be able to collect There's some stuff around the margin there Walt, but nothing material. Okay. The third part of the question. Yes.

Speaker 2

I mean I think Walt, I mean this is Eric. Just to add a little bit more color. I Obviously, my opening statement, we talked a little bit about it, but on the DISH side of the business, That's where most of the impact was really felt, right? The legacy You want

Speaker 6

to explain why that was?

Speaker 2

Yes. Legacy infrastructure, As you can imagine, we've talked about it here. We've definitely modernized kind of our tools and staff associated with Sling. Obviously, we're on a TSA for some of the business through T Mobile for Boost and then obviously we're building out our new Digital operator platform for our new Boost and Boost Infinite businesses. And The modern architecture really wasn't as impacted as much, right?

Speaker 2

We have different principles, cloud based, etcetera. But so when you think about DISH and the legacy side of the business, that's where the impact happened. And quite frankly, we've been giving We've talked about our J. D. Power awards here, which are 5 in a row and we're quite proud of them.

Speaker 2

And so quite frankly, we just didn't live up to the expectation. And so there were long hold times and we weren't able to process payments in DISH. I mean, obviously, we're in a postpaid billing cycle. And so as Paul mentioned, we caught up on some of that. So there might have been a late fee here or there, which benefits the customer.

Speaker 2

But in some cases, Obviously, we weren't able to answer a phone call or answer a customer issue where they had a technical issue and they may have disconnected and you're seeing that in Q1 numbers, but essentially we put that past us. Like I said in the opening remarks Boost and Sling Not really materially affected. DISH on the legacy side of the business is where we had the impact and that's generally behind us now.

Speaker 6

Yes. And just because I know the way you got Well, maybe you guys are to answer your question, 2 things that happened on the DBS side of the business, which is, one is we had elevated churn. But the second thing is we didn't market. I mean, we didn't make sense to go out and try to get so we had lower gross adds and we had higher churn. We would expect obviously That we returned with the outage behind us More normal run rates.

Speaker 6

To more normal run rates.

Speaker 15

And that's what you've seen thus far in the 1st month of the quarter that there hasn't been any impact

Speaker 6

from it? I don't think we

Speaker 15

give guidance.

Speaker 6

Thanks for asking the question again. We don't give guidance, but I think we expect that we will return to the new operation. How about that?

Speaker 15

That's fine. Let me just do one of a different one, if you don't mind. You hit the 70% or whatever it is. I don't think the FCC has an obligation to do anything, but clearly it's going to help you in terms of raising capital and The 4th competitor of the market, yada, yada, yada. Like have they given you any indication that when you're done and you submit whatever you got to submit in terms of engineering studies That they're going to give you some formal stamp or is it going to be normal standard or normal procedure, which is like they don't really have to say anything?

Speaker 6

Yes. I think my it would be very helpful if they would give some indication to the market. They did not do that with the 20%. It would be helpful. It's one of the things we don't control, which is The regulation and the government and so forth, it's probably one of the more frustrating things, because I think everything that we can control, We just work really, really hard to be successful at and we've done that for 40 something years, right?

Speaker 6

But From a regulatory point of view, as an example, my congratulations to SpaceX, but there was a 12 gigahertz Study that was out there that we came on the short end of that stick, SpaceX was allocated to spectrum and we were not able to even though we paid at auction for that spectrum, We weren't able to access that spectrum for mobility. So, it's a we're a bit of a losing streak there, but We've had we've been on both sides of that. And I hope that It'd be helpful, but I don't think we should expect that the FCC will say anything in part because it will take they're going to have to do their study To verify, our team will certify under penalties of perjury that we've made it, But they have to certify that themselves, which they should do. Do you think they're going to That will take them some time. So I think From an expectation point of view, I don't think anybody should expect that the FCC is going to sometime in 2023 is going to say, DISH has made their build out requirement, but we will be certified to the extent we do, we will certify that under penalty of perjury.

Speaker 6

So we take that

Speaker 15

Charlie, does that in all inhibit your ability to reduce CapEx into the extent that like, Let's say, hey, you believe you hit the 70%, you pull back on CapEx and then T Mobile or whatever and their reg people are like, oh, look at Charlie's cutting CapEx And trying to get the FCC to hold your feet further to the fire? Or do you think these are 2 different things and you shouldn't have to Continue to spend, which is unrelated to hitting that milestone with the FCC?

Speaker 6

No, I don't think we're First of all, you can expect our competition to always go to the FCC. We were hoarders, we were speculators, none of that was true. But when you've got 3 or 4 companies coming in and saying the same thing, that punches we don't quite punch above our weight versus 3 or For people at the FCC. So, you can expect that there'll certainly be a lot of You're going to hear about O RAN and O RAN 3 years ago, O RAN didn't work and then well, maybe it'll work. Then it was like, well, DISH will never maybe it will work, but DISH will never make it work.

Speaker 6

And now it will be, well, maybe DISH made it work, but it's still a decade away. So you're always going to have that noise from people who aren't doing it. But I don't think that we're required to continue to spend on CapEx once we believe we've made our milestone With the exception of the 3rd milestone, which is we'll have to continue, which we will a little bit, continue, but ramp up in late 2024 and early 2025.

Speaker 15

Understood. Thank you.

Speaker 3

Our next question comes from the

Operator

line of Doug Mitchelson with Credit Suisse. Please go ahead.

Speaker 11

Thanks so much. I think two questions. I'm curious if you're willing to share what percent or maybe ballpark what percent Traffic is running on your own network at this point versus T Mobile or AT and T's network. And Charlie, we've poked around it a little bit. So I'm trying to figure out how

Speaker 2

to ask the question in

Speaker 11

the most constructive way. But my experience with you historically has been pretty conservative Approach to operating the company, but the markets obviously think you're flying pretty close to the sun on your capital structure. And I guess I'm just wondering If you feel like you're in a pretty conservative position or if you sort of sympathize with the market's views that things are pretty tight here. Thanks.

Speaker 6

Yes. I would say that I do think we operate pretty conservatively, but I do think the markets had historical rate Changes in the last year, so that certainly has pushed us more into that has pushed us closer to the sun, But not to the Sun. So we haven't look, we have a narrow window of opportunity here. We have a narrow window to Perform and execute and address our capital structure. So we have to do a lot of things right.

Speaker 6

We have a small margin of error, but it's all doable. And it's not a place that's unfamiliar to us, right? So We started in 1980, I think mortgages were 15%. I mean, the capital markets were much worse than they are today. We started the business from scratch with no money, So or very little capital.

Speaker 6

So we had a merger denied With DIRECTV by the Just Department, we were in and that's we had a very narrow window back then. So we've been there before. And again, the things that would worry me would be, did the markets get worse? And where are they next year? We don't know that for sure.

Speaker 6

And obviously, from a regulatory point of view, there's obviously a lot of things from a regulatory point of view that we have I continue to have in front of the regulators and how do they rule on those things. We haven't we didn't do very well on the CDMA shut off, which was Pretty bad. We haven't done we didn't do very well in the DE litigation. We haven't done very well on some things. But my experience is you don't always you win some, you lose some.

Speaker 6

We've been on both sides of it, but the losers you don't have a losing streak forever. And so I'm hopeful that, that at least will be a positive, but we'll see. But again, We focus on the window of opportunity we have, control the things that we can control, and we have a good we have a path. And it's not evident to the people on this call, but we have a path and we have to execute on that and hope that nothing gets any worse in the marketplace.

Speaker 11

Got it. And then on the boost traffic?

Speaker 6

We don't disclose that, but it's not a material amount yet in part because We only have 5 maybe John can talk, but we have 5 we only have 5 handsets now that have band 70, which is a major part of our spectrum.

Speaker 8

Yes, it's Charlie. So it is early days. We're going to continue to have a growing portfolio of products. They're going to be available for Boost Mobile and Boost Infinite on our own network, including iPhone. We're really just getting ready to support that business From a supply chain perspective, networks up and ready to roll in those markets and we're going to be loading customers.

Speaker 8

And then Once we clear the 70% and we're on track to do that, we'll then start optimizing those markets and loading on our network there as well. So, and we're ramping this year.

Speaker 6

And we should make one distinction. Realize one of the things that we've done is built a network with voice over new radio. So we're the The only person in the United States really in the world other than the Chinese, partly, that does that at scale. So that's the new way to do voice. And Our goal is to have the vast majority of have the majority of the population Be able to utilize our network with Vonar by year end and obviously to the extent that you do that then the next step is the majority of all your traffic is going on your network.

Speaker 6

So that gives Feel for where we think it goes, but we're not there yet.

Speaker 11

Great. Thanks so much.

Speaker 3

Our next question comes from

Operator

the line of Jonathan Chaplin with New Street. Please go ahead.

Speaker 14

Thank you very much. A couple more questions on the 800 megahertz auction. So Based on the value ascribed to the option, it looks like the underlying spectrum is being valued at about $5,300,000,000 Does that value assume like a certain exercise of the option? Or is it still probability weighted? And If not, what would the value of the spectrum be if it was certain?

Speaker 5

This is Paul. Yes, it's still probability weighted at this point in time. And the only change that you saw quarter over quarter from year end in the valuation really just the time value of money impact.

Speaker 10

Got it.

Speaker 6

And we don't give

Speaker 14

And how much? And

Speaker 6

We're not given the amount non probability. Correct.

Speaker 14

Right. Can you give us what the sort of the reference transaction or the reference value is It establishes that $5,300,000,000 value?

Speaker 5

We look at other auctions and so forth out there. We won't give you the number Specifically, but that data is out there and I'm sure you know who you can compare it to.

Speaker 14

Got it. Okay. So it would be something like the T Mobile's Purchase from Columbia Capital or something like that for 600 megahertz that you might look at?

Speaker 6

It could be something like that.

Speaker 14

Got it. And then the can you tell us when the exercise date has been extended Is that July 1st or is it September 1st? And do you still have to notify the FCC of your intention by June 1st?

Speaker 6

It's a little complicated because they haven't ruled on the actually haven't ruled on the extension request, but the exercise date, as I understand, is July 1.

Speaker 14

July 1, got it.

Speaker 6

We're still awaiting the formal ruling.

Speaker 14

And then one last one on the 12 gigahertz. It looks like there's a prospect that you might use that for fixed wireless broadband, Given that you can't use it for mobile use, can you give us some more context for your thoughts around that?

Speaker 6

Well, I mean, I think for us, mobility is really the key use and we were disappointed that We weren't able we believe we could have we believe that we could have used it on a non interfering basis with mobility. But look, the engineers are good at the FCC and I respect their decision because they had enough information. They did their own analysis. So I think The FCC is opening comments on the 13.200 to 13.75 frequency. And again, given that we paid at auction, Given that we believe mobility is imperative for us to compete, that would be a you can imagine that that would be another place to go, but We'll just have to wait and see.

Speaker 14

Got it. Thanks very much guys. I appreciate it.

Operator

Our next question comes from the line of Kannan Venkateshwar with Barclays. Please go ahead.

Speaker 13

Thank you. It's within the 600 megahertz spectrum. I just wanted to clarify something. I think last week, You guys or maybe the week before, there was an application to cancel some of these licenses. I just wanted to get some clarity on why Cancel instead of just waiting out the license period.

Speaker 13

And then secondly, when we think about The 60 day extension for the 800 megahertz spectrum, is that based on some concrete Discussions you may be having with maybe potential partners in terms of funding it? Or is this just an extension of an option to see what else Is out there that you can go out and explore, that would be helpful. And I have one follow-up on funding.

Speaker 6

Yes, on 800 megahertz, I just don't want to comment on strategically where we are there, other than we believe it's Spectrum that we need to compete and we think it's valuable spectrum obviously. On the cancellation of 600 megahertz, we made a mistake. So when you go to the SEC website, we had a lease with T Mobile for some markets and that lease We can't that lease was up by the terms of the lease. So we went in to cancel the lease and inadvertently canceled the license. So that was a foot fault on our part.

Speaker 6

But again, we believe That will that the FCC will have to put that unplugged notice and not cancel the lease, and we don't think that's going to be an issue.

Speaker 13

Okay. And does this strip anything on the secured debt because I think $600,000,000 is the collateral for that debt frame?

Speaker 6

The answer is no, because I believe the inadvertent mistake is going to get rectified.

Speaker 13

Okay. All right. And then on funding, I just want to I mean, you have maturities, which obviously, are the evident need As you go into next year, but then if you really want to be aggressive competitively, I mean this is a working capital heavy business, so you potentially need capital for that as well. And so when we think about the scale of funding you might be you might go to market for, How should we think about that as you go into next year? Is that mainly to fund the debt maturities early in the year?

Speaker 13

Or Might you be proactive and maybe access the market for more than just the maturity amount? Thanks.

Speaker 6

I mean, look, I guess, when we look at it, you have your The first priority is to fund the debt. So that's and then we'll be opportunistic beyond that and creative. I mean, I think again, That's why management gets paid is to make sure that you can navigate when you have narrow windows, you can navigate those narrow And teams that are really good, they do really well when they have to focus. And I'm quietly confident here that this team can navigate that, right? And we just have to focus on the things we control And do that.

Speaker 6

We the way I'd say this, I think the market looks at us It's half empty, maybe even 90% empty today, right? And I think the truth is that the glass is more than half full, right? This is a company that's been we're in our 43rd year, so we didn't start yesterday. So we've had a lot of experience in similar situations. It's a seasoned management team.

Speaker 6

We're not starting from scratch here, so we know how to work together. We know how To assess risk, right, and we're asset rich. So arguably, we have spent $34,000,000,000 For spectrum, that has gone up in value. We're building a world class network. There is not another network in the world that is advanced as ours.

Speaker 6

So you're talking we and again, I've traveled the world. There is not another network as advanced as ours and it's up and operating in 50 markets today And working. So cloud based, open RAN With voice over new radio, it just doesn't exist. So we have some advantages in the architecture. And I think one of the things people don't and we're getting a little lucky, Which is nice, but you read a lot about AI.

Speaker 6

And in AI, the most needs data. And the most data rich place is a wireless network. And if you want to access data, you better be in the cloud and you better have a very sophisticated network That works more like an IT network. In other words, we've built an IT network that kind of operates as a telco. Our competition is a telco that has to start operating like If you think AI is going to have an impact, it's not going to have probably the first place you're going to see is when you're talking to your phone, Because you're just asking the questions.

Speaker 6

And now you have access to the world's information at your fingertips in a way that you didn't have before, but you need a network to be able to do that. So we have a lot of things going on from a half full perspective, that from a short term Wall Street Obviously, it's probably not that relevant. But when you look at strategy and you're a long term investor and you're long term that we think that that we think we The killer application ultimately will be AI and all that goes with it and we're fortunate that we've designed the network to take advantage of that. All

Speaker 3

right. Thank

Speaker 6

you. Rachel, this is

Speaker 1

Tim. We'll take one final analyst question here

Operator

We will begin the media portion of this call Following the answer to this final analyst question. And our question comes from Craig Moffett with SVB MoffettNathanson. Please go ahead.

Speaker 16

Yes. Hi. Thank you. Charlie, I want to go back to something you said earlier in the Q and A session where you said the debt markets look They were effectively closed and but you are asset rich. Am I correct in reading that as you're saying that you would be selling some portion of your spectrum as a way to finance your build?

Speaker 16

And if so, are you referring to the 800 if you exercise the option? Or are there other spectrum bands that you think of as less critical for your build That you would be willing to consider an offer for if they were available. And I mean, I guess, I'm also thinking you could presumably use Spectrum as collateral, but it sounds like since you already have done that That you were saying that that's not sufficient in saying the debt markets are closed. Am I reading that correctly?

Speaker 6

Well, I mean, I think that our debt is trading for Literally 20% returns, right, yield to maturity. So it doesn't bode well for Our ability to access in a competitive way to the debt markets, that could change, but that's the way it is today. So when you look at the financing that we need to do for Debt repayment and growing our business, I think there's levers that we have. Obviously, we have assets. Obviously, anything is on the table when it comes to As a business person to get to where you want to get to run a successful business, but we're certainly not going to go into strategies and all the levers that we would pull there.

Speaker 6

I just think That it's I think there's more opportunity for us than people realize, let's put it that way.

Speaker 16

All right. Thank you. Yes. Thanks.

Operator

Thank you. We will now take questions from members of the media. And we will take our question from the line of Scott Moritz with Bloomberg News. Please go ahead.

Speaker 11

Yes. Hi. It is Scott, Bloomberg News.

Speaker 9

Question about Boost.

Speaker 11

It sounds like there's some ramping going on towards a possible launch. You have the iPhone coming in a few months. Curious about the voice over new network and whether that's the gating factor here, but is there a date On the calendar where you would call with a full launch?

Speaker 6

Hey, Scott. It's John. So I'm going

Speaker 8

to interpret your question as meeting Boost Infinite, which would be our postpaid offering. Yes. So we're bringing iPhone to boost Infinite and we'll be looking to ramp our marketing distribution opportunities in the back half of the year. Yes, we certainly do have our own network on the way. We've got sort of more progress there With Boost Mobile, as of today, we're looking to launch devices and competitive products with Boost Infinite on our own network as well.

Speaker 6

And realize the iPhone is on Boost Mobile Prepaid today. It's just coming to postpaid.

Speaker 11

And did you have a date for launch?

Speaker 6

We're not going to share a

Speaker 8

date right now. I mean, obviously, we are Not wanting to broadcast our strategy to our competition, but you'll see us significantly ramp activity in the back half of the year.

Speaker 3

Our next Question comes from the

Operator

line of Paul Kirby with TR Daily. Please go ahead.

Speaker 10

Yes. Hi. Thanks for taking my call. Charlie, you said you're disappointed at the what the FCC plans to do in the 12.2 gigahertz. Are you surprised that they rejected the Technical study submitted by the folks who wanted to open it up for 5 gs?

Speaker 6

Well, I mean, I think Having been on the inside to talk with staff and look at engineering studies, I think look, I think they did a thorough job. I trust them to do a thorough job. Obviously, And SpaceX is doing a good job out there. So all I can do is congratulate them. We believe that it could have been we believe our studies We're valid, but we didn't win on that one.

Speaker 6

So, it's just disappointing, but it's not I don't think it's I would call it surprising. And again, we'll look and see where they go with other frequencies and other things. But that was something that That and also getting we haven't been able to get the CBRS, higher power CBRS For study, that would be the other thing that we're a little surprised that that hasn't given that Some of the commissioners have publicly talked about support for that to take a look at CBRS and trying to harmonize our C band in the United States because We're awkward versus the rest of the world. As a country, we have to compete. We're the only country that's got this low band Got an awkward CBRS in the middle of a C band spectrum band that's standardized around the world.

Speaker 6

So it's I think it's imperative that we take a look at that and get all the I don't know what Decision should be in terms of if they should do something or nothing, but I think it's imperative that the SEC Take a look at that so that we can make the best country make the best decisions as a country and we'll continue to fight for that.

Speaker 10

And just to clarify, when you talked earlier about the other band they're looking at, you meant the 12.7% to 13.25%, right?

Speaker 6

Yes, dollars 12.7 to $13 to $13 to $13 to $13 to $13 to $13 to $5 to their credit, the FCC is looking at Perhaps opening that band up, again, that is a band that could be mobility. And Given the 12 gig decision and given the fact that we paid for Spectrum at 12 gig 2 ways. We paid for DBS and we acquired the Spectrum from News Corp, that was auctioned and we also paid for auction of the terrestrial rights to the 12 gig Frequency and by contrast, SpaceX didn't pay anything for Spectrum. So it's a funny sort of situation where you pay for Spectrum And somebody who hasn't paid for it gets a priority. So, but they do a good job with it.

Speaker 6

So, the FCC has got to look Big picture, look at the public interest. And again, I think all I can say is I respect their decision and it looks to me like they did a thorough analysis of that and We're just disappointed, but you that it is what it is.

Speaker 10

Okay. Thank you.

Speaker 1

All right, everyone. I think that's it for today. Thanks for joining. Thanks for your questions, and we'll see you back here in roughly 3 months.

Operator

This concludes today's call. Thank you for your participation and you may now disconnect.

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Earnings Conference Call
DISH Network Q1 2023
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