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spk11: Hey, welcome to the Dish Network Corporation Q4 and year-end 2020 earnings conference call. Today's conference is being recorded, and at this time, I'd like to turn the conference over to Tim Messner. Please go ahead, sir.
spk15: Thanks, and good morning, everyone. We're joined today by Charlie Ergen, our chairman, Eric Carlson, our CEO, Paul Orban, our CFO, Tom Cullen, EVP Corporate Development, Mark Ruan, our Chief Network Officer, and John Turinga, EVP and head of our retail wireless business. We have some opening remarks, but first I'm going to run through our safe harbors. Statements we make during this call that are not statements of historical fact constitute forward-looking statements that are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from historical results and our forecast. We assume no responsibility for updating forward-looking statements. For more information, please refer to the risks and other factors discussed in our SEC filings. We filed an application to potentially participate as a bidder for Spectrum and FCC Auction 107. Due to the FCC's anti-collusion rules, we will not be answering any questions on that auction during today's call. That's it for me. I'd like to turn it over to our CEO, Eric Madison.
spk03: Hey, thank you, Tim, and welcome, everyone. I hope you're all doing well. We appreciate you being with us today. Paul and I are going to keep our comments brief and leave plenty of time for your questions.
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spk03: You know, this year has been a trying year for everyone in the face of the pandemic, and I'm proud of how the DISH team has responded and turned obstacles into opportunities, and also proud of how we've kept the safety of our team, our customers, and our communities we serve top of mind as we execute against our goals throughout the year. We've accomplished a lot in 2020, and we've entered the retail wireless business with the acquisition of Boost Mobile, and we partnered with Two Cows to utilize their mobile services solutions, and we acquired the King Mobile subscriber base. Now, over the past six months, we've worked to implement the same discipline we have on the pay TV side of the business to our retail wireless business. We've introduced new plans, offers, shed unprofitable customers, and have been making plans to grow the business in 2021. In addition, we made great strides in building the nation's first cloud-native open RAN-based 5G broadband network. In 2020, we signed significant contracts with software partners, fiber providers, equipment manufacturers, and power companies. We've charted a course for a great 2021 and we look forward to sharing updates throughout the year on progress on our network. We also had a solid year in pay TV despite the headwinds presented by the pandemic. This was driven by our continued discipline and better execution in both Dish TV and Swing TV. We're focused on providing products and services with the best technology, outstanding customer service, and a great value. We strive to offer our customers with a better price to value relationship than those available from other pay TV subscription providers. And through our efforts, we recognized buyer customers for the third year in a row as being number one in customer satisfaction with J.D. Power in 2020. We reported strong revenue numbers for the year and brought in more than $3 billion in OIVDA. And we increased our revenue more than $2.5 billion from 2019 and our net income by nearly $400 million. With that, I'd like to highlight a few items across several key lines of business for the fourth quarter. In the fourth quarter, we continued to advance our wireless efforts. Retail wireless net subscribers decreased by approximately 363,000 for the fourth quarter, largely due to our ongoing efforts to integrate our retail wireless operations, shed on profitable customers, and make operational changes to enhance profitability. As I mentioned last quarter, our profitability is determined in part by what we pay to access the network as an MVNO. As we roll out our own network, we'll begin to benefit from owner economics. That's going to drive profitability and allow us to be more disruptive and drive better competition in the retail wireless space. In addition, we made great strides in Q4 with our wireless network efforts. Since our last call, we've enlisted fiber providers like EverStream, Xeo, Crown, Sergra, and Unity for front-haul and back-haul network support. We reached an agreement with Crown Castle for wireless towers, and just last month we signed a similar agreement with Vertical Bridge. We've announced an agreement with Avias for 5G microwave transport services and signed a deal with Mavineer for cloud-based messaging and Qualcomm to utilize their 5G RAN platforms. We've also completed our first 5G validation in December. 2021 is going to be a landmark year for us in wireless, and Charlie, Tom, and Mark are here with us today and are available to talk more in depth about our wireless progress in a few minutes. With regard to the quarter, Dish TV performed well, given the current environment, with gross activations of nearly 235,000. We're down year over year primarily due to COVID and our approach to it. As I stated before, the crisis has impacted our customers' willingness to respond to some marketing tactics, like opening direct mail or event-based sales, and in some cases allowing technicians to perform services in their home. As a result, we reduced our marketing expenditures and our gross new TV subscribers have decreased. However, our DISH TV strategy has been anchored in acquiring and retaining long-term profitable customers. We've been focused on a more rural and higher credit quality customer base, and we remain committed to that path. In the quarter, we saw DISH TV net subscriber loss of 149,000. Our losses are primarily due the result of a lower gross new DISH TV subscriber activations, partially offset by lower DISH TV churn rate. Paul's going to have a bit more detail on that in a moment. Turning to Sling TV, in the quarter we gained approximately 16,000 subscribers, and while we still have considerable room to grow, we're encouraged that we added subs in the back half of the year compared to the first half of the year. This was primarily due to the return of sports, and it was also helped by the improvements we made to the platform. We launched Sling Watch Party to enhance the collaborative viewing experience, added new programming like the Big Ten, and increased our on-demand library to over 150,000 titles. And most recently, we added 50 hours of free DVR storage. With that said, we continue to focus on acquiring and retaining profitable customers and delivering a great experience for both Dish TV and Sling TV. 2021 is going to be an exciting and transformative year on many fronts. And we've got a lot of work to do, but we've got the focus to resolve to realize our vision. With that, I'm going to turn it over to Paul for a little commentary on the numbers.
spk12: Thank you, Eric. I have some brief remarks on the quarter before we open it up for questions. As a reminder, we made changes to our financial reporting in the third quarter. We now disclose operating results for both our pay TV and wireless segments. In addition, we report results for our two wireless business units, retail wireless and 5G network deployment. Since we now report segment operating results, We are disclosing segment EBITDA as a measure of profitability for each segment. Eric addressed the overall subscriber trends, but I'll add a little color on our commercial subscribers for DISH TV. The COVID pandemic has significantly impacted our commercial subscribers. As discussed in previous quarters, 250,000 of these accounts were put on pause and or received temporary rate relief. They were removed from our Q1 ending DISH TV subscriber count.
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spk12: During 2020, 80,000 of those subscribers restored service or had temporary rate relief end. These subscribers came back with minimal or no cost and were added to our ending subscriber count without being counted as a gross activation. of the remaining commercial accounts, 69,000 of these accounts, disconnected during the year. We're hopeful the remaining 100,000 commercial accounts will restore service in the coming quarters. However, we cannot be certain of this. Companies in the hospitality and the airline industries continue to evaluate the amenities provided to their customers, and that includes pay TV. Turn it to the financials. In the fourth quarter compared to last year, Our consolidated revenue and EBITDA are both up significantly. Revenue increased due to the boost acquisition. The EBITDA increase was driven by pay TV generating over $1 billion and retail wireless generated $188 million during the quarter. Let's dig into the details of each segment. Our pay TV revenue in the fourth quarter increased due to higher ARPU, partially offset by a lower subscriber base. The increase in pay TV ARPU was mainly driven by price increases for both DISH and Sling. Our subscriber margins for the quarter were positively impacted by the ARPU increases just discussed and our cost-cutting initiatives related to COVID. SG&A expenses for the fourth quarter decreased compared to last year as a result of fewer subscriber additions and our cost-cutting initiatives related to COVID. We settled our telemarketing litigation for $210 million which was $70 million less than what we had accrued, benefiting SG&A expenses in a quarter. DISTV SAC per activation decreased slightly from $850 last year to $842, largely due to lower equipment cost per activation. Now let's turn to our retail wireless business unit. Service revenue was almost $1.1 billion, down slightly from Q3, and EBITDA was $188 million for the quarter. Consistent with Dish and Sling, we're focusing on acquiring long-term profitable retail wireless subscribers. We're currently in the process of making changes to our marketing, sales, and operations to further enhance our profitability given our MVNO economics. And lastly, let's look at our 5G network deployment group. We invested over $50 million in OpEx and CapEx during the fourth quarter. We expect CapEx to increase substantially throughout 2021. as we ramp up our 5G network deployment. During Q4, we generated $357 million of free cash flow and made the final payment of $730 million to the FCC for our licenses acquired in Auction 105. Finally, in December, we issued $2 billion of our 0% convertible notes due in 2025. We entered the quarter with approximately $3.7 billion of cash and marketable securities. With that, I'm going to turn it over to Charlie for some comments. Good morning, everyone.
spk14: Normally, I don't make comments, and I certainly not one to look in the rearview mirror, but I did want to point out something that I think, you know, sometimes gets lost in when you analyze addition. Obviously, we don't talk a lot. You know, we don't go to a lot of conferences, and we remain focused on really building our business. But 2020 was a transition year for us. It's a very successful transition here for us. It's the third time that we've had a transition in my 40 years in business. I've always felt that the transition time is always the toughest. If you can get through the transition, then you can really grow your business in a dramatic way. In 1980, when we started the business, the transition really was to survive. Most companies go out of business. Probably 90% of the companies go out of business because they just don't have a good idea and run out of funds. And for us, it took us about three years to make the transition from a retail company to a distribution company and actually get past the survival stage. Second transition, it took us over a decade. We realized that there was experimental technology called DBS. And we were in the big dish business and that was going to transform big dishes into little dishes. And so in 1995, with the launch of our first satellite, that year was a transition year for us because we had put all the pieces in place with spectrum, satellite construction, launch, and digital technology to go compete with the cable industry. And 2020 was over a decade-long transition of accumulating spectrum and getting critical mass with spectrum to go and compete in the wireless world. We finalized our long-term executive team, which took years to do. We were able to enter the retail market in wireless in an unexpected way with the acquisition of Boost and a seven-year MVNO term with Timo, who's quietly or not so quietly building probably the finest network in the United States. We purchased 14 megahertz of low band spectrum and 800. We purchased approximately 20 megahertz of CBRS spectrum nationwide, the only nationwide provider, and around 600 megahertz of millimeter wave all last year. We solidify key vendor relationships and have a number of companies that are helping us on our quest to build the world's best network. And we have over $4 billion of cash in our balance sheet. That all leads to the fact that as we enter 2021, we have everything that we need to build this one-of-a-kind 5G network. And now for us, it's execution. So once you get through the transition stage, you have to focus on, it's all about execution. And there are certainly significant risks for us as we go execute. We have to deploy our network, and then we've got to put it all together to work, to make it work. And there certainly will be substantial risks. There's certainly going to be lots of problems, but we have the team and the focus to overcome that. And our company has always been a company that can't execute. So I have a high degree of confidence that we're going to execute in 2021. That means that we're going to build our first major city by the end of the third quarter and more to come. We're going to round out our team soon. the really, really great engineers, wireless engineers, where they want to come work for this company because we're building something special. And we're going to continue with rounding out our vendor partners and making sure that we have, we still have cloud, we still have transport, we still have orchestration, just to name a few. So we'll continue to do that. And at the end of the day, you know, we're going to have this really, really special 5G cloud native open RAN virtualized network that really doesn't exist in the world today. So it's not our first rodeo. It's very similar to building a digital video when the world was analog. Wireless networks really haven't been upgraded from an architecture point of view in the last 30 years and we're confident that with our focus we'll actually help the United States actually start leading again in wireless and hopefully continue to bring. Most of our partners are American companies with American ingenuity, and there's no reason that America can't lead. As an example, nobody has better cloud companies in the United States. Nobody had a better, when you virtualize a network, in other words, you do it with software, not hardware. Nobody has better software than the United States. And this is the company that has the two main operating systems in the world today. and Apple's iOS and Google's Android in the handset side. So there's no reason that this country can't lead and there's no reason that DISH isn't going to be a part of that and probably will be out front in some of those things. The reason the transition is important is in 1995, we went to the little DISH business. We had two other competitors. We had a cable company and we had DirecTV. Today, we have over 20 competitors in that very same business. In fact, we compete with our very own suppliers. So that market is very competitive. You've obviously seen the trends in our industry the last four or five years. We expect that those trends will probably continue. The world's becoming an a la carte world with vendors going directly to their customers. But in the wireless world, we're one of four competitors. So there's three $200 billion companies that are out there and we're entering their business with a better network to go compete, and it's not just about competition for consumers and handsets. It's about what a 5G network can do, which includes a lot more than just consumers. So with that, we'll open it up for questions.
spk11: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to let it signal to reach your equipment. will be taking questions from analysts first and then questions from the media again press star one to ask a question we'll pause for just a moment all right i'll take our first question from michael rollins at city please go ahead oh thanks uh good morning couple questions first on the 5g side i was curious if you could just provide some additional context of how you're seeing the emerging
spk06: addressable market in dollars for the business side of what you're focused on versus the consumer wholesale side for the wireless business plan. And secondly, on the Sling business, with the cord-cutting trends in the industry, are you surprised not to see Sling grab more share of that video distribution market? And is there something that's holding it back that could be unleashed over the next 12 months? Thanks.
spk03: Yeah, thanks, Charlie. Michael, this is Eric. I'll start with the sling question, and then I'll turn it over to the team for the 5G question. You know, look at cord cutting has accelerated. Charlie mentioned it in his opening comments. I mean, we are now competing with some of our, you know, largest partners on the distribution side. We feel like sling is well-positioned, not only from a value perspective and maintaining kind of that lowest price point, but also from delivering a good customer experience and technology. Now, we have work to do on the latter, too, which we've made good progress on at the end of last year and will continue to make progress on this year. But Sling is in a unique position based on our packages and services that we provide in order to be a very complementary service to some of your larger S-Von services, whether it be a Disney, Netflix, Peacock, etc. So I think that obviously we have work to do on the swing side. I think customers, as Charlie mentioned, there is a bit of an a la carte world happening. I think there will be some aggregation back. We're well positioned to fulfill the unique proposition of providing a kind of a bundle of cable nets with quality SVOD services from some of the competitors out there. I think the other thing that we do very well is we're giving customers choice, right? And, you know, choice in how they acquire the content that is important to them, most uniquely on the locals front, right? And, you know, if you look at, you know, expenses, retrans is obviously one of the expenses that's going up at the highest rate, those local channels. And Sling is well positioned to provide services, whether it be an off-air antenna that's integrated to, you know, one of our set-top boxes or a service like, low-cast or service like CBS All Access, which will now become Paramount. So our strategy there is to really partner and become complementary. And with that, I think we can continue to make progress on the acquisition front.
spk14: Yeah. This is Jerry. I'll answer your second-party question. Just one comment on slang. I actually agree a little bit with the premise. We should have more market share there. We really were first to market. We stumbled a little bit with our with just the quality of the user interface, user experience, and technically, as we, our network was the best at first, but we maybe got a little complacent, and it's taken a while to upgrade it, but that's all being done the first half of this year, so we'll see how it goes, but we have room to improve, that's for sure, and we should have gotten more market share. On the business side, We don't have a dollar amount to give you today on where the business, but our network is designed. Let's talk about the three things that we do different from current networks. First of all, our network will be an O-RAN network. So it means that we separate the baseband and the radio. So it gives us a lot more flexibility in terms of mixing and matching off-the-shelf parts and radios and lower cost and more flexibility. more American content and vendors and not one company that controls this end-to-end like current networks have. We're virtual. We're more virtual. We do a lot more with software than hardware. So it means a lot of big boxes that use a lot of power, those things become software. And we're cloud native, which means our network runs in the cloud. Now, why is that important? That's important because we can use modern techniques like machine learning and artificial intelligence So we can actually analyze our network real time. We can make our network better. But we also opens up our ability on an automated basis to what we call slicer networks that we can open up our network to private networks and companies and what we call enterprise business so that they can have what looks like their own network. And they control their own network and they get access to the data in the cloud where they can actually use that data to make a better product, a less expensive product, and a safer product. And that also marries obviously with private clouds that they so choose to do that. So we're changing. So I think a lot of analysts look at how many handsets you're going to have, what your market share is going to be in handsets and so forth and so on. But your question is well taken in the sense that a part of our business will be the enterprise business that is a fairly nascent business today and will be on the leading edge of that as it grows.
spk05: Thank you.
spk11: All right, we'll now take our next question from John Hoddlewick at UBS. Please go ahead.
spk04: Great, thanks. Again, maybe for Charlie, just any milestones or metrics that investors should look at this year as evidence that the strategy is on plan? And maybe along with that, how many cities are you targeting at this point for year-end? And then lastly, just one follow-up, you guys. executed the transaction in the fourth quarter for about $300 million. It looks like to buy in the designated entities, just the thought process of the driver behind that transaction would be great.
spk14: I'm going to take the second part on the DEs. Yeah, John, this is Tom. Yeah, we did a transaction in the fourth quarter with one of the DEs where we just bought down their position and it was a a transaction that both parties were interested in executing so there's not much more to it than that yes they had they had a put right to do that so um that's a bit out of our control and then and the second the yeah yeah that wasn't the first part of the question was uh Obviously, we have lots of metrics and milestones internally, and we're not going to go through each and every one of those because it's just a bit complicated, and obviously our focus is on actually doing that. But the big milestone for people is probably going to be our first major city that's up and operational. That's where we'll find out. My experience has been as we open up our first city, we'll have problems. We'll drop a call. Something's going to go wrong that we didn't expect. And then that's where we find out how our team and our vendors work together to solve those problems. So by the end of the third quarter, you'll see that. You'll see the first major city. We'll have other cities. I don't have a number for you at the year end, but we'll be doing every month after the third quarter, we'll be doing multiple cities and focused on a June of 2022 metric of 20% of the population of the United States. to meet our first FCC milestone. But by the end of the third quarter, you'll be able to take a phone and see whether we work or not and see all the problems, and we'll have them for sure, and then see if we can fix them. And then you'll have a feel for how good we are at execution and how good our architecture is and how good our network is going to be. But realize we're not going to be running in the first city. We'll be crawling, and then hopefully we'll get up and be walking by the end of the year. You know, John, as Dave mentioned on the last call, you know, he has built out a distributed deployment team in many markets around the country. The RF planning is completed, and we now have permitting and zoning activity underway in dozens of markets around the country. So the activity level is very, very high. We're not at a position right now to forecast the final number of markets by the end of this year, but we clearly, as Charlie said, we're focused not only on the June 22 20% milestone, but we're really vectoring towards the 70% milestone in June of 23. And our long-term goal is radios, right? We could have done like everybody else has done. We could have built a network that was never going to compete with the Chinese, was never going to be up to the standards of Huawei. we chose a strategic, we said, what's the next generation? What's the next generation of networks? And that's where you go to Open RAN. And when we went to Open RAN, there just weren't any non-Chinese current providers that were ready to go. And it took us an extra year to get Fujitsu and MTI and now some others to help us with O-RAN radios and architecture. That's a long-term intent. And those radios start coming in in the second quarter, and then we'll, as soon as we get them in, we'll start deploying them.
spk04: Okay, okay.
spk11: All right, I'm going to take our next question from Craig Moffitt at Moffitt Nathanson. Please go ahead.
spk13: Hi. Charlie, two questions, if I could. First, you've talked a lot about adding a strategic partner. Can you just first update us on that and perhaps tell us your thinking of when's the ideal time to add that partner? Is it before you've done any of your test markets? Would you rather have a test market in advance? And then related to that, you did a convertible security in December. It wasn't a huge number relative to the overall financing, but I wonder if you could just talk about your thought process of why you decided to go with a convertible rather than debt and whether we should read anything into that for future financing decisions.
spk14: Yeah. So I think on strategic partner, Craig, we looked at it maybe a little bit different than the street does, but for us strategic partners, our strategic relations, we already have whether it be VMware or Maveneer or AltioStar or Crown and SBA, Vertical Bridge and other tower companies, and more to come. So what we do there is – and we're a pretty big R&D project, and all those companies are helping us. They're spending capital that they're not getting an immediate return on in terms of that. And like in the cloud, we've got several companies that have been helping us with cloud. And why are – Wireless is the next big growth. Telco is the next big growth for cloud. In fact, it's probably the biggest growth of the next decade. That's probably their biggest growth. And yet, it's a little bit different than the normal data that they've been doing today. So there's some things that we have to invent together and change in what they're doing. So the way we look at strategic partnerships, there's money aside is how do we make their company better and how do they make our company better? And everybody who we're working with, that's our goal, is we're their champions to go help make their companies better, whether it be providing resources or test beds or testing on our network, and they're spending a lot of resources to help make us better. From a financing point of view, the ConvertSecurity, we just felt like putting capital on the balance sheet to get us to 2023, where I think You know, there's always a chance more than zero, Craig, that we're out of business or we don't know what the heck we're doing and we fail. But I think the, you know, the rational bet is that we know what we're doing and that we have a team and partners to help us and we're going to get there. And then, obviously, the world looks at us a little bit differently. And, you know, you're probably one of our biggest skeptics and it's our job to, you know, you – Your stuff is well taken. I read your stuff. I think you're a great writer. And I think you make great points. But not one of your points, not one ever has been something that we haven't thought about here and that we don't at least believe we have a strategic solution to it. And therefore, I think that our job is to go out and produce this, is to go out and execute and build this network. And then obviously, you know, internally, you know, we talk about we just prove our skeptics wrong. And so we don't spend a lot of time talking external about what we're doing. We just stay focused on what we're doing. And good teams and good companies that do things, they focus. And we focus probably to our detriment where we don't explain what we're doing to everybody every day. But we're going to show you. And that's why I think John's question, I think, earlier, when we can see something. in the third quarter I think will be important. And then, you know, so the ideal time is when you can show people what you're doing, if you believe in what you're doing.
spk13: So I take that. That means that ideally you want to, before you would think about a major strategic partner in the sense that you've talked about them in the past rather than vendors, you would wait until after you have a sort of showcase set of test markets. Is that the way I should read that?
spk14: Well, I think we always thought we might need a strategic partner where we didn't have any capital. We had a lot of debt returns. But I think the same thing happened to us in DBS. We always wanted a partner in DBS. We wanted somebody to help us build satellites. And what happened was, ultimately, we just got confident enough and good enough of what we were doing that it just made sense to keep the equity. And it didn't make sense to give up the equity. And so I think we're probably in a similar situation today in the sense that we do have enough capital on our balance sheet today to build our network to the point where people can see whether open RAN cloud-native networks work. And I know not everybody on this call sees it. But we see it every day. The number of resumes and the quality of people that are applying to come work with us is exponentially higher than it was last year. The number of vendors that are putting resources towards us is vastly different than it was last year. I think the whisper confidence level for people in the know is vastly higher. We're leading though, you know, nobody's built a 5G open RAN cloud-native network before. We're fortunate that GEO took a first step and Rakuten took a second step, but we're going to be the first network that does it and completely. And I don't think that there certainly always will be skepticism, but every time we hit a milestone internally with our partners, That goes down. You saw with Qualcomm, and they put one of our frequencies in their chips. They don't do that for companies. That costs them money. It costs them R&D. It costs them space. It costs them antennas. It costs them the radio. They don't do that for companies that aren't going to make it.
spk05: That's really helpful. Thank you, Charlie.
spk11: All right, I want to take our next question from Phil Cusick at JPMorgan. Please go ahead.
spk04: Hi, thanks guys. Charlie, maybe following up on the O-Rent side, how's it gone in terms of integrating those network vendors? Where are you, which is what you expected a year ago with those sort of vendor integrations? And then second, Paul, regarding the fourth quarter financials, can you talk about any one-timers here? Last quarter, I remember you had some programming credits when you repeated this time. And is it right that the $70 million benefit versus the accrual on the telemarketing fine hit the G&A one? Thank you.
spk12: I'll take that last part of the question. So as it relates to one-timers, the only one-timer that we had hitting the P&L was the $70 million coming back for the FTC case, and it did hit S-G&A.
spk04: Thanks, Paul. Yeah, this is Mark. I'll take the one on the run. I would say that we're now moving into the second phase of our O-RAN journey that is we're starting to build. We have tested a lot of vendors. We have brought radios, compute software together. And now what we're doing is that we are transferring this knowledge to our teams in the field in order to build it across the U.S. So that's really where we are in terms of testing integration. For me, this has been a normal journey like I've seen in the past for other technologies. We're coming at a time when there is maturity in the O-RAN industry for us, so we're just deploying it now.
spk05: Thanks, Mark.
spk11: All right, let's take our next question from Walter. Walter Pichik at LightShed. Please go ahead.
spk04: Thanks. Charlie, the first market that's getting launched in the third quarter, can you just give us a little bit more color in terms of, is this like a, are you going to sell to consumer wireless? Is this kind of a profile of what you can do with network sharing for potential strategic partners, investors, whoever to look at? Just a little bit more color on that first market. Thanks.
spk14: Well, first of all, it'll be an NFL city, so it'll be a large market. We certainly hope to have handsets for consumers, although it's going to be a beta test, for lack of a better word. Even Geo in India, it took them six months to let people try it. And I just don't know what kind of problems we're going to have. I just know we're going to have problems and certain things aren't going to work. And it's also our integration with T-Mobile and our core and getting the handoffs right. And so it's a big test bed that I think is going to work kind of day one. And I'm hoping that's why I say we'll be crawling. And then I think that as you work those bugs and kinks out in a major market, it's cookie cutter after that um what do you hope to highlight the most how the network works into the core or how the rf works in terms of hey we can build a network where a phone will work if you drive around well i think i think that i think i think the first part is blocking and tackling so the foundation is we is what what can we do compared to you know what other people do although we won't have as much I mean, it'd be a 100% 5G network, so that'll be completely different than other people. We certainly won't. Certainly speeds are important, but certainly that, you know, everybody doesn't need a car, a Lamborghini that goes 280 miles an hour, and I think as long as we make something that goes 100 miles an hour, we'll be in pretty good shape. So I think we'll look at consistency. And then we'll look at where all the problems are. You know, where are our dead spots? Did we go wrong in our RF plan? Where did we – where does our – our Open RAN have issues and how are we able to analyze that and how are we able to self-heal and self-correct. It's just all those issues. My experience in DBS was, I remember when we launched, our pay-per-view didn't work. Then we started getting customers and being more successful than we thought initially. Suddenly, we couldn't actually provision people fast enough. We didn't have enough compute power to do it. We learned all those things and it took us you know, three or four months to kind of get the right things in place. And then it was clear sailing. We still had problems, but they were kind of one-offs one at a time. So my expectation is that we'll, you know, I think everybody on this call will have a pretty good idea where DISH stands by the end of the year. And, you know, some people are going to say, you know, we've been off more than we can chew. And some people are going to say, well, we always knew they could do it. But we're good at execution. You know, transition's tough. Execution is hard work, but there are no law of physics. Walt, this is important. There are no law of physics to stop us from what we're doing. There is nothing that has to be invented to stop us from what we're doing. People know how to climb towers. We'll be getting radios in. People know how to build radios. People now know how to build broadband DUs. Cloud exists. We don't have to invent the cloud. Handsets exist. We just have to execute. Right now, it's right to be skeptical about our execution because we've got to prove it. But this team, we have a team that can do it. For me, it's a pleasure to get from the transition stage to the execution stage because it's just hard work. We never knew 10 years... I'm looking at Tom here, but 10 years ago, we knew we had to get 100 megahertz of spectrum. We've got 40 megahertz of spectrum. We just never knew if we'd get there or not. Now we've got well over that. Well, I can't talk about the C-band auction. I think that's a whole other dynamic and a whole other strategy, counter strategy kind of thing that you guys will be writing on for the rest of the year. Think all the analyst days you get to go to and hear everybody's story. And we're going to show your story. We're going to show your story.
spk04: Charlie, can you talk a little bit about boost as well? I mean, you took this thing on. The margins, I think, in the quarter were 15%, which is higher than a typical margin. Is that sustainable? Is it balanced with just continual sub losses? You also brought on Steve so close to run it. I think historically he's been very good at developing e-commerce channels. And I'm curious, like, is there a plan to try and broaden the distribution and maybe reverse some of the sub losses there while maintaining margins with some type of e-commerce strategy?
spk14: Well, the first, the first answer that maybe John, the first is bad news for, for boost up because we have some, I think we, we, we, uh, and Craig to his credit pointed this out in his, uh, today, You might talk about the biggest negative risk factor there.
spk02: Yeah, of course. Hi, it's John. We're two quarters in. I think we talked about it on the last call that we've had a lot of operational improvements to make converting to the MD&O economics. We're certainly working with our distribution. We are focused on building new, more profitable acquisition channels. So you'll see us look to make changes there as we move forward. We are working through some very big technology and operational projects with the Boost business. One to point out which is new news this quarter is that we have received notice from T-Mobile that the voice CDMA network will be discontinued on or around January 1st, 2022. So the majority of our retail wireless subscribers receiving services from that network were part of work on planning a big migration. So we can't be certain that the network will actually shut down on that timeline, but we have to plan and act as if it will, which will be costly for us. And as Charlie mentioned earlier, we're focused heavily on building devices with our partners that will work on our future network. And so we've got some timing and other considerations that we've got to work through
spk14: So I don't think that this quarter, that those kind of margins are probably sustainable to the extent that, in fact, it might not be very good at all in the sense that we look at it from a profit and loss. The Boost customers are some of the most economically challenged customers out there. Boost pays attention to them, and they're good customers for Boost. but they're economically challenged. It's hard to upgrade to go from a phone that works great and works in their territory, works great, and then go to another phone that won't even work on our network because we're 5G. So then we'd have to upgrade them again. So you run the numbers on that, and there would be significant fallout from that, in my opinion. The second thing is I don't even think we could get to supply. of the phones that we would need. So we just don't, you can't order phones and not know that you can move the phones and the supply is somewhat limited for the kind of phones we might need for that. So that's a material risk that's out there on Boost. But I think the positive side is the team, the Boost team, John leading the team, showed they can execute. They showed that they, in a very short period of time, could turn around some past practices from Boost that weren't, economical and maybe we're to show Wall Street some numbers. We're not into that game here. We're into actually managing your capital and our capital in an efficient manner. And so they've shown that they can turn that around in a very short order. I set a goal for them to be profitable by the end of the year. They were profitable the first quarter and they became more profitable the second quarter. So we've got a management team that can execute and they're They're on pins and needles and the edge of their seat to get our first market on our network where we can control on destiny.
spk04: Okay, thanks.
spk11: All right, we'll take our next question from Jonathan Chaplin at Newstreet. Please go ahead.
spk04: Thanks. Charlie, it seems like the last big vendor, sort of category of vendors to slot in for the network is a cloud partner. And I'm wondering if you can sort of talk through the merits of one cloud partner versus another, whether it would be a single cloud provider that you would partner with or whether you could, it could be non-exclusive, you could partner with multiple. And then I'm wondering if that's a relationship that you'll be able to leverage um to sell into enterprises given the um given that so much of the opportunity in 5g seems to be in the private network enterprise private network space um whether you'll be able to leverage the the relationships of a cloud partner who already has strong relationships in in enterprises to get in to get into that business i'll let mark i'll make just an opening comment i'll turn that over this question over to mark but
spk14: The challenge I've given with every vendor to our team and to Mark is that our cloud provider has to first and foremost be best in class technically. And we're fortunate that there's several vendors that actually can live up to that. And there's just great cloud technology in the United States. And it's a whole new way of running the network. And maybe I'll let you... Talk about how that affects enterprise.
spk04: Yeah, so first of all, we've seen a very strong progress from our cloud choices. I mean, several different choices in the U.S. And Charlie was saying that Telco is a bit different in the cloud, and now we have the confidence that the cloud partners in the U.S. have the Telco technology that we need. And that's a big thing for us. So we feel very good about that. When it comes to our software, you remember that the first choice we made was to select VMware. And the reason was that we wanted to control the software that we use. And VMware has given us, over the last 15 months, has given us this capability to move our software between clouds, but also from the top of the cloud to the edge. And no other network or no other architecture has that capability in the world yet for us. That was very important because when you discuss private networks, different customers want different setups. Some want to have a certain type of cloud. Some want to have their private cloud. Some want to put the software on their premise, on their factory or on their campus. And for us, it has to be automated. And so we spend a lot of time with our cloud partners to be able to do that seamlessly. And like I said, for the O-RAN, we are now in the deployment mode where we have the capability with VMware and with some cloud partners to move the software east, west, and north, south. Jonathan, this is Tom.
spk14: Most of the focus has been with Mark's team working on the technical architecture, but we clearly expect a cloud partner to bring a go-to-market component to the relationship.
spk05: Thanks. All right.
spk11: We'll now take our next question from Khudgun Meral at RBC. Please go ahead.
spk04: Actually, taking the question, Charlie, you've talked about transitions, and I know the focus is on wireless, but maybe thinking through the transition across pay-to-be, effectively all your content partners have launched their own direct-to-consumer services. Obviously, this isn't new, but I'm curious if the tenor of your discussions during affiliate negotiations is changing, and if so, is it more about fine-tuning pricing and packaging terms with programmers, or do you expect to take an even harder line with ultimately, I guess, who you're distributing, and if I could have a brief follow-up.
spk14: Yeah, I don't know that it's a harder line. I think that we value programming as to how many people watch it. So, for lack of a better word, cost per viewing hour. And what are the alternatives to get it? So, obviously, the extent that we had football exclusively, we had NFL season ticket, you know, that was an exclusive program. that has value to the extent that you could watch it in 10 different places, it has one-tenth the value, right? So when our content, as we have a content negotiation and that content is available through other means, it's just less valuable to us. And then the content providers are strategically, I think in their strategic, rooms, they're saying, how do we keep these linear guys paying as much money as possible for as long as possible while we go direct to the consumer and cut them out? And, oh, by the way, we're making these guys bundle every channel, and we'll go to the consumer and give them a lot more flexibility and be out of the cart. So obviously that's going to be a tough business model going forward. we're unique in that Eric made me speak to this. We've made our viewing, we've looked at viewing as an experience and we've done a lot of different things to make the experience on Dish Network better than the experience might be on one of these vendors. And we go after people that are more rural and so forth and so on. But look, it's why the transition, all I can say is I'm sleeping at night. I'm sleeping at night now because I've been through this before. We knew the big dish business was going to be a business that would be challenged 40 years before anybody ever wrote the first word about it. We knew that this model would be challenged in video. I think we talked about it on a conference call probably, you go back and look at the records, probably seven or eight years ago when everybody kind of laughed at us and said, why aren't you spending more money to get these customers? And we've made that transition that, you know, it's a mature declining business and it's a solid business. The cash flows are good. It's not going away, but it's going to decline. And I would expect our cost of programming would go down or wouldn't go up as much, you know, based on customers going direct. And we probably will lose some of our customers, you know, some of our programming partners we may lose as a result of that. Eric and his team will run it as a business. We have great relationships with our consumers. We found that out with HBO. HBO didn't renew. They wanted minimum guarantees from us and high prices that made no sense for us to pay. Obviously, we're a competitor. They had Game of Thrones coming up, final season of Game of Thrones. We didn't lose many customers, let me put it that way, because our relationship was strong. And they've watched Showtime and Starz and other things and Netflix and, you know, and HBO lost the revenue stream. So do you want something on that? No? All right. All right, operator. I think we have time for one more before we... Sorry?
spk04: This is John Akin. Hello? Yeah, I've got a follow-up question from Kufkin. It's John Akin with RBC. On the 5G, I wanted to... basically drill down a little bit on the tower MLA that you referenced, all the fiber partnerships. And, you know, what type of run rates are you targeting, you know, per month or per quarter in terms of getting the equipment deployed? Is the gating factor the delivery of the radios, or is it more about the permitting and the entitlement? What kind of pace can the structure look forward to through the end of the year?
spk14: Yeah, I think the gating items can be radios. So it's rather than say it's a supply chain. It's supply change management.
spk04: And in terms of the number of markets that you're going after besides the NFL cities and to get to that 20% target and beyond, you do not assume that you deplore the hardware, pre-deploy the hardware of the network. So what kind of a cadence are we looking at, given that you already have a lot of MLAs in place and you've already been in some place?
spk14: Well, the cadence will be to get us to 20% in June. So that's 60, I don't know the exact number of POPs that is, but it's probably 65 million POPs. Well, we mentioned it earlier on the call that the activity is underway in dozens of markets. The target is really focused on the 70% build out by June of 23. The requirement is for 15,000 towers minimum. And as I said on the last quarterly call, I think it will be north of 15,000 by that time frame. Yeah, Mayo, and our daily staff meets Mayo, is always saying, I'm ready whenever you're ready. And he's looking at Mark and Stephen and Tom and me and says, I'm ready whenever you guys are. We're going to have radios. And, you know, we have a schedule for radios. And, you know, so I'm hesitant to give you that cadence because with COVID and supply chain and everything else, You know, we've already had, you know, some delays in that. And, you know, we're pretty confident. But until the factory production is spitting it out and we get to see it with our own eyes, you know, we'll see. But it looks pretty – the cadence looks pretty good. So, Operator, we have time for one more from the analyst community, and then we'll have time for a couple from the media.
spk11: All right, we'll now take our final – Yes, we will take our final question from the analyst community. Members of the media on the call, please press star 1 now to enter the queue to ask a question. Once again, there's star 1. We will begin the media portion of this call following the answer to this final analyst question. Our final analyst comes from Doug Mitchelson at Critt Suisse. Please go ahead.
spk04: Thanks for squeezing me in. Just a couple you guys have already covered a lot. Tom, when you say a cloud provider should bring go-to-market component to the relationship. Just, you know, interested in what you, what you mean by go-to-market component. I think, you know, jump ball. Are you guys wanting to give us a sense? I understand Charlie, your comments that, you know, you can fully fund the network build out at this point based on cashflow and cash on hand, but just curious if you're willing to say what the 2021 spending on deploying the network would be. And then lastly, sort of just, I'm not sure if there's much more fishing I can do here, Charlie, but just adding on to Craig's question, I think I was pretty surprised by you using equity. You certainly have a pretty long history of avoiding equity. I assume you expect a lot of value creation if you execute here. The last couple of years, you mentioned there was a lot of interest in financing and helping you with funding the network, and shifting over to equity from that seems like a change in sort of you know, balancing how you might finance things. So was the demand by others willing to give you money just sort of too expensive in terms of share of capacity or in terms of the rate they wanted to charge you versus equity? Any more that you could help us with understanding issuing a convert rather than issuing debt or taking an investment in would be helpful. Thanks so much.
spk14: Yeah, this is Charlie. Obviously, there's a balance between how much debt and equity you have and for the most part, we believe, given where we think we're going to go, that we're relatively debt-free on the wireless side. And we thought we'd get better execution. The market kind of threw up on it for whatever reason, and we thought we'd get a little bit better execution. So we were disappointed. But on the other hand, it's not going to be material in the scheme of things where we're going. That was, you know, a 0% interest for five years was attractive. And, you know, again, I think we didn't quite hit our metric of where we thought we would come in pricing-wise. And had we, in hindsight, maybe known it was going to be conversion in the low $40 range, you know, I think maybe we would have thought about it differently. But, you know, you win some, you lose some. And our best guesser wasn't quite as good as it should have been, I guess. And so we'll go back, file that one away, and now we're a little smarter. Tom, do you want to take the rest of it? Yeah, Doug, nice job getting in four questions there. As far as the go-to-market, obviously the conversations, they range depending on which cloud service provider we're talking to. But they clearly all have enterprise sales channels. and they all see a movement towards distributed cloud mobile edge computing, which brings 5G into the conversation naturally with their customer base. So beyond that, I don't want to go into more detail.
spk04: That's helpful. And spending this year? We don't get guidance on that.
spk05: All right. Thank you all very much. All right, Doug. Thanks.
spk11: First question from the media from Scott Morse at Bloomberg. Please go ahead.
spk04: Great. Hey, Charlie, you spoke earlier on the call about the risks of the Boost Network shutting down. Have you had a chance to talk to the FCC about this? Do you have any confidence that maybe we'll get a break on the timing of that shutdown?
spk14: We have not. I haven't talked to the FCC. It's possible that our staff has. It's a risk that's out there. This administration wanted four providers. We wanted four providers. We don't know what the regulatory environment is. It's one of the risks that we always worry about is that Washington picks winners and losers and they make a policy that affects people one way or the other. We've had some good luck. We've had some bad luck with that as have others. We'll have to see which way that goes. I'll probably tell you a little bit about which way the wind's blowing. We view it as anti-competitive. It's as simple as that. Obviously, those customers If they can't go to our, we don't have a network up yet, obviously, you know, there's only a couple places they can go. And so, you know, we view that as anti-competitive.
spk04: Great, thanks. Do you face the risk of those customers going back to T-Mobile, and would that also be considered anti-competitive?
spk14: Well, you can see what, look, I don't know. I can't speak to their motivations, but obviously one of the beneficiaries, what we can say is that one of the beneficiaries of a premature turnoff of the CDMA network would be T-Mobile.
spk05: Got it. Thanks.
spk11: Right. And once again, that is star one. If you'd like to ask a question, now take our next question from Amy McClain at cable facts, please go ahead.
spk07: Hi, thanks for taking the question. Um, I just wondered, uh, discovery said today that it's discovery plus service has surpassed 11 million paid subscribers. Um, I wondered what you, what you thought of that service and do you foresee it changing how you, you deal with them as a partner?
spk14: I think Discovery's got great content, and we've had a long-term relationship with them, but obviously to the extent that you can get it on an a la carte basis, it'll affect future negotiations. Because if our customers, some of our customers don't watch Discovery. A lot of our customers don't watch Discovery. Should we burden every customer with Discovery if they can get it somewhere else? I mean, you know, so it has to be a relatively That's going to be a fair rate that we can burden customers who don't watch it, and you have to run that math. And that's just economics. It's not rocket science. We know our customers who watch it and how long they watch it in real time. Look, it's why I started out with, which I don't think I've done in a long time. That's why I talked about transition to start to call, because that's why it was so important for us to get work. in 2020 where we are.
spk05: Okay, operator, I think we can take one more from the media, please.
spk11: Once again, that is star one. If you'd like to ask a question, we'll pause for just a moment. All right, there appears to be no further questions. I'll turn it back to the speakers. Please go ahead.
spk14: All right, good. We'll see you in late April or early May, right?
spk03: Yep. Thank you all. I appreciate it. Thanks, everyone.
spk11: This concludes today's call.
spk05: Thank you for your participation. You may now disconnect. The Readiness Index is a measure that provides us with a metric or a number for how ready
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