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spk12: Good day and welcome to the Dish Network Corporation Q1 2021 earnings conference call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Tim Messner. Please go ahead, sir.
spk17: All right. Good morning, everyone. Thanks for joining us. We are joined on the call this morning by Charlie Ergen, our chairman, Eric Carlson, our CEO, Tom Cullen, our EVP of corporate development, Paul Orban, our CFO. And then on the wireless side, we have Stephen Bai, our chief commercial officer. Mark Ruan, our chief network officer, and also John Syringa, EVP and group president of our retail wireless business. Before we start, I need to remind you all that statements that we make during this call that aren't statements of historical fact constitute forward-looking statements. Those are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from historical results and or from our forecasts. We assume no responsibility for updating forward-looking statements. For more information, please refer to the risks, uncertainties, and other factors discussed in our SEC filings. We're not going to be making any opening remarks this morning, so operator, we'll go straight to questions.
spk12: All right, folks. Sorry about that brief technical difficulties, but we are back, and we can go ahead and start with our Q&A session. If you are an analyst, please press star 1 to queue for a question. Again, that is star one to ask a question. I'll go ahead and pause for just one moment to allow everyone an opportunity to signal. Okay, we'll go ahead and start with our first analyst question. from Rick Prentice with Raymond James.
spk03: Thanks. Good morning, guys. Two questions, if I could, on the 5G side of things. First, so many other operators out there have suggested there could be some supply chain issue possibly. I know you guys have a fairly unique network build. Can you talk to a little bit about how you're seeing the supply chain, any concerns in the rollout schedule?
spk21: Unfortunately, Ms. Charlie, we didn't have Dave DeMeo today, but supply chain issues we are seeing, and Eric may speak to it, we're seeing those issues across the board, whether it be in our set-top boxes for our traditional dish TV to handsets and semiconductors. But, you know, we'll work through that. And, you know, in business, you always have obstacles. And this is just one more of them. And it's, of course, in the backdrop of a pandemic that doesn't help things. But we focus on what our task is at hand. And we adjust our management decisions as we see the conditions. And so, you know, I think as a result of the pandemic and shortages and increased demand, I think you're going to see that for a while.
spk03: Makes sense. A second question on the 5G side. is we think the enterprise wholesale side of the business could be actually fairly exciting and significant opportunity. Help us understand what you're hearing from customers as far as what do they need to see from you guys before they could make commitments or contracts? Is it Vegas up and working? Is it a nationwide network? What do the customers want to see from you before they start making commitments? And am I right that wholesale enterprise could be significant?
spk21: And so, just Charlie, I'm going to hand it over to Stephen By who kind of runs that side of a business for us. But the context of it is that, first of all, I think it's a big, as a general statement, it's a big business. I think it'll be good for all carriers because it's a very nascent business today. And you can see, once you can get into the enterprise business and do it a little bit different way. But it requires a different architecture to do it correctly. Maybe I'm going to turn it over to Mark real quick and just give you a little architectural tutorial on why what we're doing is different there, and then maybe it goes to Steve and to talk about the business opportunity.
spk04: Yeah, the way to think of our cloud-native network is a network of networks. That's the way it's architected. So when a customer comes to us, it's easy for us to offer one subnetwork, which we can call a private network. And there are techniques behind that, like slicing, like automation, like software defines. I'm not going to go into the techniques, but natively, the way to think of it is really this network of networks, right? And then, Stephen, you're saying that you're playing this to the prospect customers, and they're telling you how they would shape those subnetworks, right?
spk02: Absolutely. Yeah, no, I think we've talked to a number of customers across multiple verticals in different industry segments and there's an increasing appetite and demand for the kind of network that we're building which is really to enable them to have more security, more control and also more visibility into the data that's coming off the devices so that they can control their business more effectively. So we're seeing a terrific demand and the network architecture that we're putting in place actually enables and unlocks that opportunity for those enterprise customers It's, again, not restricted to any specific vertical. We're touching a lot of different companies and a lot of different vertical segments across the country. And the other aspect of the opportunity that we see for ourselves is that while we build out a nationwide network, we are in the process of working with customers and prospective customers on private networks that are not limited by the geography of our national footprint. So we can deploy those within their environments to support their business operations as well. The demand we're seeing is terrific, and we're already engaged with a number of customers today.
spk03: And they don't need nationwide to place some of these contracts and commitments on for some of these opportunities.
spk19: Exactly. Okay. Thanks, guys.
spk12: Thank you. And once again, that is star one to ask a question. If you find your question has been answered, you may remove yourself from the screen by pressing star two. The next question is from David Barden with Bank of America. Please go ahead.
spk09: Hey, guys. Thanks so much for taking the questions. I guess, too, Charlie, you saw your stock price move on the AWS cloud partnership announcement. I was wondering if you could or would be willing to opine on what you think the The significance of that relationship is, is it, is it just a business partnership or is it the beginning of something bigger? Um, and then I know we don't have Dave on, but Steven, maybe, um, on the L Las Vegas build, could you talk to us about what does that build look like? What are you, what are you going to do? When is it going to happen? What are you trying to get out of that in terms of showing people what this network is capable of? Thank you.
spk21: Okay. This is Charlie on AWS. Thanks for the question. You know, as we've said for, gosh, as long as I've been doing conference calls, we view partnerships maybe a little bit different way than other people do, but it's really, we like to work with committed companies that share our vision and that are helpful in making our company better. In return, we're going to make their company better. So the AW, but we start in any, we start in any, any, partnership, particularly when it comes to technology and building a network, is you have to start with best-in-class technology. So you would never compromise somebody else's multi-billion dollar investment and take a secondary network. So we've analyzed for... I've been working on it for five years. Mark was a lot more expert than I was, but over the last 18 months, we've really been, with all the cloud providers, And the good news is they're all very good, and the United States is very lucky. There's no question that the United States leads in cloud technology. But at the end of the day, Amazon had too big of a head start. They jumped in really early. They wanted to get into telco space. It was strategic for them. The cloud infrastructure as it existed a couple years ago really didn't handle telco very well. There's been a lot of R&D and investment. that they've had to make to transform their network into something that where a telco can operate in the cloud, because it's a little bit different than their traditional IT infrastructure. And at the end of the day, they were best in class for what we needed. And whether it be their APIs and the documentation and discipline and vendor and the, the community that supports them and the developers, and then, of course, obviously reach into the enterprise business. So that's the first and foremost. And the second thing I think is, is the company committed? And I'm not going to put words in Amazon's mouth. I'll let them talk to their commitment. But they've done a lot of work for us to help us without knowing where they'd have a deal or not. And we're very appreciative of that. And I think it's helpful that Andy will become the CEO because he's owned this project from the start. And he can, you know, he'll be able to move all the pieces within Amazon to focus on this. And so I think at the end of the day, I think we're going to be their largest customer in cloud. And I think they're going to, they may be the largest customer in our network. I mean, that, but we have to build a network to prove it and they have to build it and prove it. I think that other carriers around the world, including the United States, will look at Amazon as a real leader here because we're just doing something different. I say this, the simplest example, you've got to look at it. We're building Netflix in a blockbuster world. All Netflix did was put the video in the cloud. That's all they did. Instead of going to a physical store, you put it in the cloud. All the business plans in the world, all the numbers, all the They just did something simple. They put it in the cloud. And the technology was, they were a little ahead of the technology, but the technology got there. All we're doing is taking all those towers that you see as you drive down the highway, we're basically putting them in the cloud. And so instead of driving to a physical store and renting a movie, you're going to get all your data and information and automation and everything from the cloud. And so it's dramatic paradigm shift in the way a network is built and it's an advantage over legacy carriers who have 30-year-old architecture. So they'll slowly get things in the cloud. They'll put pieces of their network in the cloud, but they just can't take a front loader and move everything in the cloud at one time.
spk02: So with that, I'll turn it over maybe to... Yeah, so just in terms of what the Las Vegas build looks like, I think there are several attributes that are really important to what we're doing to build on Charlie's comment. One is We are building a cloud native infrastructure. We are using an open radio access architecture. But it's also a 5G native network. We're not trying to put 5G on top of 2G, 3G, and 4G. The infrastructure that we're deploying is optimized for 5G. And the way we've designed the network from an RF perspective and a deployment perspective is to take advantage of the 5G architecture as well as the 5G platform. And so what does that look like? It's basically a new network. It's a new infrastructure. It's designed using all of the spectrum bands that we have. And the RF is optimized to take advantage of that. So we're on a path to launching that in the third quarter. But it's one of a number of markets we have coming on. We just haven't announced those markets through the end of the year. But it's the first of, obviously, a number that we have in flight today. And we've got activity going on across the country to actually build out this network. So it'll be the first one that people can touch and feel and get the experience. But it is really a 5G native network. And, you know, we've proven that O-RAN from a technology perspective can work. We demonstrated that at the end of last year. Now we're in the execution phase. Now we're in the deployment phase. And so, you know, Vegas will happen to be the first one that it will be a fully deployed market that, you know, people will be able to touch and feel and experience.
spk09: And if I could just quick follow up on that just real quick is, is this experience, is this going to be a business enterprise experience or a consumer experience?
spk02: It'll be done in phases, but the network is designed to support all customers across all segments.
spk19: Appreciate it. Thanks, guys. Appreciate it.
spk12: Thank you. So the next question we've got is from John Hodelick with UBS. Please go ahead, John.
spk08: Yeah, thank you. Maybe, Charlie, just Could you expand on the comment you just made that Amazon could potentially be your largest customer? I mean, or talk about sort of the go-to-market plans that may evolve for you to sell services into the AWS customer base. And then again, back to the AWS deal, I mean, obviously it's got to help in terms of sort of time to market, CapEx. are your overall sort of cost, total cost of service say versus the incumbents. I mean, did the original plans that you laid out for sort of all these issues, is that sort of, can you build upon those benefits that we were seeing or was that all contemplated, you know, that you would strike a deal like this with AWS going forward? Thanks.
spk21: A, your comments were correct. The AWS does help us with time to market. They do help us with CapEx, a lot of material with CapEx. Some of that does go to OpEx, right? But our OpEx is still going to be, with automation, are still going to be materially lower than it otherwise would have been. But they definitely, and they help with expertise. I mean, they have fabulous engineers that, that invented the cloud, and they're now helping us invent the telco cloud. So all that's good. Yes, we anticipated a cloud-native network from the beginning. So the $10 billion total build-out cost that we announced a couple years ago, I think people are probably still skeptical. Some people are still skeptical. But you can see where we're headed, that most of your models will probably take, well, several to a lot of CapEx off the board when you understand the architecture. And we're not going to go through all the architecture in this call, but it certainly has a material impact on CapEx.
spk15: Yeah, John, this is Tom. I'd just say, obviously, they've made massive investments over the years in compute, storage, transport, and edge. We'll be sitting on top of that. And as we tightly integrate telco into their infra, then we can expose APIs to their development community, which we think enables third-party products and services to have network connectivity as well as enterprise applications.
spk21: And you can see if we were one of the three big incumbents where you have scale, what we're doing might not make as much sense, but realize we're starting with a very low customer base of 9 million. So on a variable cost, it just makes more sense. Having said that from that, we still would do it because the technology of what we're doing with the fact that you have your data stored and you can now analyze it and the fact you can automate and use machine learning, artificial intelligence, and the fact that you can slice a network. Those are, you know, a few people are writing about that now. A few people understand that. You're starting to see a bit more visibility to why that makes sense. You know, we've been a few years ahead of the curve. But, you know, O-RAN was pie in the sky a couple years ago. You know, we'll prove that it works in Las Vegas. You know, cloud native architecture maybe was pie in the sky a couple years ago. We're going to prove that it works. And the rest of the world will follow. And you're seeing that. You're seeing O-RAN now being adopted around the world. And, you know, the regulators understand it now where they didn't have a great understanding a couple years ago. everything's, I think from an architectural point of view, and Mark really is the architect here, I don't know that you, you know, you've spent a lot of time on it and you've talked to a lot of people. I don't know you've changed anything today.
spk04: No, absolutely. I mean, the more we play with it, the more we're impressed. You know, when we are, of course, we have onboarded a software, you know, all the telco software on the cloud, and it's fascinating how fast it is. how we can make changes, how we can scale it. I mean, just scaling it. In a telco network, everything is frozen, and you plan your investment 18 years ahead. We scale. We scale up and down during the day, during the night. We need a new platform to test a new private use case. We just scale it. It's quite fascinating for engineers to see what we can do now.
spk21: And so I'll just repeat my opening comments last time, which is we're We're technically now confident that we can do technically what we've talked about for the last several years. But we do have execution risk. And I'm sure that things won't go smooth, you know, whether it be COVID, supply chain, or the actual execution of taking things from the laboratory and then deploying them in Las Vegas and multiple cities over the next few months. We're going to have some stuff that's not going to work. And having been through this kind of scale before, and we just had to fix it. And then we find out how, you know, we find out whether that strategy of picking the vendors who are committed to what we're doing, is that we pick the right team from a vendor community? And do we have the right team internally to overcome, you know, the obstacles that we inevitably will face? And, you know, we're all confident today. And then as soon as we light up Las Vegas, you know, we're probably going to be less confident the next day. That's the way my experience is. And then we'll dig in and fix the problems. And, you know, we'll be patting ourselves on the back, hopefully. But it's execution risk. And so, you know, look, you guys as investors, that's a serious risk. But we've eliminated what I always thought was by far the more serious risk. You know, probably 10 times more risky was could you architect network could you enter the marketplace when there was a paradigm shift so that your technology you one up not only the not only the incumbents in the United States but but we're one up and what other people around the world are doing particularly in China so you know it we'll see thanks Charlie okay thank you very much
spk12: We will take the next question from Phil Cusick with JP Morgan. Please go ahead.
spk11: Hi, guys. Thanks. Hi, guys. Thanks. So I wonder a couple things. First, can you talk about the commitment of Amazon and AWS to building the edge of their data center network out to host your applications? How close to your radio layer do those AWS host applications need to be? And then a separate topic, I wonder if you can expand on the T-Mobile relationship. What's the ideal outcome from this CDMA network dispute? Can T-Mobile help you transition customers, or is it really too late with only eight months before they plan to turn off CDMA for that, and you really just need them to delay? Thanks.
spk04: Yeah, so let me take the one on the architecture. So everything north of the base station, the site, is in the cloud, right? And then when we have different options for the edge, so for the sites but also for the private edge, where the first option is to use Outpost, so with different form factors. So what is Outpost? It's a small rack that is onboarding all the cloud with itself, so you can move that small cloud where you want, all the way to your factory site or wherever. We have that option with AWS, so we can put our software all the way to the edge. The other option is that we're building together a next generation RAN acceleration, what we call a DU, which is the compute part of the O-RAN. We're building that next generation with them, which is Cub Scout and Scout, which will allow us to mix and use that technology in the RAN as well. The first part of our deployment, as you know, is on FlexRAN with Intel, but we have also announced we are working with partners. We announced Qualcomm, now AWS on Generation 2, because speeds are going up. We are introducing Massive MIMO. We are accelerating CBRS and a lot of other technologies, and that's what we are doing with AWS.
spk11: Mark, do we need to have more outpost construction? Do we need to have a lot more outpost construction by Amazon? Is that a substantial capital commitment for them?
spk04: Yeah, we have plans with them. I mean, currently we have, today we've designed a network with the latency we require, which is, I'm not going to give a number, but it's way better than what you see in the current networks. So we have enough local zones, if you wish, and availability zones to create a differentiated latency network. But as the demand increases for extremely fast machine-to-machine, we are going to build, and AWS is going to build, deeper and deeper into the network when the demand is coming up. So we have plans with MMS.
spk21: I mean, I think the key there is, Phil, it's designed into the architecture. We don't have to bolt it on. Every time you're bolting something on, you get heavier and heavier and heavier. You don't have the right foundation. Eventually, you just get so much cost to bolt stuff on and try to make it work. I believe that the edge is going to the phone in your hand, so it's going farther than even most people think about it, it ultimately will be the phone in your hand, but we're architected to go all the way from the phone in the hand to the core and everything in between without having to bolt stuff on. That helps. Oh, CDMA. You know, it's disappointing. I mean, I very rarely get into the politics of this kind of stuff, but the CDMA issue is real. You saw our disclosure. I was extremely disappointed. You know, I've always had a high respect for the management of T-Mobile and particularly their CEO. But I was disappointed when he went on TV and really said a couple of really untrue things. One was that it was no big deal that he was turning the CDMA network off. Only, you know, so 10% of people didn't have phones. Only 900,000 people, no big deal. First of all, that number was way low, as you've seen in our disclosure. I'm not sure exactly. I don't think he's looking at our books. Maybe he is, but I don't think he's looking at our books. I don't know how he knew the number. And the second thing he said, which was even shocking, was that he had to do it because the FCC was requiring it and demanding it. I mean, I don't know the exact words, but that was the gist of it. But this is the same company that goes on Twitter and talks about Dumb and Dumber and how they're for everybody, they love everybody, and they're for the consumer. They went to the Public Utility Commission in California yesterday. under oath and said to be three years before they turned CDMA off. They forgot about that. Once they got their merger done, they became, they looked like every other big company. You as shareholders should be pretty happy because they're certainly given a good return. They've gone from synergy of $43 billion to now talking about $70 billion of synergy from the, and they're going to go on and turn off millions of customers, you know, particularly low economic customers, to me, that's a heartless. And that's just not the Timo that I've seen before. And, you know, they've become the Grinch, right? So, you know, we've seen this story before, right? The Grinch went and stole everybody's, all the kids' toys, right? And they're stealing everybody's phone out of their hands. It doesn't work anymore. And it was because the Grinch's heart was too small. He had a tiny heart. And so the uncarriers become the uncaring carrier. And that's a shame. Now the positive is that the Grinch at the end decided to get the toys back and his heart grew three times the size. Right? So I'm hopeful that T-Mobile will, nobody will work harder than this company to try to make that transition smooth, but it will take, to answer your question, it'll take more time. If they were to give us several million phones today that we could use, we still couldn't do it in the next eight months because we don't always have the emails. Customers don't always have emails. They don't have addresses. They're more transient. They don't always come into our stores. So it's a much more difficult process. Verizon's recognized that. They've extended their 3G shutdown, CDMA shutdown. I hope that That T-Mobile will reconsider that. But if not, it'll have a material impact on our customers and certainly on our financials.
spk11: Charlie, that might be the hardest I've laughed on a conference call in 20 years, thinking about Mike as the Grinch on top of Mount Crumpit. Thank you.
spk21: Well, no, that heart is so small. It's funny because I just happened to read that story to my granddaughter. And I kept, every time I kept seeing the Grinch, I kept seeing, instead of being green, I kept seeing them in magenta. I kept seeing the magenta Grinch. And, you know, it's just serendipitous. I guess you learn a lot from reading to your kids, grandkids.
spk19: Thanks.
spk12: Thank you for the question. The next question we will take is from Michael Rollins with Citi. Please go ahead.
spk07: Thanks, and good morning. First, just following on your supply chain comments, is there a mechanism for you to ask the SEC and DOJ for an extension of your build-out requirements, and do you plan to submit a request for that? And then just secondly, taking a step back on the retail wireless strategy, can you share with us how the postpaid and prepaid retail strategy is going to evolve over the next 12 months? And I noticed in the 10Q that you described after acquiring TING, that you're offering that nationally. And I was just wondering if that satisfies that component of your regulatory obligation to be a postpaid service provider. Thanks.
spk21: Yeah, I'll let John talk about the TING acquisition and our postpaid plans. As far as supply chain, obviously, the FCC agreement we have recognizes that there's supply chain issues outside of our control, that the timelines could be adjusted. But we don't look at it that way internally. I mean, you always have, you know, there's always unforeseen circumstances. This one might be particularly acute. But we're not going to let anything stop us. We're focused on meeting our timelines. regardless of what the challenges are, and nobody's going to, you know, that's our focus. And, you know, we'll have to reevaluate that from time to time, but we're focused right now on Las Vegas, and we're focused on a 20% build out by June of next year. John?
spk22: Yeah, this is John. Thanks for the question. Certainly, you've seen us acquire now three MVNOs in the past three quarters. Certainly started with Boost. We're working to improve the profitability of that business. We did acquire Ting and have since relaunched it as a nationwide postpaid service. Starting to see some traction there. And we certainly do expect to close on Republic Wireless here this quarter. And generally, we're looking to expand our reach, expand our distribution. look for new segments to serve compared to where we started with Boost. And look, I think we'll really start hitting the gas when we have access to our own network and the best products and services. And just to follow up on some things Charlie said earlier, the handset market is a big factor for us right now. We're certainly making some progress, but we could potentially do more as the supply chain situation starts to open up a bit.
spk21: Yeah, and I would say that, you know, Not to belittle the CDMA point of view, but talk about a tiny heart. LG has shut down production, which was our biggest vendor for phones for our customers, and you've got a pandemic, and you've got a supply shortage of chips, right? And that's the time that you decide that you've got to make $70 billion of Synergy instead of maybe 69.8. And I doubt you guys would sell the stock if they only made $69.8 billion of Synergy. So that's particularly disappointing.
spk07: And does this King National launch, does that qualify for the regulatory requirement? I think it's the year anniversary, I believe, after you closed the transaction with Boost. Is that right?
spk15: The answer is yes, it would qualify. It satisfies the final judgment as is, but we believe as we add Republican and other growth into the market, it will further reinforce that requirement.
spk21: But I think you're being a little too anal on the thing. We got FCC obligations, but what we're really doing is building a world-class network that takes telecom to the next level. It really is an IT network that looks like a telecom network. It's really the same thing that happened in IT world 20 years ago. So we work with the FCC to explain what we're doing and why we're doing it. why this is important. And the FTC is always going to make decisions in the public interest. And from time to time, they may want us to go in stronger in one direction or another. And, you know, we're always listening to their advice of how we can help consumers because, you know, we are a regulated body and a company in that sense. And so we don't, I get it that, you know, retail, but we got so many, you know, we're going to be in retail postpaid in a much, much bigger way. But for us to make an impact, a bigger impact, we have to have our own network. We have to have the owner economics. And we have to have a unique network that we can do things differently than other guys can do. And that's where we can make the biggest impact. So you'll, you know, that's where you'll see it.
spk19: Thank you.
spk12: And the next question is from Doug Mitchison.
spk13: with credit suites thanks so much i love the um thanks so much i love the blockbuster uh analogy since you're actually 100 at one point charlie but um well you're talking yes you're talking to the guy who cost their shareholders 100 million dollars so you know in life
spk21: One thing about management is you make a mistake, you try not to make that mistake again. And I don't think you'll ever see us go into last year's technology ever again.
spk13: So, you know, a few quick ones for Mark. I think you answered this with regards to Phil's question, but I still wanted to ask it directly regarding massive MIMO and ORAN because there was some controversy over the last sort of a couple of months, you know, with the radiomath. To do beamforming and other things I don't fully comprehend, moving from the radio to the distributed unit with Open RAN, what you were saying basically is you're highly confident that O-RAN on your architected network will have no issues doing massive MIMO. That's one. I think second, Charlie, we look at the available financing and gauge the potential pricing for the upcoming 3.45 spectrum auction. What's your level of interest in expanding beyond the 114 megahertz or so that... Yeah, given the confidence you're showing now in the technology at this point, do you think about future potential market shares versus the spectrum that the other folks have post-C-band? And then lastly, I don't know if Jason's on, but any thoughts on managing the June 21s that are coming due, whether those are going to be sort of rolled forward or paid off with cash? Thanks so much.
spk20: Paul can answer the June question. Yeah, we're going to be opportunistic here. in the marketplace, so we clearly have enough cash on hand to redeem both this year's maturity as well as next year's. And what was the other part of the question?
spk04: Yeah, you said it right. On the massive MIMO, I just want to say a couple of things about Oran. We have seen an extraordinary investment, especially in the US ecosystem on silicon. In the radio domain, Everybody has been dreaming of that for the last 20 years. You know, silicon has been the weakest point. And what we see now, wow, I mean, it's all over the place. And RORAN has driven that. I mean, you can think of it of all the IT and silicon industry of the U.S. and abroad investing now to serve that market. I mean, I've never seen that. So what we have in our hands for today, but also for Massive MIMO is just incredible. And we're going to leverage that. And, you know, I'm making a bet that the existing vendors are going to use the same silicon that was brought to the market by the ORAN because they just don't have the same in-house. So that's forcing them to come to the market as well. And for Massive MIMO, now there is a debate about Massive MIMO, and people are confused about ORAN. One of the debates is that you need to pair the compute with the radio in order to manage the beamforming. And we agree with that. But O-RAN allows you to do that as well, right? O-RAN allows you to pair the compute and the software and the radio in order to have advanced beamforming. So O-RAN can do exactly the same, if not better.
spk21: And then on spectrum, you know, 100 megahertz probably was table stakes up until the T-Mobile Sprint merger and last auction. You know, obviously, we look at, we've been in every auction except the first two. And once that odd auction that nobody else has been in besides couple companies so we always look at that but but you know you know we have advantages in our architecture we have enough spectrum to do what we just to grow and you know we'll go from there and we'll see what happens you know because people you know that there are spectrum caps and spectrum limits and I would think that the that the regulators would look and make sure somebody doesn't
spk12: capture too much it's just it's maybe gotten a little bit sideways but we'll see all right thank you very much thank you and the next question is from jonathan chaplin with new streets um thanks thank you got a couple couple of quick ones um first
spk06: Charlie, you mentioned that the AWS deal materially helps you on CapEx, but guidance is still 10 billion. Does that mean that the sort of the scope of the network now that you've locked in this Amazon deal is bigger than you initially anticipated? And then you mentioned that Verizon is keeping their CDMA network around for a while. Is there any way to transition CDMA subs off of the Sprint network onto the Verizon network. I presume that they'd be happy to have the extra traffic if they've got a fixed cost there. And then thirdly, you bailed on the C-band auction pretty early in the process. What does that say about your sort of appetite for the three gigahertz band generally? Are you likely to be a big player in the 3.45 gigahertz auction? Thanks.
spk21: On the auction question, look, I feel confident that we have a fairly good feel of what the value spectrum was. We just thought in that particular auction, because of the structure of the auction and the dynamics of the auction, that it went far beyond what a reasonable company would bid. I think that was a level that didn't make sense for our company. Obviously, if you had a hundreds of millions of customers and you had bet you were telling everybody that millimeter wave was the future and maybe that technically was a bit of a problem, you had a different strategy. And I think the guys, regardless of the price, I think they'll do fine on what I think that long-term they're going to do just fine. They're going to be very happy that they have that spectrum. So it'll take, but it's, It doesn't set up very well with the consumer. The $90 billion has to be paid by the consumer unless the government's going to give the money back. So, you know, it makes it a less competitive industry out there. So I think it's maybe even more important for DISH to be successful. And then I think with AWS and cloud in general, when we started, we and Mark had been looking at it for a long time. may or may not know but mark used to be one of the big oem providers he's always been frustrated by the pace and the the technology and that's one reason he came to to work with his dish because he could start the clean sheet of paper and it was his dream to do that it was in his head how to do that um and he knew a lot better than we did the the issues with legacy and so um i think that at least in the meetings that i've been in and stuff we We always had high hopes for cloud. We knew it would get there. But I do think the scale, the investment, and the vision of Amazon is maybe a bit larger than, I mean, you might want to speak to it, maybe because you had been working with them before.
spk04: Yeah, you know, if we were to start a network by ourselves, we would build one data center, a second data center for redundancy. Here, we're just expanding across the footprint. And in terms of what we can do, implement in different regions, in different availability zones, this is something we could never have built. Nobody could have built on day one. It would have taken 10 years to do. And same on transport, on the redundancy, on the size of the compute. The same on the elasticity of the network. One of the things about the telco that is really slowing down telco is that they are over-optimized. They never have more capacity than they need. We have unlimited capacity. And for us, it's a luxury because then we can put additional software. We can put automation. We can put things that no telco would dream of because all their hardware is tight. They run it at 70%, 80%. We scale it down, up during the day, during the night. So it's a different scale. It cannot be compared.
spk02: So on the question around Verizon and CDMA, it's really not a viable option because you've got to look at the bands in the devices, where our customer base sits today, and the fact that it would be potentially even more disruptive to try and do that transition. So we're very focused on the customer experience. even as we go through those transitions with T-Mobile today, and that would just add one more variable and actually one more complexity in that step. And so while in theory it might be an interesting concept, it's just not practically or operationally viable.
spk15: Not to mention it's not plausible from a timing standpoint.
spk02: But you'd only be doing it for a year.
spk15: Yeah. You'd do it and try it again.
spk19: Got it. Thanks, guys.
spk12: Okay, thank you so much. We'll take the next question. The next question is going to be from . Excuse me. with Barclays. I apologize for butchering your name, but go ahead.
spk01: don't worry i butcher it myself sometimes it's all good so charlie a couple of questions uh first on the dbs side um you know the directv deal with private equity i mean it probably opens up uh another avenue for you to look towards monetizing that asset um and you've been you know running this business for cash margins have expanded like you saw with the results today um Could you just talk about if the AT&T plan makes it a bit easier for you to somehow look at divesting this deal, regulatory issues aside? And then on the capital side, the AWS deals should help you on CapEx. And like you said, I guess it increases your OpEx needs. But when you think about the overall capital needs, I guess it's also a function of the cash burn as you scale the business in the first few years. so the 10 billion dollars probably does not capture that could you give us a sense for what your total capital needs would be if you include you know the cost of scaling the business and the initial years of cash burn thanks um you know that you know we we're not sharing that that modeling today but i'd say a couple things one is
spk21: The $10 billion we're building, that doesn't all happen in the next two years. We don't spend that entire $10 billion to meet our FCC obligations. And you'll see it as we ramp up. You'll see the ramp rate we get to, and you'll be able to model that out. We're just giving the overall objective of where we're going. But all that $10 billion isn't spent by June of 2023, which is our major milestone. take us through the complete build-out for the FCC. And then the other part of the question, I didn't write it down, was? Direct TV. Oh, direct TV. I just say the same thing I've always said. I think it's inevitable those two companies go together. It'd be harder and harder for regulators and people to make a case when, gosh, there's got to be 10 or 15, 20 competitors now, all with 50, 100 million subscribers. You know, I think Dish and DirecTV are probably not even the top 10 video companies today. And you run the risk that prematurely rural America and other people don't have a choice. But, you know, our vendors are competing with us in, you know, linear TV, so that's an unhealthy place. And so I think that's inevitable, but certainly, you know, That will be something that gets scrutinized if it ever came to pass. That's an AT&T question. You have to ask them whether they have an interest in that. And now a TPG question.
spk01: And can I ask just one quick follow-up on the AWS issue? Was there ever a discussion around Amazon putting capital into DISH as a part of this whole negotiation?
spk21: Man, we've talked about that for five years, and I just think that... I said this last conference call, I made the mistake of doing a 0% convert, which is essentially us selling shares a little bit less than $41 a share. I thought we'd get better execution on that. They want to do, they're so committed to cloud, telco cloud, they want to be a vendor for everybody, so you should ask them, but they're not picking sides here. I think they want to be a vendor for everybody in the world, and And they've got a leg up to learn from us and so forth. And we think we're building the world's best network. And we think that's pretty valuable. And we think that that's a lot more valuable than where the market has us today. So we've been building value for the last five years. Every day, it's just not showing up. As analysts that are on the call, you guys I used to be a financial analyst. You want numbers, you want to put it in a model that spits out a net present value kind of thing, and you can kind of value a company. We're not quite there yet that we don't quite fit that mold. We're a bit conceptual of we're one of four wireless players. You can't, nobody can be connected without one of the four of us in a nationwide way. Wireless business is going to be a bigger, more profitable business for everybody that's in this business, including the three incumbents, because everybody has to be connected. Facebook made almost $10 billion this quarter, and I think 90% of it was from your phone, data on your phone. I don't know. I'm not that smart. I'm from Tennessee. I can't figure it out. I just know that not one Fortune 500 company can make money without wirelessly connected Not one of the big infrastructure companies. They all rely on it. It's a necessity. And the technology is changing to provide more robust service for all the incumbents and us and opens up a lot of value-added service for the incumbents and for us. And we think we'll get our fair share of that. And when you start seeing that, you'll be able to put that into a model and, but, you know, We're probably that first FCC milestone before everybody will be comfortable with the numbers to put in that model. You know, I think we're still a bit conceptual for another year.
spk19: Thank you. Operator? We may have time for one more question if somebody's got one.
spk12: Yes, sir. The next question will be from Rich Greenfield with LightShed.
spk16: Thanks for taking the question. Two questions, Charlie. One for Walt, who couldn't make it today. But in five or ten years, the question was, what will be generating more EBITDA for DISH, traditional consumer wireless or new 5G applications? And what role would Amazon play in actually selling the latter? And then I've got a follow-up on the media side.
spk21: Rich, hey, I saw you guys doing great. Great quarter for you guys. I think 5G applications will be the more valuable part of our business. But, you know, only because that's where Mark likes to tinker and, you know, he kind of runs the show when it comes to that kind of stuff. And Amazon, look, If you look at, this is a question you'd have to ask them, but I look at it from a big picture point of view. They are a business that does cloud, but it doesn't do the last mile. It doesn't wirelessly connect it, but they have a huge base of customers that need to be able to connect to campus, or connect to factory, or connect the last mile, or connect to their customer in a secure way. And they've seen some of our white papers on security about how what we're doing is more secure, we believe, than incumbents. They have a retail business, and that retail business, you need to be connected to order. But that retail business also needs to deliver things to you, and they deliver by plane and by truck. Those move, they need to be connected. They're going to deliver by drones, needs to be connected. They have devices in your home. They want to connect to your home, whether it be a camera or a doorbell or Alexa. All those things need to be connected. They'd like to make those products better and safer If you have, if you're connected and you can do that on your own private network, they can make their products better and maybe get a leg up on their competitors. So all their businesses, and then their video company. So last I looked, video, you needed a connection to get it. And whether that means storing it overnight or on the phone or watching TV or watching on a tablet or watching on an Alexa device. So all those things, and they're making a move into healthcare. And if you have the future of healthcare is people being connected so that we can be monitored without having to go to the emergency room, save costs, and give better outcomes to patients. So I don't know. Again, I'm fortunate enough that I'm not smart enough to figure out all the stuff that you guys figure out. I'm not smart enough to figure out every, to write a report. I'm not smart enough, I can't even speak English. And you got, you know, all I know is I can see trends. I can see where things are going. I can see what people do. I observe what people do. And you just observe it. And you just say, let's go where the, let's go where things are going. And let's invent things that people don't even know they need. And let's make it a great product. And so.
spk15: All right. So, Rich, you had a media follow-up. And then operator will go to the press after that.
spk16: Speaking of where the puck is going, all of the media companies now, they just redid their NFL deals. They're all talking about the fact that they're now going to simulcast all their NFL games essentially on streaming services that don't require Dish or Comcast or DirecTV or any of you, as they're really putting now even some of their most iconic content out of the bundle. Yet, you know, sub fees keep or affiliate fees keep going up and retrends keeps going up. And I guess, what changes this? Like, is there going to be, someone going to draw a line in the sand, Charlie, and just say, this doesn't make sense. Affiliate fees should be down 30%, not up five.
spk21: Affiliate fees should probably be down over 50%.
spk16: But what makes that happen? Who's going to make that happen?
spk21: I don't know. I don't know. I mean, I think that, I think it's unfortunate. I'm very empathetic for broadcasters, particularly local broadcasters. A lot of them are, started out small businesses and grown their businesses. They're not only having to deal with legacy linear TV, but they're having to compete against their big owners. And I think they've got to come up with strategic solutions to reinvent themselves. And, you know, we'd like to work with them to do that. But Retrans has peaked. You know, we were the first guy that they had a regional sports. We said regional sports have peaked. Two or three years later, people figured that out. Retrans is peaked. I mean, you know, you've already said it. I've said it. Retrans is basically an NFL season ticket subscription, right? I mean, how did the Academy Awards do this year, you know? That used to be must-see TV.
spk14: It's just changed. All right, operator, we'll go to the press now. Oh. What did you say, Rich?
spk16: I was just saying, retrans peaking is an important statement.
spk19: I think it's Captain Obvious, but we'll see. Thanks, Charlie. Thanks, Tom. All right, operator, we'll go to the press now.
spk12: Okay. We will now take questions from members of the media. Again, if you are a member of the media and would like to ask a question, please press star 1 now to enter the queue to ask your question. And our first media question comes from Scott Moritz with Bloomberg. Please go ahead.
spk05: Great, thanks. Charlie, if you would, go back with me to the trial when the state attorney generals wanted to block the T-Mobile Sprint deal. You were called as a witness and you had to describe your business to the judge. Was this Amazon cloud partnership part of that discussion?
spk21: Um, Amazon specifically was not, you know, I wouldn't give you testimony, but obviously the technology and the, and the, and the paradigm shift and what were you doing was, was, uh, and to the judge's credit, uh, which, you know, I think there's probably people on this call that don't can't understand what Mark or I are saying, but, but I think he understood that the world was going to go to a different place.
spk19: As you know, Scott, it was a closed proceeding. Got it. Thanks.
spk12: Thank you. And our next question will be from Andrew Fitzgerald with WSJ. Please go ahead.
spk10: Yeah. Hi, Charlie. Two questions, if I could. First of all, this partnership with AWS will affect CapEx. Could you describe, is it necessary is it dependent on AWS building more infrastructure closer to the edge, closer even to the tower? And do you have any idea on if that's a commitment on like what kind of timeframe AWS would be working on? And then just second, I didn't see in the following, sorry if I missed it, what is the company's headcount today and where do you see hiring going over the next year?
spk21: I think Mark answered the first part of that question, but maybe you can summarize for Andy.
spk04: Yeah, so we have designed a network with AWS and the data centers they have today, what they call the availability zone and local zone, together with the transport they have is sufficient for the first phase of our services and the latency that we have defined with Stephen. And that latency is already much better than what can be done today with the 4G plus, 5G minus networks that we see in the U.S. Now, when over time, you know, we expect the demand to be for very specific applications and some customers to ask us for a specific latency. In that case, we can push up, push down Outboost or other sites with Amazon, and we've discussed that, so we have a path forward to that when needed.
spk21: And in terms of headcount, I don't think, I don't know that we've disclosed that, but we certainly have thousands of people working on, the biggest hiring probably has been in deployment over the last, you know, six to nine months, probably been in deployment. And then the other thing that you don't have visibility to is our vendors. I mean, we got over 10,000 people probably between all our vendors working on what we're doing. So there's a tight community that wants to see this happen. And look, we're happy to be working with the people, some big companies, some small companies. And it's fun because we all want to see it happen. We all want to make it happen. And everybody, we're all convinced we can do it. and we'll see how good we are when we start working through the problems.
spk15: Operator, I understand there's one more press in queue, so we'll go to that and then close up.
spk12: All right, thank you. We'll take the next question from Mike Dano with Light Reading.
spk18: Yeah, hi. Thanks so much for taking my question. I appreciate it. Two quick questions. One is that can you talk about your plans for the CBRS spectrum licenses that you have. My understanding is that the radios may not support that spectrum band. And so I'm wondering if it's going to be deployed at a later date or kind of what the plan is there. And then the second totally separate question is, you know, you've talked about having silicon from Qualcomm and Intel and now, I guess, with the Amazon Graviton silicon, are you planning to deploy equipment using that, so all of those different kinds of silicon, or are you going to pick one and stick with that, or like how does that work?
spk02: Yeah, so I'll touch on the CBRS to start with and then hand to Mark. But in terms of CBRS, the radios that we're currently deploying for our macro pills and for example, for Las Vegas and the other markets that we have underway, those radios don't include CBRS. And we are working on another generation of radios that will incorporate CBRS as we go forward. And what's important there is a lot of the traditional radios today for CBRS have really been LTE and 4G radios or band 48. And we're actually moving towards N48. And so being sort of 5G native, we need to see that next generation of radio development to happen. The other thing that you've probably seen is that we have filed to look at different power levels and increasing the category on the power level up on CBRS as well that would give us far more flexibility and a much more efficient build using that spectrum. And so we're working through that, and that will have an impact in terms of the supply chain. So with that, I'll just hand it over to Mark.
spk04: Yeah. So the Silicon. So today, you know, we are deploying a 4T for our network. with 100 megahertz, so we are happy with our flex-run architecture. It's powerful enough. We're using Ice Lake. We can include all the processing. We have good acceleration guards. Now, when we go to Massive MIMO, when we go to CBRS, when we go to other bands, we expect to need more acceleration and more integrated silicon, and that's our second generation. That's when we will make the choice for additional silicon. You were asking about Qualcomm and Graviton and on top of Flexran. You have to think about the diversity we're going to use for small cells, for example, or indoor, distributed indoor. I'm pretty sure that the type of silicon we're going to use will be different for certain very high density massive MIMO. I'm pretty sure that we would have integrated DU and RU with different type of accelerators. I think we will tend to have one silicon per use case, but when we diversify the use cases, I see different requirements. And we're working very hard with the software vendors to put an abstraction layer on top of the silicon so that we can pretty much port our software on top without much changes between the different blocks of silicon.
spk18: Great. Thank you.
spk15: All right, thank you all. Operator, that'll complete the call. Thank you.
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