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spk10: Welcome to the DISH Network Corporation first quarter 2023 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tim Messner. Please go ahead.
spk12: All right. Thanks, Rachel. Good morning, everyone. Thanks for joining us. On the call today, we have Charlie Ergen, our chairman, Eric Carlson, our CEO, Paul Ergen, our CFO. On the wireless side, we have John Sweringa, president and CEO of Wireless, and Dave Mayo, EVP of Network Development. Before we start, I need to remind you of our safe harbors as usual. During this call, we may make forward-looking statements which are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from historical results or from our forecasts. We assume no responsibility for updating forward-looking statements. For more information on factors that may affect our future results, please refer to our SEC filings. And with that, I'd like to turn it over to Eric for opening remarks.
spk02: Thank you, Tim, and welcome, everyone, and thank you for being here today. I'm going to begin with a few brief comments before opening it up to your questions. As most of you are aware, it's been a busy few months, some planned and some not. On our last earnings call, we announced we had experienced a network outage that affected our incident response and business continuity plans. Once we determined the outage was due to a cybersecurity incident, we promptly notified the appropriate law enforcement authorities. On February 28th, we further disclosed that certain data had been extracted from our IT systems as part of the incident. Our investigation to the extent of the incident is now substantially complete, and we have determined that our customer databases were not accessed in this incident. However, we have confirmed that certain employee-related records and a limited number of other records containing personal information were among the data extracted. We've taken steps to protect the affected records and personal information, and we have received confirmation that the extracted data has been deleted. While we have no evidence this data has been misused, we have started the process of notifying individuals whose data was extracted. We restored the systems affected by the cybersecurity incident. Our websites, customer care functions, self-service applications, and payment systems are operational and have been since March. Our customer care operations are up and running, and service times have normalized. Our DISH TV, Sling TV, Boost Mobile, and wireless services all remained up and running throughout the duration of the incident. We sincerely regret the inconvenience to our customers and team members, and certainly appreciate their patience while we work to restore systems and return our customer care operations to normal. Data security is extremely important to us. Our team, including third-party cybersecurity experts, has been working to enhance our cyber defenses and overall security posture. We've upgraded our endpoint detection response system, and we've taken other measures to further secure our data and systems. We've also refined and will continuously improve our business continuity and system restoration processes. Now, with respect to the financial impact of the incident, we disclosed in our 10Q today that we incurred about $30 million of expenses, mainly related to remediation, additional customer support, and consulting and IT costs. This amount is included in cost of sales and our financial statements. We also disclosed that the outages related to the incident negatively impacted our disconnects and churn for DISH TV. The outages did not materially affect our Boost Mobile or Sling TV subscribers. During the incident, we undertook extensive efforts to support and protect our customers and employees and to further enhance our cybersecurity practices. Due to the commendable efforts by our team at DISH, we do not expect any additional material future costs or further impacts to our subscriber base from the incident. Look, I want to thank our customers, employees, partners, suppliers, and vendors for their support, patience, and understanding. And with that, I'm going to hand it back to the operator to start taking questions from the analyst community. Operator, please open the phone lines.
spk10: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name and affiliation before posing your question. Again, please press star 1 to ask a question. Our first question comes from the line of David Barden with Bank of America Securities. Please go ahead.
spk01: Hi, this is Marlene Pereira on for David Barden at Bank of America Securities. You know, I wanted to start out the questions regarding CapEx. You know, can you talk about the run rate CapEx post the June 2023 buildout? And then, if possible, provide, you know, what potentially could be a new run rate when that run rate would start and then potentially when CapEx would ramp again heading into 25 for build-out requirements.
spk13: Hi, this is Paul Hale. I'll jump in. That's a good question. I think we'll come in slightly lower than last year's CapEx, but unlike last year, it will be front-end loaded with it dropping off after we hit our June milestone. But other than giving future CapEx guidance, we're not going to – we don't provide that.
spk06: This is Charlie.
spk05: I think – I think, to add a little more color to that, I think that obviously we had two back-to-back milestones in 22 and 23 with the vast majority of the population, you know, 70% of the population. So you can look for us to be able to, two things that we really would do from a CapEx perspective. One is we can go we certainly will be able to take a little bit of a pause in terms of some of the new markets. But we will continue some CapEx to densify the current markets that we have. You know, once we're with customers, you always find you have some gaps and things. So we will have some CapEx on current markets. But future markets, we'll be able to take a bit of a pause until the 2000, really the late 2024, early 2025 timeframe. Got it.
spk01: And then as you build out the licenses to meet the mid-23 requirements, is it possible to give any update on the build of the 600 megahertz that you might be building out concurrently with the other licenses?
spk14: So, yeah, hi, this is Dave Mayo. We've started construction on about 18,000 sites as of the end of the first quarter. It'll take approximately 16,000 sites for us to meet the objective, and those sites will have to be fully fibered and powered, and we're well on our way to achieving that.
spk05: Yeah, I think on the second part of that question, the 700 megahertz is in those numbers, but additional 600 is in those numbers, but in terms of new cities for 600, that's something that we'll take on a kind of case-by-case basis. As you find that you have more roaming charges than you could do by putting something on your own network, you'll build for success. Ultimately, you'll build for the FCC.
spk14: We're well on our way.
spk05: In addition to that.
spk14: Yeah, we're well on our way to meeting the 70% with respect to the 600 megahertz licenses.
spk01: Got it. Thank you. And then once you do hit the mid-June requirement, is it possible to give us a sense of how much this will make in terms of business operations and your go-to-market strategy? It was 20% last year, 70% this year. So just trying to think about the impact it could have on the business now with a much broader offering.
spk04: Good morning. It's John Twereng. I'll take that part of the question. So as the end of the first quarters, we're now serving 70 million people with commercial bonder on the DISH 5G network through Boost Mobile. That's a little bit more than 50 cities. So as we build out 5G broadband, we then come in and optimize the network, densify it, and move those markets towards commercial launch. So we would expect that by the end of the year, we'll be serving the majority of the U.S. population with commercial Bonner, and loading retail customers onto that network. We're making steady progress with getting Bonner and Band 70 devices into our distribution in our supply chain, and we expect that to pick up as the year continues.
spk01: Got it. And then just turning to your cost of capital, just given the current cost of capitals, Can you walk us through maybe what some of the levers are that you could pull to address, one, you know, upcoming maturities, and two, you know, other funding needs, including additional CapEx? Yeah.
spk05: This is Charlie. Well, obviously, you know, we focus on, you know, our maturities with obviously the next one coming up in March of next year or so for a billion dollars. And that's a convert. So we look at the levers there and say that – That idea would be equity or equity-like in terms of nature because it's kind of equity-like today. And we think there's a number of levers. Obviously, we're liquidity poor in the sense that the markets probably from a debt perspective just really aren't open to us, but we're asset rich. And so we look at all the different levers we have. I'm not going to give you those on the call. But over the years, we've been a good steward of capital, and we think that there are many things that we can do and some that we can do to meet those maturities. And so we're focused on two things. One is the operations of our business. And obviously, to the extent that we operate our business efficiently and start putting people on our network and start competing in a little bit stronger way with postpaid, which is a more profitable customer on our network, the liquidity becomes a little bit easier to attack because people will see the growth and the profitability of what you're doing. If you're not able to do that, then that's a different story. And obviously we have to wait and see where the markets are next year. Even the government having a debt crisis. So obviously there is money available today out there in the marketplace. There is a fair amount of capital in the marketplace. We hope that doesn't change, but we're like everybody else. We don't control where the economy goes.
spk01: Thank you. And then one final one, if I could. Can you provide any update on the 800 megahertz spectrum option? Is there anything there that you could share in terms of timing or potentially what you'll do with that?
spk05: I think I can repeat what the CEO of T-Mobile said we did get an extension of 60 days on that at a minimum. We think 800 megahertz is extremely important for us to be able to compete. Obviously, capital-wise, we're challenged to be able to do that transaction today, but we think that there's ways that we can make that transaction happen. We think it would be From a competitive point of view, that's an important low band, particularly uplink spectrum.
spk01: Great. I'll leave it there and pass it on. Thank you.
spk10: Our next question comes from the line of Rick Prentice with Raymond James. Please go ahead.
spk06: Thanks. Can you hear me okay? We can, Rick.
spk02: Okay. I want to follow up on that if I could. With the 800 megahertz spectrum, is there any regulatory requirements to build that? Is it possible to resell it? Also, the spectrum securitization market typically what lends at about 35%, 40% of value. Just wondering if you could elaborate a little further on what the requirements are with that 800. Okay.
spk05: The requirement is to build it, but we have built it. So part of what Dave and his team have done is to build 800 megahertz. And it's my understanding that T-Mobile has turned that network down for the most part. There's still some statutory requirements that they keep a couple towers up, but they've pretty much turned that network down. So we basically have a functioning 800 megahertz from a transmission point of view. It'll be at 70% of the population. in a few weeks, so we wouldn't have a regulatory problem for meeting the commitment for build-out. If for some reason we weren't able to exercise the option, we would have a penalty of $72 million to T-Mobile. That's the other piece of it.
spk02: Were you able to take over any of those old Nextel antenna sites then to help with the transmission?
spk05: We did not take over, Dave, did we take over any?
spk14: We've taken some sites, Rick, but not a, I wouldn't call it a significant number, but it's not the next cell radio gear that we would use. The 800 megahertz frequencies are in the radios that we've deployed, the low band radios that we've deployed.
spk05: But, you know, put that in perspective. If you were to do a new build of 800 megahertz, you're talking several billion dollars. If you were to go out on your own and build 800 megahertz to the extent that we have, that would potentially be a multi-billion dollar build. It would cost you almost as much to build as we've had to build for all our frequencies. I leave it up to the analyst on here to figure out if that's positive or negative, but I think that's a big positive for for an asset we have that people just don't recognize.
spk02: Last one for me is on the private network side. I think you've said several times that the best use of the network might be for wholesale, business, enterprise, kind of private network type applications. Update us as far as what you're seeing in the marketplace. I know it's a long sales cycle. How is the team performing there? What are the hurdles in pulling that revenue stream in? And are there any opportunities for financing with potential strategic partners in that area?
spk05: I think you're talking about the enterprise side of the business?
spk02: Exactly.
spk05: Yeah, we haven't made substantial progress in terms of the enterprise business in terms of announcements. Behind the scenes, obviously, there are really, and you mentioned it, a couple of ways that we would approach the market. One would be we'd actually build it out and lease it, which would take CapEx. That obviously is a bit less attractive to us. The second is people just pay for it from the get-go, so it's cash positive from day one. And the third is that some of our partners in our build, whether it be Cisco or Dell or AWS come to mind, where they already have a big enterprise business, that they just add our spectrum into their thinking about how they would design private networks. And at that point, we would be more of a wholesale company. provider spectrum. So any of those three things are possibilities of how you would go ahead and build an enterprise business. But it's going to be a huge market for all the players. I just think we're a little bit better positioned because I think the kind of network we have is the kind of network that companies, when they really become omniscient about what a private network can do for you and what it should do for you, the architecture of what we have is just Without the legacy, it's just a better, you know, if you're going to build it new, you should build it right.
spk02: Any idea when we can look for it formally announced so we can see it on our side of the fence?
spk05: Don't have a timeframe for you. I mean, you know, we said before that we think you'll see, you know, it's a 2024 event for us. Great. Thanks a lot, guys.
spk10: Our next question comes from the line of Michael Rollins with Citi. Please go ahead.
spk09: Thanks. A couple questions. The first one is, just reading the 10Q this morning, there was a comment in there that DISH plans to implement one or more of the following options, raise additional capital, pursue strategic transactions, and or advance additional cost reduction initiatives. Just curious if you can unpack that a little bit more And what investors should expect over the next number of months from that?
spk05: Well, I mean, I think, I think we're good stewards of capital and we obviously realize that the, that the, that we're more of a look right now, we're more of a liquidity story than, than anything in the market. And obviously we have to address that. And I think there's two ways, you know, I don't know what else I can say about the options out there, but the, You know, obviously, the first thing we do is focus. And, you know, I've really focused the team on executing to build, you know, the best network in the world and to enter the postpaid business, which is more profitable, and to make sure we get more devices that we can put on our network because that makes liquidity that much easier because, obviously, you're proving you can compete. And we really haven't proven that yet, so... That's kind of number one. The second thing is to meet our milestone with the FCC. We just have to do that. And the third thing, which is maybe a bit more nuanced for people on this call, but we've been on the TSA agreement with T-Mobile since the inception, which is basically our billing and provisioning and all our back office functions. And we have to be off of that by the end of this quarter. So those are big things that we need to do. And if we do that and we're successful at that, then you start to see the growth that everybody's been hoping for and expecting probably a year earlier than this. And then that obviously helps you in your liquidity side of it because you're showing you can compete. John, there's one other thing we need to do this quarter, which we actually have done, It was two things. One was to get the cybersecurity behind us, and that was a massive effort. And I wouldn't say it was record time, but certainly for us it was, I think, right up there at best in class in how you recover from an incident and a lot of real solid effort on our team. And it gives you a lot of confidence going forward that your team, when under pressure, can operate. And the other part maybe John can talk about.
spk04: Well, there's been a lot of focus on getting Boost Infinite ready to go, and we've made a lot of progress there. You'll see us ramping up marketing later in the year as well as distribution, and one of the big things there that's been a focus for us is bringing the iPhone to Boost Infinite, and you'll see it come later this year. Big effort there across the teams to make sure we're ready to go in post-pandemic.
spk05: Yeah, and I think that iPhone's important because it's obviously a big part of the market share out there, and I think it'd be very difficult to be successful in the post-pay business without it, and so we're pleased that we have, that we will be able to bring the iPhone to the market actually within the next few months. So we've done a couple of things already this quarter that we needed to do, and we've got two more things to do, and then I think we get to go a bit more on offense and it's been a little bit frustrating to pay defense as long as we have.
spk09: And just shifting gears to the video side, I also read that you entered into a contract to build and launch another satellite. Can you share a little bit more details on the cost and just the thoughts around continuing with the satellite side, if there is an opportunity at some point to maybe take these customers and leverage the Sling product and accelerate the you know, migration to streaming.
spk02: Yeah, Michael, this is Eric. I'll take that, and maybe Charlie has a few comments. But we did enter into an agreement to build what we would call Echostar 25, sort of 25th satellite, and we entered into that agreement with Maxar. We fly Maxar satellites today, and so it's a satellite that we're familiar with. Obviously, as we've been talking about on the call for quite some time, from a DISH TV perspective, we've really been focused on adding profitable subscribers in rural America. We've had some success there, and we've had decent success in retaining some of those customers. As our fleet continues to age, we're in a position where we need to add a satellite in order for us to continue to operate the service with appropriate backups, you know, within the latter half of this decade. And so that satellite is under construction now. We're under contract with Maxar, and we would expect to launch that somewhere in the neighborhood of 2026. Yeah.
spk05: We don't think that the DBS business is going away. It's still a preferred choice for a lot of Americans in terms of an efficient way to watch TV. Obviously, we're able to add apps and things to the set-top box for a seamless experience. We don't think that business is going away. We just want to make sure that we have the right facilities in place for our customers and a To some extent, some of these satellites, you have to have a satellite for insurance purposes too, so that's the reason.
spk09: Is there a rough cost that we should just keep in mind for this?
spk13: We don't disclose that, but if you take a look at the capital commitments footnote in the queue, it's included in there.
spk05: So what is it? Don't make them read, just tell them what it is. No, we don't disclose it. Oh, you don't disclose it.
spk13: It's included in the totals.
spk05: Oh, it's included in the totals, okay.
spk13: On the capital commitments table.
spk06: I got you. Thanks.
spk10: Our next question comes from the line of Walter Pychek with Light Chat. Please go ahead.
spk17: Thanks. Charlie, when you look at the sub losses in DBS and Boost, what would they have been if you hadn't had the cybersecurity event? And then similarly, you know, to the extent there wasn't collected revenue, How do you account for that? Is it show up at ARPU and then like a receivable that gets written off? Is you just not reported in revenue? And then kind of a third part to the same question, which is what's been the impact? I know you said as of March, it's been, you know, the systems have been repaired. But, you know, given the impact it had on customers, what have you seen in April and early May in terms of any lingering impacts of to subscriber churn or usage or anything.
spk05: All right, let's unpack that. Probably a couple different people here to answer that. I'll take the boost really quick. Not a material impact on boost mobile. We're in a situation, Walt, as you might expect, where we realize we're entering the post-paid business now as we bring up our network. And post-paid customers just a lot more profitable than a prepaid customer. So if you have limited capital, you're going to spend your capital on the most profitable customers. And so we haven't been perhaps as aggressive in Boost as just knowing that we've got better things coming, better economics coming. So a dollar spent today that makes a small return, you're better off waiting until next quarter to spend that money where you have a much better return. At least that's our theory. And then for Boost Mobile, we also know that there's another benefit of putting those people on our network, and that's starting to happen now, too. So I wouldn't read too much into Boost. As it relates to the accounting question about revenue, can you take that, Paul?
spk13: I'll jump in. This is Paul. The revenue impact was really immaterial, so you're And you are seeing it, the immaterial amounts show up in ARPU to answer your question.
spk17: How is that possible? Because, I mean, if you weren't able to collect revenue from customers and there's reports that people had to, like, go to stores and bring cash to stores, how is that possible? Like, did you go back and let people that weren't able to collect money you did collect?
spk05: A lot of the press stuff is exaggerated. It's just really hard to comment on every exaggeration that's out there. I think the more cases, maybe you didn't collect a late fee or something like that. I think there's a little bit of that.
spk13: We were up and running collecting all amounts by the end of the quarter. That did get all caught up. You would have seen it to answer your specific question. It would have been sitting in an A.R., But as you can see, our AR balances are down from year end.
spk05: But we might have waived the late fee. You're probably a little down on the margin because you waived the late fee. Or you extended somebody three more days than you would have because you knew you'd be able to collect it. There's some stuff around the margin there, Walt, but nothing material. Well, the third part of the question.
spk02: Yeah, I mean, I think, Walt, I mean, this is Eric. Just to add a little bit more color, I mean, obviously, you know, my opening statement, you know, we talked a little bit about it, but, you know, on the DISH side of the business, you know, that's where most of the impact was really felt, right? You might explain why that was. Yep. You know, legacy infrastructure, as you can imagine, we've talked about it here. We've definitely modernized kind of our tools and staff associated with Sling. Obviously, we're on a TSA for some of the business through T-Mobile for Boost, and then obviously we're building out our new digital operator platform for our new Boost and Boost Infinite businesses. The modern architecture really wasn't as impacted as much. We have different principles, cloud-based, et cetera. When you think about DISH and the legacy side of the business, that's where the impact happened. You know, quite frankly, you know, we've been giving award-winning customer service. We've talked about our J.D. Power awards here, which are five in a row, and we're quite proud of them. And so, you know, quite frankly, we just didn't live up to the expectation. And so there were long hold times, and, you know, we weren't able to process payments in DISH. I mean, obviously, we're in a post-paid billing cycle. And so, as Paul mentioned, we caught up on some of that. So there might have been a late fee here or there. which benefits a customer. But in some cases, obviously, we weren't able to answer a phone call or answer, you know, a customer issue where they had a technical issue and they may have disconnected. And you're seeing that in the Q1 numbers. But essentially, we put that past us. Like I said in the opening remarks, you know, Boost and Sling, you know, not really materially affected. DISH on the legacy side of the business is where we had the impact, and that's generally behind us now.
spk05: Just because I know the way maybe you guys are – to answer the question, two things that happened on the DBS side of the business, which is one is we had elevated churn, but the second thing is we didn't market. I mean, we didn't make sense to go out and try to get – so we had lower gross ads and we had higher churn. We would expect, obviously, that we return with the outage behind us to more normal run rates.
spk17: And that's what you've seen thus far in the first month of the quarter?
spk05: I don't think we give guidance. Thanks for asking the question again. We don't give guidance, but I think we expect that we would return to normal operation. How about that?
spk17: That's fine. So let me just do a different one, if you don't mind. You know, you hit the 70% or whatever it is. I don't think the FCC has an obligation to do anything, but clearly – It's going to help you in terms of raising capital and becoming the fourth competitor of the market, yada, yada, yada. Like, have they given you any indication that when you're done and you submit whatever you got to submit in terms of engineering studies, that they're going to give you some formal stamp? Or is it going to be normal standard or normal procedure, which is like they don't really have to say anything?
spk05: Yeah, I think my – It would be very helpful if they would give some indication to the market. They did not do that with the 20%. It would be helpful. It's one of the things we don't control, which is the regulation and the government and so forth. It's probably one of the more frustrating things because I think everything that we can control, we just work really, really hard to be successful at, and we've done that for 40-something years, right? But from the regulatory point of view, you know, as an example, my congratulations to SpaceX, but there was a 12 gigahertz study that was out there that we came on the short end of that stick. You know, SpaceX was allocated the spectrum, and we were not able to, even though we paid an auction for that spectrum, we weren't able to access that spectrum for mobility. Absolutely. So we're a bit of a losing streak there, but we've been on both sides of that, and I hope that it'd be helpful, but I don't think we should expect that the FCC will say anything, in part because they're going to have to do their study to verify. Our team will certify under penalties of perjury that we've made it, but they have to certify that themselves, which they should do. That will take them some time. So I think from an expectation point of view, I don't think anybody should expect that the FCC is going to sometime in 2023 is going to say DISH has made their bailout requirement, but we will be certified. To the extent we do, we will certify that under penalty of perjury. So we take that seriously.
spk17: Does that at all inhibit – Charlie, does that in all inhibit your ability to reduce CapEx to the extent that, like, let's say, hey, you believe you hit the 70%. You pull back on CapEx, and then T-Mobile or whatever, and their reg people are like, oh, look at Charlie's cutting CapEx and trying to get the FCC to hold your feet further to the fire. Or do you think these are two different things, and you shouldn't have to continue to spend – which is unrelated to hitting that milestone with the FCC?
spk05: No, I don't think we're – first of all, you can expect our competition to always go to the FCC. We were hoarders. We were speculators. None of that was true. But when you've got three or four companies coming in and saying the same thing, that punches – we don't quite punch above our weight versus three or four people at the FCC. So you can expect that there will certainly be a lot of – you're going to hear about O-RAN, and O-RAN, you know, three years ago, O-RAN didn't work, and then, well, maybe it'll work, you know, and then it was like, well, DISH will never, maybe it'll work, but DISH will never make it work, and now it'll be, well, you know, well, maybe DISH made it work, but it's still a decade away, you know, so you're always going to have that noise from people who aren't doing it, but I don't think that we're required to continue to spend on CapEx once we believe we've made our milestone, with the exception of the third milestone, which is we'll have to continue, which we will a little bit, you know, continue to ramp up in late 24 and early 25.
spk06: Understood. Thank you.
spk10: Our next question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.
spk03: Oh, thanks so much. I think, you know, two questions. I'm curious. If you're willing to share what percent or maybe ballpark, what percent of boost traffic is running on your own network at this point versus T-Mobile or AT&T's network. Charlie, we've poked around it a little bit, so I'm trying to figure out how to ask the question in the most constructive way, but my experience with you historically has been a pretty conservative approach to operating the company, but the markets obviously think you're flying pretty close to the sun on your capital structure, and I guess I'm just wondering if you feel like you're in a pretty conservative position or if you sort of sympathize with the market's views that, you know, things are pretty tight here. Thanks.
spk05: Yeah. I would say that I do think we operate pretty conservatively, but I do think the market's had historical rate changes in the last year. So that certainly has pushed us more into a – that has pushed us closer to the sun, but not to the sun. Yeah. Look, we have a narrow window of opportunity here. We have a narrow window to perform and execute and address our capital structure. We have to do a lot of things right. We have a small margin of error, but it's all doable. It's not a place that's unfamiliar to us. We started in 1980, I think mortgages were 15%. I mean, the capital markets were much worse than they are today. We started the business from scratch with no money, or very little capital. So, you know, we had a merger denied with DirecTV by the Just Department. We had a very narrow window back then. So we've been there before. And, you know, again, the things that would worry me would be, did the markets get worse? And where are they next year? we don't know that for sure. And obviously, from a regulatory point of view, there's obviously a lot of things from a regulatory point of view that we have or continue to have in front of the regulators. And how do they rule in those things? We haven't, you know, we didn't do very well on the CDMA shutoff, which was pretty bad. We haven't done, we didn't do very well on the DE litigation. You know, we haven't done very well on some things. But, my experience is you don't, you don't, you don't always, you don't, you win some, you lose some, we've been on both sides of it, but the losers, you don't have a losing streak forever. And, and so I'm hopeful that that at least will be a positive, but we'll see. But, you know, again, we focus on, we focus on the, on the window of opportunity we have to control the things that we can control. Uh, and we have a good, we have a path and it's not evident to the people on this call, but we have a path and, and, We have to execute on that and hope that nothing gets any worse in the marketplace. Got it.
spk03: And then on the boost traffic?
spk05: We don't disclose that, but it's not a material amount yet, in part because we only have five, maybe John can talk, but we only have five handsets now that have band 70, which is a major part of our spectrum.
spk04: Yeah, as Charlie said, it is early days. We're going to continue to have a growing portfolio of products. They're going to be available for Boost Mobile and Boost Infinite on our own network, including iPhone. We're really just getting ready to support that business from a supply chain perspective. Network's up and ready to roll in those markets, and we're going to be loading customers. And then once we clear the 70% and we're on track to do that, we'll then start optimizing those markets and loading on our network there as well. So we're ramping this year.
spk05: And we should make one distinction. Realize one of the things that we've done is built a network with voice over new radio. So we're the only person in the United States, really in the world other than the Chinese, partly, that does that at scale. So that's the new way to do voice. And, you know, our goal is to have the vast majority of – be able to utilize our network with Bonner by year end. And obviously, to the extent that you do that, then the next step is the majority of all your traffic is going on your network. So that gives you a feel for where we think it goes. But we're not there yet.
spk06: Great. Thanks so much.
spk10: Our next question comes from the line of Jonathan Chaplin with New Street. Please go ahead.
spk08: Thank you very much. A couple more questions on the 800 megahertz option. So based on the value ascribed to the option, it looks like the underlying spectrum is being valued at about $5.3 billion. Does that value assume like a certain exercise of the option, or is it still probability weighted? And if not, what would the value of the spectrum be if it was certain?
spk13: This is Paul. Yeah, it's still a probability weighted at this point in time. And the only change that you saw quarter over quarter from year end in the valuation is really just the time value of money impact.
spk08: Got it.
spk05: And we're not given the amount non-probability.
spk08: Right. Can you give us what the reference transaction or the reference value is that establishes? establishes that $5.3 billion value?
spk13: We look at, you know, other auctions and so forth out there. We won't give you the number specifically, but that data is out there, and I'm sure you know who you can compare it to.
spk08: Got it. Okay. So it would be something like the T-Mobile's purchase from Columbia Capital or something like that for 600 megahertz that you might look at.
spk06: It could be something like that.
spk08: Got it. And then the – can you – Tell us when the exercise date has been extended until. Is that July 1st or is it September 1st? And do you still have to notify the FCC of your intention by June 1st?
spk05: It's a little complicated because they haven't ruled on the extension request, but the exercise date, as I understand it, is July 1st.
spk08: July 1st. Got it.
spk05: We're still awaiting the formal ruling.
spk08: And then one last one on the 12 gigahertz. It looks like there's a prospect that you might use that for fixed wireless broadband, given that you can't use it for mobile use. Can you give us some more context for your thoughts around that?
spk05: Well, I mean, I think for us, mobility is really the key use, and we're disappointed that we weren't able. We believe that we could have used it on a non-interfering device. basis with mobility. But look, the engineers are good at the FCC, and I respect their decision because they had enough information. They did a thorough analysis. So I think, you know, the FCC is opening comments on the 13.2 to 13.75 frequency. And again, given that we paid at auction, given that we believe mobility is imperative for us to compete, You can imagine that that would be another place to go, but we'll just have to wait and see.
spk08: Got it. Thanks very much, guys. I appreciate it.
spk10: Our next question comes from the line of Canon, Venkateshwar with Barclays. Please go ahead.
spk07: Thank you. Thank you. If we're seeing the 600 MHz spectrum, I just want to clarify something. I think last week you guys, or maybe the week before, there was an application to cancel some of these licenses. I just wanted to get some clarity on why cancel instead of just waiting out the license period. And then secondly, when we think about the 60-day extension for the 800 MHz spectrum, Is that based on some concrete discussions you may be having with maybe potential partners in terms of funding it, or is this just an extension of an option to see what else is out there that you can go out and explore that would be helpful? And I have one follow-up on funding.
spk05: Yeah, on 800 megahertz, I just don't want to comment on strategically where we are there, other than we believe it's spectrum that we need to compete. And we think it's valuable spectrum, obviously. Um, on the cancellation of 600 megahertz, we made a mistake. So when you go to the FCC website, we had a lease with T-Mobile, uh, for some markets. And, uh, that lease, uh, we can't, that lease was, was up by the terms of the lease. So we went in to cancel the lease and inadvertently canceled the license. Um, so that was a foot fault, uh, on our part. But, again, we believe that the FCC will have to put that on plug notice to not cancel the lease, and we don't think that's going to be an issue.
spk07: Okay. And does this trip anything on the secured debts? Because I think 600 is the collateral for that debt, right?
spk05: The answer is no, because I believe the the inadvertent mistake is going to get rectified.
spk07: Okay. All right. And then on funding, I just wanted to – I mean, you have maturities, which obviously are the evident need as you go into next year. But then if you really want to be aggressive comparatively, I mean, this is a working capital-heavy business, so you potentially need capital for that as well. And so when we think about the scale of funding you might be – you know, you might go to market for – How should we think about that as you go into next year? Is that mainly to fund the debt maturities early in the year, or might you be proactive and maybe access the market for more than just a maturity amount? Thanks.
spk05: I mean, look, I guess the way we look at it, the first priority is to fund the debt. And then we'll be opportunistic beyond that and creative. I mean, I think, again... That's why management gets paid is to make sure that you can navigate when you have narrow windows, you can navigate those narrow windows. And teams that are really good, they do really well when they have to focus. And, you know, I'm quietly confident here that this team can navigate that, right? And we just have to focus on the things we control and do that. You know, the way I'd say it is I think the market looks at us as half empty, maybe even 90% empty today, right? And I think the truth is that the glass is more than half full, right? This is a company that's been around. We're in our 43rd year, so we didn't start yesterday, so we've had a lot of experience in similar situations. It's a seasoned management team. We're not starting from scratch here, so we know how to work together, right? We know how to assess risk, right? And we're asset rich. So, you know, arguably we have spent $34 billion per spectrum that has gone up in value. We're building a world-class network. There is not another network in the world as advanced as ours. So you're talking, we, and again, I've traveled the world. There is not another network as advanced as ours, and it's up and operating in 50 markets today and working. So So, you know, cloud-based, open RAN, with voiceover new radio, it just doesn't exist. So we have some advantages in the architecture. And I think one of the things people don't – and we're getting a little lucky, which is nice, but you read a lot about AI. And AI needs data. And the most data-rich – place as a wireless network. And if you want to access data, you better be in the cloud and you better have a very sophisticated network that works more like an IT network. In other words, we built an IT network that kind of operates as a telco. Our competition is a telco that has to start operating like an IT network. That's a tough transition for them. They'll get there. It's going to take them a decade to do it, but we're already there. And so if you think... If you think AI is going to have an impact, it's not going to have, probably the first place you're going to see it is when you're talking to your phone because you're just asking the questions. And now you have access to the world's information at your fingertips in a way that you didn't have before, but you need a network to be able to do that. So we have a lot of things going on from a half-full perspective that, you know, from a short-term Wall Street perspective, obviously it's probably not that relevant. But when you look at strategy and you're a long-term investor, We think that the killer application ultimately will be AI and all that goes with it, and we're fortunate that we've designed the network to take advantage of that.
spk12: All right. Rachel, this is Tim. We'll take one final analyst question here before we move on to the media.
spk10: Thank you. We will now 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. We will begin the media portion of this call following the answer to this final analyst question. And our question comes from Craig Moffitt with SVB Moffitt Nathanson. Please go ahead.
spk11: Yeah. Hi. Thank you. Charlie, I want to go back to something you said earlier in the Q&A session where you said the debt markets look like they were effectively closed, but you are asset-rich. Am I correct in reading that as you're saying that you would be open to selling some portion of your spectrum as a way to finance your build? And if so, are you referring to the 800 if you exercise the option, or are there other spectrum bands that you think of as less critical for your build that you would be willing to consider an offer for if they were available? I mean, I guess I'm also thinking you could presumably use spectrum as collateral, but it sounds like since you already have done that, that you were saying that that's not sufficient in saying the debt markets are closed. Am I reading that correctly?
spk05: Well, I mean, I think that our debt is trading for literally 20% returns, right? Yield to maturity. So... it doesn't bode well for our ability to access in a competitive way to the debt markets. That could change, but that's the way it is today. So when you look at the financing that we need to do for debt repayment and growing our business, I think there's levers that we have. Obviously, we have assets. Obviously, anything is on the table when it comes to as a business person, to get to where you want to get to run a successful business. But we're certainly not going to go into strategies and all the levers that we would pull there. I just think that it's – I think there's more opportunity for us than people realize, let's put it that way.
spk07: All right. Thank you.
spk06: Yeah, thanks.
spk10: Thank you. 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 a question. When your line is open, please announce yourself by name and affiliation before asking your question. And we will take our question from the line of Scott Moritz with Bloomberg News. Please go ahead.
spk15: Hi. It is Scott, Bloomberg News. A question about Boost.com. It sounds like there's a ramping going on towards a possible launch. You have the iPhone coming in a few months. I'm curious about the voice over a new network and whether that's the gating factor here. But is there a date on the calendar where you would call it a full launch?
spk04: Hey, Scott. It's John. So I, I'm going to interpret your question as meeting boost infinite, which would be our postpaid offering. Um, uh, yeah, so we're, we're bringing iPhone to boost infinite and we'll be looking to ramp our marketing distribution opportunities in the back half of the year. Um, yeah, we certainly do have our, uh, own network on the way. Uh, we've got sort of more progress there, uh, with boost mobile, um, as of today. but we're looking to launch devices and competitive products with Boost Infinite on our own network as well.
spk05: And realize the iPhone is on Boost Mobile prepaid today.
spk06: It's just coming to postpaid. And did you have a date for launch?
spk04: We're not going to share a date right now. I mean, obviously we are not wanting to broadcast our strategy to our competition, but You'll see us significantly ramp activity in the back half of the year.
spk10: Our next question comes from the line of Paul Kirby with PR Daily. Please go ahead.
spk16: Hi. Thanks for taking my call. Charlie, you said you were disappointed at what the FCC plans to do in the 12.2 gigahertz. Are you surprised that they rejected the technical studies submitted by the folks who wanted to open it up for 5G?
spk05: Well, I mean, I think having been on the inside to talk with staff and look at engineering studies, look, I think they did a thorough job. I trust them to do a thorough job. Obviously, and SpaceX is doing a good job out there, so all I can do is congratulate them. We believe that We believe our studies were valid, but we didn't win on that one. So it's just disappointing, but I don't think I would call it surprising. And, you know, again, we'll look and see where they go with other frequencies and other things, but that was something that, you know, That and also getting, you know, we haven't been able to get the CBRS, higher power CBRS, you know, for a study. You know, that would be the other thing that we're a little surprised that that hasn't, given that some of the commissioners have publicly talked about support for that to take a look at CBRS and trying to harmonize our C-band in the United States because we're awkward versus the rest of the world. As a country, we have to compete. We're the only country that's got this low-band, kind of awkward CBRS in the middle of a C-band spectrum band that's standardized around the world. So I think it's imperative that we take a look at that and get all the facts. I don't know what the decision should be in terms of if they should do something or nothing, but I think it's imperative that the FCC take a look at that so that we can make the best decisions as a country, and we'll continue to fight for that.
spk16: And just to clarify, when you talked earlier about but the other band they're looking at, you meant the 12-7-13-25, right?
spk05: Yeah, 12-7-13. Somebody might have said it wrong, but 12-7-13-25, to their credit, the FCC is looking at perhaps opening that band up. Again, that is a band that could be mobility, and given the 12-gig decision and given the fact that We paid for Spectrum at 12 gig, two ways. We paid for DBS when we acquired the Spectrum from News Corp. That was auctioned, and we also paid for auction of the terrestrial rights to the 12 gig frequency. By contrast, SpaceX didn't pay anything for Spectrum. So it's a funny sort of situation where you pay for Spectrum, and somebody who hasn't paid for it gets a priority. So... But they do a good job with it. So, you know, the FCC has got to look at the big picture, look at the public interest. And, again, I think all I can say is I respect their decision. And it looks to me like they did a thorough analysis of that. And we're just disappointed. But, you know, it is what it is.
spk16: Okay. Thank you.
spk12: All right, everyone. I think that's it for today. Thanks for joining. Thanks for your questions. And we'll see you back here in roughly three months.
spk10: This concludes today's call. Thank you for your participation and you may now
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