EchoStar Corporation

Welcome to the ECHO Star Corporation Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll now turn the conference over to Dean Manson, Chief Legal Officer. Dean, you may begin.

Thank you. And welcome to Echostar's second quarter 2025 earnings call. We will begin with opening remarks from Hamid Akhavan, President and CEO, followed by Paul Orban, EVP and Principal Financial Officer, and John Swearinger, President of Technology and COO. We request that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recording, which we ask that you respect. All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on form 10Q, the quarterly report performed 10Q for the quarter ended June 30th, 2025, filed today, August 1st, and our subsequent filing made with the SEC. This information and supplemental materials relating to today's call will be posted on our investor relations website. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. We refer to OIBDA and free cash flow during this call. The comparable gap measure and a reconciliation for OIBDA is presented in our earnings release and, in the case of free cash flow, in our 10-Q. With that, I'll turn it over to Hamid.

Thank you, Dean. Welcome, everyone. Thank you for joining us today. I would like to address a few notable items from the second quarter as well as an additional recent development. As we have said in our SEC filings on May 9, the FCC informed us that it had begun a review of our spectrum licenses. This includes a review of certain obligations to provide 5G broadband service, the September 2024 build-out extension granted by the FCC, and our exclusive rights to the AWS 4 band. and the inquiries it introduced have led to considerable amount of uncertainty over our spectrum rights. It has effectively frozen our ability to make decisions about our 5G terrestrial network build out, has materially impacted our ability to implement and adjust our overall business plan, and has required us to reevaluate the deployment of our resources. As a result of the FCC's inquiry, we chose to delay several of our scheduled interest payments. We submitted detailed responses in the various public proceedings the agency launched back in May. As explained in our responses, we strongly disagree with the factual and legal basis of the FCC's inquiries. On June 11, our chairman met with FCC Chairman Carr and explained how the FCC's actions threaten our viability. Following this meeting, President Trump encouraged the parties involved to reach a positive resolution. Due to the nature of our ongoing discussions with the FCC, government, and other entities, we chose to make our delayed interest payments within the permissible grace periods. In addition, today we made the due payment for our HSSC bonds. Since then, we have had numerous collaborative conversations with the FCC, the administration, and various parties to try and reach a constructive solution that is beneficial to ECOSTAR and consumers while also addressing the FCC's wishes and fosters U.S. leadership in telecom. It is our highest priority and a huge focus of the leadership team, including myself, but given the ongoing nature of this issue, I can't say more or get into any specifics today. The commitment to securing our future and promoting U.S. leadership in the global communications industry is a top priority. An exciting step towards that goal we've announced an agreement with MDA Space for them to be the prime contractor for our new LEO direct-to-device, or D2D satellite constellation. This new constellation will enable EchoStar to provide global wideband services directly to standard 5G and TN devices, such as popular Android and Apple and other compatible IoT products, and help foster U.S. leadership in D2D connectivity and the space economy. The constellation is enabled by our global S-band spectrum rights, which includes exclusive U.S. rights for AWS 4, along with the 30 megahertz of S-band, 2 gigahertz of SS rights in Europe, and similar magnitude of spectrum around the world. These spectrum rights, our technological leadership, and our strong service delivery capabilities will allow us to provide the dedicated capacity and security services that are in demand by consumer, enterprise, public safety, and government sectors within the U.S., Europe, and the rest of the world. Since 2012, Echostar has invested well over $13 billion in the S-band, beginning with the acquisition of two of the original MSS operators, DBSD and TerraStar, who held S-band FCC licenses, as well as three geostationary satellites, which are in operation today. We also led the efforts to include the S-band in the 3GPP standard to allow for satellite compatibility with off-the-shelf handsets. Echostar's total investment includes the acquisition, integration, deployment, and operation of the AWS 4-band as part of its 5G Open RAN network in the U.S. Echostar's new LEO constellation will utilize up to 25 by 20 megahertz of AWS 4 slash S-band spectrum. And we... will be fully compliant with the newly created NTN and 3GPP standards, allowing EchoStar to provide messaging, voice, broadband data, and video services upon launch to all devices with the current 3GPP NTN specification without modification. This is true 5G mobility. This wideband service is a fundamental improvement over the existing satellite messaging and SOS services. Launch of the satellites is planned for 2028, with commercial services starting in 2029. Initial configuration of the system consists of 200 satellites rapidly growing from there to provide continuous growth of capacity globally. Peak funding of the project is estimated to cost $5 billion, which will be self-funded by ECOSTAR. As we said, when we merged ECOSTAR and DISH in 2024, A key goal was to unite the spectrum and technological assets across both companies to realize our vision of a global D2D service seamlessly integrated with terrestrial connectivity to everyone. We look forward to sharing more details on this project in September at World Space Business Week in Paris. I'll now comment on some details across our lines of business. Our wireless segment continues to perform well as we executed on another quarter of sequential growth with 212,000 subscribers net ads in the period compared to a 16,000 net loss in the same period of 2024. Boost Mobile continues to focus efforts on driving profitable subscriber growth and delivering an exceptional customer experience with better value than the established carriers. The quality of our subscriber base continues to improve as evidenced by churn of 2.69%, an improvement of 24 basis points year-over-year, and an industry-leading level of prepaid ARPU. A significant factor in this success is our net port positive performance. These efforts led to us ending the quarter with approximately 7.4 million subscribers. Our broadband and satellite services segment offers market-leading products and services to a wide range of consumers, enterprises, and governments throughout the world. Our technology leadership in satellite, networking, and broadband services enables us to provide advanced communication services and solutions, fueling an 8% increase in our enterprise-committed contract volume year over year. On the Aerofront, we are pleased to be recently selected by two large airlines to deploy our huge in-flight connectivity solution in their fleets continuing our penetration in the market. Our in-flight connectivity business provides the aero industry's only future-proof solution by leveraging multi-frequency LEO-GEO satellite networks with multiple connectivity providers to offer airline customers a unique, flexible, and cost-effective solution. We have made significant advances with our in-flight product offerings, such as in-line fit production capabilities and selection by Airbus to offer joint service technology solutions to their customers via their HBC Plus in-flight connectivity program. In the second quarter, Hughes also received the AS9100 quality certification, a compliment to the numerous FAA certification milestones for products we have received over the past year. We are pleased with the success of this business unit and are optimistic about future global opportunities in this market. Finally, our HughesNet consumer business we closed Q2 with approximately 820,000 broadband subscribers, delivering higher ARPU as a result of focusing on higher value customers. In regard to our pay TV business, we remain steadfast in acquiring and retaining the most profitable subscribers despite headwinds in the pay TV landscape from new service entrants, M&A activity, and the overall cost of programming. Dish TV finished the quarter with approximately 5.3 million subscribers, churn continues to be at its lowest levels in more than a decade, excluding the pandemic, while viewership is up 8% year-over-year. For the quarter, churn was 1.29%, a reduction of roughly 11 basis points from Q2 of 2024. Our customers appreciate our exceptional product and the performance we are able to deliver, as is evidenced by this decrease in churn year-over-year. Pay TV also grew its ARPU 3% year-over-year. In spite of the highly competitive headwinds in the streaming market and lower tuning events across the sports and politics, Slink viewership increased 18% year-over-year. Additionally, Slink's streaming quality reached an all-time high, increasing our industry-leading performance measured by Conviva. We closed the second quarter with approximately 1.8 million Slink subscribers. Now I would like to turn it over to Paul Orbit for commentary and color on the numbers.

Thank you, Hamid. Revenue was approximately $3.7 billion in the second quarter, a decrease of 5.8% year-over-year. This decline was primarily due to fewer subscribers at our pay TV and broadband and satellite services segments, partially offset by increased ARPU at our wireless segment. Orbita was $280 million in the second quarter, a decrease of $163 million year-over-year. The decrease in Orbita was primarily driven by fewer subscribers in pay TV and an increase in operating loss in wireless segments. due to our increased subscriber acquisition efforts and enhanced network coverage. Through the first half of the year, Equistar generated $166 million in positive operating free cash flow. This is defined as free cash flow before debt service payments and non-operating capex related to Equistar 25 and 26. Free cash flow includes debt service, or free cash flow including debt service was negative $739 million for the second quarter compared to negative $191 million in the prior year. This $548 million decrease was primarily due to $326 million in higher cash interest, $163 million decrease in OIVDA and changes in working capital, partial offset by $56 million in lower-cap X. In Q2, we paid $777 million in cash interest, significantly higher than the $236 million paid in Q1. This increase reflects the timing of interest payments related to the capital we raised at the end of last year. Going forward, you'll notice a pattern where cash interest payments will trend lower in Q1 and Q3 and higher in Q2 and Q4. As a result, our free cash flow will also follow this seasonal cadence. We continue to expect positive operating free cash flow for the full year as we remain disciplined in managing our operating cost structure for growing our wireless and huge enterprise businesses. As of June 30, 2025, our total cash and marketable securities, including restricted cash, was $4.7 billion, a decrease of $711 million compared to the prior quarter. This decrease primarily resulted from $739 million of negative free cash flow and $167 million of debt repayments. This was partially offset by the issuance of an additional $150 million of our tenant three-quarter senior notes due 2029, and 47 million proceeds related to the sale of our fiber business. In our 10-Q, we have included a going concern qualification. Please read the statements contained in our 10-Q to see the precise disclosure, but to provide some color, the accounting rules require us to project our cash position one year from our filing date. The rules do not allow us to consider any new funding sources unless that financing is committed at the time of our filing. There are two maturities due within one year of this window. $2 billion due at DDBS on July 1st of 2026 and $1.5 billion due at HHSC on August 1st of 2026. We believe we have adequate time to address these maturities. Now turning to our segment performance. Total wireless revenue due to increased by 4.7% to $935 million This was driven by a 4.1% increase in ARPU to 3740, mainly due to a shift to higher-priced service plans and increased sales of value-added services. Equipment sales and other revenue increased by 3.1%, driven by the sale of higher-priced devices, including a greater share compatible with our 5G network. Wireless orbital loss increased to a negative 452 million compared to a negative 394 million last year. This was due to higher marketing expenditures and increased costs to support the expanding footprint of the wireless network. We added approximately 212,000 net subscribers ending the quarter with just at 7.4 million subscribers. This increase in net ads was driven by a historically low churn rate and higher subscriber acquisitions. Pay TV revenue decreased 8% to 2.5 billion due to a lower average subscriber base partially offset by a 3.1% increase in ARPU. Pay-TV-Orbita decreased $663 million from $753 million in the prior year. This was driven by a lower average subscriber base and higher programming cost per subscriber, partially offset by a decrease in SG&A. This SG&A decrease was a result of lower marketing expenditures, fewer gross new DISH-TV subscriber activations, and reduced costs to support Pay-TV. Broadband and satellite services for VSS revenue decreased by 13.8% to $340 million. This is primarily due to lower sales of consumer broadband services and enterprise hardware sales. VSS oil debt decreased by 17.8% to $68 million, primarily due to fewer consumer broadband subscribers, partially offset by lower bad debt expense and lower marketing expenditures. With that, I'd like to hand it over to John to cover our boost mobile network.

Thanks, Paul. The experience on the Boost mobile network continues to receive accolades from customers and third-party network benchmarking companies. Most recently, OpenSignal ranked our network as the best in 5G reliability and 5G coverage in over 1,200 towns and cities. We provide 5G broadband coverage to more than 80% of the U.S. population, and in combination with our partner networks, we offer customers 99% coverage across the U.S. We continue to focus on activating an increasing percentage of new customers directly on the Boost mobile network, as well as upgrading existing customers to our growing portfolio of Boost mobile network compatible devices. Last quarter, we expanded our device portfolio to include the iPad, Apple Watches, and Android tablets, including our first Boost exclusive Solero 5G tablet. Today, we have over 1.55 million customers on net, and are loading more than 75% of compatible devices on our network in the accelerated markets. As Hamid mentioned earlier, the FCC's review of our previously approved September 2024 network build-out extension has introduced uncertainty around our spectrum rights, which has pushed us to suspend furthering our 5G network build-out. Therefore, we have little to report regarding network expansion within the second quarter. Until this matter is resolved, we are focused on continuing to optimize the network infrastructure in place and continuing to add customers to our network. Wireless capex in Q2 was 171 million. We are not providing network capex guidance for the second half of the year at this time. However, we are finishing construction for certain cell sites that are in process. As a company, we have always had the vision of delivering global connectivity seamlessly integrated between terrestrial and non-terrestrial connectivity. We built the world's first 5G standalone open RAN network and have been applying this technical know-how to integrate 5G terrestrial connectivity in coordination with NTM services, specifically with the new LEO constellation across our AWS 4 spectrum in the U.S. EchoStar and Boost Mobile's extensive experience in building and operating satellite services and terrestrial mobile 5G networks uniquely positions us as a telecommunications company at a truly global scale. We look forward to continuing the important work of helping the administration and FCC continue to deliver for the American people. Now, I'd like to turn it back to Hamid for a few short closing comments.

Thank you, John. We are pleased with the overall performance for the second quarter and are optimistic about our opportunities in the second half of 2025. We remain focused on hitting our operational targets of positive operating free cash flow, optimized subscriber profitability from our pay TV segment, expansion of Hughes' enterprise business, and continued growth from Boost Mobile. With that, we'll open it for Q&A from the analyst community.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, you may press star 1 from your telephone keypad. and a confirmation tone will indicate your lines in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you, and the first question is from the line of Rick Prentice with Raymond James. Please proceed with your questions.

Thanks.

Good morning, good afternoon, everybody.

A couple of questions. I'd like to start, obviously, on the news of the day, the non-terrestrial network directed device LEO constellation. We've known for a long time, you and I have chatted about the S-band and the value it could have, but it would take some capital to operationalize or monetize it. Questions I've got on the non-terrestrial network is, is this a decision that you then are going it alone, or is there potential for more partners? The service level Sounds like you want to do more than just messaging. You want to get 2G, 3G, 4G, 5G. How will you go to market? It's a crowded marketplace. There's a lot of people talking about it. Do you anticipate going direct to the consumer, direct via carriers, via OEMs? And also, maybe can you lay out a little more of the pacing of that $5 billion peak funding?

Great. Seven or eight great questions in one. One asked, I'll try to parse it out to the best of my ability. If I miss any part of it, we'll come back to it. Let me start with one of the middle parts you mentioned is a crowded market. I want to say that there's no one, no one today, no one today and no one on the roadmap today we see that is going to do wideband. We are the unique one. Everybody that today, let me parse this out for you guys. When we talk to satellite connectivity, there are three different completely different product sets or segments. One we call broadband, and that is connectivity from a space to a dish. An antenna that usually is mounted, whether you can move it or not, that's a different story, but it's an antenna that is on the ground somewhere, unique piece of equipment, whether it be our HughesNet antenna that is there, whether it be somebody from YS has one, Starlink has one, others have, Kuiper will have some, That replaces your broadband connectivity at home or broadband connectivity in some other location. Then you have the narrow band on the far right end of the product set, which is messaging or SOS. Apple has that. We have that in Europe. We have had it for a long time in Europe. It's being sold not under our own brand, but we allow other people to sell it. We'll be offering that in the U.S. We have always had the capability using our geostationary satellites. Starlink and T-Mobile offer that today, and Apple and GlobalStar offer that. today, that's messaging and SOS. And then you've got something in between that is ours, and we call that white band, and that is the natural use case of your mobile phone the way you use it today. It is not messaging only. It is not SOS. It's not a station. It's in your pocket. It's in your purse. It's in your briefcase. You move around anywhere in the world, maybe on the top of the mountains or in the middle of the oceans or in the middle of Frankfurt or in the middle of Toledo, you're going to get the same connectivity to the satellite, and you will not be able to tell the difference whether it's connected to the satellite which is a cell in the sky, or is it connected to the cell in your neighborhood? That nobody else has. And nobody else is ahead of us. I want to be very clear about that. And so there may be a lot of confusion about this marketplace is crowded, perhaps crowded in the broadband space, maybe crowded at some point in the narrowband space, but there's zero crowd right now in what we call wideband, and we are doing it. And why are we unique in doing that? I can give you five different reasons. But the first of it is that we have the unique intellectual rights around the world nobody else has. And second, we are focused on 5G, NT, and the standardization, which we have worked very hard to standardize and develop for our spectrum piece, marrying it to our AWS 4 and S band so that you can have this exact same architecture as 5G that we have in our network on the ground in the sky, moving the cell from your neighborhood to the sky. That's all we're doing, which seems very simple in concept. Obviously, it takes an incredible amount of work that has been done for over a decade to materialize, but I want to say that nobody else is doing that, and that's my claim, and you can quote that. Now, coming back to going alone and with partners, look, at this point, we believe we have everything in-house to make this happen, but we have never been close to partnerships, never, on any part of our business. Today, we are a great partner of many, many governments and countries and airlines in our Hughes business. We are absolutely appreciated across the world. Welcome everywhere from Brazil to Europe to Far East. In Middle East, we have been a staple supplier everywhere in the world, and we continue to be the trusted partner of everyone. And we are not planning to take this to market in a way that would discriminate against the carriers. Our business model relies primarily on a wholesale model, a partnership relationship with every carrier around the world in a non-discriminatory basis. We want to make this available to 8 billion people in the most easy, cost-effective, and convenient way. That is our target. And we believe we are well on the way of doing that. Remember, the system is going to continue to grow both in terms of number of satellites and in terms of capabilities and technological improvements that are absolutely relevant and usually available in the telecom industry in a very quick fashion when you invest into them. And in terms of expenditure, we talk about a peak funding of $5 billion. You can imagine that that $5 billion is not due day one. And when the satellite is going to be in service 29, so you have to assume that there's a typical payment schedule for the industry. We We can't disclose any of that for both confidentiality and other reasons, but you can imagine that's over a longer horizon. But I also want to say that the system is, in perpetuity after that peak funding, in our business model, self-funded. So this is not one of those cases where as we increase the satellite number, as we enhance the capabilities of the satellites and we launch new ones, that we need additional injection of capital. Our business model easily self-funds all of that R&D and additional expansion. So we expected this to be a one-time $5 billion investment. And again, the one-time investment is a spread over a window of time with a peak funding calculation to be $5 billion. As of that point, after the peak funding, on a typical business model, you start paying down what you have already paid. So it starts paying back. I hope I answered the six or seven questions. You're all in there, but if there's any pieces that I missed, happy to talk about.

Just one other ancillary, then I'll go to the 5G network question. Do you envision this as a replacement for terrestrial wireless, a complement to terrestrial wireless? How would you envision how this would fit into the marketplace?

The answer is yes. Like every other technology, this will start being, in our vision and view, This starts being a complement to every terrestrial network out there. It's not trying to replace a terrestrial network. It would be a great complement covering 70%, 80% of the world's surface. That is never possible or economically viable to cover terrestrially. But as the technology becomes more capable and the amount of capacity from the sky becomes much, much larger than its very, very initial version, which, by the way, comes very quickly. When we're talking about versions and generations, you can imagine they're only a couple of years apart. These are not like 5G, 6G, 4G that are 10 years apart. You can imagine batches of satellites being only 18 months apart, that are two years apart, and they go up. So the technological, quote-unquote, generation, if there is such a thing in this case, very rapid. So very quickly, in a short few years, we're going to get to the point that the satellite capability will be far, far larger. As a result of that, you know, it will eliminate the unnecessary heavy cost structure and a burden on carriers covering very lightly populated rural areas, highways and roads, the rural roads where it really is uneconomical. As you know, a great portion of a carrier's network is uneconomical. They're doing that just to have the service for people who travel rarely and occasionally through, and that just becomes a necessity. But once the satellite capability goes higher, you could eliminate hundreds of thousands, potentially millions of cell sites that are not green, not cost-effective, not friendly, hard to maintain, they need air conditioning in the middle of a desert and a bunch of other things, and all of those things would go away. So the answer, very long answer to a short question is, it starts as being a very good complement But over time, it can relieve the carriers from the obligation and the cost structure to pay for those. In fact, the biggest beneficiaries will be terrestrial carriers, that they can have the great service without having to actually pay the cost structure in the longer term. But in the short term, I just want to say that the initial version will be a 100% compliment. It is our intent to work with every carrier around the world on a non-discriminatory and very friendly business-enhancing fashion, we absolutely will be complementary for every carrier's business model.

Great. I appreciate the color. Thanks, guys.

Our next question is from the line of Walter Pajczyk with LightShed. Please proceed with your questions.

Thanks. I guess let's bring the dialogue back to earth on this one. You know, Chairman Pai – or, excuse me, Chairman Carr – has said there's really not a need for four network operators in the market. Obviously, there's stuff in the press about best and final. I know you said in your prepared comments you can't really talk about it, but you have suspended capital payments on the network. So, I guess if we just assumed that these things get resolved, you get funding, right, because you do have a going concern. which you address that you can hit those, you know, it doesn't factor in additional capital you brought in. But the result of whatever's going on with CAR and the FCC is that you remain a network operator. I know that's not necessarily assured one way or another, again, depending on how things play out. What is the go-to-market strategy as the fourth network operator? And do you think that that, at this point, requires... a major distribution partner. Because it seems like with gross ads insured up across the three operators, there is an opportunity. It doesn't feel like cable is that alternative because based on what Brian Roberts said on his call earlier this week, doesn't necessarily want to partner in that way or own assets. So how does this work if you remain a network operator?

Thank you for, again, many questions, Walter. As I mentioned, I cannot be specific about how we proceed. Much of that is in play today in terms of our discussions with FCC. I will certainly not comment on whether the market needs three players, four players. All I know is that I am the fourth player, and until change, I'm notified to do something different. My head is down in a in the weeds, running the best business I possibly can as a fourth player in the U.S., competing, winning. You've seen us. We are disruptive. We have, you know, we have taken share. We have gone from losing hundreds of thousands of subscribers per year to gaining hundreds of thousands of subscribers and a net worth positive. You know, we will operate. We continue to operate until a different, if and when a different, you know, avenue is open for us or is demanded of us, we'll certainly head in that direction. But, you know, we need to maximize the value that we have for our shareholders, you know, be the player that people want us to be in a marketplace, serve the customers that we are increasingly serving. And I will not try to predict or protect what the market may end up being. You know, you referenced cable, you referenced others. You know, I certainly don't control their business or their strategy and, unable to comment on any of that. All I want to say is that we find ourselves in a very unique position. We have been a good carrier. I think we have delivered on everything that we have been asked to do and committed as part of the formation of Echo Star, I guess at that time Dish Network, and now Echo Star. We'll march along. What we have done today has been in the works for a very long time. I won't comment on how the funding, you talked about that. All of that I'll make more clear when we share with you a more holistic picture of our financial situation and our system when we get to hopefully the satellite show in Paris. All I know is that we have a very positive step in front of us right now with this announcement we made today. We will work very collaboratively with FCC to find an amicable solution that is in the best interest of everyone. We still have all the strategic options in front of us, We have not closed any doors with any angle or avenue that we could pursue, but I remain constructive in my view that we'll find a solution going forward.

Given that you're not spending on the network and likely pulling back on marketing expenses given the issue, maybe not, is there any reasonable timeframe that you can provide in terms of when whatever the resolution is reached with the FCC? Are we talking... by end of year, by end of quarter, and any type of ballpark end date you can give us on this timeline?

Again, it's primarily not up to us. We have been constructively working with FCC to provide responses to each one of their inquiries, including detailed information that comes our way as a request from FTC. We're also in parallel working with a wide-ranging number of alternatives to make sure we find a win-win-win, I guess I like to call it, solution. Since we are not on all sides of that, I can't predict how this may go. But I want to say that we, from our side, we are not passive. We're not sitting there and... and we are progressing with our discussions everywhere we can, but it all depends on other parties' needs and desires. I would think that this will not be years away. This is probably not very far away. I think the patience of FCC or request of FCC has been that we do something together in a reasonably shorter timeline, but I wouldn't necessarily tell you that I have a hard deadline or milestone in my mind about how we come to a closure. I know it's a softer answer than you expect to get, but candidly, I don't control all aspects of it. All I can say is that if there is a delay in finding a solution, it is not because of us. This is the highest priority for me and my team, and we're not taking it lightly.

Got it. Thank you.

The next questions are from the line of Brian Kraft with Deutsche Bank. Please proceed with your question.

Hi. Good afternoon. I guess I had a follow-up question on the LEO constellation announcement. So I wanted to confirm the right interpretation of the press release language, and I appreciate that you don't want to share details of when payments are being made, but is the $1.3 billion for the first 100-plus satellites the roughly the amount that gets invested through 2028? Or is the 5 billion the number that gets invested by 2028 or shortly thereafter? Just those are orders of magnitude different. So I'm just trying to get in a sense for what that capital envelope actually needs to look like for you.

Yeah.

And then I had a follow-up after that, if that's okay. So sorry, go ahead.

Yeah, the 5 billion, let's talk about 5 billion because that's the more umbrella headlines. The $5 billion is the overall peak funding of the project, and I have not specified, at least in today's discussion, as to when that peak funding will be reached, how many years down the road or days or months down the road that may be. But the peak funding includes, obviously, your satellites, includes the cost of launching them, includes the cost of gateways, operations, you know, everything else that you have to have in a typical business plan as you would put together. Now, the peak funding at some point will be reached, Who knows? I've not specified, as I said today, how many years down the road that will be. So therefore, we need to have, by that time, a total capital of $5 billion available to us. And post that window, post that peak, every day the system pays back that investment. Obviously, as a typical private equity case, you ultimately end up paying that money back, and you end up generating the additional value that the system delivers to you. The $1.3 billion is the one piece of that five that we announced as a result of having made the commitment or agreement with MDA to manufacture the satellites. We have not talked about any of the other components yet of cost structure, which hopefully we will be more informative about and be able to give you more in Paris, which is only a few weeks away. And today, the most important piece is that we have embarked on that journey, which the rest of the picture will also come into play, as we are 100% committed to being the best provider of direct-to-satellite connectivity in a wide-band way. The second part of your question, if there's any, I'll be able to follow through.

Yeah. So I guess I just want to understand, too, what are the service capabilities that you expect to be able to offer, you know, let's say in 2028? It sounds like that's when the service would launch in terms of geographic coverage. You know, I assume it'd be a 24-hour service. What kind of bandwidth? And also just high level, what do you think the revenue model looks like for D2D? Is it a revenue share model with carriers? Is it you know, sell them low-cost capacity on a, you know, per gig basis? Just curious how you're thinking about that.

Okay. So the service, our vision of the service is, even from day one, will be to offer everything you have in your pocket today. So if you do text, voice, video, FaceTime, accessing your apps, and... If you're in the middle of Grand Canyon or the middle of the Atlantic Ocean and you just want to watch Netflix, we want you to watch it. Whatever you do, you can't tell the difference whether your phone is connected to the nearest cell site. Where is the nearest cell site? Is it 600 kilometers above you or two kilometers to your right? That is the standard. That is the standard we have worked on and the architecture we have tested and we put it in place and we manufacture it. no one else is doing that i want to be very on the record so when they say crowd of the space yes other parts of the industry is crowded this one is one player and um you need the position to do it now of course on day one and the first version and the not smallest number of satellites which i call minimum viable offering to start you don't have all of that capacity in a way that every person can do that and we're not planning to do that you're planning This is not replacing where you already have great four other carriers covering your neighborhood. But as soon as you go out of it, and there's hundreds of millions of people that are outside, and there's travelers and governments who want it differently, and security services, drones, unmanned vehicles, everybody else that needs to be connected that are not necessarily only reliant on terrestrial coverage. we'll be able to serve this. But our product will be indistinguishable from what you already have on your iPhone or your Android phone. As time goes on, the system capacity goes higher. This becomes more affordable, more available to more people. So I can envision that just to be safe, let's put it 20 years down the road, you're going to get to the point that anybody, anybody that want to watch Netflix, they can also watch it through the satellite. They don't have to watch it through terrestrial. That's possible. So let's just leave that. Now, So in terms of go-to-market model, as I said, we are not planning to compete with the carriers. We are producing this as a benefit to the carriers. It will be an additional source of revenue for the carriers. It will be a service enhancement for the carriers. The carriers will be offered, instead of 99% coverage or 82% coverage, 100% coverage of globe, not just even where people, you know, their houses are, wherever they travel. So our model, we are not able to share the details of our model, but I think it will be value-enhancing for a carrier and us in a collaborative way. We do not wish to go direct to consumer. We may be forced to do it or choose to do it in cases where there are no carriers in some geographies over the waters or other places where we may have the obligation to do it or some other way we want to do it, but that would be a... abnormal, very unusual corner case, we really like to go to the market with the carriers using their relationship with their customers, strengthening that relationship with their customers, making sure the regulators and local laws and everybody else is happy about our offerings in the countries. So that is our path to market, very collaborative with governments, regulators, carriers, everyone. That's our model. Okay.

Thank you. Appreciate it, Hamid.

Our next question is from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Thanks. Just sort of sticking on the topics of the day, Hamid, you've suspended spending on the wireless, on the 5G network. but are you going to be moving forward with your investments in this LEO project? I don't know if it starts immediately, but you've obviously signed a contract with MDA. It just seems a little confused as to why you'd be moving forward with one and not the other. Maybe I'm just thinking about the timing differently.

No, sir, I'll be happy to explain. That's a very good question. I would say that, look, our direct-to-satellites, You know, I've talked about it almost every earnings call. And in fact, going back to the merger of the two companies, a key decision factor, a criteria, a benefit of bringing Dish and EchoStar together was to activate this opportunity. We had the spectrum on one side. We had the technology on the other side. You know, there was two hands that we wanted to clap. We need to bring them together. And we did that. So this is not an accident that we are doing this. There's nothing to do with, honestly, it has nothing to do with any of the recent events. Now, you have a very good question. The question is that if you have this network issue that you're saying, hey, I don't know, until I resolve with FCC all my issues, I'm hesitant to invest in a network. Well, why aren't you hesitant to invest in a space? I think that's the nature of your question. We can't alter the terrestrial. I can slow down to get more clarity, and I don't lose a lot of market opportunity. I don't, because I have a national roaming. We already have a great, great coverage. 280 million cost consumers are covered. I have perfect experience with my consumers. The lowest churn, highest ARPU. They're satisfied. I'm winning. I'm winning. I've got more consumers, prepaid consumers, than almost all of the other carriers this quarter. And so... We went in there, and I don't need to do anything until I have the certainty shows up. As it comes to space, I don't have that luxury to wait. The opportunity is here and now, and if I wait a few more months, my business model gets impacted negatively. Europe is in the process of asking us and everybody else how we are going to get to space. I need to have a definitive answer in Europe. I want to have this American leadership, and I don't want to lose it in Europe. I don't want to lose it in other places. If I wait to resolve this, that opportunity for U.S. and us is lost. And so we have decided to continue on the path we have been on the direct-to-satellite because we cannot wait. That is critical time, Pat. You know, the national network build, we are already in a phenomenal position. We have over 24,000 sales sites. And so I don't see a few months of delay until we have more clarity detrimentally changing my business one way or the other.

Yeah, that makes sense. That's a helpful answer. Is there any reason why you are going to be able to share a lot more detail on this in Paris than on this call, other than that's a more important audience than maybe this one?

Absolutely, the most important audience is the audience that listens to me, no matter who it is. But, no, kidding aside, this is in development. There are many more pieces that have to come together For this picture to be clear, for instance, the satellite is one piece. We still need to talk about all the other components. There's launch that we have to talk about. We have to talk about gateways. We have to talk about... But there was a question earlier on that I didn't... I forgot to, I guess, cover. On the day one of the service, we will cover almost all citizens, you know, from 60 north to 60 south latitude. So that would be... That's almost everybody except for North Pole and South Pole, which we'll have the opportunity to cover, but we will leave that for discussions with governments and militaries. That's where the biggest customers are. But we have designed a system that we can provide 100% coverage of the Poles. So there's still a few things in play that I think the next few will clarify and sort out. I think then we can provide more holistic answers. It really isn't to try to hide the ball from you. It's just that I don't want to change the answer in a few weeks. I want to be completely comfortable with every angle of it, and then we share more of the business model and details with you. There's only a few weeks away.

Okay. And last question. I'll take a swing at this. I know it's a tough one, but I think everyone understands what Equistar is trying to do with your business. What does the FCC want? What is the end game for them? Because... You know, they've sort of made a bunch of accusations about your spectrum use or lack of use and the milestones. The press, I think, and the market at one point, I think, thinks they want you to sell your spectrum. Maybe there's an Elon Starlink angle. It's just sort of hard for us outside of all this to figure out what the FCC is asking Echostar to do. I'm wondering if you could share anything there for us.

Yeah. So first of all, we... I want to reiterate and say that we believe we are standing very tall and good on every obligation we have ever made to FCC. So we stand behind all of those today. We have always done, and we do it today again. We have made the certifications. We have delivered on every commitment. Any trade that we have made with FCC and relied on FCC's approval has been as a result of us committing to something else that we have delivered. We've committed to put consumers on more... customers on net, have a price plan that is one of the lowest in the industry, a bunch of other things. But in terms of what FCC wants, I think that's a good question for FCC, honestly. I cannot comment on that because we also ourselves have been in the process of discovering more and more what is it that would satisfy the FCC? Why would these inquiries come when we believe we have been one of the companies that have been most flexible in terms of meeting the needs of FCC, Justice Department, and everybody else. So you're right. I cannot answer any more than that because I honestly don't know. And that's a great question for FCC.

Okay. Thanks so much. Our next question is from the line of Sam McHugh with BNP Paribas. Please proceed with your questions.

Awesome. Thanks, guys. I had a few. I'll start on wireless. You obviously had a great quarter in terms of nets, but a pretty high cost. I guess in context of the going concern and the spectrum stuff, do you think you still have a similar budget for subscriber acquisition in the second half of the year? Obviously, you've pulled back on the network capex, but on the subscriber side, is it still all steam ahead?

Look, I make the decision, honestly, as it comes to operating business, I make the decision on a very dynamic basis on the market conditions. We do intend to continue to be in a market, and we're not pulling back from our go-to market. If the market is receptive to our offers, and I see a market that is still in demand, I will invest, I will get consumers. But I want to tell you that the market on the consumer side is very volatile today. Is it tariffs? Is it economy? Is it immigration? Is it what is it? I have no idea. But the market demand is unpredictable. We had a great start to the year, even though we delivered our best results so far in the history of this acquisition. The first part of the year, the first few months of the year, all the way through May, markets seem to be stronger, but now seems to be a little less strong. So if the market is not as strong, I will choose not to invest as much into it because the cost of acquisition will not be justified. So a long way of saying I'm not changing our acquisition strategy, but you have to know that that is in itself a very big variable depending on conditions of the market. If I don't find a favorable market, I may acquire less customers. If I find it continuing to be in good demand, I will increase my spend in the market. But it's not relevant, but it's not as a result of anything that is going on with FCC today.

Got it. And then more broadly on the wireless business, is it still core for you or with this directed device, do you think there's a path maybe to shift to more wholesale business and have the talks around spectrum with the FCC maybe change your view at all on that difference?

I'm sorry, I'm trying to get the gist of the question. I may have missed the gist of it. Could you tell me one more time?

Sure. Yeah, go ahead. So I was just saying, is running a retail wireless business all core for you? It feels like with the director device and, you know, what the FCC is saying around the spectrum, do you think there's a future of EcoStar where you become more of a wholesale provider rather than a direct-to-consumer?

You know, we today are... I am not predicting that we are changing our model in any way other than the fact that we have always talked about adding this. Now, how the future goes, obviously, as I said, is a result of a dynamic picture that is, you know, of the industry, of discussions with FCC. But we have been committed to doing both. You know, we have not been pulling back from one or the other. We have not been trying to switch from one to the other. Let's see how the future holds as some of these developments in industry happen. We are very capable, incredibly well positioned to do both. We have expertise in satellite. We are the only company in the world that knows how 5G O-RAN really works in great scale as a standalone. We can marry the two together very well. And again, a unique position of being both a carrier and a satellite company, satellite technology company, puts us in a unique position. Let's see how that goes in the future. So thank you for the question. Next, I think, Operator, we can take one more question in the interest of time. Please go ahead.

Thank you. That question will be coming from the line of Craig Moffitt with Moffitt Nathanson. Please just use your question.

Hi, thank you. Returning to the direct-to-device satellite business for a second, just given the cash constraints on your business, it's reasonable to assume that you'll be looking for additional financing or financing partners Are there spectrum bands or other assets that you would be willing to commit and put liens on for that debt? And how do we think about that in the context of the current creditors and the calls on your existing assets?

Right. Again, a very good question, Craig. Thank you for asking. As I said, I'm not in position to describe the entire financial picture of the company and this project. but obviously you must assume that we're looking at that picture in trying to make sure we are within the means that we can deliver on, and we are within the means of meeting every obligation we have always had. So it is not lost upon us that when we add another $5 billion in here that we need to somehow finance it, we need to meet other obligations. So I'm repeating your question in a way to say that I understand the question, It's not lost on us that we have to have answers for those. I know that I cannot give you those answers today for a variety of reasons, not just one or two, but there's a variety of reasons I cannot provide you a complete detailed answer today. But as time goes on, starting with the satellite show, we hope to disclose more of that and clarify more of that picture. It is my intent to be as transparent as I possibly can, but sometimes that transparency either is not possible or is strategically not in the best interest of my shareholders. And that's my job. So we disclose the information we must as soon as we can. Great question, Craig. We will be more informative about what our financials looks like. It's not lost up on me or anyone in this business that we do have a significant amount of financial obligations. We believe this is very conducive to solving those and making those better as opposed to worse. Otherwise, we wouldn't be doing it. So I hope that answers at least partly what you needed to hear.

Well, can I ask a follow-up then? I mean, there was a report earlier this week in Bloomberg suggesting that the FCC was pushing for spectrum sales from AWS for... Would selling part of your spectrum be a potential avenue for raising capital? And I would presume if the FCC is pushing for that kind of a of an alternative, they would be inclined to waive the constraint on who would be available to buy it under the consent decree or waive it sooner. If that were waived and the big three were able to be participants in an auction for your spectrum, would you consider selling assets as a way to raise capital?

You know, I can't say anything about Bloomberg's article. All I can say is that it did not come from us. And... I, therefore, I have no way of knowing what the source of that comment is. I'm not even able to speculate as to where that comment may have come from. It is not something I can comment on. I mean, all the information available from FCC is the information that you have already heard. FCC would like to see more spectrum in use. They'd like to see, you know, the market become, you know, more efficient in a number of ways. And I think we understand that. And there's a million ways that can happen. Those million ways have not yet landed in a way that I can give you a full picture. We have not eliminated any options from the table. FCC has not necessarily given us a, you know, very, very detailed mandate of a certain thing or another. I think we're still in collaboration with FCC and other entities. to see what might be a good solution that everyone is happy with. So I honestly would not build any more on what Bloomberg has reported than another piece of information in the market that may or may not be true.

All right, thank you.

Thank you, everyone. Thank you, everyone, and I hope to see you in Paris or our next earnings call.

Thank you. This will conclude today's conference. Let me disconnect your lines at this time. We thank you for your participation. Have a wonderful day.