Q1 2020 Earnings Call
[music].
Please standby.
Good day, ladies and gentlemen, welcome to the Dish Network Corporation first quarter 2020 earnings conference.
Conference is being recorded.
This time I would like to hand things over to Mr., Jason Kiser. Please go ahead Sir.
Well. Thank you. So thanks for doing so everybody a choice they been Charlie Ergen not true from Cowen.
Both.
Or close or no.
She also Brendan here hurt our general counsel, Poland Nerco pets.
Yes in public disclosure so well.
Good morning, everyone. Thanks for joining US statements. We make during this call that are not statements of historical facts constitute forward looking statements that are subject to risks uncertainties and other factors that could cause actual results to differ materially from historical results.
From our forecast.
No responsibility for opinions.
For more information things Research Division.
Doctors disgusting residency Bobby.
Let's turn it over to our CEO calls.
Brendan and welcome everyone to call before I assure you draw submissions on a core.
Sure.
These are incredibly difficult times for many of us.
So I hope you all day long.
One space.
Levels family friends and neighbors.
Nothing that wants to go.
Understand don't pass through most of this organization from top to bottom line.
Really the Kratos response until the crisis.
I'm proud and grateful responsibility.
Turning to compassionate or co workers.
Demonstrated every day and one on ones when customers as expenses.
He's built or.
No I can't really answer on the call equipping our fuel based test.
Safely.
No homes across the nation.
Turn to moving in very short warm.
Well, we're frontline down customer experience and sales agents as well as management.
Posture.
It's really going on for whatever that's it's another example, like our manufacturing distribution teams can change you than usual high level performance. In addition to their day jobs.
They drove I enjoy shortages and protective gear and helped her workers and their own colleagues bodies I'm sure.
Hey, shields and face masks some big Thank you Judy entire just change.
Let's get started I'll touch on wireless.
Yeah disruption, we changed the hard work on the wireless initiatives first we stopped you'll be iOS you got from the core Paul haven't been commentary on that.
The wireless seem to change to make progress.
Fiveg networks, and we continue to pursue close whose passes and T mobile Charlie Tolmar also here in the columns builds into questions.
Oh for garden corn dish.
He brings a strong fundamental game, but the crisis was about $1 sometimes.
We saw gross addition grow quarter over quarter by 56000.
Did you see the radios and slowing orchard, especially in the back half.
Due impart to some customers reluctance to a super marketing efforts like direct mail and to have folks are working in their homes.
You here and for me personally every quarter.
For years aren't just strategy doesn't anchored on acquiring and retaining long term profitable customers.
And that's why we focused on a more rural and higher credit subscriber base.
I didn't Saddam path.
In the quarter, we saw just TV subscriber losses like 33 zones.
Exactly.
Vision, how slow we did adapt our activity to match conditions, we adjusted our marketing.
More value to customers.
One time, delivering waterborne channels and content.
Once the health of our programming partners, that's always focused on providing an excellent insane and home installation and service experience.
That's the country wouldn't know children's place posture, we saw customer usage of our platform.
I'm pleased to see subscribers growing gauge how do you have some experience the hopper platform delivers.
Moving onto their apps and our dish anywhere capabilities that given the massive impact alcobras had all the travel and hospitality industry, including Airlines and hotels James.
Taking a step up approximately 250000 subscribers representing their personal accounts renting and TV channel.
I'll have more color on this in a moment.
Turning to sling kinda quarters for the last 281000 net subscribers in her not had 7000 here and over it.
Certainly the supporting we opened up the core having rolled off price increase washing Fox news more.
Thanks package.
And introduced a pretty called DVR like just sling TV viewer engagement did increase that said well like originally in February and March was up more than 100% lots of sports.
The last part of the core strength of viewing equation significantly.
The competitive environment was also aggressive, especially.
Commercial free streaming services stays within the country offers on promotions.
Well its continued focus on acquiring are saying problem customers and delivering a great customer experience when it comes to platforms to build and user experience.
Well, we saw it might grow we'd have to execute a much higher level.
Before I turn on Paul Let me once again I Express my gratitude.
He has a leadership in here.
A lot of people, who work in a lot of extra hours to take care of customers and take care of the broader just community, but I couldn't be prouder, so down I'll turn over to Paul frequent commentary on some of the numbers.
Thank you Eric.
We get into the quarterly results I have two items to highlight.
First because the impact of covered 90 in the measures with implemented to address it second because the impairments we took during the quarter.
For our pay TV business, we've implemented a series of initiatives to address the impact of carbon 19.
Ignore belt and put in place cost cutting measures to slow the pace of Opex and Capex.
Recalibrating investments, we're making in that business.
Yeah, so back in marketing want to keep our powder try for the time being.
Corporate 19 introduced our in person selling opportunities. It has also theater a direct mail marketing because customers don't want to open their mail in some customers are currently reluctant to all our technicians into their home.
We increased our bad debt reserve by 21 million.
Because many commercial sentiments are closed are running after just capacity. We have put these accounts on pause or provide a temporary rate relief.
These accounts.
Foodie commercial accounts that have or will ultimately disconnect difficult at 90 represent approximately 250000 subscribers and they were moved from or anything just TV subscriber.
We expect the vast majority of these commercial accounts to reactivate in coming quarters.
The reactivation will come with minimal cost therefore, we will not caught them as gross activations.
In the back to our ending subscriber time in the corner that they return.
We also took a $356 million impairment charges during the quarter related primarily to our narrowband I don't see building inner satellites you one into one.
Now that the T mobile script merger has closed and there's more clarity surrounding our revised buildout requirements.
No longer intended to finish our narrowband LTE build.
Accordingly, we recorded impairment in the corner narrowband LTE assets and satellites that we couldn't do not trying to use you know fiveg field.
And looking at the piano or operating income and EBITDA for the quarter, both down compared to last year.
However, absent the impact of the impairment charge, what operating income and EBITDA would have increased versus last year.
I revenue decreased due to higher pay TV ARPU.
The offset by lower subscriber base.
The increase in the pay TV ARPU was driven by price increases Apple dish insulin.
Our subscriber margins for the quarter were positively impacted our continued focus on higher quality subscribers and also reduce costs related to try to removals, including regional sports.
Dish TV Soc is up this quarter due to increase subscriber activations in the cost reactivation increased slightly from 800 $828 last year to 861.
This was driven by increased advertising spend prequaled at 19.
Offset by more subscribers activating with remanufactured equipment.
In Q1, 2020 satellite transmission expenses decreased by 65 million.
As discussed on prior calls this reduction in expense was related to the acquisition of certain satellite some echostar during the third quarter 2019.
Gee expenses were up this quarter as a result in cost to support our wireless initiatives.
Our free cash flow of 537 million for Q1 benefited from improved operating performance and working capital.
We ended the quarter with approximately $3.4 billion with cash and marketable securities.
Which we used to redeem a 1.1 billion dollar debt maturity I mean first.
That leaves us with $2.3 billion, which will allow us to purchase boost in fund our wireless initiatives Twentytwenty.
We still expect or 2020 wireless expenditures to be between 250 to 500 million.
Given the impact to cope with my team, we may end up closer to lower into that range.
With that I'll turn it over her questions operator.
And ladies and gentlemen at this time, we will take questions from analysts. If you are in analysts and you have a question at this time. Please press star one on your telephone keypad.
And everyone.
Boy depends on your phone line will also indicate when your line is open we do ask that you state your name and your company name.
You ask your question and we'll go to our first color it sometime in Morocco RBC market.
Well.
They're please check your mute function. Your line is now open.
Great. Thanks for taking the question if I could.
Charlie on pay TV, a lot has been set over the last few weeks about sports rights and then how there should be some sort of the lease to consumers.
Another there quite a few steps required to get to the scenario Elecsys said about the toppings and consumer won't come down 20 or $30 a month month throughout the summer imports come back WAM yields go back up again.
In what is already account ecosystem, we up in consumer build for the sports call seemed a little bit significant churn event across the entire ecosystem. So I'm just curious about how you think about some ability of your pay TV subscriber base should all of it play out I don't have a brief follow.
Yeah, I think I heard that question I think goes about sports and that's going to play out.
Good system, well first of all the the.
The concerns about the sports are always seasonal so [noise].
Again, with so and and.
The real question would be whether sports come back or not whether.
Well the seasons or canceled on the seasons or parts of citizens against the second question would be wasn't.
The.
The content owners get the brief and believes.
Directly or indirectly and then and then.
They did.
They pass it onto the distribute distribution network, what I would so all those things are going to play out and I think it'd be premature to try to try to speculate on how that's going to it but I don't see I don't see builds going down going up.
The way you described it up I think we've we've tried to do that more part you know whatever we do we need to be a onetime credit or did something from what I would say is a big.
A couple things one is.
First of all we've we've bought really hard for consumers that they have more flexibility and and how they have they can actually subscribed for us it would work or a.
A lot of our customers like regional sports take for example.
Not required.
The take regional sports are they looking to take a lesser package he doesn't have regional sports in it.
So regional sports loss and the sports they could take a downgrade that when you make that pretty pretty easy to do the second thing I would say that extent that that the content owners.
Great and US unit will pass that on a to consumers so and I will say, we'll work with work with our district with food and packaging customers because at this point.
He believes that you know like nobody has an example tease out of them Council. So they're not writing position that probably does that make a determination there. The one place that maybe is worthy of discussion today is on the and see that way tournament, where yeah, CBS and the Turner networks maybe.
Maybe I'm just guessing maybe maybe there's some things that have happened within that rail but.
Well just stay tuned like everybody else, but certainly anything you know.
It starts with the way they do they send have your claims to that.
So the net to the to the yes piano networking so forth another they get credit.
And then we will basketball.
Absent that.
No that's hard to do.
I understood great. Thank you and I could I'm going to hang up my called Tom Im asking for a follow up.
Yeah. Thanks, very much I'm just interested in what are you stand on the Fiveg network planning.
As you kind of evaluate the potential sprint sites that you could utilize and working stand on that and the pros and cons have taken over some of those leases starting new ones up your old I imagine, there's a trade off in terms of costs versus speed on air, but how do you I'm thinking about that and where things stand currently.
Hi, This is Tom I think it's little too early in the process for that you know the first step is we need to close on boost once we close on boost that initiate the consent degree requirements and so as you probably know from that the water.
Jason for them to give us visibility to decommission sites would not commence until after we closed on boost.
That being said.
Our deployment team is already doing or a planning and you know were far down the road with or tower company discussions. So the deployment planning has begun ourselves, but it's not dependent on the decommissioned sites at this point.
And when did you anticipate then I'm getting equipment up at all there after they did under either scenario.
Well you're.
Oh, I'm seeing that we announced a deal with now than year as the first vendor selection.
Mark continues to work on the architecture and further vendor selection. So I would anticipate more of those announcements in the third quarter and then.
We'll share our deployment plans once those are or formalized likely on the next call.
Thank you.
Our next question will come from David Barden Bank of America.
[noise] [noise], Hey, guys. Thanks for taking the question appreciate it.
Charlie I think last quarter, we talked about you brackets and in the open when architecture, which haven't or is your software vendor now for a it's kind of the first or a few worded you talked about how are you.
It would be able to kind of get some learnings from them being out in front on this kind of new architecture season arrows in the back I think you said you know these launch now a couple months I was wondering if you've had any kind of incremental contact.
Them about their learnings in kind of why you chose to go the Manhattan or route rather than some other out from an open then talk with ever thanks.
And so yes, we have it we have continued discussions.
We watched data we certainly share.
I thought process and learnings.
The I wouldn't speak for the you know I'm not I'm not in Tokyo is today.
Yes, Peter.
All resolved.
Certainly, we'll do that isn't as a public company, but the.
Mountaineer.
You know the Governor's negotiators lot of people that have an areas. The first got there really isn't meant that the kinda guidelines that we needed there by no means we'll be the only vendor that we use and and we serve their certainly room for.
As you get into Virtualized network, there's lot of.
Got it parts are going to be interchangeable and certainly we would expect that there's other people the station network.
Got it and if I could.
That's the follow up which is I think that there's been a lot of concern about you know the wackos movement on some kind of.
Funding visibility for the build I think that it's probably a mistake to look at it at the monolithic.
$10 billion thing, where you need to have $10 billion into bank today, when you kinda talk about.
You know what your comfort level remains with you access to the banks going into more kids. Your access other somebody markets to kind of support the plans that were talking about your today.
Yeah, what I mean, we look at we look at what our funding needs are and then we looked at where the marketplaces and we try to be opportunistic and.
Finally, the markets not particularly opportunistic today number one number two we don't have a funding need today.
In the short term so that doesn't give you a little bit what we have done is over the last 13 months, we paid down two and a half a billion dollars at that and we raised a billion dollars of equity. So it's not like we're not stand still that 10 billion now 9 billion because you're right. It's a billion dollars of equity so.
In terms of things we have to do so.
And we continue that obviously generate a fair amount of cash flow. So.
And you know.
Like I guess is that the math there at $900 million a cash in the balance sheet in the quarter.
I think you can anticipate there were positive cash flow.
Going to spend a billion for to.
Two.
Purchased boost and I think I heard policy, we're probably in the low end of the 250 to 500 million dollar Capex expense for this year. So you can see that we get into this time next year before we'd have a funding requirements due to the next debt payments. So.
You know a lot of stuff is going to happen between now and then and we have and we're focused on that.
The funding part is not the.
Probably the thing is keeping up keeping this up at night. So at this point.
Certainly that's certainly the things we don't control like it.
Tend to covert crisis that not not worried yesterday, the where it might go that probably does keep us up because that's a fair the unknown.
But where it is today were.
I feel like we can we can manage through that so.
That's kind of where we are in that.
You know they can.
It's office off it's off the answer, but I think you know internally.
We're able to see this maybe a little bit better than people outside but if you look at where we were a year ago.
And where our today, it's been one of the most productive years ever been so this is my 40 year. This has been one of the most productive years.
Yes.
Year ago are going to narrow band the network.
That wasn't exactly what we want wasn't what we want it certainly wasn't what the CMC wanted because it wasn't it started out it makes sense.
I'm going to move the needle and help people communicate United States and it certainly wasn't that put us in leadership position.
And it certainly wasn't going to be against the Chinese vendors and everything else.
And you know you fast forward.
And by the way, we had that never ran I see never rebuilt and then we had to build the broadband network on top of that and the broadband network had to be built and we had to build virtually the whole country before we could turn it on the start generating revenue because we need a national network.
That's for a year later, what's changed there while we didn't write off.
We spent a lot more than what we just wrote off obviously that we spent I don't know you know again, you know half a billion dollars and their fan out there and we just had to them.
The flush not great right, but the right thing to do but now we're going to broadband network that will be then be the world right that broadband network now.
There's gonna be using open architecture is gonna be cloud based on your words like Iran. If the old ran compatible.
So we're building the state of the Ark network. The we're aligned with the FCC were lined with executive branch realized with both houses of Congress on where that needs to go and.
We have a timeline that he said that's manageable to do that.
We've also seven NVNO deal.
Work for seven years, where we can we can start generating revenue with it and we're purchasing boost so it start generating revenue day, one the purchase of but we also thing.
Generate very profitable revenue as we build city by city. So when we built the city and get older economics.
That city than than the then the profit there can be a profitable business force and we can do that on a city by city bases. So we're not waiting to build the whole network.
Together and as I said, we paid down two and half billion dollars and raised $1 billion of equity so.
That's come this.
The only and so the negative is right is the money was spent on narrowband LTE and the co. The crisis. That's affecting every part of our economy. Those are the two negatives, but even putting those things.
And those tend to pile this company is materially better off and materially less risky.
Then it was before this time last year and we felt like we had a plan to be successful last year and now we just I think we just have a higher degree of confidence.
In terms of where we're trying to go and.
We now know.
Just on.
Working with the with the vendor community that we are we now know that over in Israel. It's not find this guy we know that this vast support in the United States and around the world for and we know that we know that the at least our approach is.
We're not allowed to new Chinese equipment business National security issue for whatever reason right. Wally the was really good the Chinese them is really good its best in class. They know we're the only way we're going to be better is out innovate and it and we shouldn't just try to be as good as.
What the Chinese manufacturers, we should be better and to be better you got to innovate and innovations is things like go Rand open architecture cloud based automation those are all things that can make the network better and.
Did we get too we could help lead that would you be part of that pain, along with some others of course, but we that we could definitely but just as this company.
And that and they really nicely done it's led the 19 nineties led and digital this coupled with the first company the World Mpeg two standard.
There's a compressor right, we'd let him this version.
Our digital video will lead again, and how wireless operates and the.
There's a silver lining and cold with its showing US help just how imperative and how much of a necessity. Good communication connectivity is so.
We feel like <unk> and [laughter].
Not begin wall Street here, but I will win win when Tom and I started on this I think it was but I mean, you you'd have to go back to conference calls and we're the first people who does the linear television network.
He is going to get challenge.
Out there and less and less of linear programmers change what they're doing it will be challenged and we pivoted and and started to look at the connectivity business ministers way.
And make our investments there.
Because we knew that there was not likely the linear TV providers, which it would change so.
I think that I think that strategically we're well positioned now and I think it's even though we took some barrels for.
And we took some punishment on conference calls for years, where our numbers weren't up daughter competition was doing we were we were building long term customers and long term cash flow in a business that was sustainable even if linear television was gonna be challenged and we're well positioned for the worlds wherever it wasn't where the industry is going where the consumers dawn I should say, they're not just to consume about enterprise.
Susan.
Businesses.
That was a long answer that's also [laughter] they sort of really appreciate it.
Our next question will come from Jonathan Chaplin Street.
Oh.
Thanks, guys well computing so.
Sediment Pos said before you go out and raise capital you would locking in aim man could tell you to know you're building the network for before you raise capital when you think will get and announcement on.
We would be the pot real partners, so they're going to use be that said that the test to users at the network would be and then the second question I had was around 600 megahertz. Good T mobile's borrowing at the moment in the merger agreement was contemplated that they would be Scott spectrum for you that you hadn't compete at the negotiations by that.
Time, the deal needed to be amounts that you.
Where where all the what's the status of those negotiations. Thanks.
Yeah, let me start to 600 megahertz piece.
So you're correct that the consent degree did require the.
[noise] government or negotiate in good faith in that.
You don't see mobile lease all or some of the 600 megahertz spectrum.
Those negotiations have gone on for a bit of time and that's now both companies are presented to just department and the just Barbara will make a decision.
As to.
What the definition of all some with the length of any leases being with the payment would be so.
We would expect something we've expected to know that in the near term.
Whether there is gonna be at least and if so what it might be.
Clearly T mobile <unk> based on their advertising, we made it available to T mobile.
During the initial stages and the crisis.
For free.
The right thing to do that because obviously uses he's had gone up.
Dramatically and they were able to take advantage of lighting up right away.
They they certainly bragged about in the commercials in fact that are speeds of double so it certainly has value.
For them.
In the network and they certainly their customers are benefiting and that probably gaining market share.
As a result of it so you know that's that's.
Hopefully a positive for us, but we'll see what we know it's that that our controls is going.
Right now Tom you want to yeah, it doesn't that some regarding.
Anchor tenants are partners consistent with what I said on the last quarterly call. That's not something that we feel any urgency around if anything the momentum around old man has definitely accelerated in the last quarter and so the potential and the opportunity associated with the.
Network that can facilitate both consumer wholesale and enterprise that recognition has grown within the industry and global so our three real.
Swim lanes of.
Activity right now are preparing for the boosted integration.
Completing the architecture and vendor selections and deployment planning and as it says on the last call. Once we had a market bills and were able to demonstrate the capability with a virtualized network can do you think that's a better time to attract a third party interest.
This is Charlie I'd add a little that first of all there is a lot of third party answered already but but the way the way that we look at US two kinds of vendor, there's two kinds of partners for us.
One is that driven.
Traditional vendor relationship they've got to block the.
Best in class, we'd like to buy that product and we buy that's like as best in class.
ER and they make money and we get the best product, we possibly can there's another there's another partner chip arrangement and I think the one that you're alluding to.
Is when they're strategically isn't alignment and it's been a vision alignment that.
Vendor says we know we think things like open ran and and Virtualized network. This cloud native makes a lot of says that would be really that's something that we want to promote.
Because it would be good for our business that would be good for our customers and we would we wouldn't be aligned in the sense of obviously.
But that would help us get the network build and then perhaps we would get customers do that relationship that we otherwise wouldn't so both companies would benefit.
From a common vision and.
In that particular thing that though the one reason that would probably got a little slower than maybe people might have expected marketplaces. There is a there is some zero some gain problem for us there and that but some vendors have a service that's very similar to another vendor and we have and if we had in both of those.
Vendors, Mike shared the same vision, so we've got to pick one and we pick one it might leave out the other one.
And so we have to be pretty confident that we're picking that not only best in class, but also the shared division because once you do that you're you're kinda married.
And and so that that takes a little bit longer to make sure that.
But then you're going down the same path and it and that it's not just to.
It's more than a vendor relationship and you pick the best in class customer to the to share that vision with so.
That's exactly the same kind of thing ready to do backing and DBS.
And do our history of our company, but so.
And you end up you know it into some other personal some of US management teams that just work better together or some of its you know and somebody longer or sometimes it's somebody was more aggressive on the pricing, but they're just as good or somebody else. So it's a lot of factors there but there.
There's just not in question in my mind that at least over the last year chicken over the last three months or six months.
The the.
The momentum for the kind of things that we're trying to do.
Our clearly recognized.
Outside of Wall Street, and analyst community, it's already recognized for the people who know what a modern networks it look like.
And it's starting to be recognized internationally now.
And it's certainly recognize now by the regulators and the than that and then and the Legislative Executive branch in the United States. So that's been a big.
A marked difference save and then six months ago. So again, I think run the leading edge of that in terms of thought process, we're serving in the leading edge.
Of that in terms of our building.
Oh, the said one thing that well vendors in technology companies, our perspective partners. The consideration set of partners is broader than the universe.
Right. Thank you guys.
Next we'll hear from Doug Mitchelson Credit Suisse.
Oh, thanks, so much.
[laughter] Charlie you know we've heard you talk a lot about the a advantages Oh did not work you're building any chance you sort of calculated and want to share with a cost per bit advantage will be versus the traditional networks that are out there and [noise].
As part of that I think what most of these calls last few years I sort of expectation that you were headed more towards the wholesale path.
With the wireless network build out or wireless operations and today talked a lot more about sort of retail and make it might get go with the up you know what are you thinking about retail versus wholesale in terms of where you're going to end up wouldn't give we look out a few years and one more for that thank you.
Yeah. So the second part first.
We've always thought the wholesale model was was [noise].
The one we focused on the most but with the opportunity for them being Odell and boosted.
We're thrust into the retail business the way we didn't expect.
So that'll be a both of those that both the positive or negative, but we have to bands you know Bruce you know prudently and we got to prepare for competing against three pretty entrenched incumbents and we got to than a profitable way long term. So.
We think we can do that and we think that.
The way I would look out of is that our retail business will just be a slice of our network and that that hole that wholesale part of our network sales as a slice. So if it's a smart city, that's the slides for that Smart city.
And dish retailers just to slice of that networks, so weve been kind of got.
You know, we kind of got an added thing that we didn't we gotta Cherry on top that we didn't think are going to get or we didn't didn't have plans for.
What was the first part question.
Oh, it's opposite.
Yeah, They got copper <unk> yeah. They.
And were.
I would say Oh.
That's it this way because we until we have all the cost and from all the vendors and we start building, but I don't know that we.
No no enough to know it will be.
Materially less expensive than a cost with it today.
No material less expensive to do operate because we'll be able to use a lot more automation that people can do today. So we know that and from a business perspective again I went to the University of Tennessee. So.
And so I wouldn't rule in the smartest guy, but the one thing I did figure out that it.
Well, we stone.
We still have been here.
Okay, I can hear but if you sort of the one thing is is what you really look from a macro point of view is can you build a better products that's less expensive and if you can do that you can be a very successful business. We can go to better product. That's less expensive you. Maybe you may be able to stay in business. If you build a better product it's more expensive.
Certainly you know Mercedes car was cheaper than a fortune I mean, its Chevrolet chevette. They stayed in business. If you build a cheaper car that's bad better.
And then you're going to gain market share and there's no question Armani, and we're going to build a better network, that's less expensive and less expensive operate and more flexible so therefore.
We think that.
We'll be materially less cost per bed, but it's more than just cost per bed, it's going to be more flexible in terms Allen networking is architected weve submitted its netflix versus blockbuster.
So that's probably the second question, which is this 10 billion dollar number.
You have that out there for a while it is sort of stuck out there I think it's pretty healthy debate among investors as to how much. Eventually this will all cost to build out.
To share with us at all what does that 10 billion. You know gets you does that get you to your regulatory required build out as it gets you to all.
And he kind of coverage than any sense of what that 10 billion you don't get you to would be helpful. Thank you [noise].
Essentially gets us to the scale nationwide coverage, which is which is materially more coverage than the network.
So the 10 billion is not to meet the FCC regulatory but it's it's to build and that was that can be competitive.
All right. So that's helpful color that you know we haven't gotten a good job of.
We haven't get it done a good job the presenting that articulating that to you guys can really good question and I think people think it's $10 billion just to get to the milestone for the FCC.
But it it's it's really.
Beyond that right that doesn't include spectrum purchases. It doesn't include.
So millimeter wave.
Build out in those kinds of things you know, but it includes the total nacco layer.
Competitive in the United States.
Well beyond well beyond the FCC well beyond the FCC recall.
Yeah.
Got it.
Thank you.
Our next question comes from Walter Tae Sik license.
Oh.
This is walk from let's yet.
I just do you expect to still launch of Fiveg network watching you had mentioned that trial you pick one network.
By yearend and then also on the network side.
No Horizon. In addition to T mobile has been using your spectrum for free during the kind of current situation.
Is there an opportunity to lead spectrum to horizon or 18 key either to help generate some cash flow to fund the network build or or even as kind of a way to more quickly.
Roll out your own network.
So it's like by the question yet I mean, there always is an opportunity. They clearly are are using some of our second I think when I'm using some of the spectrum and obviously you know if you look at the.
Moving to patterns of where they're using that it's certainly increase their capacity and increase their speech you know to tighten crisis. So it's certainly opens up the possibility of discussions.
For that but certainly it's also possible but.
Nothing with some of that as well and the first part was [noise].
Sitting here or do you expect Hitachi by your why don't you said one marketed trial by year end, Yeah, I think that we have to do things are working on one is to launch a market.
By year end and I believe we will do that are what the core and that will integrate the T mobile extent that they cooperate.
And then I'm, just saying, we're going to postpaid so that we expected a year from now we'll have it will be in the postpaid business, which is a glitches and.
When you when you're.
And for a network rail posted isn't just about business. So if you look at postpaid and prepaid.
Pre graders.
Is it is not nearly as good of businesses posted business. So yeah, I mean I'd like to ask a follow on I like if you've looked under the hood, a boost yet, but I'm going to deferred what rich chime in with one of his question.
Yeah, Charlie I wont would worthy on will be only company to let you guys ask questions right.
Well I think someone decides he is well that's true that's true.
Charlie I appreciate you taking your questions. This is a philosophical one for you based on everyone's results. It looks like the Paytv universe, probably lost at least 2 million subscribers in Q1.
You know if we're on track to lose eight to 10 million subscribers from the pay TV universe.
And you the programmers are all coming to you asking for annual rate increases whether its viacom, which is up for renewal soon or are a sands or whatever.
Do we see a new normal like easy you know is the time for prices to start really rolling back you've got viewership collapsing I mean, even in a pandemic, we've got viewership down other than for news networks in 18 to 49 like.
Who did it finally hit a wall in terms of the the rate increases for all of this programming because it was just such a collapse in the universe.
Well it a logical person would say they answer but yes, there is a but if your ratings are down and there and that you're not going to than people are watching less hours.
And your programming, you're not going to be able to get more revenue for.
And that is rich much wider than that.
The.
It's not it's not just about that but the product itself on the consumer point of view isn't good enough and so.
And everybody on this call probably had a there's watch more television.
The last eight weeks and everybody that I see that I just watch human nature.
They they're going to Disney plus or Netflix or Amazon.
Because it's not commercial.
And because you you can binge view something or watching whenever you want to you can watch makes its easy to watch need device because it's an app. So TV is becoming a half without commercials and if it ends our commercials is a lot. It's a lighter but any threat that linear TV where are you.
We might have 16 17 minutes of commercial time.
During the hours or show it might be a really good show.
But.
You just it's painful right once you've seen some of that commercials and then and then the second.
So that AD load needs to change would be different and then if you want to Ben something that you got to push a bunch of buttons to the Watson that show as opposed to sit there for eight seconds and and watch something so the user experience has to be better.
And and the final thing is that a lot of People's programming.
You mentioned back on a lot of their content been sold another avenue. So the the branding of that particular channels kind of gone away and people are used to a particular show, but not necessarily the brand of the channel and so they're used to getting that show somewhere else and they don't want to pay for twice so.
All those dynamics are out there and and.
What did we lead the way we would go away. We approach every negotiation is here's how much value yours ward.
Station or you're a broadcaster your content as to our customers because years I'm actually watch of it and here's how much the cost per hour is and we do all that analysis in real time and they have you know.
A dozen years, a history of that and we can see those trends and so you kind of what tough consumers right and and so obviously regional sports became the most expensive thing in our portfolio that customers didn't on and as a gross generalization customers didn't see the valuing it at least what was that and and certainly a 100% people.
And watching very small minority watch the regional sports so that makes for a tough negotiations once it once they went down right, but but others.
Or maybe it is agreed just that they have similar issues that they have budget. There that most program has come and say well you paid this much last year, we want an increase there's no one because there's no asked there's no math behind it. It's just we needed that's what we need to make our budget I mean argument as we move to make a budget that's the argument.
And those would be pretty well cared about what their budget as and when I look at <unk>.
I look back FX is telling you to go to Hulu now to watch their programming not to go to dish.
That that and so that's what's gonna have that's what's going to happen right. So let's fast forward right and we talked about this years ago with Netflix win win win London programmers sold so other stuff to Netflix or $25 million year, we pointed out that there you're going to create a monster.
Right, that's going to get leverage over you you're in the context going to get leverage and then it could become a competitor and the same so now that you're going to you through the new Lou and yeah, you might be getting some pretty decent rigs today, but the next negotiation.
They're going to Oneq.
Right if linear TV if the other distributors are out there, they're going to own right and.
That that that's what's getting great.
So Eric My thought to this as a result of those things and those trends with sometimes you pointed you guys important correctly pointed out to I think we see some are things something a little different air maybe you talk about what our strategy since the last several years and how we counterbalance that.
Sure Charlie or I'm, sorry, John what things are well I mean I mean.
I've been done pretty consistent going off and comments on the call and at our approach, especially in the linear recycling business seems to.
Really targeted customers, who want to still falling value.
Linear TV into have less of an opportunity to you know they have densified rod that are drilling to you know when do you have to drive providers to look at our strategy has been G look at a rural America has been focused on high credit quality customers customers that find value in linear TV.
Fine dining rooms, giving commercials find value and and the all the things that the a you know the hopper platform, a brands and try to insulate or ourselves a little bit or mitigate.
So decline.
No I.
I was going to say.
We dealt value into the hopper platform and away just beyond linear TV.
And so you can get that's what you can get Amazon you can't get you to fill our platform, but you also can search and so something something might be on dish on and it might be 399, it might be free on Netflix. It will show you Netflix for free so we put the customer first let's say here's your best value and so this is Nick.
I find personally.
But I still by far loved the hopper experience better than any other t. experience because.
I can record everything I want record keeping as long as I want I can skip commercials I want to a if I forget to record something that's already recorded for me if it's in primetime. So there's feature set there and if and when me my family want to watch Netflix and one of the LTPS disease, where easily able to do it without having.
And all the TV sets without having to do anything and I can do it my voice.
Right.
And and so.
I think the Eric and his teams credit that but that's that and that's going to continue to pay dividends for us.
Thank you.
Next we'll hear from.
JP Morgan.
Hey, thanks.
Hi, guys. Thanks.
Charlie <unk> earlier comments, because it's fair to say that you have the choice of partners for work with.
At this point, especially on the strategic side.
And is there a trigger at which point you have to make that decision, maybe it's the sort of construction or an auction or something like that.
Yes.
Oh Wow that.
It.
Yeah, I can only gone experienced nice branches Ben.
But.
Every kind of everybody kind of moves at their own pace and you end up with three kinds of companies right and there was one that one a lead and make and if they believe they get to help make the rules and you end up with some fast followers and you end up with some stragglers right too.
You know maybe don't even get to playing the game.
Same thing is going to happen with us This is where we believe we're leaving.
And we believe that there'll be some companies that want to lead and helped make the rules.
And does those unlikely, but where we share a common vision and and that.
That that that pace will be chopped will be different.
Right you know simple example would be.
You know you saw Facebook announcement, and GE on India that Facebook. They said, we're going to we've we're going to jump in and help make some of the rules and how commerce is done in India.
Right.
Other people, what the probably looked at that and maybe didn't feel comfortable for whatever reason right, but they probably went I don't think Facebook was the only companies are saying look I'd like to make some girls in India as a long term play.
Right.
But there is there a company that went in and I think there similar companies that will say that similar things.
In the United States, and say, we want to help develop but what is what a modern networks. It looked like and here's what I sell it helps us in here and we'd like to participate what.
So.
I guess I'd I'd say lot of things that the thing that but people are skeptical clearly are skeptical based on our stock price you can go super skeptical of our ability to compete and to build a network.
But I don't think yeah, we're not skeptical and we're just going to go definitely good to talk about it. We're just going to do well just gonna go what is going to build it and and you'll see and will either be right or wrong right and.
There's not the first time weve been in this situation and the second thing I'll say is that.
Our company's built for.
Funny sort of ways wants to know got work, we're better and a crisis work better and I think the cold. The thing is is the crisis and I think were better than that environment. We bought a leaner and were make decisions quicker there's visibility when I was layered in management.
It's a it's the environment the middle East personally I feel more comfortable in ER, and that's where I think weve Excel does the company and I think it's where we have made up.
The most the most creative times in the marketplace for us take scrambling back in 1986, where our business went to zero overnight, but we came back the next year and doubled our business and doubled again doubled again and doubled again, because we made we had a plan long term plan and we make sound decision to move quickly and I think those are the things.
That we challenge Eric and his team every day.
To to make sure we're making we'd have long term plans and with that.
There are good and there.
In funding sort of way the markets moving that way.
No. We just got looks like and execute and if we do that we're going to be a much bigger company.
And at a much more profit company and we'll gain market you're in a in a place where it's been a kitchen and economic situation, where a lot of companies are going to drop now and if we don't do that will be will be one of those struggling companies and the skeptics will be right.
So.
Operator, we have time for one more analyst question.
Thank you Sir we will now take our final question from the analyst community members of the media on the call. Please press star one now to enter into keeps asking question. We will begin the media portion of this call. Following the answer to this final analyst question and our final analyst question comes from cannot think Scottish for Barclays. Okay.
Thank you.
Sure you when you think about it in bringing them, but I didn't put out I mean, it depended upon if you've made look like that's largely capex, but.
As you go into that he did a business unit is also going to be operating losses into for two years I just feel that business.
When you think about the <unk> funding need.
Well beyond just the build out.
How should we think about the scaling well get Goldman capital requirements may be able to me.
Yes, good years [laughter].
Well a couple of things I mean, I think there's there's there's two things that could that could require additional funding right potentially but one is if you're if that if you're if you're in spectrum purchases and the and then certainly auctions coming up the second would be.
I think I think if you're if you ended the retail business and you have losses I think what he said, but those would certainly require so a couple of things one is.
We would hope is it whereas we ended the retail business that we don't have.
Significant two years of funding gas there from a cash flow perspective, right I do think I think I'll have to manage that I think what's like close attention to that I think that will be difficult right, but not impossible by any means.
But to do that and.
You know, obviously, our balance sheet at our balance sheet and come to auction. So.
I think we're really focused I think we're mostly focused on the network and what it takes to get through or want to go.
And then there's you know maybe revenue opportunities for us as we talked about spectrum leases and so forth and maybe other revenue opportunities.
For us.
As well so you bounce all together and I think.
While we're cognizant of the markets and we keep an eye on it we certainly would be opportunistic if the marketplace. We're we're opening a favorable way that's not our focus for the the near term and then I think Tom articulating, where our focus is as a management team and if we execute those things and then in the near term I think we'll be fine.
Yes.
Thank you Charlie.
That.
But we do any crestor there.
Well now take questions from members of the media again, if you remember if immediate I'd like to ask a question. Please press star one now through your Q, we'll take our first question from any Mclean cable facts.
Hi, Thanks for taking my question I was just wondering if you could provide any color on negotiations with a bike on CBS.
Not really.
Not really I mean, we tend to keep our negotiations private and way they've been a long term value vendor for us, but the reality is that you know certainly a lot of their content is available from other sources than a that people are already paying for and.
Obviously from a.
Radians perspective, or viewership perspective, they've had declines.
Over the last several years.
And you know a lot of their investment has gone into the Pluto now and that's free so.
It we'd hope we get there with the with the with the transaction because I said, there's a long long term they help build this company.
We like them the company a lot personally.
But theres a reality out there.
But where the market is and it's it's probably not the same as it was.
In years past.
Yes.
Thanks.
Next we'll hear from Paul Kirby PR daily.
Thanks for taking my just one.
Thanks for taking my call just wanted to see there's.
And the execution timeline is of the FCC resolving the de issue.
[music].
Its I'd say, so let's take a little backgrounds. So that I mean, obviously that it's we're coming up on I think since you know the auction <unk> almost five years or so Josh and there's been a court case.
Where the court.
Found that that's usually was corrected that perhaps these didn't qualify.
But they are incorrect into they didn't get the ease a chance to care.
Ah the D and in our opinion at cured and they have and that has been.
In front of the FCC for well over here and a half now.
Yes, he hasn't ruled on that so that's disappointing given that I think.
This FCC has been incredible about bringing new spectrum to the marketplace. This essence, he's been incredible about advancing fiveg a in the United States and pick up the country in a position to compete against China I mean, it that it's incredible really what they've done.
It's just a point that the one thing that what the one thing that affects addition, big way potentially.
Hasn't been drilled on yet and and you know as management you always want certainty right and we have uncertainty, which makes it tough for us than tougher to manage the business. So we would encourage the FCC to.
Or whatever to make a really not on that and and and then more importantly, maybe is that.
Some of the some of the spectrum.
To be even displayed a penalty on.
And that could get resolved it could get used a lot faster and he put into business plans, particularly as we are designing their network worried that there's big question Mark out there or what do we do with it.
Yes, three spectrum out there so.
It's a bit frustrating.
But.
We hope in the national interests at least we get a ruling on that and I think that the.
Current crisis is more evidence that the maybe that's in place we could weaken.
Get a ruling.
Thank you.
Our next question if you could please announce your name and company name once your line is open.
And your line is open.
Yeah, Hi, this is true from Wall Street Journal Physics, Gerald I think there's a technical difficulty earlier. So apologies. If this has been answered before but the first I'm just curious about where you see in general and most of the impasse in negotiations over.
Next to sports content being has any of the weeks waive fees or even refunded or some of what scare programmers Oh.
Given the fact that there are no.
Ah games on right now or is the issue more.
Between the programmers and distributors.
And then second I'd just be curious given the social distance, saying a new normally have what's the current virus crisis, whether that's change your thinking at all.
The value of.
Physical stores did pick up from spread for elsewhere.
The first question was answered asked and answered drew but.
So you'll see that in the transcript.
Second part the I do think that the.
I think the modern economies doors are probably.
But.
Stores of any kind of probably.
I have to be reevaluated.
And there certainly need for stores and the certainly certainly needs, but I think you see across all segments of the population that people will reevaluate that within within a boost of course, the those doesn't own in stores and other distribution dissolved.
Independently owned and operated our retailers himself so it's not.
It's it's not a it's not a huge issue for.
<unk> other than.
This is very similar to dish, but this doesn't own stores, either but we would rely on small business people that a.
Promote our business and performed and for one sales and service functions and boosters heavily dependent on those retailers for that so.
You know so we don't quite have the overhead at the stores. They still have cost indirect cost related and so we're looking at we're looking.
Forward to building those relationships with independent theaters, and and although you know boost.
When we look at boost we see some things there that that probably aren't the best business practices from a dish perspective since we won't on the network they want and obviously that to be some changes there, but there's a huge opportunity there because suddenly we have a.
A really good network.
And the network that more devices.
And can work on and you get away from Cdna voice for example, and so there's a lot of positives and and you know we're gonna to feel away through there and manage it closely and be prudent about what we do.
Operator, we have time for one more question. Please.
Thank you Sir and we'll go to my next question if you could announce your name and company.
Oh, great. Thanks, Scott Morris from Bloomberg.
I'm, sorry, I'm wireless.
Well, what kind of timeline are we looking at in terms of closing the boost steel.
Maybe changing the name it that's in the works and then selling your first gone.
Well you probably when the consent degree them first of all we probably most likely because of the county and everything we closed on first of them up so.
But.
Simply and then the second thing just for the consent decree.
Or certain things that have to happen before close it could happen, it's probably one of the biggest ones. As an example is cost provisioning. So that we that woman's when we own boosted that our customers can get prevail, we can provision all our customers and new customers on the T. Mobile network, because we don't want to go back and then says no new and existing we don't want to.
I don't necessarily want to go back and.
I don't want to necessarily put people on the ground network and then have to go back and switch them later and the cost of switching later to T Mobile network and obviously when you every time you switched customer yep yep excess churn. So we want to be able to be but we want to be just competitive in metro and timo for device can be provisioned on t. no matter what to death.
That there's going to the same thing so.
That condition hasn't been met yet so June 1st would be the earliest but that but it could be you know July 1st.
Condition Getnet. So you know that's kind of a time that's timeframe that we're looking at today.
Thank you for your time and interesting times you next quarter.
[noise] like again, ladies and gentlemen that does conclude today's conference we would like to thank you all for your participation today you may now disconnect.
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