Q2 2020 DISH Network Corp Earnings Call
First thing David the I'd glass name Brown.
Our old double yet.
You may have your company.
A I.E.R.A.
Hi, Rob.
Thank you I now five your email address please.
David and I are about.
Okay.
Thank you and all PCU on hold with music for the additional Corporation Q2 2020 earnings Conference.
Thank you.
You're welcome.
Mr. Jason Kiser. Please go ahead.
Thanks, Jim that's what if everybody I'm joined today by career Gonna German.
I'm told me repeat corporate development, Erik Olsson or CEO.
Michael swimmer, our new President was one Paul Orban, our CFO and are on the wireless side, we've got even bother with few commercial officer remember the first bomb material or your network well. That's why we've got some messner our general Counsel American will have some prepared remarks, but we've got some <unk> safe harbor disclosure so occurred over them.
Yes, I do thank you Jason Good morning, everyone statements. We make during this call that are not statements of historical fact constitute forward looking statements that are subject to risks uncertainties and other factors that could cause actual results to differ materially from historical results.
Nor from our forecasts, we see no responsibility for up any forward looking statements more information. Please refer to the risks uncertainties and other factors discussed and rest easy filings.
Part of the process, perhaps you actually want to 5000 applications to potentially participate as a better for those spectrum assets because of the Fccs anti collusion rules were not able to discuss what it's a new spectrum resources mains and bid on and we will not be answering any questions on that auctions are in today's call that I'd like to turned over to our CEO Eric Carlson.
Thank you, Tim and welcome everyone to the call to our analyst and media Investor community. So I hope you're staying well during this tumultuous times I want to thank you for being with us today.
Before I share a few observations on the quarter I'd like to take a moment to recognize the entire this team and a thick each and every individual here for their dedication I'm certainly proud of the job. Our team has done in responding to the code of 18 crisis no I'd like to highlight a few items across our business units in wireless.
We continue make progress building the nation's first Doran compliant Fiveg network and since the last call. We've named several key vendors and including all Geostar open ran to have an air Fujitsu and be Adler, Charlie and Tom are with US today and are available to talk progress.
On our wireless efforts.
Now with regard to quarter dish TV performed well with a gross activations of 268000 from quarter to quarter, we actually increased by 5000 subscribers.
The crisis has it back to customers willingness to open direct mail marketing and allow for in home technicians into their homes.
And as a result, we controlled costs and reduced marketing expenditures on or gross new TV subscribers did decrease.
Our this TV strategy has been a anchored to acquire entertaining long term profitable customers.
Four or five years, we've focused on a more rural and higher credit subscriber base, we remain committed to that path.
We saw dish TV net subscriber loss of only 40000 or lower losses are primarily the result of lower churn rate due to covert by team, partially offset by lower gross new additions.
With that just TV subscriber base and Paul is going to have.
More detail on this in a moment.
Turning to slide during the quarter, we lost approximately 56000 subscribers and this is disappointing.
The decrease in net sling TV subscriber additions was primarily related to.
Lower sling TV subscriber activations, a bit of increased competition and delays and cancellations and sporting events as a result to cope with 19.
For both dish and sling or the pace of Activations have slowed we did adjust their marketing abrupt more value to customers and an important time by delivering more content free previews with the help of our programming partners Andrew as always we're focused on providing excellent unsafe customer experience.
Throughout the pandemic, we've seen customers usage of our products increase we were pleased to see the additional engagements.
Excellent hopper experience, but that platform delivers including on demand apps and dish anywhere capabilities, but that said well, we'll news coverage was up the loss of sports change the viewing equation significantly and the increased competitive environment was also aggressive, especially from the free and commercial free streaming services. That's what are the space with introductory offers and promotions.
With that said, we're going to continue to focus on acquiring to retaining profitable customers and delivering a great customer experience about dish TV and sling TV as we know we have room to grow.
Now as it relates to wireless retail I will discuss results in greater detail on our third quarter call, but I want to touch base on a few key updates first this week, we announced a partnership with two calls we acquired Ting mobile assets, including customer relationships and the brand that will also engage in 2000 technology services.
Next I want to thank our integration team for their effort over the last several months our boost team has hit the ground running in serving already customers and welcoming the boost employees to this family.
Our approach to boost reminds me of where we pivoted dish TV.
Because for five years ago, and as I mentioned earlier, we implemented more disciplined strategy and acquiring and retaining profitable customers and thats exactly what we've begun to deal with boost.
Our profitability is determined in part by what we pay to access the network as most of you know right now we're operating as an NVNO much like the Tracfone.
As we rollout our own network will begin to benefit for older economics, and that will drive profitability and allow us to be disruptive in the meantime, we know we need to pivot the business, while we havent yet had a full billing cycle, we're already beginning to focus and acquiring more profitable customers and providing a great customer experience.
Closing I want to express.
My gratitude again for the entire dish team a lot of extra work is gone and taking care of our customers taking care of each other and taking care of the communities that we serve the efforts of the team have been commendable without him and turned over to Paul for little commentary on the numbers.
Thank you Eric before we get into the quarterly results I had two items I want to highlight first the impact of cover 90 on our operations and second the closing of the boost acquisition.
As I mentioned, the first quarter, we've implemented a series of initiatives in our pay TV business to address the impact of cover Nike, we tighten our belts and put in place cost cutting measures to slow the pace of Opex and Capex.
Benefits of this hardware are reflected in our quarterly results.
As Eric alluded to pursue activation were negatively impacted in churn was positively impacted by cobot 19.
As discussed in Q1 this many commercial sams, establishing its our clothes are running at reduced capacity.
Put these accounts on pause or provide a temporary rate relief.
These accounts represent approximately 250000 subscribers and were removed from our Q1, ending this TV subscriber count.
During the second quarter 45000 to both subscribers restore service.
Our had temporary regularly that.
These subscribers came back with minimal or no costs.
And they were added to our ending subscriber count without being counted as a gross activation.
The remaining commercial accounts that were removed 70000 of these accounts disconnected.
You continue to expect the vast majority of the remaining commercial accounts to restore other service in the coming quarters.
Combining to 45000 subscribers discussed above with a 40000 net subscriber loss related to the other accounts just TV subscriber count increased by 5000 during the quarter.
The next Adam I'd like to discusses boost.
As Ed noted, we close acquisition and we will report boost results in the first time for for the first time in the third quarter.
We believe we report boost in our wireless segment, and we will disclose key metrics such as ARPU subscriber data.
We're also allocate the consideration paid to tangible and intangible assets acquired.
The liabilities assumed.
All right now looking at our pay now.
Our operating income of EBITDA for the quarter are both up significantly compared to last year.
Our revenue decreased due to a lower subscriber base, partially offset by higher pay TV ARPU.
The increase in pay TV ARPU was driven by price increases at both dish and swing.
And increases in premium and pay per view revenue.
In addition, we had fewer commercial accounts during the quarter.
Most commercial relationships are included in ARPU.
Evolent billing unit basis, which means that ARPU for these accounts is lower than residential subs.
Our subscriber margins for the quarter were positively impacted by reduced costs related to channel removals liquidity regional sports and by our pay TV cost cutting measures.
Our dish TV Soc is down this quarter due to decrease subscriber activations.
However, the cost per activation decreased from $786 last year to 84.
This was largely driven by fewer commercial activations this year compared to the prior year.
These accounts have lower saks than residential subscribers.
Satellite in transmission expenses decreased by 67 million.
As discussed on prior calls this reduction expense was related to the acquisition of certain satellites from Echostar last year.
Gee expenses were up this quarter as a result of cost to support our wireless initiatives, partially offset by the cost cutting measures that we get in the pay TV business.
Our free cash flow a 574 of 574 million for Q2 benefited from improved operating performance and working capital.
Expect some of the working capital benefits to reverse in the second half of this year.
After redeeming our $1.1 billion debt maturity and May Onest, we ended the quarter with approximately $2.6 billion of cash marketable securities.
July 1st we acquire boost for $1.4 billion and also raised $1 billion a debt.
We still expect our 2020 wireless go out expenditures to be between 250 500 million. However, we will probably end up closer to the lower end of that range.
There are matching that we have recently entered into agreements with several several wireless vendors.
I expect the majority of the expenditures under those agreements to impact us in future years.
Then lastly.
If we managed to successfully our goal is that boost will be accretive to both free cash flow in EBITDA.
However, given the promotional and operational changes we are currently implementing its too early to predict.
We currently have NVNO economics, and therefore, we're pivoting the business to implement a more disciplined approach to acquire and retain profitable subscribers.
As we build a fiveg network and benefit from owner Economics, This will drive greater profitability.
With that ill turn it over for questions operator.
Yes.
Lessons from analysts.
Please press star one at this time.
Speakerphone, please make sure.
Tom.
Again press Star one to ask a question.
We'll go first David Barden with Bank of America.
Hey, guys. Thanks, so much for taking the questions and a welcome onboard the today.
I guess in the first question would be just kind of coming back to this boost.
Acquisition in the past you guys have said that this business with would have any tracfone like margin.
Recognizing when the promotional season.
Could you stand by that assertion.
Based on what you know over the past quarter and then.
Second if I could.
Charlie.
Keith last quarter that this quarter, you might have a little more kind of concrete information to share with us.
On the facilities as build and you've seen a lot of vendor announcements and obviously you people being brought on board. So if you could kind of give us an update on on the status and really identity Super helpful.
I didn't quite catch all the second half a bit on boost.
I would say that the first of all we don't even have a full months of.
Our billing information.
As we pay.
We know the mobile for the network. So we are applying a little bit blind.
Here and John shrink it is running that businesses, we gave them a day off.
If we normally don't do but given the success in the and the hard work that it was to put that all together and get that closed in July 1st It was deserve until I have a lot of information on the next quarter because like financials.
I would say displayed the the.
The margins at the low and within the in India business that.
Tell you did owner economics with your own network and then the margins are quite good.
So we have to pivot that business the big thing in the street need to understand there's we have the pivot that business sprint ran the data BNL. So spring when that business really in the contribution margin basis, because they own the network in the in the network had excess capacity. So there was no net worth charge.
But internally for them, we have to pay theme over to the network. So you have done it a little bit different. So obviously some customers that are very good customers for sprint.
Potentially aren't aren't good customers for us.
And and so there is conditioned clean up there in terms of and then were little bit more conservative than how we account for banks or what have a little bit clean up there.
We'll go through and we'll try to get all are done in the first quarter.
Rather than wait so at the legacy, but feeling in the current quarter.
In this quarter, yes, and.
But I think just as Paul said, our goal would be that were that were at least at least a dollar positive in EBITDA and cash flow right and then obviously to do better than that that's great and as we build on that worked out obviously, we expect that to be materially higher.
An update on on dish and were dishes.
We make in very steady progress.
On our build out of our network you saw a few vendor announcements.
Where that's probably the most important thing is we're committed to the overran architecture. We're the only company United States that we know of this that's doing that for clean to the paper, we're able to do that.
Fujitsu is our first radio.
Partner in that.
They obviously are very respected radio manufacture in Japan.
And.
We're excited to have them onboard to.
To build radios, we are working with other radio vendors to so lot of excitement about Orion radios and the path that will go down there.
But then obviously mavenir announce geostar both have been some of the software for some of them from the basement and distribution unit. So.
And then we and then we added them where it was really allows us to to to stitch together the cloud so everything that we're doing those things like kubernetes, which is a buzz word for containers and micro services, but when you put all that together you got to make it work and you got to make it work on different cloud providers and private clouds and be in where the allows.
Adjusted to the horizontally horizontal go across the stack and stuff that stuff together so.
And the in the way we look at partnerships.
Liam Vmware has done a lot of work for us already the before we signed the contract with them.
They're learning a lot about about telco and over in and so they're getting a real R&D sandbox to plan and and they're making our business better and we're making their business, but it's it's a really where it really did win win for both both companies and that they've been a tremendous vendor even before early we signed a contract.
With them so.
The the.
The Big picture thing is there is nothing theres nothing that stops us from build and really the best network in the United States.
There is no loss physics business Theres no of physics, there's no.
Technology that really has to change it's really execution.
It's really execution risk for us in our in our in our and our vendors to make it happen, but we're not reinventing science were not reinvent new thing. We're just we're just taking really good.
Cloud providers and software providers, and Macon, where there's been a very clunky hardware centered up highly operational cost environment.
Very summer to data centers 20 to 30 years ago and return on that we're going to make it into a modern network. So everything exist to do that.
And we're just going to go do it.
We don't spend a lot of Don talking about it externally because.
Everybody is going to be skeptical up until we really light it up and.
Then people will have their opinion about it so thats what were going to.
I also will be remiss I wanted to graduate aired Carlson This is 25th.
Anniversary at dish.
Today and do started out as.
And then a pretty entry level position up in Chicago, 25 years ago, and and has taken a more and more responsibility, it's been running and doing an incredible job for us the last four years as a CEO.
Dish and so.
Congratulations there'd been a job well done and has been done to what you growth over the last two years. Thank you Charlie.
Operator next question.
We'll go next to Jonathan Chaplin.
[music].
Great.
Charlie just following up on Youre on the last question.
When do you think will have a more complete sense of who owns the vendors are and how the whole plan.
Together is that something that sort of.
Weeks or months away or would you think this will evolve.
As of.
Several quarters.
And I know, we're forgetting from speaking about Pbrs, but I.
I feel the disclosure in the two 10-K in the 10-Q about.
You'd be interested more spectrum generally I'd love to get your thoughts on.
The feedback and auction that hopefully will not quite period for yet, but also on some of the other pieces of spectrum floating out there like the L band.
Yeah in terms of in terms of for your visibility to internally, we that's all.
Pretty much come together for US I guess is away. So we have our we have our senior team in place.
The.
You know exactly what we need to do.
I'll, let de Mayo who's in charge of the blend that.
So to speak to that and just the segment, but we know executive the thereof.
When you focus so when you are really a focused company you're not worried about the external stuff in lot of times people try to spend a lot of time trying to convince people, but they're doing in and we're not we're not trying to do that we're we're just going to go do it and.
And then and then you'll see it so.
We're in discussions with other vendors.
Obviously, there are more that we need to help us to get will to where we need to go.
And they have to share division, where we are uncompromising that they have to share the vision and take some risk with us to get there.
And not and there are many companies we've narrowed we had about 100 over 100 companies that have responded RFP we're down to.
Using two or three potential vendors for each category that we have left.
They they.
It is a focus where where we'd like to pick the best in class vendors, where they shared division with us and if they don't share division with US then we move on but I can tell you that people were talking to them to they all do.
And.
I think the the people on the inside of technology and inside of aboard networks can go who don't have a legacy. So when you have legacy and you can't do something obviously you might have a different opinions.
It's a wise that maybe something doesn't make sense, but the people who don't have legacy.
I think it's it will become clear declared people that the direction. We're going is dramatic in and it's a paradigm shift and built whitetail settlement with the bill.
And then terms I can't talk about the Soubirous auction I think thats an acquired period.
We historically have looked at every option and case, there's an opportunity there. We've looked at every piece of spectrum in case, there is an opportunity. There obviously, we would be challenged from from a from a balance sheet perspective, we're obviously cognizant of that but we piece together the kind of spectrum portfolio that you need to compete.
In the modern network and we'll continue to look for opportunity there.
And in the future that day, maybe just a little bit on deployment get I sure sure if that external in Jonathan. Thanks for the question. So our approach really is to vector ourselves towards the 70% milestone that must be completed by June of 2003 and in order to do that we're building a fuel based organization to help us with the rollout that's kind of really tough.
Mind right now.
We're also.
In the about midway through completing RF designs for all the markets.
Had having conversations with the tower companies, both the national level, but the victory and as well as this the second tier tower vendors to in order to.
To build a portfolio of choices.
We think we're in great shape, there pretty exciting what we're seeing in terms of colocation rates, because they're very very high there's lots of choices.
In terms of field service vendor self let's get some of the some of the more bandaid detailed work done in the field, there's lot I get lots of choices in the team has done a really good job growth.
Building a portfolio of selection on a market by market basis that will use to help us before the network.
Got it.
Thank you.
Hi, Subways, Charlie I might just add this idea of give sense of timing the the.
We don't get radios and scale till the second half of next year, because obviously, we're building a different kind of radio with overran. So some of the incumbent vendors, where it weren't either weren't able to our garden or wouldn't participate in that and that kind of development, but but.
And Dave and team will be ready to go and radios commenced work on the tower. So.
But that's that's the.
Getting the supply chain and radios as long as long as qualifying for us right now.
Okay.
We'll go next to Walter pricing with light.
Thanks, Charlie just a follow up on I'm, saying you know your comments around C band, saying you would be challenged from a balance to see perspective is that something that that will factor into discussions that you have with strategic partners to the extent that.
Some type of partner strategic or financial or otherwise could provide capital to grab some of that spectrum or do you find that C band spectrum to be not necessarily in terms of giving you a mouse assets to compete over five or 10 year period.
Well.
It did this briefing mature that.
The legacy ban I mean, if there is an option going on today, we'd like to see the result of that those are I think an empty I think the fccs empyrean came out yesterday I haven't seen it yet on C band So.
It would like to see that but.
You know, it's a it's a.
Hi.
I I, it's certainly a good band it certainly is one that we have spent time with overseas and then playbook.
And we're certainly in it and it made decision to clean sheet paper.
In terms of design in the right that work for the future. So.
We'll have to wait we'll have to wait and see where the strategic or but we feel like we have the information that we need other than other than what we FCC and seeing what happens in the current basically C band auction today, and that's kind of see where that goes.
Okay, and then a multi I'm, sorry, I think I'm, sorry, I'm, sorry, that's a non answer answer but.
But even if I knew what I was going go until you.
Okay, Okay, asking another one on on around but but I don't want to dominate the call like some analysts to this all of which hop almost a quick one.
Ill call. It afterwards go for rich.
Just quickly Charlie.
Seen basically every single media company legacy Media company basically jump heading into streaming from peak to HBIO Max Viacom put all of their network brands up on all access and they're calling it sort of a superstore that's been our Super service, it's going to relaunch early next year.
With so much of the content on streaming now and everyone, putting all of their exciting stop and DSP and sort of seen teasing putting sports on SP plus.
It is there any point, where you ever expect to actually have rate reductions like when we start seeing you pay less I know you just need to deal with Viacom I think surprise a lot of people but.
Our rates ever going down or you're just going to pay more even as content moves away from the bundle that you're paying for.
Okay.
Well, it's a it's a good question I think that the rate should come down.
And I think that that that when someone.
When we look at a couple of things, but we look at you know, we obviously look at.
How much people watch something we watch the cost per hours as simple example, and we see those trends declining for a lot of people.
In the industry in the second when you look at is a product available somewhere else and is that product is available somewhere else. Obviously, then the value to us.
Because at that point.
As an industry were not explosive.
That value goes down and.
No I think.
I think where we approach it.
Financially, we looked at it and and when we make decisions based on the back that how much is going to cost us how many customers. We think we'll lose the result of that.
Versus how much money will say.
One of the reason obviously, our cash flows there's been a little better than I think.
We have rejected because of Wassa regional sports the loss of customers within less than we projected because we knew that many of our customers don't watch.
Regional sports so.
There are other categories, where they're approaching regional sports status, where those costs are going up beyond what the valuation in terms of customers watching those and those will all be I'll have to.
I have to negotiate do that it's a shame that the we looked at it as what the customers revising the customer I think the incumbent operators look at it for their budget and they just have a number they need to get to and and we obviously, we saw Eric and his team saw five or six or seven years ago, and which is why the company pivoted dividends.
Strategy that we're less dependent on.
On some of those things Inc.
Yeah, I think it I think it ultimately will lead us certain direction, we're prepared for me and are.
The art <unk>, our linear business, the solid and I think Michaels getting every opportunity to take advantage of some of the the streaming but in a way that maybe we have a past but.
No it's.
Well.
Birth or discipline, there and we're well positioned well it it it maybe the triangle change, but and I'm surprised it hasn't got worse for us but.
Barbs.
You know, we're we're doing well there.
Well go next to Doug Mitchelson with credit Suisse.
Oh, thank so much for us for taking the question.
I just wonder are making sure you may be shifting strategy had skewing. It all im not sure. If that was part of a preview for you coming into that roll recently, and and and Charlie I'm going to throw three at you I think the fact that you're paying on getting the radios. The second half of next year is super interesting.
And the three questions are one once you get the radios how long does it take you to find the towers and installed on how much could should you have relative to those FCC timelines ambiguity pretty quickly, but I'm just curious and does that suggest Charlie that you don't really need to procure any financing that last 9 billion as a 10 billion build out.
Really until second half of next year, when those ratings or arrive.
And lastly, just any update I think you talked about the launch of your first market around yearend and if the regulator kind of second half of next year are you getting some.
Limited supply to do that first market or was that is happening pushed off thank you.
Okay, Doug Thanks for the question.
I think it was whether that we are looking to shift our strategy. It slaying sling has been really good at bringing customers too.
Washington could then sports and whatnot and made a very flexible for them to come in and leave without contracts and so forth and we'll certainly continue to be able to too you know to do that I do think that there's a lot of opportunity out there, particularly given our low price point and some of the economic pressures that that everybody's experience.
In these days at basically 30 Bucks people can get a lot of programming that they want and and we think we're well positioned as as folks a entertainment budget gets compressed as there is as they take on some of these other asphalt apps, but we can still deliver a lot of what people want me.
Maybe not what everybody wants with live linear sports.
News and entertainment and so for US I think we will be more cognizant of the opportunity to bring in folks are going to stay with us longer.
And this Charlie that the the.
Well the first thing you have to do in the network is yet through the RF planning in the and the site acquisition. So we have to do that anyway, and then well and they get the permitting in zoning and permitting down and that typically take anywhere from six months to two years depends on the market and that's it and progress in place today and then.
Assuming we execute on supply chain management. So for those are radios come in we will we will strategically I think Dave I'd like to build out he can comment on this but.
We have critical mass for city will will we won't bid build a city piecemeal will will have critical mass to build all those towers in that particular city, a onetime radios would be there permits will be there.
That leases will be rather the towers and then it's.
A task of climbing the tower installing the radios and antenna.
And they are going up everything they work. So they have that we have a simpler radio design, we have a simpler antenna design and then traditionally you've seen some people it's going to the total Wade will be less the cable in will be less.
The amount of real estate me at the site will be less.
So just as just the you know it's another leapfrog and how you might design and deploy something so we're hopeful that they can go.
He quickly once we get radios and baby, maybe yeah, I think thats right earlier I just pile on and say that did I you know as I mentioned earlier were vectoring towards that 70 for some objective and really getting you know the activity early stage activities, albeit design work inside acquisition work done across that whole suite of markets with the expectation.
Dolby Dolby compressed markets that are much easier from a site after mizzone perspective, mostly smaller small second and third tier markets that we can white up much earlier in order in order to achieve that 20% threshold. That's a one year nine months and 27 days away.
23 to anyway I stand corrected.
Totality my thinking about it right that there's really no financing needs until second half of next year or perhaps even a little bit after that.
Yeah, I mean, I mean to for our bill that the.
I think we ended up with.
I think I heard a couple billion dollars in the balance sheet today. So.
Thanks.
I think.
We don't anticipate that we.
That we spend that much money between down next year, but to say.
And sorry, lastly, just that first Mark are you still fine I'm watching the market this year or is that got pushed out.
I work that we haven't given up on doing that but we're waiting on well wait and onto on on prototype.
Radios and.
For the albeit we'll still have a market up this year.
Alright, thanks, so much.
The next to no.
JP Morgan.
Okay guys. Thanks.
Charlie thinking about the yard off auction or headlines from cable companies going deeper into rural areas and the federal discussion on Universal brought down how do you think it impacts the addressable market for satellite video overtime.
And with fiber inquiry level.
Pam satellite broadband looks more of that satellite video market as well.
I guess for Mark.
Yeah, Dan second I didn't hear the second part of the first of all the addressable market for satellite broadband given.
Well I mean I think.
Since I was on the Echostar comp I think they have a little over 1.2 million subscribers, the United States that their capacity is full.
There is excess demand buys that I think reported today around 600000 subscribers or the market is 1.8 million today in the United States for two satellite broadband that we'll get that will get challenged as people build up more in rural America, but not but.
The market could use a lot more capacity.
Then it has today, so because I think I can't speak device habit, I know, but I know echostars fall.
There's new generation I think what's going to happen is that as new generations satellites come on.
Speed to go up and people use more and but I think I think there's a.
I think there's a solid.
The people in Rural America that.
And small businesses and people for back up and then things like aeronautical and other users and then for US satellite we look at it or Dave looks ahead.
I'll speak today, we look at it in a lot of world Rural areas. We believe is broadband.
There's a wide wireless backup so we think there's a real we don't see that going away and within that maintain and that you know the being a profitable business and even though.
The amount of people.
Getting access to high speed broadband cable or perhaps fixed wireless will go up and obviously one of the ways. It's going to go up as because you know wireless carriers.
Well have the ability to the fixed wireless late in the mobile wireless and to compete against some of that.
Cable companies in the future because by juices going that a lot more capacity out there if that's going to be interesting development see how that that goes in.
We haven't seen much of an impact from the millimeter wave stuff.
Yes, but I would anticipate that the lower frequency people will move to the lower frequencies, ultimately, though maybe pivot strategies.
You have a different story.
Our next year.
Because its economics are better.
And that's a great place right I mean as a company. We have we have we had very good skill sets and satellite we are very good so skill sets and video we now are incredibly skilled and in overran cloud based.
Architecture for the next generation of telcos. So we have a we're unique NSS and the focus is that you put those assets together.
The good to have good services, a consumers and businesses enterprises will pay for.
Because we get a return on investment obviously, we have a huge investment.
And telco today as we do in satellite video, but obviously telco divorce that today so.
[laughter].
You know.
They see [laughter] I'd say is everything everything that we see today is in terms of the core strategy is better than it was last year and it's better than last year than it was the year before the that technology shift is dramatic it's not understood by but most people. It was it reminds me of digital when we were we were.
We're doing digital compression when when people thought it was impossible or they would never make a difference and and we we knew it was going to make a difference we knew that we knew the analog video was.
With data or you know, we're just not the right way to go once you could go digital and there and ultimately when the than the technical problems resolve that it was just execution and for US that was launch in a satellite build the set top box, but what are the same situation today there is no.
There's nothing in the off visits are technically that prevented some building is filled in this very modern network that was different a year ago.
But.
But the big categories that we were worried about.
Particularly vendors and no ran radios, which some people would bump on the sky and say in five years out in seven years out.
The big guys aren't going to do it you can't by Chinese.
We resolve that problem and others that others are doing that as we speak and.
It's this is an execution this isn't execution risk company right now and.
The way you minimize visits to execution build a good team.
And.
We've got a good team we need to strengthen it.
We need bench strength, and we need to strengthen the.
Lower levels, but but we have as we have it incredibly strong team is focused on emissions.
Yes.
Hey, John Hodulik.
Yes.
Thanks trying to maybe just on back to wireless strategy first on the prepaid side.
I think you're focusing on profitability.
Yeah, then do you know economics, I guess should we assume that you got to be less focus on customer acquisition and as a result, we may see prepaid sub decline I'm keeping that was built out and then in terms of your entry into postpaid.
Again any thoughts on the timing there and I guess, given what you said it at the end you know should should we expect that really well under the postpaid market until you've got sort of critical mass of I was sort of facilities based networks.
Towards the end of next year.
Yeah.
Yes, a little jumbled, if I didn't get it right timing jump in but the and boost.
We certainly heavy.
We have a profitable customers that are the most part in the customers that we acquired their subscriber acquisition costs has already been paid they're already customers. So.
They're based for the most part of the proper there are some of those customers or perhaps away.
Brand accounted for them.
Perhaps that you know the way they ran that doesn't that would make sense for us. So we certainly have some clean enough to do there, but we'll get that Don as far as new customers. We just announced different plans to today's really kind of first day, we really own boost because we.
It takes that long to get our new plans out in the marketplace I think there's five new plans today those stores.
All under $50.
The postpaid as a <unk> is a place that that is more profitable or even as an embryo as well and you.
You saw our two cows announcement, but maybe it was a Monday Monday and they are helping us not only did we.
Acquire he is the pieces drivers both above but they're helping us.
With regard, though that the entered the postpaid business.
Because that's not something that that sprint or T mobile systems would work for us so.
You know is as the sidelight I'd say that the the prepaid business is the is kinda backwards United States is really only country that I know of or the prepaid business actually.
Theres less expensive than the postpaid business, so today and the prepaid business you'd normally can get a free phone or near freephone, even though you have no credit.
And if you're a creditworthy customer go postpaid you actually finance the bone. So you back you pay for it so it's actually a little bit backwards from you know if I go put my financial analysts had on I'd kind of scratch my head a little bit at some of the things that.
Our down in the post in the prepaid business business.
Reminds me of some of the Crazy thing that we used to seeing that.
Video business some of the some of the things we saw in the and Ltd business where.
There you know you sell below cost and make it up on volume and and.
You know University of Tennessee freshman class finance one on one.
That's that's one thing I learned only one one thing and finance class, but I did want to that and so we're going to turn out to do that so John This is Tom again subject to Charlie point that the this feeling as if somebody activity that goes on and repaid the discipline that Eric referenced that we're going to be injecting into boosted. Your your question is really.
The around wireless strategy in general and we don't view or opportunity as the only prepaid and postpaid there's a huge wholesale opportunity.
As we open up a market unleash a 100 megahertz admitted more bands back and they're going to have so much more capacity than you need for pre and post paid.
And at the same time with the law way push coming out of DC, There's a there's quite a bit of sport now or Oh man, and so and and the desire for a U.S. based telco ecosystem. So we're seeing basically you're getting inbound activity from every major technology.
In the United States, where they'd be enterprise focused companies or cloud based companies and they're all successfully now running.
Telco instances in the cloud so the progress that we've seen over the last.
You know called five to six months around automation network slicing and the ability to sell wholesale capacity has been tremendous suited to in our minds now it's inevitable that and that then deniable, but Oh man will be part of the landscape and the wireless the wholesale wireless opportunity is much much larger.
People expect yeah, and I think you know just as I think we as we pivoted the world five years ago, and obviously, our subscriber counts went down and we got chastised for for for not having not grown or sub base, but we grew our sub base were counted.
And.
At the same things got that we went with you know there was.
You know a solid base, what's going to happen here, we're not just about handsets to you know as mostly incumbents are what that's going to be very competitive market, but the fact that an enterprise get slack have a slice of our network.
And be able to have their own data and their own security and looked like their own network that is gonna be for a while that's going to be one of the caught and.
And there are going to be companies.
There are going to get a huge renter return on investment to to to be as be part of our network because we're going to make there with the data and the ability to connect where we're going to help them improve their business or other product in a way that they just can't do today and.
Yeah that will become more evident you know I think the people over coming years. So operator, we'd probably have time for one more Paul from the analyst community.
We will now take our final class question from the analyst community from Brian crack with Deutsche Bank.
Hi, good morning.
Asking one question on funding and then another on satellites just on funding is you do think about.
Sources of funding for the wireless plan, what what are the most important consideration there as you look at the different options for funding to plan and then as you think about the capital needs for the.
He business on the satellite side at some of those satellites reached end of life are you planning to replace them with your own new ones that you'll build or is there an opportunity to go back to leasing capacity from another company such as accurate star and would you need as many satellites going forward as you have historically thank you.
Okay.
Well, if it does own satellites.
We don't have a need for additional satellites in the short term.
Obviously, I'm surprised we haven't gotten a question that obviously.
I said the pass up Allison I would be inevitable that dish and Directv probably at some point would work with good good good.
To be allowed to merge it and you know that.
And that would reduce need to her satellites as well so I don't think thats a material cost on on capex for traditional foreseeable future.
With any kind of financing were generating a lot of cash flows there were and obviously to extent that David and his team are successful owner build out in their timelines.
We're going to generate cash flow from from boost in as well. So that has reduced perhaps that that does reduce some of our external funding needs perhaps.
And then we've raised we raised $2 billion, we raised a billion dollars in a rights offering I think the before the end of last last year and have embraced a billion dollars in and that this year. So.
Most typically we look at financing you know what are the.
We look for flexibility will look for interest rate, we look for term.
I don't know what we look at the traditional things we've looked at it from a financing point of view. So a lot of what we're doing though you know is infrastructure. So that's a whole different set of you know financing opportunities for us because because we're building real assets you can touch and feel and then and then spectrum, they're not making any more spectrum anymore. So they are print.
Money, but they're not making spectrum. So the brightness Tom will you know what would I think what we're saying we'll be opportunistic if needed, but right now given our cash position and the build out timing, we don't see any imminent need second thing that we're seeing that we're encouraged by is the promise of over in in actually lowering the capital costs.
So deployment were seeing because you're able to break apart the proprietary traditional system, we're getting radio pricing that is a fraction of what a typical radio historically has cost that's one area second area is.
As the Silicon Road map matures over the next 18 months the costs will go up even further on capital and then on the Opex side as you're seeing a orchestration becoming more mature in for instance, with B B M, where it's part of the.
Solution that we negotiated with them that you orchestration layer has an opportunity to significantly lower traditional opex associated with wireless.
Sure if I could follow up and it sounds like Tom I know, you're not backing off of the 10 billion dollar number now, but it sounds like you do see some opportunities for that overall build costs to come in below that 10 billion based on what you just said is that fair.
Yeah, I am not we're not changing any guidance and as you know, we traditionally don't give guidance, but that 10 billion going out there for several years.
What we're saying as we have visibility to promising cost curve improvements.
And this trend I would say that people, who people is discounted that number and so that was an impossible number the building that were.
I think that they'll start I think you'll start seeing real data that says that that's a.
You know given that it gets over and it could be a little more or less but that's a pretty realistic that numbers as becoming more and more realistic I think as people well. In addition that number predated our deal with chemo. So it seems like you had to build the whole network before you saw dollar one of revenue given the current structure and deployment, but we're on will be.
Generating cash in the interim while we continue to build the now.
The two things one is that the cost of that word we still believe it's been a $10 billion. Its questioning do you have to finance 10 billion that that might we might be more optimistic about that today that we wouldn't have to finance as much.
Okay, and if I could ask one last follow up I promise as Lance.
Is there a tower account that you would share that corresponds with getting to the 70% coverage.
It for years.
It.
We're not hearing that we're not sure not exact terror account, but we're not really trying to hide the ball. There is you know it you can.
I guess, who you know we run the math, we'd say how many people when we cover with the tower and.
And you kind of run that math, when you get to 70% population and total network build isn't 50000 tower macro tower range.
And to cover 70% as a fraction of that yeah. As you know where FCC commitment is 15000 hours and it's probably.
Slightly more than that.
Yeah, We know we're building momentum of 15000, but we believe it takes a little bit more than that to cover 70%. So that will give you more guidance on that as we get as Dave and team have the.
You know as we get that we get like answered and we have strategically we have to decide just out dance, we make the network as well so that that's a piece of it.
Thank you very operator will.
Well head to the media now.
We'll now take questions from members of the media again, if you are not the media and would like to ask your question. Please press star one now to enter the Q to ask a question.
Our first media question comes from Scott Moran with Bloomberg.
Hi, Thanks.
Wireless question, obviously the.
There's a lot of discussion about one get rid of unprofitable boots customers and you also have some aggressive.
Offers in the market just wondering if you start with 9 million customers.
With the acquisition.
Where do you end the year, you can be up or down from there.
We don't know.
You know there I think we said earlier, there's some cleanup on on the approximately 9 million based customers certainly clean up there for for customers that we might count it doesn't look there might be an unprofitable customer.
When you when you pay for the networks. The second thing is we as we add customers, we want to add customers that that only add customers or potentially profitable. We don't want add customers that we would lose.
For for and not just did have a number or for Walter So we're gonna be disciplined about the way we do it having said all that.
Hi, I, rather look at it from a subscriber count point of view, we look at the financial point of view, where we would like to be at least one one dollar positive one dollar EBITDA positive and our cash flow positive.
And then as we better as we get owner economics around network that obviously shifted to.
There are much more profit only be obviously more aggressive and try and within your customers.
So sorry, thats kind of cannot answer answer in terms of number.
But it doesn't matter for profitability.
I hear you good luck.
Metric.
But again I couldn't hear you see.
Good luck with Oh, what that meant Oh, Okay next question.
Well go next to Joe Fitzgerald with Wall Street Journal.
Yes.
Two questions again first.
Some that are you still think for testing.
I thought that addition, Directv the DBS businesses.
Eventually be demerge kind of the best thing that an inevitable inevitability.
Do you still hold that view and then second theres not a couple of company there.
I'm going to go into the lower or that business with.
Very low latency satellites that might address some of the business customers that you're tired nature Fiveg network just wondering.
If those plans are successful had an effect the economics of what you're trying to do besides you never.
Yeah, I mean, I still think Greg dish and Directv will will will be inevitable I wouldn't you know that that could that be a month from our 10 years from now on that I don't know.
As far as low latency satellites. The we're certainly aware of the plans I mean, obviously, we oh on the board of Echostar they've.
Potentially investing more in Oneweb, we certainly understand what what.
Star Lankan perhaps with the.
Telesat and others.
Have you done we see that.
We see that any new technology, where you can connect things.
And provide the information we see that is is in general a positive and we think that allow the asset that we haven't place, including geosynchronous satellites, but also terrestrial markets. They play together.
Because people I think consumers and businesses are going to continue to consume more and more data and there's going to be more and more demand for data and.
There is gonna be demand for lower latency. The satellites will never approach the latency that we're going to be able to get with a modern network. So.
There's always going to be latency man, you're not going to gaming and things like that in my opinion, the satellite you're not going to be you know so a lot of things.
The industrial production and things like that they too higher latency satellites, but but they all work together because not every need not every need justify expensive low latency and so for US we try to world try to provide the solutions to our customers that a best for the best of out of your customer that usually one gig them onto other planned for you.
The other if your customer uses a 100 gig amount will have a plan for it you need low latency will have a plan for you need you need that's not a factor will have a plan for it and where you need company that we actually technically I understand most of those things and that and again, we're but were pretty good satellite were pretty good a video we're getting really get to that.
At five GE open ran architecture wireless.
So operator, I think that was the asked a question in queue. So thank you everyone for joining and were brought a few again next quarter.
Yeah, I meant to Macau.
That concludes today's conference we thank you for your participation.
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