Q3 2021 DISH Network Corp Earnings Call
Please standby we're about to begin.
Good day, everyone and welcome to the Dish Network Corporation Q3, 2021 earnings call. Today's conference is being recorded at this time I'd like to turn the call over to Mr. Brandon Ehrhart. Please go ahead Sir.
Thanks, Alan and good morning, everyone. Thanks for joining US we're joined on the call today by Charlie <unk>, Our chairman Erik Carlson, our CEO, Brian <unk>, and our EVP and group President of pay TV, Michael Schwemmer, EVP and group President of Sling, TV and Paul Orban, our CFO and on the wireless side, we've got to either buy our chief commercial officer, Dave May RSVP.
Network deployment and John <unk>, our EVP of group President retail wireless in the dish CLO, we're not going to be making any opening remarks today, but we will start with the same safe Harbor statements that 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 our actual results.
To differ materially from historical results <unk> from our forecast, we assume no responsibility for updating forward looking statements for more information. Please refer to the risks uncertainties and other factors discussed in our SEC filings.
Also as part of the process for FCC auction 110, we filed an application to participate as a bidder for those spectrum licenses because of the FCC's anti collusion rules, we're not able to discuss that auction and we will not be taking questions on that during todays call. That's it and with that Alan let's open it up to questions and let's start with analysts first.
Thank you, Sir if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure that your mute function is turned off to allow your signal to reach our equipment.
I've always pumped on the phone line will indicate when your line is open again. This session first will be for analysts only analyst. Please hold your question for now.
But again for analysts star one if you'd like to ask a question at this time.
We will take our first analyst question is from David Barden with Bank of America. Please go ahead.
Yeah.
Hey, guys. Thanks, so much for taking the questions I appreciate it.
So I guess.
Questions are number one.
That was Vegas coming along.
Uh huh.
When are we expecting the launch.
How are the pieces of the network working together.
And what's the game plan when we do get.
Two market and I guess, the second question would.
It would be I just noticed in your filing today.
The the work in progress Capex is now about 820 million, that's up $400 million sequentially for about a $1 6 billion dollar.
Annualized run rate up from about $250 million of Capex, a year to date in the wireless business could you kind of elaborate a little bit on where that's going.
Is that run rate going to persist.
Anything you could tell us about what's happening in wireless would be great. Thank you.
So thanks, Thanks for the question, David So I think well I'll start off talking about Vegas hold that were.
Where we're actually.
In a beta test mode, we've got.
Friendly users.
Working.
Helping us test the network, where we were a little delayed.
Consequences.
Frankly the.
Vegas network.
I think about it as a preproduction environment or a bank or a.
Development environment until fairly recently.
Just kidding.
And the <unk>.
A little more color as just getting the radio software.
Core network software too.
Work, well together and be reliable.
We're still working through chemo is eroding and specifically handover issues.
So Vegas is I'd say coming in along with the beta test mode and.
We will progress that over the course of the next.
90 days.
We look forward to launching Vegas sometime.
In the first quarter of 2022.
As it relates more broadly to the development process, we are making great strides in great progress around the leasing and permitting activities associated with the 70%.
Milestone for 2023, and as it relates to the 20% threshold or PA requirement for 2022.
You probably saw we've.
In the Q, we started 35 markets when we filed or at the end of the.
At the end of the quarter, we're now up to 42 markets that have that have construction activity.
And as it relates to the sites that are required to meet the 'twenty two obligation.
We have building permits on two thirds of them, which I feel really good about that.
Once away from the deadline in we've got building permits on a two thirds, we started construction on well over 30% of the sites required for 2022.
The Bill is very focused I mean, we're we're really just building in markets that we plan to launch in 2022, and we'll start the build activity on markets for 2023.
And that's in the new year.
Yes.
Oh, yeah and from a dollars perspective, Youre right. The Capex is ramped up and as you would expect it's going to continue to ramp over the course of the first quarter and probably reach kind of a steady state until we finished the 70%.
23.
Over the course of.
Yes.
The four quarters of 2022.
So Q1 will ramp up some more.
We'll flatten out just because from a build perspective, we've tried to level load to the fullest extent, we can only because it's really hard to bill we don't want saw the saw tooth.
Because it's difficult for the gcs, it's just difficult to manage so we're on a ramp.
Hum argued some color we had.
Yeah.
Last week, almost 300 construction starts and that that number will continue to grow as we move into.
Enter into the first quarter and then we'll stable will stabilize that.
Midway through the first quarter.
It'll run run.
Throughout the balance of 2022 or 2022 at that level.
Perfect. Thank you so much for that color if I could just ask one follow up to that the.
The big debate has been Charlie.
How you want to come to market does just want to be the last to market.
Consumer smartphone broadband player or does it want to be first to market wholesale provider or enterprise service provider.
Any color you could share about how youre thinking there would be great.
Yeah, No I think we're going to do both.
So in.
On the <unk>.
As a fourth player we're not going to dominate the retail handset business and I know a lot of analysts is going to look at us as retail.
But we will get our fair share of that.
That business.
And that'll be a very profitable business for us, but obviously the network and the amount of spectrum that we have from a wholesale perspective, we're willing to.
Wholesale some of that spectrum, and particularly on the enterprise side.
Where that's kind of a jump ball in other words I think all of the carriers are going to do we're going to we're going to do well in enterprise is a new market segment. It's a market segment that can that go.
<unk>.
Uh huh.
That can rival the kind of.
Demand you see for consumers because because because on the enterprise side when they're when they have.
When they can have their own private network so to speak a slice of our network. They can they're going to be able to build their product safer cheaper.
Veterans and gain on the competition so it's <unk>.
To be a big market, we're well positioned for that because our opinion is that you need to be cloud based and you need to be automated to do it to slice your network. So we're going to have an advantage there.
But the incumbent to have an advantage of incumbency and brand recognition that kind of stuff. So I think everybody is going to do pretty well, but I feel like that's a place where we where we can get more market share than we will in the handset business.
Stephen do you want any Steven runs that side of it for us.
Charlie you characterized it very well and I think.
That's interesting and sort of the enterprise basis sort of move to sort of industrial for Dod Gerard and sort of the opportunity that that presents for enterprise customers to build a more efficient operating model and say without platform. We do have some capabilities in that environment with the cloud native architecture that we're deploying that gives us the opportunity to differentiate.
More and actually provides more degrees of freedom for an enterprise customer as well than what you would have with a traditional networks. So we do think we have some inherent advantages there but.
Yes, it's certainly going to be a good business for everybody.
Thank you guys so much.
Alright next question will be from Jonathan Chaplin with New Street research.
Thanks, guys.
Two quick ones I'm wondering if just.
Housekeeping matter you can give us an idea of how many subs you still got left on the T Mobile network and if you had your choice how much time, you you would need in order to switch those over.
And then more interestingly.
I'm wondering if you can give us a sense Charley of how the market splits. So maybe this is a question for Stephen between you and the enterprise market splits between you and the cloud service providers.
Is he going to market with the likes of Amazon.
AWS as partners, how does the enterprises spend on communications services get split between you and then in.
In those in those kind of deals.
Yeah.
Yes. This is Charlie I'll take the first part about CDMA and stuff and Steven maybe you take the the business side question the CDMA shut up.
Obviously.
We have.
Since its now extended to March 31, we will still have well over a million customers on our CDMA network and.
If T mobile has a way those customers will lose service on April on March 31, and in fact, they won't even.
Based on T Mobile's testimony in California, they won't even be many won't be able to make 911 calls.
So we look at it a little bit different the T. Mobile we look at it for a consumer first and say why in the World do you want a distant branch customers, we realize where for a for profit company, we realized that T Mobile's a for profit company.
We play the long game and we.
And we want to make sure that we that we're taking care of consumers and theres not despite our best efforts and aggressive efforts.
We know that we're not going to get to.
There arent too.
Too many people we disenfranchise on these are these are more economically challenged customers for the most part.
Which is why we're not able to convert them in and it just seems like the wrong thing to do and I get that and despite.
And there are other headwinds such as supply supply chain and they didn't have enough.
Units to do it I would have preferred to work with T mobile and we're there for them.
If they want to work with and work together so that we can make sure we have enough units for customers.
Better ways to work together to convert the customers we want.
We would love to see.
We're not against the CDMA shut down.
Leave technology needs to advance, but you have to do it you can do in the backup.
Customers and so.
That's something we'll have to live with their whole the whole life theyre going to live with the fact that their anti consumer.
To the extent of profits.
That's something that.
They're going to live with and we've taken the other approach and we spent.
A lot of money some headwinds in this quarter.
Although you see we spent a lot of money to upgrade people for the false deadline of January 1st and now we've got maybe another false deadline, there so well.
Well continue to go as fast as we can but it's disappointing I'm disappointed in T mobile and.
I wish I had taken a little bit longer term approach to it maybe a little bit higher in consumer approach to it but.
We're here to work with them to make sure that consumers arent disenfranchised.
Ill turn it over to.
Stephen Yes, so just on the question as it relates to AWS.
We do have a very good partnership with AWS, It's obviously very strategic.
And we are working with them on enterprise opportunities.
I wont come in and sort of how that split works.
In terms of how we do that each deal is generally a custom deal.
As you would expect depending on the enterprise requirements at the point to probably highlight is the arrangement with AWS is not exclusive. So we do have customers that have different requirements in different partnerships with other cloud providers as well and so we'll work with them and complement that solution. We also worked with multiple systems integrators.
And we partner on different opportunities across different verticals based on kind of the solution that those customers are looking for and I guess my earlier comment about the degrees of freedom. We have in the platform that we have allows us to be able to integrate that in different ways, depending on what the customer requirement is.
And just as an example, and some opportunities we're partnering with our sister company Echostar and Hughes on certain opportunities that theyre in segments that complement what we're doing on the terrestrial side as well. So it's a good partnership with AWS, they're a very important partner both in their network build as well as in the enterprise opportunities that we're exploring.
But we are also working with many other advise as we pursue this market opportunity as well. Yes. This is John let me let me jump in when you look at from a big picture perspective, and this is it's hard to model now because we are certainly in the infancy of this but but we do the way we look at it from a network perspective, where do we get where do we get the highest.
Profitability per bit right.
We don't for the enterprise customers you don't have some of the customer service to consumers you don't have the retail stores you have a lot of cost you bring out of that and because those bits are so valuable in terms of them being able to.
To make their products better we think that the enterprise business.
More profitability, probably that's our guess is a lot more profitability than kind of a very competitive retail wireless business, where where everybody is selling the same thing where the where the best <unk> were the fastest <unk>.
We can differentiate a lot more on the enterprise business, where we can say we are in the class.
Don't think of business survives. The next decade, if you don't if you're not if you don't have automation and you don't have you're not using artificial intelligence and you're not cloud based I. Just don't think you Sir with rare exception. So most go industries, maybe do but youre, just not going to survive and we're on the leading edge of that.
Sure.
And so.
We think that we move people there in a way that our help move them there in a way with our partners in a way that they couldn't otherwise get there with the other carriers.
Got it thanks guys.
All right next question will come from Walter Patrick <unk>.
Okay.
Thanks.
Charlie can you tell us what exactly this consumer data service, meaning like what does that look like.
And I think related to that Dave and his comments.
<unk> talked about working through some issues with T mobile roaming.
Are you hooked up with AT&T, yet in terms of.
Roaming or using their network I was in <unk>.
Biggest last week didn't really see much of anything there, but in the stadium T mobile didn't even work. So I'm just curious where you are with AT&T.
We don't have we don't have roaming with AT&T yet and.
T Mobile's first up for US there they remain a very important partner for us in the roaming commitments that they've made are very very we can't launch commercial service where that team alone. So.
You can't I don't think you have a commercial service of <unk>.
If you drive outside Las Vegas, and you don't have any.
Any service so we have to get that done.
We're working through those.
Those issues, but it's not a secret that our relationship is not the greatest so that's difficult, but they've made commitments to why not why not prioritize AT&T.
And our regulators.
And we will get through that with them and make sure. We can get it and then what you know.
<unk> will come later.
And then in terms of what abate our beta test today, it looks like it looks like.
Our employees some people who have signed up on our.
Our system.
Our signed up to be a beta tester, then required to give us information and then everyday we go through all that.
Tickets of the stuff that doesn't work and there's stuff that doesn't work and then we go go fix that and then we'll continue to add more and more people know more and more system is.
We.
Get it more stable so.
Okay.
But but but Bob if you come to Vegas, and you want to test it out we'll be able to.
To do that for you. The next big thing for US is is ended and in November when AWS as they reinvent conference.
It's around the first of December or something like that and I think people.
We'll probably try to get to experience a part of our network then.
Okay, maybe I'll come out for that so on the <unk>.
Topics there has been some breaking news.
Apparently the FCC is back down to the FAA and C. Band is now delayed they are claiming a month, but obviously, we have seen with legato that these things can drag on <unk>.
Much longer than that.
You have you are building in a couple of markets, but you have this depth of spectrum that is leasable.
To AT&T and Verizon.
Is that something that you would consider or are you just going to hold all that spectrum back in because it's going to take you a while I think.
To build that who knows maybe this one month delay becomes nine months and you can make some money and nine months by leasing the spectrum. So is that an option that you would consider.
The answer is yes, we're we have been very public there were wholesale and so.
It's public that we are leasing capacity to T mobile today.
And we do think there are other interested parties in.
Leasing capacity and so I'm looking at Dave here, because Dave Dave.
David in a situation as you as you look to it as build out where does the air pockets, but but I think that thats a.
That's certainly something that that.
We would consider and there are a number of parties that have asked about the ability to lease capacity for in the short term.
Obviously, if I hadn't seen the news on C band, but obviously thats.
That would have any delay in C band, particularly for Verizon, probably where they they really spend a lot of money on it would not be.
Would be positive for T mobile, probably but not positive for the other guys.
Charlie It's rich Greenfield just wanted to jump in.
You're always thoughtful on sort of the big picture of the video industry and I know you're sort of now.
<unk> is sort of in a blackout situation with Turner syncline.
There are a sensor obviously still dark major league baseball.
The NBA or started talking about doing their own over the top RSM service, sorry streaming local sports service.
And every media company I've, just listened to over the last week all they talk about is their streaming services and not their linear networks that you pay a lot of money for I'm, just wondering sort of how you think about like are we getting closer to the point where rates for channels actually start coming down like or do you think anyone's learning that they can't charge more every year.
As viewership goes down and they don't even care about the assets versus the streaming services and how does that affect how you negotiate.
Re trans.
Cramming et cetera.
Yes, I mean, I don't think it doesn't really change anything.
It does change stuff, because thats something thats available through streaming.
Your product becomes less valuable on a linear basis, because people have another way to get there. So as it relates to Retrans now that the biggest really retrans today has a dozen NFL season ticket through your local teams right.
It's the value there and absent the NFL.
If they have a show on the top hundred that gets there right. So maybe maybe the oscars or something I don't know, but there is not much there based on what we see so the viewership we've seen viewership declined 15 years in a row.
On the networks and Retrans go up by 1000.
Percent that that's not sustainable, but we look at it for math and we know we'll lose customers. So we know we'll lose technet customers, if they're not up.
We are losing some customers.
But not not as dramatic as it might have been in the past and.
And once you do football season and once.
People find a way to get football next year.
That's going to be a permanent loss.
Viewers for protect and of course people also can go get it from the networks. So they can give peacock from NBC directly and maybe taken against revenue from that maybe they get more revenue.
And then they do from us and maybe that makes sense for them, but.
But we look at it economically.
Sinclair is.
Is bigger than <unk>, we've had a long term relationship there and then.
There is more conversation around that than there is in they are bigger and would probably have a little more clout and scale in the marketplace, but.
You know I've said it last time, I think the moves in retrans or down not up.
And I don't know what that does devaluations.
Got it.
I saw you know gray publicly said, 50% of their revenues are retrans.
I think thats going to come under pressure.
But just to be clear there hasn't been at <unk>.
The end result of this the end result, this is networks.
Fast forward a decade I don't think I think most things will I don't know that networks exist maybe for local news.
Because their pricing themselves out market.
Just to be clear no deals have been done at a down level, yet, but that's where you think it's going.
We yes, we don't well taken us down and there was no and there is no deal done there. So Sinclair is still up and obviously we've had several extensions that are public.
Beyond that we would just wouldn't we wouldn't talk about the current negotiation that cut where the company is still up did you want to say something or no I mean, Richard I mean, youre right. I mean, retrans is still going up viewership is still declining. So this is.
Charlie spot on there I mean generally you mean youre looking at Retrans as just being a tax on the American consumer right now.
What is it something like $12 billion or something like that and viewers.
Viewership continues to decline and so that obviously puts pressure on our margins and it puts pressure on you know Arkansas.
Our consumers' willingness to pay so we've got to be better customer experience and a bunch of other things in order to combat the tax, but I don't know why you want to drive customers to watch Netflix and Hulu and I don't know why you wouldnt do that but they're doing it so but you know they have their own in their shoes. So they have their own they have a reverse retrans in there.
Their own somewhat empathetic to play because.
They don't have a real place to go.
Absent some fundamental changes.
Thank you very much.
Alright, our next and last question will come from Ric Prentiss with Raymond James.
Yes. Thanks.
Thanks.
Couple of questions one on the Las Vegas consumer trial, do you anticipate having a wholesale enterprise trial strictly to Vegas or do you need more footprint before you could actually do a wholesale enterprise trial.
Yes, Rick its very good question and in fact, we do have.
Both wholesale and enterprise lined out we're very focused on the consumer trial right now.
And at the appropriate time, we'll talk more about what we're doing there on the wholesale side and what's actually exciting about the wholesale opportunity is.
A lot of pundits would suspect that you need to have a nationwide footprint to support that segment. There are a lot of.
Opportunities there to serve customers with very niche products and capabilities that are at a local or even a regional level and we're working with companies to do that.
And we will announce at a later date some further details on what we're doing there.
Because I think Stephen you also talked about.
I like companies, we've seen one web with AT&T project Kuiper with Verizon.
Mr. Coby, Echostar, maybe broadly Charlie and Steven how do you see satellites, meaning to.
Intended the space here for you.
Yeah.
Satellite is part of <unk>.
Connectivity, where connectivity company, we are pretty.
Do they work through our history and through our Echostar relationship were fairly knowledgeable about about satellite and I think youre going to see Geos leos and meals play a part.
In.
And the products that you can bring to market and how and how you can differentiate yourself whether it be on the enterprise was consumer basis, and I think we're well positioned.
And you know and if any sort of way videos most of your traffic and we're pretty good at video.
Satellites are part of your connectivity, we're pretty good at that and so.
I think I think we I think we're able to do.
To differentiate in ways, there and well just you just have to stay tuned as we moved through those those issues and see where everything lands because a lot of it depends on where the.
I mean ideally the idea that it would be a standard and people would all deal to standard that it wouldn't be a sandbox individuals' sandbox for everybody else, but like most things in wireless everybody seems to want their own sandbox and we're probably the only guys that say.
Makes sense from a capex perspective.
Have a standard and playing the same sandbox, but we'll see.
One quick housekeeping question, if I could on.
Pay TV SG&A was somewhat higher than we were expecting in third quarter or is there anything out of period and there is this a good run rate or was the first half of this year, a better run rate than anything unusual in pay TV SG&A.
Yes.
Yes. This is Paul yes, there is no one timers in there. This year. However, our last year, though had the benefit of Covid and everyone kind of hunkering down on costs. So going forward, though I think it is probably a pretty good run rate to look at I think rich. This is Eric I'd also say look at theirs.
Generally you're hearing about inflationary pressures and theres some of that baked into that we'll see what happens with that on the run rate and then obviously we've had.
Harley alluded to already on the call just.
<unk>.
With the false January 1st CDMA deadline, we've had some additional expense along with converting customers. So we'll see where that ends up over the next few quarters, but we'll keep you posted on that.
Alright stay well.
Okay next question will come from Michael Rollins with Citi.
Hi, Good morning, two questions if I could first I'm curious with the Vegas clients and the other markets that you're deploying alright, those radios capable of using the 800 megahertz spectrum that you have an option to buy from T mobile and just curious what the what you thought.
Sorry in terms of fully acquiring that spectrum band and then secondly are.
You shared your thoughts in the past about the possibilities of satellite video merger just curious your current thoughts how the industrial logic for that type of merger.
Evolving and is there an urgency to try to get that done.
So I'll take the first question there Michael in terms of the radios that we are deploying it does support all our current bands.
And the radios from a hardware perspective, and even a software perspective has the ability to turn on the 800 megahertz.
We decided to ensure that as we did the deployment we would not.
Not having to come back and add an additional radio in the event that we decide to exercise that option. So all the plumbing is in place all the hydro is in place the software there or we have to do is really activate those radios and beyond that even though the carrier aggregate aggregation combinations are already being designed into be able to support that depending on what we do with that option.
Yeah.
Then on the.
I think you've talked about the industrial logic of putting the two video companies together again I've said it many times the inevitable.
I think that there's been a change of control there.
In terms of from AT&T to TPG and the question is probably.
No there, but I assume that they see the logic there as well.
But that's probably a better question for them I think the big debate thing, we'd be regulatory and you know I think.
It's prudent for anybody to wait till we have.
And addressed.
A team that the government has anti trust team in place, which could happen maybe in the next month or two.
And so you kind of how theyre looking at mergers and seeing what they are focused on and what they're not focused on but but obviously industrial logic is.
It's not there's not three competitors in the video business in a matter of if our competitors.
Dozens of competitors and.
All with large scale and.
The technology has changed the economic equation and you run that.
If you want consumers to have a choice of satellite TV.
Have a much longer.
Runway and choice pattern. If there is a combination then if there's not.
Thank you.
Okay, we'll move onto our next question from John Hodulik with UBS.
Yeah.
Great. Thanks, guys, maybe back to the wireless.
Network build thanks for the color on the I guess 42 markets I mean, how many markets do you guys expect to.
Built into it.
Well, it's the 'twenty two and the 23 mandates and then from a sort of breadth versus depth standpoint anything you can tell us about the build in each market is it just sort of a downtown urban areas or how deep into the suburbs. You go unless you can give us sort of towers or nodes per market standpoint.
Has that view or that that.
Shifted at all with the.
With the AT&T deal does it does it make you build out more efficient or do you change how you think about deploying infrastructure because of that.
That roaming deal thanks.
Yeah sure. Thanks, Jonathan This is Dave.
So I'll start off with the AT&T question, what were doing hasnt changed a bit as a consequence of the AT&T roaming deal.
And when I think about what we're building, it's really the metropolitan areas in any of the given market. So I mean, we built.
Designed the footprint sufficiently large to minimize the handovers to other networks. So we put the networks were built such that the hand over back to T mobile would be.
On an interstate outside of town, so that would that would imply that all of the key suburban areas and all of the geographies will be covered.
If I think about your question was can you help dimension.
20% in the 70% and I would say.
With respect to the.
70%.
And that encompasses all of the major metropolitan areas across the country.
If you think about.
Cities over a half a billion dollars, they're going to be.
In the.
The foot in the Continental U S or if it's over a half a million pops, it's going to be in the footprint.
And I'd say, if I, if I roll the clock back or to the 20%.
Similarly.
It will be metropolitan areas, where.
They are relatively easy to build so for example, California that is intrinsically more difficult is not high on the list of the 20% doors. The northeast. Although there are some areas in the northeast, it's primarily the middle of the country, where co location is prevalent.
And we can move very quickly so I think that's probably what we're trying to do.
In the 2022 timeframe, we will attack and address the more difficult areas.
In the 'twenty two.
To meet the 2023 build.
Objective yes.
Sure.
Add to it we were already building for 23 right. It just takes longer because there's more rooftops in morristown from a permitting and things like that.
Doing the <unk> and the <unk>.
<unk> okay.
And you.
You know, you think Texas, and Ohio, and North Carolina.
Dave knows us better than me, Florida.
Those are the markets that we will give you more color on the markets.
As we as we well we got to let we have internal competition here and we don't want to pick sides yet.
Nobody's nobody is getting the yellow jersey, yet and so we're where.
We're seeing who kind of gets their own haven't ran a little bit of fun with that and then we will as we start seeing some of our.
36, 36 30.
36, 36 market organization. So some of those guys are going to get the yellow Jersey.
We now.
Thanks, Phil it's going really well, obviously deployment deployment is deployment.
Every day I think we spend most of the time and team other than day deployment has gone well we're on track for the 20%. So it's really the execution of how you get all of our vendors and all of our software and our radios to work together because it hadn't been done before.
In the class.
Is it easier to make it work traditionally.
But.
We don't need to build.
Last generations network, we got to build we build where things are going and it's more difficult. So the execution risk is still there for us.
But.
The teams the teams and the external vendors or put an extraordinary efforts and to getting there and we're excited to finally have vegas, making calls.
Alright, thank you.
Next we'll go to kind of and Venkat with Barclays.
Okay.
Thank you.
So I think maybe it would be.
Okay.
When you think about the go to market strategy.
Looks like are you thinking of some kind of a branded goodbye and that'll obviously help you manage working capital, but is that some kind of a template we should think about as you enter the market more lightly.
As you go into next year, and then just from a.
A working capital perspective, as you head into next year I mean, the current free cash flow run rate of roughly about $2 billion a year.
That change materially either because of you know maybe working capital step ups or the capital intensity as you go.
Indicated I guess it steps up the next couple of quarters and stabilize it.
But then you also have pay TV costs potentially stepping up post COVID-19. So how should we think about the run rate for free cash flow.
As we head into next year.
Yeah I'll take it.
Paul.
John take retail this is Paul I'll take a free cash flow going forward youre going to see a drag on free cash flow as it relates to our fiber deployment as Dave spoke about earlier that Capex number will continue to grow and that will drag down the historical free cash flow amounts that you've seen.
Yeah, I think the way to really look at it.
Accident, the Capex expense right we're still.
We had a strong free cash flow perspective, but capex will drag it down.
Yeah, Hi, this is John on the handset side.
We're working with all major Oems and partners.
It's incumbent upon us to build out the partner ecosystem on the device side of our own network and also to secure devices are compatible with the T mobile and AT&T networks.
I think it's been a pretty common theme.
There are supply shortages in the low and mid tier Android space.
So we don't really have scale. So we are on allocation with some partners now.
Which impacted us in the quarter when you think about going forward.
Yes, we do want to take a broad approach.
Having the right consumer offers in the right segments.
We did launch.
<unk> this week and we think it is going to do well for us and we're going to focus on bringing the right products based upon the consumer segment. That's a device will primarily be distributed through boost.
Branded retail national retail and digitally and we've been happy with it so far and a lot of work next year as we bring in Dubai.
Devices for our own network, and certainly with band 70 support and alike.
Okay can I just follow up on the cash flow question.
Broadly as we go into next year at some point I guess, when you know before year revenue start scaling with potentially gets into a.
Negative territory.
And so is there any thought in terms of Uh huh.
How to finance some of the cash burn initially as your revenue.
He has scale and should we expect that maybe over the course of the next 12 months or so.
Okay.
Yes, I think I think as we've always said, we always are always looking at the marketplace Opportunistically.
If there is.
No.
Depends a lot of factors, but we obviously expect we're going to grow our business, particularly the retail wireless retail wireless business.
And we do think that our spectrum.
We can monetize more spectrum together, there could be cases, where we go to market as well.
Right. Thank you so much.
Next we'll go to Doug Mitchelson with credit Suisse.
Yes.
Thanks, So thanks, so much.
First clarification, then a question.
I guess the first the 300 construction starts and that this last week and Thats going to ramp. So if you end up doing sort of 5000, a quarter or so I thought at some point there was a mention that maybe about 17000 sites would get you to where you need to be and it seems like you might be running well ahead of that so I'll just ask them one by one any thoughts on that.
Yeah, I don't think we've disclosed the number of sites that we need but we will have but.
Uh huh.
We have a commitment to the FCC a 15000 sites.
At certain speeds by June of 2023 now.
We believe that number will be higher than that obviously.
But the.
The 20% number doesn't require that kind of scale.
Okay, I'm, sorry, Charlie I thought at one point you had told us sort of just over 15, but maybe just tied to that FCC commitment.
How should we think about the transition to AT&T I mean, though I know it was sort of asked earlier, but is there like a percentage of 2022 traffic that you know we can expect that would be shifted over to a T T. Rather than T. Mobile, it's just sort of interesting I think for everybody watching dish.
Or how that relationship with T mobile evolves.
Yeah, I mean, I think it's a lot.
It depends on T mobile.
Yes.
If they're not interested in a relationship but it's a little bit.
They view it as a shotgun marriage by the Justice Department I guess I mean, you know.
And if they're not interested in a relationship that obviously the.
We see T mobile has been very fundamental to what to what we're doing but to extent that.
But they're not interest in more traffic will move to AT&T.
So okay and then.
Yes.
Our experience has been.
That the AT&T network is superior from a coverage perspective, I think that when you look at 600 megahertz and <unk> I think I think I think I think T mobile.
It has done more in getting <unk> out on their low band spectrum, having said that.
You don't as a consumer forget all the marketing for our consumers and we've done the test.
You did a blind test our customers.
With far.
It'd be a pretty big discrepancy they would prefer the AT&T network, if you get into the marketing of it and things like that and you look at five years and excited I think T. Mobile has an advantage there, but that's where our.
That's a bit more.
That side of the marketing is not as important as really it's really coverage and dependability and know and particularly as you get into rural America, where a lot of our customers are.
On the wire on the video side, they take T Mobile's still.
Building that out.
Okay got it and then last couple.
$10 billion of Capex that was reaffirmed in the 10-Q.
For a <unk> network build out.
Are you able to give us a sense of timeframe is this 2023 time frame.
Cover that entire 10 billion or is that over an extended period of time.
That's over extended period of time, so that goes through at least 2025, where we have continued to build out requirements beyond 2023.
And.
Dave can speak, but as you get into smaller markets your cost or.
R R.
Our higher.
Our pop.
Pop you know obviously, it's less parts.
That's over extended period of time through 2025.
There is some confusion out there because R. R.
Commitment number went up this quarter right.
And those those commitments are really opex right. So our tower leases are over.
On average 20 years or greater.
We have a commitment now to AT&T, which has been publicly disclosed.
$5 billion, that's what that's all Opex and obviously there is revenue associated with that.
For sure AT&T, there is offsetting revenue materially higher than that so.
That's that's not in our 10 billion, that's opex, but actual capex.
Still on track to be $10 billion or better or over an extended period of time, so not to be less than that in 2000 and frankly.
And then last one.
Comments on consumer versus wholesale are always interesting and.
And that's versus enterprise I was I was hoping you could help us understand the timeframe a little bit for the enterprise opportunity. So you've talked about would be the big opportunity, but it's one that might take a while to emerge like what's a good time frame for investors to think about when enterprise becomes a really big business for dish and I'm, just curious the capital intensity of that business versus consumer.
They're big upfront cost to help enterprises activate that service or is the thought that enterprises will will bear those costs. Thanks.
Yes, so on the.
Enterprise, where actually where where we have traction now in the enterprise segment, but you know the revenue is still fairly small you know obviously that business scales as we grow the business. So we already have some really positive traction right now.
That will grow as we go into 'twenty, two but I don't anticipate that to be material until we get into 2023.
And so we'll continue to grow that business scale that we can grow that wild date is building the network.
Because it's not constrained by geography, and so we can actually and we office sharing opportunities that aren't limited by the geography of the footprint, we're deploying but as we build that footprint out that it expands the market opportunity for us. So we'll see that sort of begin to pick up as we go through 'twenty, two but really not having a material impact until we get into 'twenty three.
So that's kind of where we see the enterprise.
Think we see a lot of capex for that business beyond what we do for our macro network.
And its very success driven capex, we don't spend the capex in anticipation, it's really tied to the opportunity each one one by one.
Great. Thank you for all the questions.
Okay.
Alright. Your next question comes from the line of Craig Moffett with Moffett Nathanson.
Yes, hi, two questions if I could.
First when you talk about the enterprise segment, what are the specific applications. If you could just drill down a bit that you're you're targeting is it mobile edge compute is it more iot types of things.
Is it something where where latency is the real advantage.
Because it would seem like all of those things have somewhat different implications for the network and then if I could just return to the comments you made about financing Charlie can you just talk about as you think about going to the capital markets for financing.
How do you prioritize between debt and equity and if it is that would you be willing to secure any new debt against spectrum or would you only look at unsecured.
Okay, Great I'll take the last part is like Barton.
The.
We look at the market. We know we don't have a religion and we look at the marketplace in terms of in terms of.
Where you are.
<unk>.
Where is it where you can get efficient execution.
And obviously.
That could be that could be scared unsecured could be equity it could be some combination of those kind of things you've seen we've done.
Virtually everything in the past.
Overtime. So we just look at where that where that where the marketplace is what's available and where.
And what makes sense from our capital structure long term.
So with that yeah in terms of the question on the enterprise grade, it's really all of your Bob there.
There isn't a single application that.
One could point to incited that dictates the enterprise opportunity for us.
It really depends on the vertical.
And really I would say that if there's a common.
Theme that runs across each of the verticals.
It's really about how do they drive their operating efficiency as a business.
Using the technology to facilitate that and so depending on what vertical it is.
Depending on what solutions. They are trying to deploy what systems. They have in place are driving different requirements. There are requirements in some opportunities for very low latency, depending on what they're doing in terms of the control systems and there are others that don't have that same criteria. So each one of these and it goes to my earlier comment about degrees of freedom you have to have.
The degrees of freedom within the platform and the architecture to support those different solutions based on what their enterprise need us so.
There is no silver bullet in.
One application isn't going to win the win the opportunity here, it's the ability to put it all together on the on the on a common platform.
Great. That's helpful. Thank you, we'll take one more analyst call before we go to media.
Alright, certainly Sir our final analyst question comes from the line of Ben Swinburne with Morgan Stanley.
Sure.
Hi, Good morning, one on wireless and what on the video business. Please.
We've heard from lots of companies this quarter I'm sure you know there's tons of supply chain stress.
Excuse me out there.
And I'm just wondering if if you think theres an opportunity to work with the FCC to get more time.
It seem like that would be a reasonable request just given all we're hearing on the equipment front.
So that's the first one and then on the on the on the video side.
Churn has been unbelievably strong it at DBS since Covid began it feels like part of that is sort of no.
Nobody is moving.
And there is just sort of depressed activity I'm wondering if you guys have a view as to what when or if and how that normalizes and you know what you guys are doing to make sure you keep it below where it was kind of pre COVID-19. Thank.
Thank you.
Okay.
You bet, it's Eric I'll take that second one first and then I'll turn it over to Charlie or John on the supply chain items, I think Charlie but.
I mean, we've been talking on the call for quite some time about a bit.
A a pivot strategy.
In DBS.
And so we have been focused really kind of an acquisition.
<unk> and retention profitable customers in Rural America, There's no doubt I think COVID-19 had a unique.
You know inflection point, where youre seeing that.
A bit less switching.
Some of that is obviously impacting our acquisition and we're you know we're managing our spend out acquisition.
Based on the kind of response rates were seeing in some of its benefiting obviously subscribers on the retention side, but I'll tell you our strategy of really over the past several years focusing it on.
Attracting and retaining the right customer.
It's starting to pay dividends and we are starting to pay dividends before COVID-19.
So when that when that changes.
Look at Theres, just a lot of variables right you still got Covid, you've got some of our strongest.
Strongest and longest term partners now competing of the GTT D to C side. Obviously, there is a piece of you know him you know.
A lot of the customers that we reach our in Rural America and.
It's broadband densify is obviously customers will have more choice and so there's just there's a lot of variables to try to forecast, what's going to happen, but you know.
We're still focused in on.
Profitability, providing customers a great customer experience for our fourth J D power win last quarter was.
Great for the team in order to celebrate a great Testament to the efforts we put in the customer experience side, So I'll turn it over to Charlie.
On supply chain, I mean, theres no doubt there are supply chain issues, but.
There's a lot of issues covered the fact that people have had to work at home and a lot of our vendors work at home and you're just a lot of disruption out there, but we focus on it every day, which as.
You're always going to have challenges and we just have to overcome those challenges and we are a company that has been in the office since may of last.
2000.
'twenty. So we're working as a team in managing through those issues and Dave and his team have managed through the deployment issues and we're on we're still on track and we're not yes week the FCC.
In our in our agreement you do have supply chain issues is the reason you could be late but there has to be a real reason I mean than you would make that up and so we're just going to get there and that's just the way we're going to do it on the on the on the handset there's two other areas labors.
And issue debt.
Teams, having to work extraordinarily hard because you.
People are.
There's not enough supply out of.
Of labor out there today.
And the handset issue is probably the biggest because we.
We had headwinds in this January 1st shut off RCD may So we had to take handsets and give it to existing customers. They would it would have been a new customer.
Oh man, so absence of supply chain issues on the handset side, where we're getting a fraction of what we've ordered.
We would've been we would've had that growth that we had a lot more growth there. So.
And we don't have the scale that incumbents have with the vendors.
So I don't know that we get our fair share.
Of handsets and so we you know we worked extraordinarily hard to make sure that that were on our radar People's radar screen and you know our customers arent, primarily arent buying a $1000 phones, there theyre more economically challenged it but as we get into postpaid and as we get into two.
Owner economics.
That changes for us in a very positive way Jonathan you want to talk about we really haven't retail is important because it really positive story for us and maybe John can talk about the second yeah of course, thanks Charlie.
We are definitely building capabilities.
To return the business to profitable growth.
<unk>.
We see it as a situation, where we would have grown in the third quarter.
If not for some of the supply chain issues as well as some of the headwinds from CDMA that have been covered.
We're definitely ramping up our team across retail national retail and digital.
Let's take the business to growth.
Taking a segmented approach.
To the different opportunities we see.
And access to handsets is a key thing going forward and as Charlie said, we're definitely focused there.
We would anticipate.
Seeing these situations clean up for sometime late next year, we were not quite sure about Q1 Q2, yet, but we're focused on supply and also making sure that the devices that we do have.
Towards the most profitable activities.
And we talked about earlier with respect to CDMA, we see there being over 1 million customers still on the CDMA network.
The network were to shut off on March 31, so additional.
Additional handsets is something that we're definitely focused on.
And we'd love to be able to partner with T mobile on that as Charlie alluded to earlier.
And it's a daily focus here to make sure that.
We can keep our partner supplied and move the business forward.
Got it thank you.
Okay, operator, we're ready for a few calls from the media.
Thank you, Sir and again, we will now take questions from members of the media. If you remember the media and you'd like to ask questions. Just as a reminder, that is star one to enter the queue to ask a question. Once again, please make sure that your mute function is turned off so that your signal reaches our equipment, we'll pause for just a moment to allow the Q to Q up again.
That is star one if you'd like to ask a question as a member of the media, we'll pause for just a moment.
And once again, everyone that is star one if you'd like to.
Ask a question, we'll pause for just another moment.
Yeah.
Alright, well take our first question from Scott Moritz, Switzerland Burke.
Great. Thanks Chuck.
Charlie.
<unk> taken a big hit today I think people here.
From all of this that the fiber network costs are creeping up.
The commercial launch might be slipping out a little further.
Routers are probably saying I told you. So how would you address these concerns.
Well.
I don't I don't think there shouldn't be a surprise as the capital expenditures are or where they are since we.
That's what it takes to build a network and we're doing it infinitely less expensive than anybody's ever done it before.
So.
And obviously that the.
Yes.
I think we're doing I think we should we should have we should've been a little faster on.
On rollout in Las Vegas, I mean, I think that's fair, but I think other than that.
Most everything else we're doing is.
We're doing probably better than we anticipated on an.
We're not.
Not exactly understood by the industry I imagine part of it's because we don't spend a lot of time going through strategically what we're doing.
And we spent a little bit more time and just.
It's a complicated story and it's a little bit easier for us just to do it and then show people.
As opposed to try to explain it.
And.
Just a simple examples were about more than just the handset business.
The people, who follow us and stuff are.
And you know, where we're basically a cloud Iot network that we're building and it's a little bit different.
That process on what that looks like then than traditional regional networks and so.
We have to do a better job of explaining our story and we have to execute in our markets between now and June of 2020 'twenty. Two so I think that's the stuff will focus on it.
The marketplace. They don't always get it right in the short term it doesn't get it right in the long term.
And we're one of the few companies that has the ability to be able to think long term there.
If we did talk short term, we would we would be trying to get DBS subs.
Five years ago, because that's what people wanted us to do and.
And so I think I think we know where it's going and we now have the power of this network. We know how special this network is going to be and we know the opportunity.
So.
It's on us to <unk>.
Execute.
And then and then give people the roadmap to see why the investment and dishes.
A smart investment.
We have certainly work to do there, but we're focused on making sure we get our our network out of an operator and then we'll talk about it.
And there'll be a little bit and AWS I think there'll be a little bit in Las Vegas <unk>.
AWS reinvent stuff I think people will start to see it there and start to understand a little bit better because those are the people that actually.
Developers and the people in the cloud.
So they will have a better feel for it.
Last year. This time people didn't say, we were going to build a network.
Now now I think has shifted to okay. We get it I think most people believe we're building the network now can you make it.
Can you stand your your $10 billion of long term and can you make it profitable that we have to show.
Okay, operator, we'll take one more from the media.
Alright, certainly Sir we'll take our last question from Amy Maclean with cable fax.
Okay.
Hi, there. Thanks for taking my question I just wanted to check in your comment earlier about technology did not sound very optimistic and I know you filed a good faith complaint are there negotiations going on between the two of you.
This is Charlie.
I don't think theres serious negotiation going on really I mean, I think I think.
I think we remain.
Ballpark.
And you know, we we got eight weeks of football left.
You know then.
Yes.
We will have lost the customers, who can't find football somewhere else in that.
And it remains such a huge tax that we know where that ends up so.
Having said that we remain available to have an honest conversation about where things go we know what the prices we pay everybody else's, we know the prices in the marketplace. We know the ratings that we know.
The economic value, we always pay more than the economic value because we have to factor into customers that we lose but.
The economic value to us is going down not up right now because we've probably lost the you know and it's not.
It's not a tidal wave by any means in terms of a customer.
They find another place to watch news.
And they found the place to watch football.
<unk>.
And they can save money, we give them a credit book.
When they when they don't have tenants that we give them a credit so they save money. So it's a bit of a balance, but we prefer to be up we take it's been a good partner we'd prefer to.
So to have it up we'd prefer to have an honest negotiation, but.
We're just apart.
Alright, operator and everyone. Thank you we will talk to you next quarter.
Yeah.
And that does conclude today's conference we thank everyone again for their participation you may now disconnect.
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