Q3 2022 DISH Network Corp Earnings Call
Standby.
Yes.
Good day and welcome to the Dish Network Corporation Q3, 2022 earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Tim Messner. Please go ahead.
Alright, Thanks, Justin and good morning, everyone. Thanks for joining US we are joined on the call. This morning by Charlie Oregon, Our Chairman Erik Carlson, our CEO , Paul Orban, our CFO and on the wireless side, we have Tom Cullen EVP of corporate development, Johns wearing our president and CEO of wireless and Stephen by EVP and Chief Commercial officer.
Before we start I need to remind you of our safe harbors. During this call. We will make forward looking statements, which are subject to risks uncertainties and other factors that could cause our actual results to differ materially from historical results or from our forecast we assume no responsibility for updating forward looking statements for more information on factors that may affect future results. Please refer to our SEC.
Filings, that's it and we do not have any opening remarks. This morning. So operator, we'll open it up to questions starting with the analysts please.
Thank you if you would like to signal what questions. Please press star one on your Touchtone telephone if you're joining us today use a speaker phone. Please make sure new function is turned off to allow your signal to reach our equipment Youll hear a tone, indicating when your line is open at that point. If you would please state your name.
And company name again that is star.
Wanted to signal with questions well go ahead and take the first caller.
Okay.
Hey, guys, it's David Barden from Bank of America. Thanks for.
Taking the questions lots.
Lots to go through today, so I'll, let other people kind of touched on a lot of stuff first would be.
Could we talk about the spectrum secured bond that's in the market right now.
And I think I'm most interested in understanding kind of how you think about loan to value collateralization.
And and what this exercise will tell us about using spectrum as a funding vehicle on a go forward basis for the business I guess, the second thing I'd like to talk about.
Jason on the line or Charlie with respect to this back it and in the process that you were maybe investigating with respect to the prepaid business sale I guess I understand that the stack is likely to unwind for the most part based on the shareholder.
Vote on the 31st is the prepaid business still for sale and if you could kind of describe a little bit about the.
Thought process on why it might be or it might not be thank you. So much.
Okay. David This is Charlie.
Unfortunately, I'm not going to be able to answer.
A lot of what you asked a good question for Lee.
For legal reasons.
Operating history, but let me let me just take a chance to maybe reset some things and then try to address what I can say about the questions that you asked them.
You know that the it was another really good quarter for us in terms of in terms of us.
A lot of a lot of things in it in a relatively short period.
Sure period of time.
As we said last quarter, you know one of them one of our goals was to stabilize the retail wireless business in a while from an EBITDA perspective.
Didn't do as well as we'd liked.
Needed to stabilize that business and we were successful in doing that and going from instead of losing over 100 thousands of subscribers each quarter to have a very very small gain and that doesn't count. The 139000 customers. We got from T mobile so that.
That was that was an important for us to get our process in place to do that we actually did have a.
I'd been unexpectedly with some some growth in linear TV Avis has certainly led by <unk>, but one of the few companies in linear television maybe the only company that actually.
Growth.
And importantly, too a lot of people in this call. We had we continued our buildout of success to get with over 10000 towers now constructed that can reach over 35% of the population. So we're still.
Still continued focus on that on the next milestone is 70% and I think one thing that's not quite understood by everybody as were building 600 megahertz out it includes all our frequencies.
When we're building these towers out so.
Were.
Pretty far down the path on 600 megahertz towards the final milestone of 75% of which only which affects the 600 megahertz milestone so 600 megahertz frequency so.
That we continue and will continue on that thousand approximately 1000 tower pace.
<unk>.
The.
We're now poised for we are we've launched boost infinite internally and.
We still have a lot of operational issues.
To make sure we're buttoned up on and you only get one chance to do it right for the consumer but for our customers that we've launched internally that there's still a pretty good experience, but we got some work to do so that's been a lot, but we're poised now to launch that in the first quarter were launching that and.
John maybe talk about this in a minute, but we're launching that on our own on Oss BSS system. So.
Today, we are on T mobile's system and so that's that's misunderstood.
Good how important it is to get onto your own system. There and finally, we are in the market to your question. We are in the market for funding today for the network.
The $2 billion.
Offering and <unk>.
Because that is.
Limited to qualified investors I can't.
I can't go into details about that but it obviously.
As funding for the network going forward on this back can't say a lot about that.
But the.
I think it would.
Despite.
They'd have higher redemptions.
But is still intact.
And still a public company and still capable of.
Nothing's really changed strategically there because in the spec world today Youre going to have to have.
You're going to have to have a pipe and no matter what you do.
Other secured funding so it may be a different set of shareholders, but theres still opportunity one of those opportunities it's public.
Is that there have been preliminary discussions with dish.
Let me take this back cat often talk about dish, obviously, one of the things we've talked about is we'd like H H bump each sector of our business to be to be self funding as it possibly can be.
DBS, obviously has been self funding.
In the marketplace for network COTA to move that move.
In that direction, and we think that retail wireless is in unique position to do that as well as we as we entered the more lucrative postpaid business.
Because it doesn't have any debt.
That it doesn't have any capex.
And it's got 8 million subscribers. So it's it's a it's a pretty interesting business and one that's got.
A lot of growth ahead of it so.
I know I didn't answer everything that you wanted but that maybe gives you kind of a reset a big picture.
Thanks, Charlie for that I appreciate it.
And we will take the next question.
Yeah.
Great. Thanks, Jonathan.
UBS I guess, just some follow ups on David's question first.
Charles anything you can say about the boost sale in terms of timing or the process that we have from here and then.
Following up on the comment on boost infinite just any.
Any additional details on the timing of the launch.
Maybe anything you can say about price in your distribution or what some of those issues are that you guys are trying to just trying to get them over to I talked to launch on your own Oss and BSS great. Thanks, Okay, I'll, let John answer boost infinite and I didn't quite catch the first part of it was about him as boost some of that boost for sale. Our boost yeah. Just just a prepaid sale and then this back in gist.
Hello timing around the process you guys Gotta go through.
No.
Debt.
Guess depressed depressed kind of got that one wrong.
There is.
There's some preliminary discussions between is back and dish retail wireless that would be a that would be with potentially would be a sale of a very small portion of the retail wireless business.
We think a dish that retail wires belongs in what we're doing right and we think it is not.
It is not impossible that you could sell a company, but we but today it would be more likely that you would sell a portion of the company.
It certainly wouldn't be limited the board of directors is going to look at everything and when they look at retail wireless.
They've had some preliminary discussions with this back but they've also looked at a lot of other things that they can do with the retail wireless.
So and it's a pretty plain.
The company doesn't have huge financing needs.
But it certainly has a clean balance sheet and a real business. So.
That's kind of.
I think you're heading I think everybody's ahead of their skis on on on or maybe this back discussions, but with that I'll turn it over John .
Yeah, Hi, John starts wearing.
Regarding boost infinite.
We've been sharing all along that we play.
Plan to move into postpaid, we want to move our retail wireless business up market.
We have gone ahead and launched boost infinite here internally.
It's a.
Whole postpaid business with retail credit qualifications device financing.
Full assortment of iconic down to mid tier devices, you'll see us come out sort of after some of the holiday rush with the competition and.
And be in market in the first quarter, you will see us largely focus on the transition initially into digital and then later you will see us into national retail and market the brand and distribution.
Big focus on that business here I believe.
Great path to building enterprise value for the retail segment.
Underpinning that there has been a lot of work to.
To get our own sort of operational and technology shops in order.
The process now of transitioning off of the T mobile transition services agreements not only for boost but we're launching.
Presenting it at the same time.
As everybody sees it a little bit of OIBDA pressure in the quarter.
A lot of that can be attributed to the steps we're taking.
To get boost internet ready to roll and also the transition activities for boost mobile which are fairly significant.
Just to add to what John This is Charlie.
The.
You know I've said this on conference call after conference call, but the wireless business as an outsider coming in looking at the postpaid customer there's way more profitable than prepaid customer in the pre K pet customers actually get into a much better deal United States is really the only mark that I know of or prepay, it's cheaper than the postpaid.
And so.
You know you can be really really really good in the prepaid business you know as an immuno and youre talking about 10% margins in that kind of thing and obviously, we know in the postpaid business people are north of 50% margin. So you can get a feel for further investment in our postpaid customers youre going to get a much better return.
We haven't had that luxury to do that so.
And the and the competitively.
Competitively the postpaid businesses.
Not yet not nearly as competitive as the prepaid business, it's not even close.
So there's just there's just a bigger opportunity there and.
I wish we could have started six months ago, but we're excited to get going and we can have a great product in.
With Great network partners on our own network. So we're uniquely positioned for coverage.
In terms of nobody really good match our coverage.
Hughes multiple networks.
We'll be competitive.
You know some new entrants youre going to have to be a lower price.
But a lower price with a better services is a good business.
We found that Ed and DBS right, we had a better product and we had a lower price and then and if you can do both of those things.
You can be successful.
Okay. Okay.
And moving onto the next question.
Hi, guys. Thanks.
It's Phil Cusick so.
Two things here one can you talk about maybe John the better prepay.
Prepaid churn in wireless that you saw this quarter.
And.
I assume that new handsets, you'll be launching on boost infinite will all run to AT&T, what's the path of moving existing subs over to AT&T.
And then second of all Charlie maybe talk about the the Directv combination you sort of talked about this a couple of times in the past you've talked about it as being inevitable.
Do you think that the political environment, we'll we'll let that go through and with the linear market accelerating to the downside what are the synergies look like of doing something like that going forward. Thanks very much.
Thanks, Phil It's John I'll take the first part.
So with respect to boost infinite you will see us.
Once that business has an MBA with AT&T.
You will however, also start to see band 70 devices in that portfolio as well as with boost mobile.
It certainly will be in a position as we launched <unk> commercially in our.
Deployed cities Youll start to see us activate a mix of the devices onto our own <unk>.
That will be the same for boost mobile as well.
So devices that are fielded I mean, certainly as.
As you all know we have some experience now with networks transitions we.
We feel like we have a pretty good playbook two of our customers across.
As we feel confident in doing so.
And then as Charlie pointed out I'll, just double click on it.
Once we are on our <unk>, we've got access to three networks, our own <unk> network as well as two partner networks.
So obviously, we can do some things there to make sure we're providing a great customer experience.
It is also a good setup for us to be competitive.
On the prepaid churn part that you asked about.
We certainly expected that number to go down a little bit and it has.
L a very competitive marketplace.
In prepaid as Charlie mentioned, we're doing what we can there.
Certainly have a lot of focus on.
Continuing to get the right handsets into our customers' hands and we're now in the business of doing that with band 70 devices as we start to.
Pre.
Preload band 70 monitor capable devices into our base.
It's going to be a big effort as we head into 'twenty three.
And I think and I think this is Charlie.
Just add to it.
Theres not a necessity to move.
Boost prepaid customers at AT&T.
Some will but.
That's not a big conversion thing like the CDMA shut up was it it's more the more interesting part is when you move boost cut.
Customer pre baked into our network and then obviously you get owner economics.
That's a more logical path in terms of your thinking because T mobile network works great.
And people that are on the T. Mobile network are happy and there's not a need to move them, except for making the economic point of view.
It's the biggest economics would be when we have our own network.
Uh huh.
On the.
Question about Directv.
<unk>.
I've got couple of things one I think politically obviously, there's three parties I can't speak for anybody else I've always said I thought it was inevitable.
Change my opinion on that I do think the political environment within elections going on you you don't really want to.
Yep, you're hesitant to be a political.
Got you.
Foot ball for somebody to complain about big companies are or whatever in an election cycle, but that election cycles over next week.
And then you have a window, where I think people all companies are looking at M&A.
You gotta be you're probably going to see some increased activity in that sense and you're not really in the political arena from a collection point of view for another 15 months or so so.
There was a timing.
Tommy was right it would be in the near term that the longer term, there's still material synergies. There are significant synergies I won't go into detail of what we believe those are but we believe that those are still material, they're not what they were five years ago or two years ago, but there's still material.
And certainly in a in a in a declining industry taken.
<unk> taken advantage of synergies is a rational strategy.
So.
And I think the political on the political side in terms of a legal objection to a merger that's been diminished by time and obviously the degradation of the linear TV business and competition from from dozens of companies in the OTT business and the personal information of broadband today. So there is not.
Theres not a home in America today, they can't get broadband now that one if you want to buy space, Spacex or revise it or abuse right. So theres not anybody can get broadband and the government spending I think now up to $80 billion to to.
Enhanced broadband so they're gonna cover unless they just unless the government waste the money, they're going to cover every every man woman and child with broadband in the next several years.
Charlie can I follow up on the wireless side. Just one thing are you able to move a boost customer with the T mobile handset.
To look at your network for example, in Vegas, where where that exists already or is that something we have to wait until you sort of swap those handsets out. Thank you.
You could but he wouldn't have band 70, and so there are more rational approach would be that that particular customer.
You would movement and upgrade them.
You had a little bit of cost to do that but you'd also have the benefit of a what you would do that for longer term customers you would do that with customers that.
We're in an upgrade cycle anyway, and you do that with customers that had been 70. So that you got to wonder economics, which would.
More than pay for the cost to do that but there certainly is a portion of your current customer today that you're just not going to move you're going to lose them from churn.
And youre going to lose them because they don't have any handset that's upgradable.
I don't know Jon did I get that right.
Thanks, Charlie.
Yes, I think you've got it right Charlie I mean, there's really two components there's the.
Spectrum bands and the device and then in some cases.
Those arent able to operate and <unk> stand alone yes.
So the <unk> voice boehner is the other piece of it so.
That would be the reason you wouldn't do it.
So you can look at like anything else the booth transitions, probably at two or three year transition.
Okay.
And our next question will come from Ric Prentiss with Raymond James.
I appreciate some of the clarity.
Yes, Thanks, Ric Prentiss Raymond James.
Some of the clarity on the connects transaction, but just wanted to clarify some of the other folks keep calling it a prepaid Charlie you keep referring to it as maybe a portion of retail should we assume boost prepaid and boost infinite postpaid would be on the table. If you wanted to do something with a portion of retail wireless.
Yeah.
I think you should assume that that retail wireless.
Boost includes both prepaid and postpaid.
And <unk>.
Because there is not really that much difference between prepaid and postpaid one customer has credit and they get billed.
Post activation and a prepaid customer gets billed usually doesn't pass qualifying credit maybe it doesn't have a bank account maybe doesn't have a credit card.
And they pay at the time of activation that that.
That's the difference in the marketplace. There's a difference because typically a prepaid customer can get a subsidized phone doesn't have a contract.
It doesn't necessarily have a monthly fee on their phone.
And really.
And the churn is higher so you can you know you guys are smart Grand net present values on that.
That's a lower.
It's a lower return on investment customer still positive return, but a lower a lower return on investment.
You know an incumbent and you're seeing companies doing a couple of things they have extra bandwidth.
So they would they would enter the prepaid business for that group of customers because not every customer has credit. So there's no reason to do not play in that field and now theyre doing some stuff with fixed wireless where they actually take excess capacity and compete against cable on the fixed wireless side right. Both of those are relatively.
Are good uses of the network because there.
They've got excess capacity, so if they don't use it they lose it but theyre not huge returns on investment.
Don't believe I'm not privy to all their fixed wireless stuff, but they're not as big a returns as opposed to a business.
Right.
The question in retail wireless will you someday I expect to report enterprise wholesale as a business segment and how is that going with what Steve and buys working.
Yeah.
I'll, let Steven answer that I mean, I think when the second gets big enough, Paul Florida manager segment that parents elsewhere, and I expect it'll get big enough that that will happen, but perhaps that's a good opening for first Steven to bring us up to date on enterprise. Thanks.
Thanks, Charlie and thanks, Rick for the question.
You know as we've talked about in the analyst day, we started out with that are private <unk> and what's sort of evolving that product.
Into a private five D as a service solution.
You know we talked about the early success, we had with Dod.
We continue to win more projects in <unk>.
Take one more opportunity with the department of defense to very exciting projects.
Unfortunately, I can't go into a lot of details specifically about those projects.
But we're also very active in several other verticals and industry sectors.
Liza, which includes hospitality given the dish business from a video to our side of the business. We are actively engaged with different hotel groups for private networks and also industrial and manufacturing are responding to more and more rfps in that space as companies are looking at how do they invest in.
More sophisticated solutions to take cost out of the manufacturing facility in the plant. So we are actively engaged in responding to a number of rfps, there and we're seeing more and more RFP flow coming to us which is very encouraging and then we're also active with utilities and you've seen different stopped being published recently that utilities and.
And their activity and sort of the private space.
And we see a movement there in a very positive direction and we are actively engaged in those conversations I think the point.
A point that I would leave you with is we've got some really strong proof points in 'twenty two.
We're seeing growing momentum as we step into 'twenty three.
We expect that your ability to continue to grow.
And we're excited about that opportunity I think on the projects we have won.
We're very focused on the execution against those projects is very important for us to deliver against those commitments.
<unk> is key as we've done on the macro network, we're shifting that focus onto the enterprise side.
As it relates to differentiation.
This is really not as a competitive this is not as competitive as other spaces.
The point I don't want to get across here is in order to build these networks. It is absolutely vital.
I have access to licensed spectrum.
We're running into different players in the space of our offerings.
<unk> solutions, using Gia or Wi Fi.
And what we're hearing more and more from customers that just doesn't cut the grade they need access to licensed spectrum and it is not sufficient to have one band it's actually very important to have access to a combination of three five are using althaus, but also have low band spectrum is a vital ingredient in with.
With these networks and so we're obviously in a very good position with the spectrum portfolio. We have today, we talked a little bit about that on analyst day, but that also limit sort of the competitive playing field to those who have access to that kind of spectrum.
We continue to work with our partners, we have very good partners that.
They're working with us on the technology side, both on the network side, but also in the private space.
<unk> talked about Dell and Cisco GMA I worked very closely with Hughes as assistant company as we work with the department of Defense.
And we continue to work on those Rfps. So it's a good business to be in and we expect that momentum to pick up as we go into 'twenty three.
And as Charlie and I know, it's a bit frustrating because it's a it's a kind of a new concept for private networks.
It's really.
Everybody has a different definition of about it but and obviously take the sales cycles, a little bit longer, but it's been long term customer you're going to have virtually no churn and its big contracts.
Automobile contracts when you weight them, so it's going be a big part of our business our business was designed.
To be an open wholesale network, where if you could.
If you're in a private enterprise business and you can think of a need that you have because of our software based and we're in the cloud you can write an API you can ride. It you can write code that can do that for you and it's a big differentiator between legacy networks, having said that you can argue why the business is 30 billion to our business, our $100 billion business or whatever it is but there but it's.
Unquestionable that there's really only four companies that can participate.
And a large degree in the private network business that have that have spectrum private spectrum license spectrum portfolios.
We think.
We think.
Everybody's at the same starting line we think.
The incumbents are going to get a lot of business there, they're going to get their fair share of that business, but it would be realistic that with a better network than somebody who is architected.
That we have an ability to get 25% of that business.
And.
And that is going to be it's going to be a very profitable business and we get it two ways right. We get one way that that where we're the integrator and that we're going to go to places in Rural America, where we're strong we're going to go to places like hospitality, where we're strong and already have relationships, but then working with our partners integrator partners, where they may.
Go in and do the integration we may just be we just may be a network supplier spectrum.
Or some connectivity.
And Thats just the.
But at least some spectrum so to speak.
And while the revenue not as it's not as high.
It's not a lot of work on our part and monetize our spectrum in a way that it's not visible today.
And it's obviously very profitable.
Great. Thanks, guys.
And our next question will come from Kannan <unk> with Barclays.
Yeah.
Thank you.
Charlie I mean.
Thank you and played that part of the wireless business, if you contemplate that.
Congrats on a good multiple clinics, but I wanted to understand I mean is there any constraint under the Doj contingency.
So you don't have.
Wireless more completely away.
Based on an independent wholesale business.
That is possible then why not go down.
And can you put a capital light model that dish, whereas the onboarding.
A more detailed model at.
Another entity.
Yeah.
The Doj question.
I don't I don't know I don't know the answer if you could do what you are saying that that really hasnt been contemplated so I don't know.
The answer to that but obviously.
The Doj Theres a consent degree, but everything is everything you would go to everything is whether it was competitive or not competitive in AR and the REIT are well finance retail business would be more competitive people probably to look at that but.
The retail businesses is relatively capital light.
So I'm not sure you gain anything.
By that so, but that's you know our board looks at that we've got a talented board. We got all the people that have a lot of experience in this and all I can say is that strategically wed like DBS defined DBS, we'd like network define networking, we'd like retail to find retail.
And we think that that's doable and Ken and just to clarify in the scenarios that we're looking at dish would always be maintained control of the entity. It would just be.
Looking at vehicles that would attract growth capital into the retail wireless segment.
Got it.
And I guess, yes.
I'm unaware of anybody in the retail wireless segment that.
A debt free balance sheet like like boost us today so.
There might be but unaware.
Yeah, if I could just follow up on the <unk> question I guess.
Do have the debt issue in the market right now.
But then as the wireless retail business skills.
Probably going to be some working capital needs as well.
And the degree to which you can scale the wireless business in some ways becomes a function of that working capital.
Management process. So if you could just help us think through.
Beyond the issue, how you're thinking about capital cadence.
Because that in some ways would inform how fast do you plan to scale the business as well.
Yeah, I think that is.
Valid question Slash point.
We went through this with DBS ware.
We had this great product and a great competitive price, but we had to scale the business. It did take some working capital not as much as people would've thought.
Because we were pretty good stewards of capital and we were able to do some things to lessen those needs obviously.
In postpaid customers are so profitable.
That you'd probably want to grow as fast as you could.
But and obviously without being.
Just trying to gain market share for the sake of market share and so that might take some working capital, but I think a debt free retail wireless business today is probably the capable raising that capital.
Obviously, the board additions looking at multiple areas. The only one that's public is that they had some preliminary discussions with this bank, but you can assume that that's not all they would look at.
Okay.
Thanks, Jeff.
Okay.
And our next question will come from Michael Rollins with Citi.
Thanks, and good morning.
Two questions if I could first back on the network.
10-Q referenced to.
$2 billion needed to hit the 70% target mid next year for population coverage is that premised on this ongoing thousands sites per month ramps you'd be ahead of the 15000 that.
He has also been discussed.
And are there some other things in that $2 billion that we should be mindful of and then just separately on the video performance can you talk a little bit about the strength of sling net adds and if theres a more deliberate effort to try to migrate the satellite subscriptions to streaming overtime.
Thanks.
Eric.
It will take us on it you take it.
Back to the Delaware.
Got it.
Yeah. Michael This is Eric so a couple of things there and we've talked a little bit about it in the past I mean, obviously.
<unk> had a pay TV had a strong quarter driven by similar seasonality in slang with.
College football and NFL.
<unk> seen that kind of year over year.
And I think that we showed up in the right place to take advantage.
In a disciplined manner of customers that we think not only will be profitable there, but also a longer term right I mean.
As you see the OTT landscape.
Obviously churn can be spiky and engagement can be spiky and so we have to have a product that meets the customers' needs and keep keep keep customers and not invest too much in customers.
That one kind of a seasonal type product, which by the way sling is selling is very good for the complement other asphalt type services as we've talked about you know over the past many years on the dish side, we've really been focused on a more rural profile.
The whole home type solution.
An older demographic now where customers have a need.
For <unk> or OTT type products.
We meet them halfway or all the way there with our hopper platform.
You know apps like Netflix, Amazon and Youtube right and the interface and along with the launch of our Android TV product, but your question is a good one and it's one that we look at.
Where customers that have a need to.
Transition kind of away from more traditional linear service into an OTT service, we're obviously opportunistic with that customer relationship that we have with dish and how else. We can monetize we'll keep that customer within the overall.
Ecosystem and that could be a sling product that could obviously be a boost infinite whose product obviously boosted and just don't go well together.
But youll see us start to monetize our customer relationships and retain them.
In a strategic way, hence your question about you know a rollout from dish dislike.
Yes.
The short answer is not a lot of roll there is not a lot of rollover from dish displaying other than adding apps.
To our platform, which they can do and then they get it in the guide and they can search for it and so forth and so on and so it becomes a whole home experience for people that wanted to add.
Netflix to our prime too.
But I think the big difference there.
Charlie and Michael is obviously slang is very light on broadcast locals is that you know as a yes.
Viewership on broadcast continues to decline slightly to really good choice to match up with.
Peacock or are Paramount.
And a netflix.
Depending when what do you need that if you just needed for a free trial or if you. If you need it for a couple of months I mean, the in and outs, thus far in the pay TV ecosystem with OTT.
Our changing so you know our dish customers definitely like broadcast television and it's one of the reasons. They chose dish along with kind of all the additional features and functions that the hopper platform brings.
And then on the network side.
<unk>.
The $2 billion or $2 billion wood wood.
Bring dash to 70%.
From a capital expenditure would bring us deployment perspective would bring us to over 70% of deployment.
To meet our milestone.
The next day FCC milestone, but in addition to that which we haven't articulated very well so I take an opportunity to do that.
Because we are building.
600 megahertz at the same time. It also gets you and because we are more urban based.
And we actually go into the 80%, 90% coverage in urban areas to meet the 70% population in fact as part of that we go a long way not all the way, but we go a long way to the 75%.
2025 milestone for 600 megahertz, so where we're at.
Be within spitting distance.
Of that milestone and in many cases.
Way early maybe even a couple of years early on some of those milestones.
As well so that's a huge positive that we we haven't haven't articulated very well, but that's a huge positive in terms of the build out schedule and then what happens is you Didnt ask this question, but I'll reiterate this one.
Then what happens is you start building.
You do see what I call success based capital.
Climate, So because you have roaming arrangements with two of the big providers you look at every tower and when you pay more for roaming then you could have but the owner economics, you would build that tower, but to the extent the roaming is less expensive.
You wouldn't have to build that tower and of course, a great example might be.
Dave.
He is traveling today gave us a stadium where.
You might have.
100 customers in the stands are using it six times, a year or eight times a year it doesn't make sense to spend tens of millions of dollars to deploy capital in that stadium when the customers can round.
And so it's just a math exercise so it's a unique position for us where I think people are going to get more confident in our total build out of $10 billion, which includes a lot of success based capital by the way.
But the latter half of that is success based capital.
I think that starts to be people trying to get their arms around that that's a realistic number where I think people didn't think that was a realistic number early on so but so we have a lot of advantages in what we're doing we have to go out and prove it we have to go out and show it will start showing up in the numbers. It will start showing up in the margins, you'll you'll start you'll start to see those kind of things.
Thanks for all those details.
And our next question will come from Craig Moffett with Moffett Nathanson.
Yeah.
Hi, Thank you.
Maybe I can stay with that same line of discussion Charlie.
Got.
It sounds like you really are describing.
More of a hybrid <unk> <unk> network than than a pure and they know network, which is maybe a little different than the way you've described it in the past.
How do you think about the amount of traffic.
With the number of cell sites that you'll have sort of Ken going to call. It 'twenty versus say, a verizon or the peers that would have 80 or so thousand.
Towers, how do you think about the percentage of traffic do you think you can send over your own network versus over the <unk> agreement and.
How does that sort of shape the product that you're offering where you've talked about some of the advantages of our <unk>.
<unk> network.
Obviously won't be ubiquitous in the hybrid network that you're describing.
Okay.
Okay.
We look at it from a financial point of view right. So just to frame it maybe your.
70% of our network.
Gets built and it and the last the last 30% cost as much as the first 70% to give you a district it.
Might even be more than that she might even be more than double that so.
There are a lot of towers or non profitable for the current incumbents in other words that tower never never ever even generate enough revenue to pay for the investment in the tower.
We don't have to make that investment and while that we may roam on their five G versus our five G you're going to you're not going to lose some of the benefits because you're coming back to our core Steve I'm looking at Steven here, because he knows there's a lot better than I do but you're coming back to our stand alone core once you're into our core or are we kind of control that customer we can kind of draw that surface. So for the most part.
Theres, probably some corner cases, where there might be something we wanted to do that we can't do when we're roaming as opposed to our own network for the most part we can we can offer that ubiquitous experience. So it you.
You know what.
We deal with this every day in this this would take me the rest of the month to explain in detail because we've been looking at for years, but the economic advantage the dishes.
As a mint and of course that shows up in our ability to.
As long as some of those savings to the customers, which gives you more competitive which when you look around the world and you see people who have not been as good positions. We have they typically get low double digit kind of market share, which is why we've publicly stated that our goal is to hit 30 million subscribers in retail wireless, which would obviously be well.
Above breakeven on our Capex.
Then our opex and everything else that we did in our network. So.
But it is just math and I guess.
The question around why would you build 80000 towers, if you didn't have to lose.
To lose money on 40000 of them if that makes sense.
And that's why the Capex that's why the Capex is so incredibly expensive for the incumbent is not all bad news for the incumbents, because obviously when we ride on their network, they're getting free money for an investment they've already made and so it's actually a actually ironically in some ways is a good thing and this is just.
You know I personally see when you look at the marketplace T Mobile's run away with the market Theyre, just theyre, just theyre going 90 miles an hour and then they're running away with things in.
You know somebody's correctly pointed out they have a higher market cap than Verizon and AT&T now so there. They started out I think they were number four when we first started.
And with T mobile years ago, they're now number one in the not even close I mean, there and their continued to gain momentum.
In the marketplace.
You got two choices and management you can let them run away at the market or you got to figure out another way to to compete with them in one of the ways that people around the world compete as you start.
Sharing resources and you start sharing capex when you start sharing spectrum and the technology is getting better and better and better to do that and so you.
There's going to be opportunities for.
All the players in this market, but theres going to be good opportunities for us.
That's a big high level stuff.
We run that math there every day.
It's you don't have you're not you don't Privy to our agreement. So it's difficult for you to run that math, but it's but it's you'll see it in the results overtime.
Operator, we will have we'll take one more question from the analyst community.
Thank you.
We will now take our final question from the analyst community members of the media on the call. Please press star one now to enter the queue to ask a question.
We will begin the media portion of this call following the answer to this final analyst question.
And we'll go to Jonathan Chaplin with New Street.
Thanks.
Thanks for taking my question guys.
Since it's the last one I'll make it an easy one.
<unk>.
Do you still need to do funding at DBS to meet the March 'twenty three maturity or will you have enough cash flow between now and then that DBS to meet that maturity or is there the potential for some of the funding that youre doing it that way.
Could go down to DBS to pay off some of the intercompany some of the intercompany loan that and then just a quick one for John I Am wondering if you can help us size the EBITDA impact.
With that you would sort of characterize as one time.
Associated with the transitioning to the new BSS offer that TSA. Thanks.
I will take that one first.
Yeah, I'll take that one first.
So.
We've had our share of.
For large.
The headwinds since buying boost the big one in front of us now.
Migrating off of all the legacy T mobile and sprint systems.
There's a few hundred people working on that.
I think each month it's.
So somewhere between $5 million to $10 million a month of incremental drag right now just based upon funding that program, which will take us through middle of next year.
And then we'll have sort of our own.
Singular platform from which we can we can operate all of our retail wireless businesses in a funny way it really kind of pays for itself.
Because.
We'll be able to jettison or higher price transition services. So it's a good use of our dollars to do it but there is a bit of a short term impact.
The bottom line Jonathan is we're paying twice for.
For services today and obviously.
One is for our own that we're building and one for somebody that we're using so.
But we get speed and flexibility and ability to wholesale to other to anybody on our network through our through our <unk>.
Oss BSS, which we just don't have.
T mobile or AT&T so.
And on your other question the.
We don't.
With the funding in the marketplace today.
We would not need to.
Raise additional capital with DBS.
Right.
Never know when the market what the marketplace will offer you never know if there's opportunistic, but we wouldn't necessarily need to do that.
And Tony is that because there's enough cash.
Yeah, that's a little bit different when you read the 10-Q, it's a little bit different because we wrote the 10-Q as of the end of the quarter, which we didn't have an offering in the marketplace. So that there is a little it's a little bit confusing. So your question is well taken.
And Charlie you said.
Because you'll have enough cash flow DBS to pay off the one fiber because we would use some of this and push it down to DBS.
We'd have to but we have enough cash at at DBS.
Assuming we're not funding the network at it which is what you know obviously, we've told the street would be our preference.
Got it that's great news, thanks, Charlie I appreciate it.
Thank you.
We will now take questions from members of the media again, if you are a member of the media and would like to ask a question. Please press star one now to enter the queue to ask a question.
And we will come to know Scott Moritz with Bloomberg.
Great.
Charlie a question.
Wanted to just check in with you on that network build out.
When you first announced it.
Opportunity.
This first mover advantage you'd have a cloud base low latency kind of a <unk> network.
Since then we've seen the incumbent has come in with kind of there.
Planned cloud based.
Virtual ran.
Although I was just curious does this still have an edge and it used to have as the opportunity changed since then.
Yes, Scott this is Steve and I'll I'll respond for Us I think.
They may put some say.
Say paint on the outside of the house, but it's still fundamentally not a cloud native <unk> network.
We don't have any of the legacy infrastructure that they have I like to sort of drawing analogy is like adding an extension to the house and calling instead of a <unk> network, but it's really that you're still stuck with the rest of the house.
What we have is unique.
It is the only cloud native <unk> open network that has been deployed at this scale anywhere in the world.
And there are a lot of capabilities that we have with that infrastructure.
The other thing, which I would add is as it relates to sort of the Oss BSS well, we don't talk a lot about that what we have is a next generation Oss BSS system.
And so we're not bringing the legacy of those systems, along with US we had the opportunity to rebuild that and in fact, that's the platform that we're moving our retail business too, but as Charlie alluded to in his earlier remarks. It also allows us to be able to bring enterprise and wholesale customers through that stack onto the network and so we're already exposing IPO eyes.
And that platform through.
Through the cloud.
That allow enterprises to be able to build applications into that space. So yeah, while the other guys, who we're competing with are talking about it.
We actually have built it and it's actually operational and now we're sort of optimizing that and scaling it up so we still have a what we believe is a significant advantage from an architecture perspective, and I think it'll be some time that we maintain that advantage.
And our next question will come from John Simone Tunnel with insight towers.
Thanks for taking my question.
Hi, Thanks for taking the question I saw an entry on.
The 10-Q, referring to a cost item called third party integration.
Can you elaborate on that a little bit what is that and who are the.
Third party integrators that are involved.
I don't think I'm looking at.
I don't we don't.
To be more specific about that when we're in the Q or are you seeing that.
Okay.
Yes.
A cost item.
Cost side third party integrators third party integrators.
Both on the both on the revenue side and the cost side obviously.
But you'd have to read that paragraph just I don't know the answer to that off top my head.
I think the reference was to the <unk> bills.
Okay.
I'll just add some color I mean, we work with a number of different partners as we put this infrastructure together.
Hi.
Often being off like who is the systems integrator and its the dish. We are the considered as the Uber integrator. This infrastructure, but we do work with a lot of different third parties that essentially subcontractors to us that are each responsible for their domain expertise, but overall, where the systems integrator.
But there isn't any I don't I don't know that we answered your question. So we'll get back.
We'll get back to you because I don't think we answered your question right. That's the first time I've been stump.
To ask a question.
I'm honored.
I look forward to response.
All right operator, I think that's the last one and Hughes. Thank you everyone for joining us and we'll talk to you again next quarter.
Well, thank you and that does conclude today's conference. We do thank you for your participation have an excellent day.
Yeah.
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Yes.
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