Q3 2023 DISH Network Corp Earnings Call
Please standby.
Good day and welcome to the Dish Network Corporation Q3, 2023 earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Tim Messner EVP and General Counsel. Please go ahead Sir.
Thank you Cynthia and good morning, everyone. Thanks for joining US we are joined on the call today by Charlie <unk>, Our chairman John <unk>, our president of technology, and CFO, Paul Orban, Our CFO, Tom Cullen EVP of corporate development, Mike Kelly.
President of retail wireless.
Gary Sham and group President of video services before we start I need to remind you of our safe harbors. During this call. We may 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 <unk>.
<unk> that may affect future results. Please refer to our SEC filings, we don't have any prepared remarks. This morning, so with that we'll open it up to questions starting with the analyst community. Thank you.
And ladies and gentlemen, I do apologize there was a technical situation. If you had press star one prior to starting the call. If you could please press star one again again I do apologize if you can please press star one again I do appreciate.
Right your cooperation and thank you very much and we'll pause for just a moment for that.
Okay. We will now begin taking questions from the analyst community. If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again press Star one to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for questions.
Our first analyst question comes from Walter Piecyk with light shed.
Okay.
Please go ahead.
Yeah.
Walter Your line is open. Please go ahead.
Walter if you could please check your mute button, we're not getting a response from your line.
I am not hearing no response, we will move to our next question.
And our next question comes from Michael Rollins with Citi. Please go ahead.
Hi, good morning.
Curious you talked more about the retail results for wireless in the quarter and can you frame.
What's happening on the subscriber side, what's happening in terms of the EBITDA burn and then break out the boost infinite component of those results.
Hi, Good morning. This is a this is Mike Kelly on.
On the boost.
Wireless side I would say.
My first full quarter on the job.
There's a lot of discipline that we brought back into the sales channel over the quarter, which resulted in less net adds than we expected.
We we we put discipline back into the sales process that I felt was necessary.
Are we focused on putting devices in the hands of our customers that a reload on the five G network going forward.
We realigned our dealer compensation for the period.
With the goal of acquiring profitable customers going forward.
And we put back in control that.
We felt it was necessary for profitable customers going forward.
Paul do you want to talk a little bit about the EBITDA, yeah. So marketing was higher for the quarter as Mike alluded to with the change of the commission structure. It was elevated in Q3 Youll see that abate in Q4.
As we get fully under the New Commission structure.
Also as Mike alluded to as it relates to equipment Cogs. The that was high for the quarter, because we had a higher percent of handsets that had or <unk> or that are capable to work on our <unk> networks deployed that will help us in future quarters, as we'll get owner economics on those phones.
And just one follow up.
If you look at the current basis boost subs, seven and a half million.
And the revenue that they're generating.
Is there a path just for that portion of the business to get that to be significantly profitable again and that confiding to subscriber acquisition for new boost infinite opportunities.
Sure.
Is it that the current business dealing with just a higher recurring cost than maybe we've seen over the last couple of years.
Yeah. This is Charlie I mean, and then maybe turn it over to Mike I'd say a couple of things one is that that that when when did.
That's it.
C. D may shut off that happened you know that but that was kind of devastating for for what we expected because we had to replace all of those customers with new phones. So we missed the cycle and had that been happening today, we could put them on phones that were compatible their network, but obviously when that was done well well over a year ago there were.
No phones that are compatible with our network. So.
So for the most part those seven and a half men customers. The vast majority of them do not have phones compatible with their network. So that's an upgrade cycle and that set of economics that we have that we'll be able to do a portion of those but not not the vast majority of that would be my guess that because we missed that cycles. So that's why we fought so hard to to to hold the <unk>.
T mobile to what they had but with.
That said under penalty of perjury yeah.
So the California regulators.
The when Mike came in and he didn't give them a little bit more credit than than maybe the street, giving them right now, but the the customers that we have that we were getting customers. We just weren't sure which ones were the good you know some customers we made money on and some we didn't and so I think now everybody we're putting on.
Now for the most part we have high expectations won't make money at it because we're on our network are because there are on the M. D&O, but theyre just a different classic customer and so some of that discipline and how you do it some of the commission structure that he alluded to for retailers. They were incentivized to get a customer, but they weren't necessarily incentivized to keep the customer that that.
Change, they're incentivized to keep the customer today, so when they have a lot of control over what customers. They put on so those are those are things that that certainly my fault for not being more on top of that in the earlier years, but Mike has come in and made.
Those changes and so that's going to that's going to be.
We'll have better performance as a result of that on an on both prepaid and postpaid.
Okay.
Thanks.
Our next question comes from Walter Piecyk with White shirt. Please go ahead.
Okay.
Thanks, just a question I guess in general about the postpaid business.
I mean, the value proposition is obviously very compelling, but it just feels like.
No one really knows about it and it's on the Amazon homepage is not really there.
Just curious is there a plan for the AD spend.
The increase and if so how much flexibility do you have in terms of that that spend and then I guess related capex wise, how much can you cut.
I mean, obviously the capex is already starting to come down, but when we head into 'twenty 'twenty four.
How much how many that'd be available dollars do you have a can you can cut out of Capex you can actually use it to tell people about the $25 a month service.
Yeah.
Well I'd say first on the on the Amazon relationship I would say.
We do have flexibility in terms of how we continue to evolve and build out the storefront.
A lot of things came together on a very short period of time towards the end of the quarter, while we continue to work with Amazon to approve the overall storefront presentation.
So you'll continue to see that evolve this quarter and with respect to advertising.
We do have a relationship with Abbott with with Amazon to focus on on acquiring customers through that channel. So we will be working with their their advertising sales team as well.
Excuse me this is Paul I'll take the Capex question Capex, we do expect it to decrease in Q4, and then going into 2024 decrease also what Youre seeing is it's a cash capex. So you you had a timing issue. So most of what was paid in Q3 really related to Q2 deployments.
It was more of a 10000 foot question I think.
Yeah Guy in charge right.
Oh go ahead go ahead Bob.
It was more of a 10000 foot question not not like timing of this quarter versus next but like if you were spending whatever it is 2725 like can you take that down to a 1 billion for next year of 500 million like how low can you go. So you have those dollars to kind of used to tell people about the <unk>.
Because it seems like the service again offering is compelling as just like.
Like how do people find out about it.
Yeah.
Constructive criticism or are we doing a great job of marketing the answer is no.
Hey, can we do you know that the.
The Mets.
Messaging, probably wasn't it wasn't didn't have quite the desired effect you know as you say because people don't know about it and let me give you examples.
If you walk into an Apple store today, you can't buy boost right you can buy our competitors we can't when you go to their homepage digitally you cant buy boost today you know we're not even integrated into their systems that takes time takes an investment on their part. So we're hopeful that you know obviously that will support us there. So we're not hitting on we're not hitting on all.
Cylinders there.
That's kind of the bad news. The good news is is is as it is we've made that.
We when we made and we do it right.
Online, we make that a better experience and go into a store and that's the strategy that we have to have we have to make online whether it be Amazon or other partners right that experience would be better for most people and go into a store and waiting in line and so forth. If we do that we'll be very successful.
And there has to be messaging and marketing things to make that happen, but having said that that's the strategy. You know if you what's nice about that is it.
Any sort of way as we we could hit the ground running a lot faster. If we had 5000 stores in postpaid, but we don't on the other hand, if you make the online process better you're going to wish you didn't have 5000 stores and talk to the book stores of the world about that right. So we think we're going where the puck is going and we think we're in the right place when we make it with her but when it works it.
He works integrate experience there are a ton of issues, but some on our side some of our partner side that we still have to correct operationally because we.
We would've liked to add a few more months before we had before we went out to the public but iPhone came out at a certain date, we had to meet that date right or else, we would miss that that wave. So we felt like we needed to be there. So we're a little ahead of our skis its a little bit like you know, but having and so we're making a few more mistakes and we probably normally would like to make.
But we're failing fast and we're learning and I think that'll pay off for us. So I think strategically what we're on the right side I think the you know.
Any criticism on the marketing side as well received here.
In terms of we know we need to do better there and we know that the messaging.
To be fine tuned and it's not just the messaging is the operations. It's how you promote it it's a it's a two or three different things in our company with our partners working together to do that and we havent quite cracked that nut, yet, but we will.
And how low can you get capex Charlie for 'twenty four.
Well I mean, I think nothing's changed but actually something did change a little bit of the week.
That $10 billion on the Capex side, we're obviously short of that the Puerto Rico sale, I mean, but maybe you're more familiar with that than I am So maybe I'll, let you.
Oh, I bet that that helps a little on the Capex side, Yeah, I don't know that pause willing to give guidance on total capex for next year, but.
We announced the Puerto Rico sale. This morning, we have a lot of experience in Puerto Rico over the years with pay TV in the last couple of years with wireless it's a challenging market. It's a very competitive market. It has weather challenges as well the build out would be expensive. So we thought it best to.
Enter into a transaction, which gives liberty a much more competitive spectrum position frees up.
Brings us new capital in terms of the sale proceeds as well as pretty significant capital savings from not having to build on both the islands, which are very expensive build and higher than average opex. So by entering into the transaction will now be able to focus those.
These funds are.
Back into the Continental U S.
But I mean, the big one.
I think I understand your question we have we.
We have several levers right to manage cash one of those is marketing and just the sack in terms of acquiring customers.
How is the more profitable customers a faster as you Wanna go the.
The more marginal customers probably the slower you go but you know it depends on our total operators are doing and then Capex, where we've met our major milestone is not that expensive for us to make the next milestone.
But because it's you know we've done the hard heavy lifting.
On the other hand, you want it you want to continue to invest in your network. Because you want you want to move people to tick off the M. D. N O. So you have to balance we have to balance those levers are and so it's not an easy answer other than you can expect a.
Capex will will continue to decline the rest of this year and into 2024 before you'll see an uptick in the first half of 'twenty five for a couple of quarters.
As we finished that final bill that milestone so I'm, just really can't more one more to me yup.
It will free up capital that gets spent will be dependent on how would how well we're doing.
In our in our business.
If you don't mind is going to try one more angle on this which is you know.
I know you've been generally adverse to.
Basically giving away phones right you know using working capital whether it's payment plans are just literally subsidizing phones like what AT&T does to a certain extent with its existing customers.
Now that you've had the offer in the market is it just a recognition of people seeing the $25 and activating our second same or whatever it is.
Versus are you starting to think that maybe you know being more aggressive with spending capital one basically giving away free phones or at least subsidizing a portion of them is going to be necessary to get some traction going on the postpaid side.
Yeah, I mean look we're realists that nobody really subsidizes the phone right. They they obviously charge customers for the phone. So we're not opposed to that I mean that that you know.
But when you have your own we have our own oney owner economics, you realize our variable cost.
That customer our variable cost is zero. So there's a lot of interesting things. We can do as we move into this question hasn't been asked but I think I'm just gonna transition. This because I think it's important it indirectly to this question. So we transition as we transition people to our network that the world changes for us economically and John maybe.
John is our president and Chief operating Officer and has all the build out.
The you know and as he's in the budget cycle pretty heavily now.
Yep.
Probably get it maybe you want to jump in here and give it to maybe better answer Walts question give a feel for how that how you look at it yeah of course, thanks Charlie.
Thanks for the questions today.
So.
Really I'm working on a three legged stool the first pieces.
We've got a little over $120 million.
Commercial water pumps today about a third of the country.
Where we have voice and data, which is needed for boost mobile and boost internet.
We're gonna take that another third up to.
240 million by June So you can sort of see our trajectory there.
In terms of where we get to a.
Sort of full MTO economics in our retail business.
At the same time and I've talked about this on earlier calls.
There's been a lot of focus on getting the device ecosystem, where it needs to be to support us.
And right now just to give you a feel for it about a third of the devices, we activate them.
Are compatible with our network five GSA or spectrum bands those sorts of things.
And again up to June next year, we'll move that to two thirds right.
Right. So that's something that's an another.
Another sizable shifts.
The support from the Android community.
You saw the news on the iPhone.
And so we're working through the device side of it as well.
And.
The impact of that is as we bring in new customers. The economics change dramatically and we expect to be able to see that as we head towards next June.
But in addition, the other effect and I think a few of the analysts wrote about this this morning and an early reports we get to take a sizable chunk out of our own bill.
So we as we look at that.
We see that going down.
By a third as we get to June of next year.
So those three things together really sort of changed our trajectory in the retail business and I think where you started is the idea that where do we find capital to invest in those are those are a few areas to look at and model around that.
So the Big picture is we have scale June of next year. That's when you have scale, we're a year behind where we'd like to be for scale, but will have scale.
Next year, both on devices in the network that network is about where sprint was you know at the end. So that now you have scale and your Capex is primarily done.
Sure.
And you're only going to get if you're only going to improve from the two thirds that John.
John's talking about so that gives you a feel for it.
Got it thank you.
Our next question comes from Kevin <unk> with Barclays. Please go ahead.
Thank you.
Well, maybe a couple for you.
When do you think about the S. Four projections that you provided with the Echostar <unk>.
Feeling.
It assumes sequentially.
An increase in lots of a further increase in lot with Q4 <unk>.
In wireless and you pointed to some tailwind in costs in Q4. So if you could just help us reconcile them you know the Q4 trends and then if you look at the same projections for next year, there's a big acceleration in trends.
With respect to profitability.
So if you could just.
Help us understand the underlying assumptions in terms of volumes versus <unk>.
Price and what you're assuming to get to those numbers that would be very helpful. Thanks.
Well overall when you look at the forecast there there's going to be some puts and takes in the timing may change, but we believe the forecast that we had in the S. Four is still accurate.
<unk> to deploy in Q4 more towers and you'll have more opex.
He will be helping to drag down OIBDA in the fourth quarter and then as we grow obviously, you're gonna have sac and the costs that are related to growing the boost infinite and the boost mobile business in Q4 into Q1.
Got it.
And then Charlie when you think about the capital needs for next year and beyond you. Obviously, you had the debt maturities in.
The Echostar deal should help address some of it.
But if you step back and think about totally gone bad there's obviously, a big you know.
Yeah, its step up in and capital required even as your Capex needs also potentially go up in 'twenty five and beyond.
If you think about you know beyond 'twenty, four and how should we think about the capital from that how much of it is internally funded how much of it is externally funded then.
If you could just help us understand what your partnership options are or update us on that that would be very helpful.
Yeah, I mean, the way you know, obviously 2026 as it is or.
As a visit pretty big Walt.
It.
Assuming you didn't refinance anything right and obviously.
A lot depends on where the markets are right. So what we wanted to control what we control from an operations point of view, we've got to generate as much internal cash from operations as we can.
And you know I the way I would say it is we have a a near we have a narrow path, but there is a path for us to achieve them.
Financial stability and make sure we meet our commitments and so you know having been through this for a long time, we've had narrow passed before.
And if it's a sharp focus for your management in it you know necessity, sometimes the mother of invention. So.
We certainly look at 2026 is a challenge today.
We expect that the.
Market environment will be better in 2026, but there's no guarantee of that obviously.
You know if the market environment today was like it was the same in 2026, I think that would prove to be difficult for us, but based on our operations today on the other hand, if your operations continue to improve and you you showed the market the trends and the financial trends based on having your own network and owner economics.
And you continue to the cash flow in your core businesses, then that's an achievable place to get to them and so you know my Crystal ball is as is.
Believes that we can do that right, but I know, what's going to be a challenge for us and we have a team that's going to be up to that.
Got it thank you so much.
Our next question comes from John Hodulik with UBS. Please go ahead.
Great maybe just a couple of follow up to Walter's question first of all I can tried can you guys talk about any traction you're seeing with the iPhone <unk> promotion and and when you are winning customers on the on the Bruce mentioned in fact, where are they coming from and then just lastly, a clarification what what drives the the.
Uptake and.
Comparable funds to two thirds.
Dale ability of new phones.
Work on your network or I'm, just wondering why sort of June is there isn't sort of magic and getting to that two thirds.
Thanks.
Well this is Mike.
Thanks for the question John.
So we're seeing some traction on the on the iPhone 15, no surprise.
Customers are attracted to the $60 offer and to the iPhone upgrade every year offer.
We're still working through that as Charlie mentioned earlier this is a weird digitally native.
Selling direct process. So it's new to us we're still working through some of the operational Kinks, but we're making progress there.
So.
So I think so again demand is coming from the other carriers and certainly we're seeing some demand coming from the.
The relationship that we have with Amazon and marketing into the Amazon thing.
Okay.
And then.
Thanks, John for the follow up question on the devices.
This is John <unk>.
So.
Let me try to simplify the earlier response I mean, essentially in 'twenty 'twenty four will have 100% support on Android.
In terms of every Android device that we distribute will be compatible with our network.
On the Apple side, it's a little bit more of a mixed bag a newer models.
Our bands and can support.
GSA software with iOS 17 and above.
And so really it's about getting to that point, where.
We've got full Android support partial Apple and then obviously there is still a profitable b Y O D business.
Where we'll.
Bring existing devices onto our network and in some cases that may be on the <unk>.
But that's sort of how the forecast roll forward and it's really been a device by device chipset by chipset.
Approach for us to get to critical mass I hope that helps and on the Apple side yet.
Don't misunderstand. The 15 is fully compatible but the 12 and 13 and 14, which we still sell accident 11 right.
Right are not compatible so obviously, we would you know that.
Those you can only go on at this point on them, but you know.
And some software downgrades or so forth and so on but the the.
100% of new apples or are but it does not 100% of our business with Apple.
Got it thanks guys.
Our next question comes from Jonathan Chaplin with New Street. Please go ahead.
Alright, Thanks, guys two quick ones, if I May just festival.
So what looked like the new <unk>.
Capital going into the clinic.
I'm wondering if that's still an opportunity to combine boost with con Ed and help accelerate.
That's sort of a flywheel that boost.
With new <unk>.
Capital.
And then I'm wondering if you could give us.
An update on where our discussions might down with TPG in AT&T.
On on GBS now that you've got the Echostar <unk>.
Cause of action squared away.
And it doesn't pop to congrats on on the next big deal. Thank you.
Yeah, I'll take both of those at the first one on the TPG question to that.
We're focused on and we're still getting the Echostar dish transaction down I mean, obviously, we filed a lot of stuff, but we got a ton of stuff in terms of combining the companies and their management teams.
And in making sure that we don't wait on synergies and get those and with him. He's starting next week that that would be very helpful. So we just don't have any plans for Directv based.
Based on that the mm connect.
It is not probably appropriate to.
Comment on here, so, but what I would say is that I think within within our capital structure, obviously a.
Our retail wireless company that has 700 million subscribers.
<unk> now has an online presence is probably a valuable company.
We could we could argue whether we've managed it as well as we should but the fact is that that's a very valuable property. So.
Obviously, there could be.
Ways that that there may be from an investment point of view there might be people that are interested in that sort of thing.
But it's also the same way with their network.
As well.
There's only four companies in the United States that have a nationwide network and connectivity. There's only one of those companies that actually does it in a 20 <unk> century architecture.
Where it is a data centric networks built 100 per cent for data of which voices just an application.
And then the world of.
Things like AI.
Where data is only valuable to you. If you can utilize it then you wont I T.
I T architecture, you want it tools like cloud and kubernetes and so.
So forth and so on.
And that's what we've built and that is a one of a kind of thing and I think that that.
That's where ultimately the the the game will be won and lost for US which is to is to make sure that we're not spending our resources trying to do exactly the same thing that everybody else has done and that we actually go where we have unique capabilities.
That that we can do for folks and customers that others can't and so.
I'm I'm excited about how may join US next week as that frees me up to do a little bit of that.
Which is where can we take this thing where we have unique.
Advantages.
But perhaps maybe even our competition doesn't doesn't want to go where it's not economical for them to go.
And and so forth so.
Yeah, I don't know if that answered your question exactly Jonathan but that's the color.
Thanks Kelly.
Okay.
Our next question comes from David Barden with Bank of America. Please go ahead.
Hey, guys. Thanks, so much for taking the questions.
We've covered a lot of ground, but Charlie.
Charlie could you.
Blaine.
Sure.
Process on.
The T mobile 800 megahertz option.
You're spending 100 million upfront, obviously, you won't have to spend 70, something that you didn't buy it anyway, but.
Your bonds are yielding 25% youre going to get $1 9 billion from the third deal when it closes, but you said it in your filings that that's not going to be you know to do that deal. So how does that deal happened and I know you love to use the word options and seasonality, but I think now might be a great time.
To be specific.
Crystal clear about how you see that happening and then.
Good question.
You've got 3 billion of debt coming due in 'twenty four.
About <unk> about nine months ago, you made you said that your attention with the convert that's coming due in March and used equity to refinance that or is that still the plan.
And and how do you how do you deal with with the 2 billion coming due at the end of 'twenty four there would be helpful. Thank you.
Yeah, well certainly we're focused on the on the convert coming up in March.
Equity, obviously, there's a bit more difficult because obviously the marketplace has been more negative for us over the last year on that piece, but we certainly.
We certainly havent given up that equity could be a component part of that.
The 800 megahertz as is I, probably can't give you a complete answer.
First of all we did a we own $72 million regardless.
We're thankful that we were able to work out with department of Justice and T mobile to to give us more time to.
To put something together there I mean, obviously the the.
We think theres some unique capabilities about that we have built it out at dish. So.
We're already have you know.
We're already heavily invested probably more than a $1 billion of investing that out and so in addition to the $100 million.
Obviously invested in that now you you arent going to go you're not going to fall for a sunk cost fallacy, obviously, but economically we think that 800 has some unique characteristics and we think that there's use cases for it outside of the of of everything that we're doing and you know the way I would say it is.
The extent that we have a good business plan for that.
Resource that that may be financeable to the extent, we don't it certainly is not financeable and it's possible even with the good financing a good business plan given the marketplace today that its not financeable, but.
That's certainly going to be a focus for me for the next six months and we'll see where we end up there, but we don't have.
Obviously, we think that I think this quarter, we reduced the odds that we're gonna be successful there we're realists about it the marketplace Hasnt improved since last quarter. So.
We'll wait and see but it's a unique resource Ah. It's it's important to what we're trying to do.
To compete and therefore, we're going to we're going to give it our best shot.
I appreciate the comments shortly thank you.
As a reminder, if anyone from the analyst community would like to ask a question at this time. Please press star one. Our next question comes from Ben Swinburne with Morgan Stanley. Please go ahead.
Uh huh.
Thanks, Good morning, guys couple of questions.
On the retail wireless gross margin service gross margins and we've been expecting to see those get better over the course of time that you guys signed up I know you guys signed two new MBA knows last year into this year, you were sort of double paying on back office stuff. I think that's ended why why are we not seeing better unit economics and the retail wireless.
Business on the service side.
As we move through the year.
And what should we expect going forward and then.
Second you know Charlie I'm not sure.
Telling anything you don't know, but when you look at the value that the market is ascribing to the company.
Especially the market value of the equity and the debt compare it to the sum of the parts value of what you've bought and spectrum and.
Et cetera is a massive gap there.
Is there anything that you were looking at that would lead you to change your strategy significantly.
And especially in the context of just the higher interest rate environment.
Where you might look to unlock value differently through asset sales spectrum cells et cetera, then the path you're on.
Thank you.
I'll take that.
The second question and maybe I'll.
I'll take the first this is Mike.
I'll take the first part of this.
We've been focused on.
On obtaining better customers and so we've been putting better devices in the hands of our customers are those that will.
For over to the to the M N L. A as we build out we've also been focused on aligning our dealer commissions with a long term profitable.
Needs of the company. So the dealer commissions had some some impact on margins for the quarter.
That'll change over time.
I don't know Paul if you want to add anything yeah, I would just add to that you'll see a material decrease in the cost of services related to the commissions in Q4 Q3.
Had more caution and as we transition to the New Commission structure in Q4 will be 100% on that New Commission structure I think.
The broader question is where do you expect margins to go.
They will improve okay.
And then on the.
Uh huh.
Hello, Don strategy.
Uh huh.
My philosophy is I look at it every day right the world events.
Our competition does something opportunity that you didn't know existed happened. So youre looking at your strategy every day.
And you're looking at that.
As related to what your strategy is in stages or anything we should change.
And so Hum we're not we're not we believe we're on the right strategy, maybe we havent articulated it.
As well as many companies do in part because I think we play our cards, a little bit closer to our vast maybe.
But.
We think we're on the right strategy, but we evaluate it means very good at strategy himself in and he may have some different ideas at hill challenges on.
<unk>.
But.
The only thing I can say is.
To your point with us what the assets that we have and the position that we're in other than the financial side of the markets right, which is obviously a great challenge for us, we're pretty well positioned for the 21st century I mean, there isn't.
Everything's got reconnected wireless is the only way you can do it on a mass basis.
Certainly wire can do it a lot, but not everywhere and we havent unique.
We haven't we have a very modern system with a unique set of resources. So.
Good management, we'll be able to fully able to take that in and and operate that and.
That's what we that's.
Certainly what we're focused on and we maybe not been as good as we'd like to be but.
We think we've got the right team in place to do it.
Okay, and if I could just ask a follow up on a different topic Charlie the.
The pay TV business is obviously important for you guys from a cash flow point of view and you've been managing it that way for a long time that the Disney charter dispute this year or this quarter or this past quarter seem to highlight some pretty big changes in that business and I'm wondering if that has informed or highlighted or brought your attention just sort of.
<unk> to sort of either dropped channels or run that business in a way that's maybe more aggressive if you don't have a broadband business are at a different place in charter, but you've also been arguably early on sort of paring off networks that don't work anymore economically I'm wondering if you took anything from that situation as you guys look head on pay TV.
So this is Gerry nice to meet you.
We're always looking at our relationships, we're always looking at our relationships to see where we can partner strategically and where we can debate it with partners and helped to improve the experience that's available to customers and yes. We're also looking at you know where are our costs. That's spent and how we allocate capital efficiently and so that's an ongoing thing. We're looking at it is important that we provide a good service to our.
Fibers to drive cash in the business and to make sure that they love us and they want to stay with us, but yes, we're always looking at opportunities to be more efficient and we were we.
We were generally aligned with I think the positioning that charter took in terms of understanding that that certain parts of the of the model is broken and this company has done taken those.
In the past, especially if you look at our history is our sense.
So we'll continue to look look at opportunistic.
[noise] ways to optimize our customer experience and our allocation of capital.
Thanks, so much.
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 the final analyst question. Our final analyst question comes from Bryan Kraft with Deutsche Bahn.
Please go ahead.
Hi, Good morning. Thank you for taking the question can you talk about the expense outlook for the <unk> business I think there was a pretty sizable step up in cost of sales this quarter and I'm just trying to understand if we should think about that as a good run rate.
Going forward or if there was anything that was you know maybe temporarily elevating it or or if it could even go the other way it might further step up in <unk> and also should we expect to see more revenue coming in on the <unk> network.
Five gene network outside or you really be focusing the growth investments on retail postpaid and then just lastly also on expenses in pay T V.
You know they didn't really come down this quarter.
You know obviously, they they need to keep pace with the revenue declines as much as possible or are you planning to manage these costs down more aggressively you know, let's say over the next couple of quarters. Thank you.
Hi, This is Paul here I'll take the <unk> expense question.
That grew due to the fact that we place more towers in service. So you have the opex thats related to that as we continue to place more towers in service in Q4 as well as the first part of next year, you'll see that number grow.
We are optimistic that we'll be able to at some point in the near future start to monetize that network on top of.
Subscribers and get revenue generation from a commercial perspective.
And just Gary on the video side.
In terms of our sales and support costs you know, it's a mature business and we're always looking to manage our costs to match, our subscriber and sales trends and so we will regularly adjust how we allocate our resources to align with what we see in the market and that's kind of what we'd like to say about that and just just structurally.
Structurally Gary add slang, but now he has sling and now he has all the pay TV so structurally.
You you what you have pointed out as a as a.
Is that correct.
Our point of view, which is we haven't managed costs down as well.
Part of it was structured in the company I guess he's got both.
Both sides of defense, there I know, there's a little bit easier to work to rightsize.
The right people would underwrite projects, but without having to duplicate it which is what we had when we had to do in any other part of it is you know as we as we combine with with Echostar, there's some other opportunities for us.
Within the organization as well, where we've got talented people on both sides and and and some synergy.
On the cost side.
If I could ask just a thank you one follow up can you can you talk about just what the pipeline looks like at this point on the five key enterprise side in terms of private network Rfps and you know whether theres a lot of activity there. Thank you.
Okay.
Say it this way there's a lot of activity and you know I think there is two two.
Challenges for US one is one is actual.
The structure and personnel, we really haven't found that the replacement to Steven Bai is now on her board, but it was obviously on the enterprise side. So we got a little bit younger team that's.
That's work in it the second thing is the integration with Echostar, which which has a more mature enterprise.
Organizationally.
And has already.
Enterprise customers at a much much higher level than we do.
I think I saw something last week or were they just didn't.
For example.
With an airline they just did a.
A long term deal with an airline or why is that interesting well airline that's a satellite deal with for broadband with airlines, but airlines or are companies.
Well, they whether it's with us or somebody else will have private networks, because they move cargo to move people. They they moved they need tremendous connectivity at airports and their hangers.
Need connectivity when when planes are circling and when you're on the ground and they need an end and so they're all going to have private networks well. That's that's an interesting play because echostar is already dealing with with some major airlines as an example, so.
I think I think youre going to see a real progress there.
I don't I don't think you'll see progress next quarter per se I think you'll see it in 2024 and you'll see it because of the the integration of our teams and that's probably one where the.
We're.
You're going to see.
That kind of jumpstart that business for us.
You know and I know Echostar has a pretty big backlog as an example of enterprise customer business already and this is just I think my discussions with the Echostar folks on the enterprise side is are excited because they got they got something else to sell and in fact for the most part some of the enterprise customers are international.
But all the domestic customers are certainly people that that I'm sure. We are in discussion or will have discussions.
Okay.
Thank you.
We will now take questions from members of the media again, if you are a member of the media I would like to ask a question. Please press star one now to enter the queue to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for questions.
Our first media question comes from.
Todd Shields with Bloomberg news.
Hi, Thanks.
Yeah.
Hi, Thanks for taking the call hi, Thanks for taking the question. Charlie You said, we just don't have any plans for direct TV is that forever or just based on right now while you're busy absorbing echostar. Thank you.
Well, that's certainly for now.
I don't know.
With that but you know our focus is elsewhere.
Okay. Thank you.
Yeah.
Our next question comes from John <unk> with inside towers. Please go ahead.
Hi, Thanks, Hi, everyone.
The infrastructure question Les.
I've heard or so but the number of cell sites deployed is around 16000.
I know you've progressed since symbol to reach the 75% of P. As nationwide, what do you think youre going to need.
In terms of cell sites.
So this is John thanks for the question.
So the top level, where we're focused on the 73%.
Bonder footprint, which as most major cities most NFL markets.
We'll have about 20000 sites on air by the end of this year.
For a macro covered huh.
We're in the process now of doing all the RF designs and plans.
For the 2025 build out its a slightly different kind of built.
In terms of morality and other factors.
We're probably not in a position to give any more guidance on that right now, but we're hard at work to put those plans together.
Okay, great. Thanks, a lot.
Yep.
Our next question comes from Jimmy Schaeffler with the Carmel Group. Please go ahead.
Hey, good morning.
You've highlighted the 20 <unk> century quality of your new network architecture.
You have any data or material analysis begins to prove that out another words, how much better than current self service will dish wireless fee.
Yeah. This is Charlie I Jimmy.
I'd say it this way that the from a consumer point of view.
The income was do a great job their networks work extremely well.
And I don't expect that we're going to see while varner voices on the margin a little better it's not something that's that that would make you rush out and say I have to have Bonner voice over you know <unk> voice or whatever so I don't think theres going to be a huge difference in the short term I think that it's a little bit.
From the consumer point of view, it's a little bit how the architecture of everything goes together, including Oss BSS and how we might be able to change.
The customer experience long term.
No different than you live through this Jamie when we when we.
Launched a digital DBS along with Directv.
The the ESPN was ESPN it wasn't really.
Is that much different when it started but we made that you know when it came to digitizing our interactive guide in making commercials less obtrusive and other things parental lock out and things like that we actually made the experience better we'll have to do the same thing here, but I think in the short term, there's not a big difference to differentiate our network for the consumer that's me.
Different.
When it comes to the enterprise business, where the enterprise business is about controlling your data, making sure you get your data. So you can improve your product make it safer make it cheaper making more innovative gained market share of the competition make sure that your taken at your reducing climate change and sensors.
And all the kinds of things that you might need.
You have control of your data and that's very difficult to do with incumbent networks and so that's why I'm. That's why I'm bullish on that side of our business because I think we have strategic advantages and that's why I'm excited about bringing the echostar team are working with the Echostar team who's already.
Down that path with satellite and now we're just going to now we're going to add one more tool to that so I'm not saying, we won't have differentiation for the consumers I think we will on a number and a number of ways.
Realistically.
You know you're not going to see too much difference on the network side realize our all of our Opex and Capex and actual cost of constructed network is much less so we're getting a lot more bang for for money, which ultimately can lead to lower costs for consumers.
And Charles one more quick question do you see anything on the fixed wireless access side that implies that you are in.
Interest you right now.
Oh.
Yeah, Yeah, there's a there's a bunch of stuff that I think is interesting.
You know the obviously.
We were we've been disappointed that the FCC hasn't ruled on our on our 12 gig fixed wireless.
You know they they ruled for 12 gig for satellite.
Matter of months and we've been at it for five years on the.
On the dress side, the only interference from it is with herself right as to DBS. So it in and so we've said, we're not obviously going to interfere with yourself. So you know we're hopeful that that's a place that fixed wireless can go.
The other the other day.
The other part of it that I that I don't.
The reason I'm a little cautious is the government is going to spend.
Somewhere between 40 and $100 billion on broadband and they set rules and it's even state by state now.
And the economics of fixed wireless now are being decided by government agencies.
And so if if if if everything was was was was fair and level playing field and the best technology, one I'd be unbelievably.
Bullish on fixed wireless the problem is if somebody is getting a subsidy, let's say for fiber to run at 10 miles out to a farmhouse for $100000 in the government's going to pay for that you're not going to compete with that with your even though it's only a $1000 on fixed wireless you're not going to compete with that 100000.
Bill because you have to pay the $1000 as a private company.
And the government pays a $100000 subsidy so.
Until we see that.
That sorted out on government policy, it's gonna be a little bit tricky on the fixed wireless side.
And so Charlie that gives Charles.
Charlie do you see any companies out there that are.
This is really improving the capabilities of fixed wireless so that it would get around some of that eventually.
Again.
All I can say is that the government is going to pick winners and losers in that and they're going to pick winners and losers in technology.
And some companies are going to do a great job with with some pump companies.
As we know as we know from past government subsidies, we know that some companies will do a great job and that money will be well spent and.
Electricity was one of those things long term you know that happened to the Interstate Highway system was one of those things, but we've also seen a lot of times, where that money's wasted.
You know where perhaps fixed.
Broadband goes where there already is broadband.
You know, maybe we havent added new customers to that and so it'll be some money that'll be wasted Darren and we'll just have to see where you now see where that goes but it's hard it's harder for our board.
If you look at our return on investment and fixed wireless when we don't know if we're competing against the government subsidy or if we're competing against the marketplace and where we compete against the marketplace. We're very bullish.
Great. Thanks, Jamie.
Operator, I understand that was the last question from the media. So thank you everyone for joining and we'll talk to you again next quarter.
This concludes today's call. Thank you for your participation you may now disconnect.
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