Q2 2024 EchoStar Corp Earnings Call
Greetings and welcome to the Echo Star Corporation's Q2 2024 Earnings Conference Call.
Operator: 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dean Manson, Chief Legal Officer. Thank you, Dean. You may begin.
Speaker Change: It is now my pleasure to introduce your host, Dean Manson, Chief Legal Officer. Thank you, Dean. You may begin.
Unknown Speaker: Hi, it's just a quirk.
Dean Manson: Thank you and welcome to EchoStar's second quarter 2024 earnings call. We will begin with opening remarks from Hamid Akhavan, President and CEO, followed by Paul Orban, EVP and Principal Financial Officer, Gary Schanman, EVP and Group President of Video Services, Paul Gaske, COO of Hughes, and John Swieringa, President of Technology and COO. We request that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recording, which we ask that you respect.
Dean Manson: Thank you and welcome to Echostar's second quarter 2024 earnings call.
Speaker Change: We will begin with opening remarks from Hamid Akhavan, President and CEO, followed by Paul Orban, EVP and Principal Financial Officer.
Speaker Change: Gary Schanman, EVP and Group President of Video Services, Paul Gaske, COO of Hughes, and John Swieringa, President of Technology and COO. We request that any participant producing a report not identify other participants or their firms in such reports.
Dean Manson: All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and for many future results of stress are implied by the forward-looking statement. For a list of those factors and risks, please refer to our quarterly report on Form 10-Q for the quarter ended June 30, 2024, filed today, and our subsequent filings made with the SEC.
Speaker Change: We also do not allow audio recording, which we ask that you respect.
Speaker Change: All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Private Securities Litigation Reform Act of 1995.
Speaker Change: These forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements.
Speaker Change: For a list of those factors and risks, please refer to our quarterly report on Form 10-Q for the quarter ended June 30, 2024, filed today, and our subsequent filings made with the SEC.
Dean Manson: All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make, wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. As we assume no responsibility for updating any forward-looking statements, we refer to OIDA and free cash flow during this call. The comparable gap measure and a reconciliation for OIDA are presented in our earnings release and, in the case of free cash flow, in our 10-Q. With that, I'll turn it over to Hamid.
Speaker Change: All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make, wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements.
Speaker Change: We refer to OIDA and free cash flow during this call. The comparable gap measure and a reconciliation for OIDA is presented in our earnings release and in the case of free cash flow, in our 10-Q. With that, I'll turn it over to Hamid.
Hamid Akhavan: Thank you, Dean. Welcome, everyone. Thank you for joining us today.
Hamid Akhavan: Thank you, Dean. Welcome, everyone. Thank you for joining us today.
Hamid Akhavan: Through the first six months of the year, EchoStar has been performing as planned. We are focused on integrating operations, advancing our 2024 plans, driving better alignment within our business units, realizing synergies, and managing costs. Our prepared remarks for today's earnings call will focus on our operating business units in the pay TV, wireless, broadband, and satellite services sectors. However, many of you may also be interested in hearing about our efforts to refinance our maturing debt obligation due in November and to improve our liquidity, including addressing the going concern disclosure. On that front, we continue to make progress and are in constructive discussions with counterparties which we feel best support our objectives. However, the nature of these discussions requires confidentiality.
Hamid Akhavan: Through the first six months of the year, Echostar has been performing as planned. We are focused on integrating operations, advancing our 2024 plans, driving better alignment within our business units, realizing synergies, and managing costs.
Speaker Change: Our prepared remarks for today's earnings call will focus on our operating business units in the pay TV, wireless and broadband and satellite services segments.
Speaker Change: Many of you may also be interested in hearing about our efforts to refinance our maturing debt obligation during November and to improve our liquidity, including addressing the going concern disclosure.
Speaker Change: On that front, we continue to make progress and are in constructive discussions with counterparties which we feel best support our objectives.
Speaker Change: The nature of these discussions requires confidentiality. While I cannot provide more detail today, we will have more to share when it is appropriate.
Hamid Akhavan: While I cannot provide more detail today, we will have more to share when it is appropriate. Our operating business continued to meet or exceed our budget targets in key metrics in the second quarter. We will elaborate on this later in the call.
Speaker Change: Our operating business continued to meet or exceed our budget targets in key metrics in the second quarter.
Hamid Akhavan: As we stated on the last earnings call, our operating plan achieves positive operating-free cash flow for the year as we continue to drive efficiencies, optimization, and synergies that increase our profitability. After the first six months, you remain on track to meeting this key objective for the year. In addition to our operational improvements, particularly in pay TV and broadband and satellite service business units, we continually refine and enhance our offerings for both consumer and enterprise customers.
Speaker Change: We will elaborate upon this later on the call. As we have stated on the last earnings call, our operating plan achieves positive operating free cash flow for the year as we continue to drive efficiencies, optimization, and synergies that increase our profitability.
Speaker Change: After the first six months, you remain on track for meeting these key objectives for the year.
Speaker Change: In addition to our operational improvements, particularly in paid TV and broadband and satellite service business units, we continually refine and enhance our offerings for both consumer and enterprise customers.
Hamid Akhavan: We remain committed to innovation with our state-of-the-art open RAN wireless network that now serves double the number of Boost Mobile customers since last quarter, at over half a million. The network, coupled with Boost Mobile's pivot to a unified digital experience, gives us the runway to increase our share of the wireless market. In our broadband and satellite business, we continue to march forward with our enterprise offerings and expect enterprise revenues to surpass that of our consumer revenues this year.
Speaker Change: We remain committed to innovation with our state-of-the-art Open RAN wireless network that now serves double the number of Boost Mobile customers since last quarter at over half a million.
Speaker Change: A network coupled with Boost Mobile's pivot to a unified digital experience gives us the runway to increase our share of the wireless market.
Speaker Change: In our broadband and satellite business, we continue to march forward with our enterprise offerings and expect enterprise revenues to surpass that of our consumer revenues this year.
Hamid Akhavan: On another positive front, this morning we received approval for the Liberty Puerto Rico transaction so that that transaction will close within the next 30 years or so. While there is still a lot of work ahead for the team, we are pleased with the performance from the first half of the year and will use this positive momentum throughout the second half of 2024. With that, I will turn it over to Paul Orban for additional commentary on our Q2 numbers.
Speaker Change: On another positive front, this morning we received approval on Liberty Puerto Rico transaction so that that transaction will close within the next 30 years or so.
Speaker Change: While there is still a lot of work ahead for the team, we are pleased with the performance from the first half of the year and will use this positive momentum throughout the second half of 2024.
Paul Orban: With that, I will turn it over to Paul Orban for additional commentary on our Q2 numbers.
Paul Orban: Thank you, Hamid. I will briefly touch on the going concern disclosure as a reminder, but please read the financial statements contained in our 10-Q to see the precise disclosure. This evaluation is a technical accounting determination that requires us to consider our current cash position and project our cash position one year from today and does not allow us to consider any new funding sources unless that financing is committed as of today. At the end of the second quarter, our cash and cash equivalents in marketable investment securities totaled $521 million.
Paul Orban: Thank you, Hamid. I will briefly touch on the going concern disclosure as a reminder, but please read the financial statements contained under 10Q to see the precise disclosure.
Paul Orban: This evaluation is a technical accounting determination that requires us to consider our current CAST position and project our CAST position one year from today and does not allow us to consider any new funding sources unless that financing is committed as of today.
Paul Orban: At the end of the second quarter, our cash and cash equivalents in marketable investment securities totaled $521 million.
Paul Orban: Roughly $2 billion of debt will be maturing this November, and currently, we do not have the necessary cash on hand and projected future cash flows to fund fourth quarter operations or the November 24th debt maturity. As Hamid mentioned, we are currently working to address this through our refinancing activities and in discussions with funding sources at all levels in our capital structure. As previously highlighted, our teams are focused on maintaining positive operating free cash flow, as defined in our prior calls.
Speaker Change: Roughly $2 billion of debt will be maturing this November, and currently we do not have the necessary cash on hand and projected future cash flows to fund fourth quarter operations or the November 24th debt maturity.
Speaker Change: As Hamid mentioned, we are currently working to address this with our refinancing activities in discussions with funding sources at all levels in our capital structure.
Hamid Akhavan: As previously highlighted, our teams are focused on maintaining positive operating free cash flow as we have defined on our prior calls.
Paul Orban: We are on track to meet this goal this year, in part, by continuing to execute on our plan to remove $1 billion of operating expenses from the business, which includes merger synergies. We continue to manage all of our brands with a focus on financial discipline and a goal to onboard the highest quality subscribers. We continue to see the results of these efforts in our DISH and Boost Mobile churn rates this quarter.
Hamid Akhavan: We are on track to meet this goal this year, in part, by continuing to execute on our plan to remove $1 billion of operating expenses from the business, which includes merger synergies.
Hamid Akhavan: We continue to manage all of our brands with a focus on financial discipline and a goal to onboard the highest quality subscribers.
Hamid Akhavan: We continue to see the results of these efforts in our DISH and Boost Mobile churn rates this quarter.
Paul Orban: Now, let's review our financial performance for the second quarter. Revenue was over $3.95 billion in the second quarter, down 9% year over year, primarily due to subscriber declines across all lines of business. OEBDA was $442 million, down $181 million year-over-year, driven by the ramp in operating costs per network as we have more sites on air, as well as decreased margins from having fewer subscribers across all brands. Pre-cash flow was a negative $191 million, primarily driven by cash interest of $450 million.
Hamid Akhavan: Now let's review our financial performance for the second quarter.
Hamid Akhavan: Revenue was over $3.95 billion in the second quarter, down 9% year over year, primarily due to subscriber declines across all lines of business.
Speaker Change: Boybida was $442 million, down $181 million year-over-year, driven by the ramp in operating costs per network, as we have more sites on-air, as well as decreased margins from having fewer subscribers across all brands.
Speaker Change: Pre-cash flow was a negative $191 million, primarily driven by cash interest of $450 million.
Paul Orban: Year over year, free cash flow was better by $360 million, driven by a decrease in capital spent per network of $565 million, which was in line with our prior guidance. This decrease in capital expenditure was largely offset by the $181 million decrease in our. As a reminder, we continue to expect CapEx for the year to be roughly half of what it was in 2023. With that, I'd like to turn it over to Gary to discuss video services. Thanks, Paul.
Speaker Change: Year over year, free cash flow was better by $360 million, driven by a decrease in capital spent per network of $565 million, which was in line with our prior guidance.
Speaker Change: This decrease of capital spend was largely offset by the $181 million decrease in Oivida.
Speaker Change: As a reminder, we continue to expect CapEx for the year to be roughly half of what it was in 2023.
Gary Schanman: Thanks, Paul. On the pay TV side, we finished Q2 with approximately 8.1 million customers. Across the business, we continue to see operational efficiency gains, and our focus on engagement, customer loyalty, and subscriber quality drove substantial quarter-over-quarter and year-over-year churn improvements across both DISH and Sling, while growing ARPU by over 4%. Improved churn combined with lower variable and fixed costs achieved by our savings for growth efforts resulted in higher per sub profitability.
Speaker Change: With that, I'd like to turn it to Gary to discuss video services.
Gary: Thanks, Paul. On the pay TV side, we finished Q2 with approximately 8.1 million customers.
Gary: Across the business, we continue to see operational efficiency gains, and our focus on engagement, customer loyalty, and subscriber quality drove substantial quarter-over-quarter and year-over-year churn improvements across both DISH and Sling, while growing ARPU by over 4%.
Gary: Improved churn combined with lower variable and fixed costs achieved by our savings for growth efforts resulted in higher per sub profitability. In particular, DISH TV SAC was significantly less versus Q2 2023, and this improvement was primarily attributable to an increase in marketing efficiency per subscriber.
Gary Schanman: In particular, DISH TV SAC was significantly less versus Q2 2023, and this improvement was primarily attributable to an increase in marketing efficiency per sub. Additionally, similar to Q1, our media sales revenue per subscriber continues to grow year over year. Our Dish Connected product, which delivers programmatic advertising to our connected linear set-top box subscribers, continues to roll out and scale in Q2, underpinning our Pooh gains. On both platforms, significant addressable and programmatic market demand also help fuel this growth.
Gary: Similar to Q1, our media sales revenue per subscriber continues to grow year over year. Our DISH Connected product, which delivers programmatic advertising to our connected linear set-top box subscribers, continue to roll out and scale in Q2, underpinning ARPU gains.
Gary: On both platforms, significant addressable and programmatic market demand also help fuel this growth.
Gary Schanman: Dish Business, our bulk sales division, has continued to experience year-over-year growth through our concerted efforts in the hospitality and senior living spaces. In the hospitality space, in particular, we increased our units by 30% compared to the same period last year and need a quarter with a total of 1.35 million hotel rooms.
Gary: DISH Business, our bulk sales division, has continued to experience year-over-year growth through our concerted efforts in the hospitality and senior living spaces.
Gary: In the hospitality space, in particular, we increased our units by 30% compared to the same period last year, ending the quarter with a total of 1.35 million hotel rooms.
Gary Schanman: In addition to our wins in hospitality, Dish Business ended Q2 with over 300,000 total active units in nursing care and assisted living facilities, with over 21,000 units in Q2 alone. In regards to DISH-TV specifically, we finished the quarter with approximately 6.1 million subscribers, with Q2 churn 12 points lower than in Q2. Our Q2 subscriber numbers for DISH-TV were positively impacted by consistency in programming and improved product quality. We also continue to offer high-value added services to our DISH subscribers, including cross-sell offers of HughesNet and Boost Mobile.
Gary: In addition to our wins in hospitality, DISH Business ended Q2 with over 300,000 total active units in nursing care and assisted living facilities with over 21,000 units in Q2 alone.
Gary: In regards to Dish TV specifically, we finished the quarter with approximately 6.1 million subscribers.
Gary: with Q2 churn 12 points lower than in Q2 2023. Our Q2 subscriber numbers for DISH TV were positively impacted by consistency in programming and improved product quality.
Gary: We also continue to offer high-value added services to our DISH subscribers, including cross-sell offers of HughesNet and Boost Mobile. Our objective moving forward into the second half of 2024 is to more closely integrate these products, improving the customer experience, and lowering collective churn.
Gary Schanman: Our objective moving forward into the second half of 2024 is to more closely integrate these products, improving the customer experience and lowering collective churn. Also noteworthy is the launch of a Netflix bundle for our existing DISH subscribers, which provides those subscribers the ability to add Netflix to their existing DISH subscription at no additional out-of-pocket cost with a DISH commitment and watch Netflix through our Hopper Classroom. Regarding our Sling business, one of the industry's only profitable streaming services, we finished the quarter with approximately 2 million subscribers, a gain of 78,000 in Q2.
Gary: Also noteworthy is the launch of a Netflix bundle for our existing DISH subscribers, which provides those subs the ability to add Netflix to their existing DISH subscription at no additional out-of-pocket cost with a DISH commitment, and watch Netflix through our Hopper platform.
Gary: Regarding our Sling business, one of the industry's only profitable streaming services, we finished the quarter with approximately 2 million subscribers, a gain of 78,000 in Q2. This increase is due to our purposeful focus on acquiring high-quality, profitable subscribers despite competitive headwinds and an improved customer experience.
Gary Schanman: This increase is due to our purposeful focus on acquiring high-quality, profitable subscribers despite competitive headwinds and an improved customer experience. Improvements to product performance and the continued adoption of features and services on Sling, including rewards, arcade, free DVR, and sports replay, which launched in Q1, have led to an increase in viewership and engagement, and we expect that increase in adoption to continue into the second half of 2024. I'd like to turn it over to Paul Gaske now, who will cover broadband and satellite services.
Gary: Improvements to product performance and the continued adoption of features and services on Sling, including Rewards, Arcade, Free DVR, and Sports Replay, which launched in Q1, have led to an increase in viewership and engagement, and we expect that increase in adoption to continue into the second half of 2024.
Paul Gaske: I'd like to turn it over to Paul Gaske now, who will cover broadband and satellite services.
Paul Gaske: Gary, our broadband and satellite services segment operates in both the consumer and enterprise markets. Our consumer business under the HughesNet brand expanded subscriber acquisition on Jupiter 3. With the support of this new satellite, we've been able to increase our gross additions by roughly 14% year over year. Jupiter 3's additional capacity allows us to offer new high-speed, unlimited data service plans and, at the same time, upgrade existing subscribers to similar plans on Jupiter 1 and 2, thus enabling them to benefit from faster speeds and increased data allowance.
Paul Gaske: Thank you, Gary. Our broadband and satellite services segment operates in both the consumer and enterprise markets.
Paul Gaske: Our consumer business, under the HughesNet brand, expanded subscriber acquisition on Jupiter 3.
Paul Gaske: With the support of this new satellite, we've been able to increase our gross additions by roughly 14% year over year.
Paul Gaske: Jupiter 3's additional capacity allows us to offer new high-speed, unlimited data service plans, and at the same time, upgrade existing subscribers to similar plans on Jupiter 1 and 2, thus enabling them to benefit from faster speeds and increased data allowances.
Paul Gaske: We also launched the HughesNet Dish TV bundle during the quarter, allowing customers opting for both services to benefit from a bundle discount and a two-year price lock. We continue to focus on acquiring high-value customers and driving customer loyalty, and our efforts so far have reduced subscriber losses by more than 50% from Q2 of 2023.
Paul Gaske: We also launched the HughesNet Dish TV bundle during the quarter, allowing customers opting for both services to benefit from a bundle discount and a two-year price lock.
Paul Gaske: We continue to focus on acquiring high-value customers and driving customer loyalty.
Paul Gaske: And our efforts so far have reduced subscriber losses by more than 50% from Q2 of 2023. We finished this past second quarter with approximately 955,000 broadband subscribers.
Paul Gaske: We finished this past second quarter with approximately 955,000 broadband subscribers. As Hamid mentioned in the opening, our HughesNet Enterprise business continues to grow as we drive to acquire the majority of our revenues from the enterprise market. In our Hughes Managed LEO business, we have shipped over 5,000 of our Hughes manufactured user terminals based on our unique flat panel electronically steered antenna, also known as ESA technology. Feedback has been very positive, and demand increased in Q2.
Paul Gaske: As Hamid mentioned in the opening, our HughesNet Enterprise business continues to grow as we drive to acquire the majority of our revenues from the enterprise market.
Hamid Akhavan: In our Hughes Managed LEO business, we have shipped over 5,000 of our Hughes-manufactured user terminals based on our unique flat-panel, electronically-steered antenna, also known as ESA technology.
Hamid Akhavan: Feedback has been very positive and demand increased in Q2. We anticipate launching new versions of this terminal starting as early as the third quarter and that will boost our Managed Leo Services business.
Paul Gaske: We anticipate launching new versions of this terminal early, as early as the third quarter, and that will boost our Managed Leo Services business. We received significant orders across the entirety of our enterprise business during the quarter, both domestically and internationally, and continue to make progress in the inflight communications business. In Q2, we announced a deal in partnership with TCI and Turksat to supply AJET advanced in-flight connectivity for their passengers. In addition, we continue to execute on our previously announced programs with Delta Airlines and Google Business Aviation. With that, I will turn it back to Hamid for an update on our wireless business.
Hamid Akhavan: We received significant orders across the entirety of our enterprise business during the quarter, both domestically and internationally, and continue to make progress in the inflight communications business.
Hamid Akhavan: In Q2, we announced a deal in partnership with TCI and Turksat to supply AJET advanced in-flight connectivity for their passengers.
Hamid Akhavan: In addition, we continue to execute on our previously announced programs with Delta Airlines and Google Business Aviation. With that, I will turn it back to Hamid for an update on our wireless business.
Hamid Akhavan: Thank you, Paul. We had a number of positive developments in Q2, but before I jump into those, I want to comment on a few significant changes we made to the business last month. Our mid-July announcement regarding the new Boost Mobile was the result of much of the hard work completed in Q2. More than just a brand refresh, we unveiled a unified and unique prepaid and postpaid experience across the Boost Mobile website and app, new and easy-to-understand rate plans, a new marketing campaign, and a 30-day money-back guarantee so customers can test our state-of-the-art network risk-free For more information, visit www.boost.com. As alluded to in previous calls, and as part of this overall effort to put forth a new Boost Mobile, we sunsetted the Boost Infinite brand and brought postpaid and prepaid together.
Hamid Akhavan: Thank you Paul. We had a number of positive developments for Q2 but before I jump into those I want to comment on a few significant changes we made to the business last month.
Speaker Change: Our meet July announcement regarding the new boost mobile was a result of much of the hardware completing Q2. More than just the brand refresh we unveiled.
Speaker Change: A unified and unique prepaid and postpaid experience across the Boost Mobile website and app. New and easy-to-understand rate plans, a new marketing campaign, and a 30-day money-back guarantee so customers can test our state-of-the-art network risk-free.
Speaker Change: As alluded to in previous calls, and as part of this overall effort to put forth a new Boost Mobile, we sunset the Boost Infinite brand.
Hamid Akhavan: This continuum of experiences and offerings allows us to bridge the gap between pre- and postpaid service and remove the binary nature of the mobile industry, giving customers access to more choices. Through these changes, our single brand will be a driver of profitable growth and help maximize operational efficiencies across the retail wireless business. In regard to the second quarter, we finished with approximately 7.3 million subscribers. Excluding the loss of net ACP subscribers, we added approximately 32,000 net retail wireless subscribers in the second quarter. With the loss of the government-funded ACP program in the second quarter, many providers experienced ACP subscriber losses.
Speaker Change: and brought Postpaid and Prepaid together.
Speaker Change: This continuum of experiences and offerings allows us to bridge the gap between pre- and post-paid service and remove the binary nature of the mobile industry, giving customers access to more choices.
Speaker Change: Through these changes, our single brand will be a driver of profitable growth and help maximize operational efficiencies across the retail wireless business.
Speaker Change: In regard to the second quarter, we finished with approximately 7.3 million subscribers. Excluding the loss of NET-HCP subscribers, we added approximately 32,000 NET-Retail Wireless subscribers in the second quarter.
Speaker Change: With the loss of the government-funded ACP program in the second quarter, many providers experienced ACP subscriber losses.
Hamid Akhavan: While we believe that ensuring Americans have access to high-speed internet and mobile services is essential in today's world, these subscribers were not very profitable under our brands, and we have worked to transition them to cost-effective solutions that are available. ACP losses account for a total decrease in our wireless subscriber business base of only 16,000 compared to the decrease of 188,000 in the same period last year, a positive sign and momentum for us to build up our business. Additionally, we have seen further reductions in our churn numbers, 2.93% in Q2 compared to 4.54% during the same period last year, a 35.5% reduction.
Speaker Change: While we believe that ensuring Americans have access to high-speed internet and mobile services is essential in today's world, these subscribers were not very profitable under our brands, and we have worked to transition them to cost effective solutions we are available.
Speaker Change: ACP losses account for a total decrease in our wireless subscriber business base of only 16,000 compared to the decrease of 188,000 in the same period last year, a positive sign and momentum for us to build upon.
Speaker Change: Additionally, we have seen further reductions in our churn numbers, 2.93% in Q2 compared to 4.54% during the same period last year, a reduction of 35.5%.
Hamid Akhavan: Our market share continues to increase as we focus on higher quality subscribers, improving the customer experience, and optimizing our network. Boost Mobile's customer satisfaction and the overall brand sentiment is rapidly improving, and in some studies, it is already exceeding some incumbents. We are encouraged by the results this quarter and overall positive trends since the beginning of the year. We strive to profitably increase our share of the postpaid market with the power of having owner's economics.
Speaker Change: Our group continues to increase as we focus on higher quality subscribers, improving the customer experience and optimizing our network.
Speaker Change: Boost Mobile's customer satisfaction and the overall brand sentiment is rapidly improving and in some studies already exceeding some incumbents. We are encouraged by the results this quarter and overall positive trends since the beginning of the year.
Speaker Change: We strive to profitably increase our share of the postpaid market with the power of having owner's economics.
Hamid Akhavan: While there is still work to be done in this area, as previously mentioned, we made great strides with operational and marketing deficiencies with the efforts in Q2 and look forward to seeing those efficiencies continue as our new Boost Mobile brand ramps up through the end of the year. Let me now hand the call to John to cover our network deployment progress. Thank you, Hamid.
Speaker Change: While there is still work to be done in this area, as previously mentioned, we made great strides under operational and marketing efficiencies with the efforts in Q2 and look forward to seeing those efficiencies continue as our new Boost Mobile brand ramps up through the end of the year.
Speaker Change: Let me now hand the call to John to cover our network deployment progress.
John Swieringa: The team has been hard at work expanding and optimizing the Boost Mobile Network, which is now capable of reaching over 200 million Americans with 5G voice and over 250 million Americans with 5G mobile broadband. As Hamid referenced earlier, we continue to add on-net customers at a high success rate when activating network-compatible devices in our 5G voice market. Our on-net customers experience pure 5G on the Boost Mobile Network, as well as nationwide 5G and 4G coverage via our partner network.
John: Thank you, Hamid.
John: The team has been hard at work expanding and optimizing the Boost Mobile Network, which is now capable of reaching over 200 million Americans with 5G voice and over 250 million Americans with 5G mobile broadband.
Operator: due to 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.
John: As Hamid referenced earlier, we continue to add on-net customers at a high success rate when activating network-compatible devices in our 5G voice markets.
Operator: If anyone's a require operator's assistance during the conference, please test R0 on your telephone keypad. As a reminder, this conference has been recorded.
John: Our on-net customers experience pure 5G on the Boost Mobile Network, as well as nationwide 5G and 4G coverage via our partner networks.
Dean Manson: It is now my pleasure to introduce your host, Dean Manson, Chief Legal Officer. Thank you, Dean. You may begin.
John Swieringa: The acceleration of on-net traffic allows us to further optimize and improve the world's first open-RAN cloud-native network, including speeds and coverage. In certain key markets, our third-party benchmarking shows that we have already moved ahead of some incumbents across key network stats and customer satisfaction, which allows us to confidently highlight our new network in the market. We are seeing a competitive network experience with room to run in the back half of the year, further accelerating our transition to the owner's economy. Additionally, we were the first network operator to commercially launch simultaneous 2x uplink and 4x downlink carrier aggregation for compatible devices this past quarter.
Unknown Executive: Hi, Central Court.
Speaker Change: The acceleration of on-net traffic allows us to further optimize and improve the world's first open RAN cloud-native network, including speeds and coverage.
Hamid Akhavan: Thank you, and welcome to EchoStar's second quarter, 2024 earnings call. We will begin with opening remarks from Hamid Akhavan, President and CEO, followed by Paul Orban, EVP and Principal Financial Officer, Gary Schanman, EVP, Group President of Video Services, Paul Gaske, COO of Hughes, and John Swieringa, President of Technology and COO. We request that any participant producing a report not identify other participants or their firms with such reports.
Speaker Change: In certain key markets, our third-party benchmarking shows that we have already moved ahead of some incumbents across key network stats and customer satisfaction.
Speaker Change: which allows us to confidently highlight our new network in the market.
Speaker Change: We are seeing a competitive network experience with room to run in the back half of the year, further accelerating our transition to owner's economics.
Unknown Executive: We also do not allow audio recording, which we have to respect. All statements we make during this call, others and statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Prime Security's litigation reform act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors. They could cause our actual results to be materially different from historical results, and for many future results, threats are implied by the forward-looking statement.
Speaker Change: Additionally, we were the first network operator to commercially launch simultaneous 2x uplink and 4x downlink carrier aggregation for compatible devices this past quarter.
John Swieringa: This accomplishment is a further testament to our efforts to provide our customers with the most advanced wireless experience and technology available. These are all positive developments, and we are pleased with the network's progress and performance as we further position ourselves to compete with the incumbent. We have met all of our FTC milestones to date. In the next year, we have some additional milestones. Specifically, June 14th, 2025.
Speaker Change: This accomplishment is a further testament of our efforts to provide our customers with the most advanced wireless experience and technology available.
Speaker Change: These are all positive developments and we are pleased with the network's progress and performance as we further position ourselves to compete with the incumbents.
Unknown Executive: For lists of those factors and risks, please refer to our quarterly report on Form 10Q for the quarter end of June 30, 2024, filed today, and our subsequent filings made for the SEC. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statement.
Speaker Change: We have met all of our FCC milestones to date.
Speaker Change: In the next year, we have some additional milestones, specifically June 14, 2025.
John Swieringa: Our fully constructed facilities, along with our construction in process, will be sufficient to meet many of our build-out requirements over the next year, including our June 14, 2025 milestone. These facilities are for licenses comprising approximately 90% of the aggregate carrying value, including capitalized interest, for our 600 MHz, 700 MHz H-block, and AWS-IV licenses. However, for the remaining licenses, we have not yet constructed facilities sufficient to meet our build-out requirements. We will need to raise additional capital to continue our 5G network deployment.
Speaker Change: Our fully constructed facilities, along with our construction in process, will be sufficient to meet many of our build-out requirements over the next year, including our June 14, 2025, milestones.
Unknown Executive: We assume no responsibility for updating any forward-looking statements. We refer to Huaypda and Free Cash Flow during this call. The comparable gap measure and a reconciliation for Huaypda is presented in our earnings release and in the case of Free Cash Flow in our 10Q.
Speaker Change: These facilities are for licenses comprising approximately 90% of the aggregate carrying value, including capitalized interest, for our 600 MHz, 700 MHz H-block, and AWS-IV licenses.
Dean Manson: With that, I'll turn it over to Hamid. Thank you, Dean.
Hamid Akhavan: Welcome everyone. Thank you for joining us today. Through the first six months of the year, Echo Star has been performing this plan. We have focused on integrating operations advancing our 2024 plans, driving better alignment within our business units, realizing synergy is in managing costs. Our prepared remarks for today's earnings call will focus on our operating business units in the pay TV, wireless, and broadband and satellite services seconds. Many of you may also be interested in hearing about our efforts to refinance our metering debt obligation during November and to improve our liquidity, including addressing the going concern disclosure.
Speaker Change: However, for the remaining licenses that we have not yet constructed facilities sufficient to meet our build-out requirements, we will need to raise additional capital to continue our 5G network deployment.
John Swieringa: In Q2, we invested $237 million in our network deployment, which is comparable to $802 million in Q2 of 2023. Our focus continues to be on capital investments and optimizations required to have a competitive network for these mobile customers within our existing and future 5G voice footprint. As we discussed last quarter, this is a logical progression for us as we transition from an accelerated build to running and optimizing our markets with a P&L mindset. Now, I'll turn it back over to Hamid.
Speaker Change: In Q2, we invested $237 million in our network deployment, which is comparable to $802 million in Q2 of 2023.
Speaker Change: Our focus continues to be on capital investments and optimizations required to have a competitive network for these mobile customers within our existing and future 5G voice footprint.
Speaker Change: As we discussed last quarter, this is a logical progression for us as we transition from an accelerated build to running and optimizing our markets with a P&L mindset.
Hamid Akhavan: On that front, we continue to make progress and our constructive discussions with counterparties, which we feel best support our objectives. The nature of these discussions requires confidentiality. While I cannot provide more detail today, we will have more to share when is appropriate. Our operating business continue to meet or exceed our budget targets in key metrics in the second quarter. We will elaborate upon this later on the call. As we have stated on the last earnings call, our operating plan achieves positive operating free cash flow for the year.
Hamid Akhavan: In summary, liquidity is a key factor for our long-term success, so significant attention is focused on this critical area.
Speaker Change: Now I'll turn it back over to Hamid.
Hamid Akhavan: Thank you, John. In summary, liquidity is a key factor for our long-term success.
Hamid Akhavan: Significant attention is focused on this critical area, and as I already mentioned, we are in constructive discussions with counterparties at this time.
Hamid Akhavan: And, as I already mentioned, we are in constructive discussions with counterparties at this time. In parallel, we are continuing to expertly and diligently operate our business, develop long-term opportunities, and create value. Pay TV and Hughes, to date, are generating operating free cash flow ahead of our expectations, and Boost Mobile has made good strides to find its footing this year. We have improved RPO and reduced churn across both the pay TV and wireless business units and will keep our focus on attracting and retaining high-quality subscribers.
Speaker Change: In parallel, we are continuing to expertly and diligently operate our business, develop long-term opportunities, and create value. ATV and Hughes, to date, are generating operating-free cash flow ahead of our expectation, and Boost Mobile has made good strides to find its footing this year.
Hamid Akhavan: As we continue to drive efficiencies, optimization, and synergies that increase our profitability. Quilty. After the first six months, we remain on track for meeting this key objective for the year. In addition to our operational improvements, particularly in pay TV and broadband and satellite service business units, we continually refine and enhance our offerings for both consumer and enterprise customers. We remain committed to innovation with our state-of-the-art open, wireless network that now serves double the number of boost mobile customers since last quarter at over half a million.
Speaker Change: We have improved ARPU and reduced churn across both the pay TV and wireless business units and will keep our focus on attracting and retaining high quality subscribers. The operational momentum we have established over the first half of the year is promising and we will work to maintain and accelerate it in the back half of 2024.
Hamid Akhavan: The operational momentum we have established over the first half of the year is promising, and we will work to maintain and accelerate it in the back half of 2025. With that, we will open it up for Q&A from the analyst community.
Speaker Change: With that, we will open it for Q&A from the analyst community.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Hamid Akhavan: Our network coupled with boost mobile pivot to a unified digital experience gives us the wrong way to increase our share of the wireless market. In our broadband and satellite business, we continue to march forward with our enterprise offerings and expect enterprise revenues to surpass that of our consumer revenues this year.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Rick Prentiss with Raymond James. Please proceed with your question.
Speaker Change: One moment, please, while we poll for questions.
Hamid Akhavan: On another positive front, this morning, we received approval on Liberty Porto Rico transaction so that that transaction will close within the next 30 days or so. While there's still a lot of work ahead for the team, we are pleased with the performance from the first half of the year and will use this positive momentum throughout the second half of 2024.
Speaker Change: Thank you. Our first question comes from the line of Rick Prentiss with Raymond James. Please proceed with your question.
Rick Prentiss: Thanks. Hi, everybody.
Rick Prentiss: A couple of quick questions for me. First, area, obviously, you're in constructive discussions, but I think you can actually help us. When do you need slash want to have the cash on hand? And related to that, can you remind us how much unencumbered spectrum you have and is that securitization market open?
Rick Prentiss: Eric, a couple of a couple of quick questions for me. First area, obviously, you're in constructive discussions, but I think actually you can help us.
Paul Orban: With that, I will turn it over to Paul Orban for additional commentary on our key to numbers. Thank you, Hamid. I will briefly touch on the going concern disclosure as a reminder, but please read the financial statements contained in a 10 cubes to see the precise disclosure.
Rick Prentiss: When do you need slash want to have the cash on hand and Related to that. Can you remind us how much unencumbered unencumbered spectrum you have and is that securitization market open?
Hamid Akhavan: Rick, good to hear from you. I will pass on the question regarding cash to Paul, and then we'll comment on the unencumbered inspection.
Paul Orban: This evaluation is a technical accounting determination that requires us to consider our current cast position and project our cast position one year from today and does not allow us to consider any new funding sources unless that financing is committed as of today. At the end of the second quarter, our cash and cash equivalence in market investment securities sold will $521 million. Roughly $2 billion of debt will be maturing this November.
Eric: Rick, good to hear from you. I will pass on the question regarding cash to Paul and then you'll comment on the unencumbered spectrum.
Paul Orban: Thanks Rick for the question. We're going to have sufficient cash on hand to pay all of our bills as they become due through the day before we actually have the two billion due. So we'd love to raise the money as soon as possible, but we have latitude to wait until basically the day beforehand if we have to.
Paul: Thanks Rick for the question. We're going to have sufficient cash on hand to pay all of our bills as they become due through the day before we actually have the two billion due. So we'd love to raise the money as soon as possible, but we have latitude to wait to basically the day beforehand if we had to.
Paul Orban: Currently, we do not have the necessary cash on hand and projected future cash flows to fund fourth quarter operations or the November 24 debt maturity. As Amid mentioned, we are currently working to address this with our refinancing activities in our indiscussions with funding sources at all levels in our capital structure. As previously highlighted, our teams are focused on maintaining positive operating free cash flow as we have defined on our prior calls.
Unknown Speaker: and the Undercomber Spectrum and Security.
Unknown Speaker: Yeah, so there are You know, in terms of spectrum, we certainly have an ample amount of a spectrum that we've not really valued in terms of incumbency, but go ahead, Paul, maybe you can... Yeah, so right now, the only spectrum that is encumbered is the 600 megahertz today. There is an internal note on the 3.45, but there is no third-party debt on that. So everything else is unencumbered, and we can use that to secure ties to raise capital.
Paul: and the Unencumbered Spectrum and Securitization Market.
Speaker Change: Yeah, so, there are, um...
Speaker Change: In terms of spectrum, we certainly have a
Speaker Change: It's an ample amount of a spectrum that we have not really valued.
Paul: Unknown Speaker in terms of incumbency, but go ahead and Paul, maybe, yeah, so right now the only spectrum that is encumbered is the 600 megahertz today. There is an internal note on 3.45, but there is no third party debt on that.
Paul Orban: We are on track to meet this goal this year, in part by continuing to execute on our plan to remove $1 billion of operating expenses from the business, which includes merger synergies. We continue to manage all of our brands with a focus on financial discipline and a goal to onboard the highest quality subscribers. We continue to see the results of these efforts in our dish and boost mobile turn rates this quarter.
Speaker Change: So everything else is unrecovered and we can use that to secure ties to race.
Rick Prentiss: Okay, and then operationally on the wireless side, help us understand what's the path to positive net ads? Obviously, you had some ex-ACP, but more importantly, what's the path and timing to getting the retail wireless business to produce positive EBITDA?
Speaker Change: Yeah, capital.
Speaker Change: Okay, and then operationally on the wireless side.
Speaker Change: Help us understand, what's the path to positive net ads? Obviously, you had some ex-ACP, but more importantly, what's the path and timing to getting the retail wireless business to producing positive EBITDA?
Paul Orban: Now let's review our financial performance for the second quarter. Revenue was over $3.95 billion in the second quarter, down 9% year-over-year, primarily due to subscriber declines across all lines of business. Orbita was $442 million, down 181 million year-over-year, driven by the ramp and operating costs for network, as we have more sites on air, as well as decreased margins from having fewer subscribers across all ramps. Preet Cashwell was a negative $191 million, primarily driven by cash interest of $450 million.
Hamid Akhavan: That's not something that Rick and I have announced, and, you know, obviously, in due time, we will be more specific about guidance in the market. That's not something we have published today, but I want to say that what we have seen, what I have seen in the first half of the year, what we have managed to achieve, It has exceeded my own expectations, candidly. I don't mean to be too bullish here about just a couple of quarters in a row, but we have made some fundamental changes in the business. This business was hugely declining in terms of the number of subscribers.
Rick Prentiss: That's not something that Rick, we have announced and you know, obviously, in due time, we will be more specific about guidance in the market. That's not something we have published today. But I want to say that what we have seen, what I have seen on the first half of the year, what we have been managed to achieve,
Rick Prentiss: It exceeded my own expectation candidly don't mean to be too bullish here about
Rick Prentiss: Just a you know a couple of quarters in a row, but we made some fundamental changes in the business
Paul Orban: Year over year, Preet Cashwell was better by $360 million, driven by a decrease in capital spend from network of $565 million, which wasn't lying with the prior guidance. This decrease in capital spend was largely offset by the $181 million decrease in order to that. As a reminder, we continue to expect catbacks for the year to be roughly half of what it was in 2023.
Speaker Change: Unknown Speaker This business was hugely.
Hamid Akhavan: The first thing for growth is to arrest the fall, and we have managed to do that, and it has not been an accident. I don't see that as a one-time thing. Now, let us have until the end of the year. I mean, I wanted to get through this year just to see... First of all, how our progress is in terms of getting our team focused, getting our strategy sharpened, and getting our execution honed.
Speaker Change: Dean Manson, Hamid Akhavan, Paul Orban, Gary Schanman, John Swieringa, Paul Orban, Gary
Speaker Change: I don't see that as a one-time thing, but now let us let us have to the end of the year. I mean, I wanted to get through this year just to see.
Speaker Change: First of all, how the progress, our progress is in terms of getting our team focused, getting our strategy sharpened, getting our execution honed. Before I put projections in the market, I certainly do not want to put projections in the market that are
Gary Schanman: With that, I'd like to turn it to Gary to discuss video services. Thanks, Paul. On the Pay TV side, we finished Q2 with approximately 8.1 million customers. Across the business, we continue to see operational efficiency gains, and our focus on engagement customer loyalty and subscriber quality drove substantial quarter over quarter and year over year churn improvements, across both dish and fling, while growing our food by over 4%. Improve churn combined with lower variable and fixed costs achieved by our savings for growth efforts resulted in higher per sub profitability.
Hamid Akhavan: Before I put projections in the market, I certainly do not want to put projections in a market that I cannot stand behind. In addition, this is a very exceptional year for us, I mentioned it, other than the fact that we have a merger, the fact that we have brands that we are bringing together, we also have these financing activities that are taking significant amount of our energy and attention and also kind of, I would say to some degree, limit our ability to participate in the market in some regards, we just targeting the most profitable customers and some of the other segments that at the time we can afford to be in the market for.
Speaker Change: that I cannot stand behind. In addition, you know this is a very exceptional year for us. I mentioned it, other than the fact that we have a merger and the fact that we have brands that we are bringing together. We also have these financing activities that are taking significant amount of our energy and attention and also
Speaker Change: I would say to some degree limit our ability to participate in the market in some regards we just targeting the most profitable customers.
Gary Schanman: In particular, dish TV sack was significantly less first Q2 2023, and this improvement was primarily attributable to an increase in marketing efficiency per subscriber. Similar to Q1, our media sales revenue per subscriber continues to grow year over year, our dish connected product, which delivers programmatic advertising to our connected linear set-top box subscribers, continue to roll out and scale in Q2, underpinning our food gains. On both platforms, significant addressable and programmatic market demand also help fuel this growth.
Speaker Change: some of the other segments that at the time we can afford to be in a market for. So all of that makes this a very special year. It would not be prudent for me to put a hard projection out there, but certainly I am very encouraged by what we have done so far under the circumstances and hopefully starting next year, we can be more specific about
Hamid Akhavan: So all of that makes this a very special year; it would not be prudent for me to put a hard projection out there, but certainly, I am very encouraged by what we have done so far under the circumstances, and hopefully, starting next year, we can be more specific about how our business is going to develop.
Hamid Akhavan: Last one for me is any update on 5G private networks? That was obviously a big part of the best use of the spectrum and the network you're building. Any update on how that market is starting to gel?
Speaker Change: You know how our business is going to develop.
Gary Schanman: Dish business, our bulk sales division, continues to experience a year over year growth through our concerted efforts in the hospitality and senior living spaces. In the hospitality space, in particular, we increased our units by 30 percent compared to the same period last year, and needed a quarter with a total of 1.35 million hotel rooms. In addition to our wins in hospitality, dish business ended to Q2 with over 300,000 total active units in nursing care and assisted living facilities with over 21,000 units in Q2 alone.
Speaker Change: Last one for me is, any update on 5G private networks? That was obviously a big part of the best use of the spectrum in the network you're building. Any update on how that market is starting to gel?
Hamid Akhavan: Yeah, that's a nascent market. Again, we have enormous hope and expectation for that market. But nothing in the immediate future, though. I mean, as you know, in enterprise sales, and particularly in a brand new category, where, you know, the customers, and, you know, there is no precedent, you know, strong precedent in the market.
Speaker Change: Yeah, that's a nascent market. Again, we have enormous hope and expectation for that market. Nothing in the immediate future, though. I mean, as you know, in enterprise sales, and particularly in a brand new category where, you know, the customers and
Speaker Change: There is no precedence, strong precedence in the market. There's a bunch of business and development activities that have to go on before significant sales can be made. We already have a couple of things. We saw, now we are participating in a Spiral 4, a DoD, and I think that came through Navy, contract is about a $2.7 billion over 10 years. Multiple operators are there. We are there. So we see that coming in. We do have a couple of deployments that we have talked about in the past. I don't want to repeat those. Whidbey Island, Hawaii, a few other places. Those are early signs, and we've seen success on all of those, but I'm not at the point yet that I can put a big forecast.
Gary Schanman: In regards to dish TV specifically, we finished the quarter with approximately 6.1 million subscribers. With Q2, turn, Q2, turn, 12 points lower than in Q2, 2023. Our Q2 subscriber numbers for dish TV were positively impacted by consistency in programming and improved product quality. We also continued to offer high value added services to our dish subscribers, including cross-cell offers of HughesNet and Boost Mobile.
Hamid Akhavan: You know, there's a bunch of business and, you know, development activities that have to go on before, you know, significant sales can be made. We already have a couple of things, you know. We saw, now we are participating in Spiral 4, GOD, and I think that came through the Navy. Contracting is about $2.7 billion over 10 years, multiple operators are there, and we are there. So we see that coming in. We do have a couple of deployments that we have talked about in the past. I don't want to repeat those, you know, Whidbey Island, Hawaii, a few other places.
Gary Schanman: Our objective moving forward into the second half of 2024 is to more closely integrate these products, improving the customer experience and lowering collective churn. Also noteworthy is the launch of a Netflix bundle for our existing dish subscribers, which provides those of the ability to add Netflix to their existing dish subscription at no additional out-of-pocket cost with a dish commitment and watch Netflix through our hopper platform. Regarding our sling business, one of the industry's only profitable streaming services, we finished the quarter with approximately 2 million subscribers again of 78,000 in Q2.
Hamid Akhavan: You know, those are early signs, and we've seen success with all of those, but I'm not at the point yet that I can put a, you know, big forecast out there for it. I just want to say that with all of this AI news that is in the market, much of it may be hype, but certainly there is some truth to it. And we believe we have the network that is absolutely optimized to take advantage of that, and we have plenty of great spectrum for that.
Speaker Change: and Unknown Speaker. Thank you for being here. We have a lot of great stuff out there for it. I just want to say that with all of this AI news that is in the market, much of it may be hype, but certainly there is some truth to it. And we believe we have the network that is absolutely optimized to take advantage of that. And we have plenty of great spectrum also for that. So, thank you. And I'm going to ask you to please take your seats. Thank you.
Hamid Akhavan: So we like it, and we are very excited about making a business that is very significant out of that. But I want to, you know, preach a bit of patience there, not because we are not moving fast enough or able to move fast enough. It's just that the market has to develop, and that takes a bit of time.
Speaker Change: We like it. We like that and we're very excited about making a business that is very significant out of that But I want to you know Preach a bit of patience there not because we are not moving fast enough or able to move fast enough It's just that the market has to develop and that takes a bit of time
Gary Schanman: This increase is due to our purposeful focus on acquiring high-quality, profitable subscribers despite competitive headwinds and an improved customer experience, improvements to product performance and the continued adoption of features and services on swing including rewards, arcade, free DVR and sports replay which launched in Q1 have led to an increase in viewership and engagement and we expect that that increase in adoption to continue into the second half of 2024.
Unknown Speaker: Thanks, guys.
Speaker Change: Thanks, guys.
Operator: Thank you. Our next question comes from the line of David Barden with Bank of America. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of David Barden with Bank of America. Please proceed with your question.
Unknown Speaker: Great. Thanks for taking the question. This is Shipra. I'm just calling in for David right now.
Paul Gaske: I'd like to turn it over to Paul Gaske now who will cover broadband and satellite services. Thank you Gary. Our broadband and satellite services segment operates in both the consumer and enterprise markets. Our consumer business under the Hughes Net brand expanded subscriber acquisition on Jupiter 3. With the support of this new satellite, we've been able to increase our gross additions by roughly 14% year over year. Jupiter 3's additional capacity allows us to offer new high speed, unlimited data service plans and at the same time upgrade existing subscribers to similar plans on Jupiter 1 and 2.
Speaker Change: Great, thanks for taking the question. This is Shipra. I'm just calling in for David right now. Just two questions if I could. Looking at the company holistically and collateral buckets that you have left and spectrum licenses that you just touched on,
Unknown Speaker: Just two questions if I could. Looking at the company holistically and the collateral buckets that you have left and the spectrum licenses that you just touched on, what is left within the company that can still be leveraged? What LTV can they be leveraged at?
Speaker Change: What? What?
Speaker Change: What is left within the company that can still be levered? What LTV can they be levered at? And how are the current fraudulent conveyance lawsuits and other legal liabilities impacting your collateral pool and ongoing refinancing talks that you're in right now? And my next question,
Unknown Speaker: And how are the current fraudulent conveyance lawsuits and other legal liabilities impacting your collateral pool and the ongoing refinancing talks that you're in right now? And my next question: the company this year reshuffled some of its assets to create new pockets of collateral to borrow against to extend the life of the equity that wasn't welcomed by existing creditors. We asked this last quarter, but with business cash performance where it is and the maturity wall where it is right now, what are the circumstances where management's obligation shifts from trying to extend the life of the equity market cap to maximizing the recovery for the $20 billion of debt outstanding?
Speaker Change: The company this year reshuffled some of its assets to create new pockets of collateral to borrow against.
Paul Gaske: Thus enabling them to benefit from faster speeds and increase data allowance. We also launched the Hughes Net dish TV bundle during the quarter allowing customers opting for both services to benefit from a bundle discount and a two year price lock. We continue to focus on acquiring high value customers and driving customer loyalty and our efforts so far have reduced subscriber losses by more than 50% from Q2 of 2023. We finished this past second quarter with approximately 955,000 broadband subscribers.
Speaker Change: to extend the life of the equity that wasn't welcomed by existing creditors.
Speaker Change: We asked this last quarter, but with the business cash performance where it is, and the maturity wall where it is right now, what are the circumstances where management's obligation shifts from trying to extend the life of the equity market cap to maximizing the recovery for the $20 billion of debt outstanding? Thank you.
Unknown Speaker: Thank you.
Hamid Akhavan: Thank you. Several questions. I don't know if I'm going to be able to answer all of them, but if I don't, please repeat some of them. So I want to make sure I hit all the points.
Speaker Change: Thank you several several questions. I don't know if I'm going to be able to answer all of them But if I don't please repeat some of it, so I want to make sure I hit all the points First of all I sensed that you believe
Hamid Akhavan: First of all, I sensed that you believe... Our spectrum assets are not monetizable or not able to use as collateral, and then we need to refer to others, and I want to say vehemently and strongly that that is absolutely not the case. Our spectrum assets are unencumbered. We can, and we will use those as collateral. And the fact that we haven't done it yet is because we have not arrived, as I mentioned, in constructive discussions. We have not reached the point where we believe that the right deals can be made, and this is a matter of negotiations, and progress is being made. No guarantees until they're done.
Paul Gaske: As Hamid mentioned in the opening, our Hughes Net enterprise business continues to grow as we drive to acquire the majority of our revenues from the enterprise market. In our Hughes managed Leo business, we have shipped over 5,000 of our Hughes manufactured user terminals based on our unique flat panel electronically steered antenna also known as ESA technology. Feedback has been very positive and demand increased in Q2. We anticipate launching new versions of this terminal starting early as early as the third quarter and that will boost our managed Leo services business.
Speaker Change: Our spectrum assets are not monetizable or not able to use as collateral, and then we need to refer to others. And I want to say vehemently and strongly that that is absolutely not the case.
Speaker Change: Zero.
Speaker Change: Our spectrum assets are encumbered. We can and we will use those as collateral. And the fact that we haven't done it yet is because we have not arrived, as I mentioned, in constructive discussions. We have not reached the point that we believe that the right deals can be made.
Paul Gaske: We received significant orders across the entirety of our enterprise business during the quarter, both domestically and internationally and continue to make progress in the inflight communications business. In Q2, we announced a deal in partnership with TCI and Turkset to supply Ajat advanced inflight connectivity for their passengers. In addition, we continue to execute on our previously announced programs with Delta Airlines and Google Business Aviation.
Speaker Change: This is a matter of negotiations and progress is being made.
Speaker Change: No guarantees until they're done.
Hamid Akhavan: And we certainly will use the necessary time to make sure that we make a deal; we make opportunities and deals that are, you know, great for our long-term success and maximize our value. We certainly are focused on that. So other collateral that we could use is not relevant relative to the size of the spectrum. We have a significant ability to lever our spectrum and create liquidity for many, many years to come on a long runway.
Speaker Change: Um...
Speaker Change: And we certainly will use the necessary time.
Speaker Change: to make sure that we make a deal, we make opportunities and deals that are, you know, great for our long-term success and maximize our value. We certainly focused on that. So other collateral that we could use is not relevant relative to the size of the spectrum. We have significant ability to lever our spectrum and create liquidity for many, many years and
Hamid Akhavan: With that, I will turn it back to Hamid for an update on our wireless business. Thank you, Paul. We had a number of positive developments for Q2, but before I jump into those, I want to comment on a few significant changes we made to the business last month. Our mid-July announcement regarding the new boost mobile was a result of much of the hardware completing Q2. More than just the brand refresh, we unveiled a unified and unique prepaid and post-paid experience across the Boost Mobile website in app.
Hamid Akhavan: I wanted to first point that out because it would make no sense for me to talk about other collateral when we have so much dry powder per se. And there was, I think it was a question about the cash position and maturities. Look, we believe that obviously we want to meet, and we continue to work on meeting all of our obligations. I will not be able to say much more about it until, you know, a refinancing is there.
Speaker Change: to come in a long runway. I wanted to first position that because it would make no sense for me to talk about other collateral when we have so much dry powder per se. And but there was
Speaker Change: I think it was a question about cash position and maturity.
Hamid Akhavan: New and easy to understand great plans, a new marketing campaign, and a 30-day money-back guarantee so customers can test our state-of-the-art network risk-free. As alluded to in previous calls and as part of this overall effort to put forth a new boost mobile, we saw set the Boost Infinite brand and brought post-paid and prepaid together. This continuum of experiences and offerings allows us to bridge the gap between pre and post-paid service and remove the binary nature of the mobile industry, giving customers access to more choice.
Speaker Change: We believe that obviously we want to meet and we continue to work on meeting all of our obligations. I will not be able to say much more about it until refinancing is there. I think that there may be a misunderstanding in the market that...
Hamid Akhavan: I think that there may be a misunderstanding in the market that certain lawsuits filed may prevent us from making progress. We don't believe that is the case. We've not seen any evidence of that today. So, I mean, the runway for us to make a transaction is really dependent on us being able to arrive at a satisfactory landing point with the parties that we are counterparties with.
Speaker Change: Unknown Speaker, The Caterpillar Foundation, www.thecaterpillarfoundation.com
Hamid Akhavan: Dr. Francis. Through these changes, our single brand will be a driver of profitable growth and help maximize operational efficiencies across the retail wireless business. In regard to the second quarter, they finished with approximately 7.3 million subscribers. Excluding the loss of net ACP subscribers, we added approximately 32,000 net retail wireless subscribers in the second quarter. With the loss of the government funded ACP program, in the second quarter, many providers experienced ACP Subscriber losses.
Hamid Akhavan: I think I probably used more words than necessary to explain the situation, but I think I anticipated some other questions related to that, and I thought this would be a good opportunity to address all of it. Did I miss any portion of your question? Please repeat that if I have. Nope.
Speaker Change: Ronen S информed dias pod with the landing point with the parties that we have counterparts be negotiating with. I think I use probably more words than necessary to explain the situation but but I think I dissipated some other questions related to that and I thought this was a good opportunity to address all of
Speaker Change: Did I miss any portion of your question? Please repeat that if I have.
Unknown Speaker: Nope, that's great, thank you.
Operator: Thank you. Our next question comes from the line of Sebastiano Petti with JP Morgan. Please proceed with your question.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Sebastiano Petty with JP Morgan. Please proceed with your question.
Hamid Akhavan: While we believe that ensuring Americans have access to high-speed internet and mobile services is essential in today's world, these subscribers were not very profitable under our brands and we have worked to transition them to cost effective solutions were available. ACP losses account for a total decrease in our wireless subscriber business base of only 16,000 compared to the decrease of 188,000 in the same period last year. A positive sign and momentum for us to build upon.
Sebastiano Petti: Hi, thanks for taking the question. Hamid, you sounded, you know, very positive about the retail wireless efforts. Obviously, second quarter, you know, XACP would have been positive. And it seems as though, with the Boost Mobile rebrand, that should persist.
Sebastiano Petty: Hi, thanks for taking the question. Hamid, you sounded, you know, very positive on the retail wireless efforts. Obviously, second quarter, you know, XACP would have been positive and it seems as though, you know, with the boost mobile, you know, rebrand.
Hamid Akhavan: But I think last quarter you did mention that you anticipated retail wireless net additions to be positive for the year. Obviously, you have a little bit of ACP noise in there in the second quarter and uncertainty on that in the backup. Should we still expect that to be the case? Maybe we can strip out any potential ACP losses and you still feel confident in hitting that goal.
Speaker Change: That should persist, but I think last quarter you did.
Unknown Speaker: Unknown Speaker mentioned that you would you anticipated retail wireless net addition to be positive for the year. Obviously, you have a little bit of ACP noise in there in the second quarter and uncertainty on that in the backup. Should we still expect that to be the case? We maybe strip out?
Hamid Akhavan: Additionally, we have seen further reductions in our turn numbers, 2.93% in Q2 compared to 4.54% during the same period last year, a reduction of 35.5%. ACP continues to increase as we focus on higher quality subscribers, improving their customer experience and optimizing our network. Boost mobile customer satisfaction and the overall brand sentiment is rapidly improving and in summer studies already exceeding some incumbents. We are encouraged by the results this quarter and overall positive trends since the beginning of the year.
Speaker Change: Any potential ACP losses that you're, you're, you still feel confident in hitting that goal. And then on the wireless network, I think you mentioned.
Hamid Akhavan: And then on the wireless network, I think you mentioned that the number of subscribers served on your network had doubled quarter on quarter. Is that the right way to perhaps think about maybe your on-net versus off-net traffic, as we're trying to think about, you know, the ability and the cost-save opportunity on a go-forward basis? Any call around that to the extent you would like to share would be great. Thank you.
Speaker Change: that the number of subscribers served.
Speaker Change: on your network had doubled quarter-on-quarter. Is that the right way to perhaps think about maybe your on-net versus off-net traffic as we're trying to think about, you know, the ability and the cost-save opportunity on a go-forward basis? Any call around that to the extent you would like to share would be great. Thank you.
Hamid Akhavan: Yes, two questions. I'm happy to answer both. On the net positive ads for the year, yes, absolutely. That's our expectation, that's our plan. And we are very much seeing that we are able to execute on the plan, so I am bullish and positive that we're going to meet that objection. As it comes to the number of subscribers that are on net, we are really limited; the only limitation that stands in our way is the availability of compatible devices. We are adding a significant majority of the devices that are capable, unmet as they come, and new devices that have come. We have ported as many compatible devices as we can.
Hamid Akhavan: We strive to profitably increase our share of the post-paid market with the power of having owners economics. While there is still work to be done in this area, as previously mentioned, we make great strides under operational and marketing efficiencies with the efforts in Q2 and look forward to seeing those efficiencies continue as our new boost mobile brand ramps up through the end of the year.
Speaker Change: Yes, two questions. I'll have to ask both. On the net positive ads for the year, yes, absolutely. That's our expectation. That's our plan. And we are very much seeing that we are able to execute on the plan.
Speaker Change: Unknown Speaker. I am bullish and positive that we are going to meet that objective. As it comes to the number of subscribers that are on net, you know, we are really limited. The only limitation that stands in our way is the availability of compatible devices.
John Swieringa: Let me now hand the call to John to cover our network deployment progress. Thank you, Amy. The team has been hard at work, expanding and optimizing the boost mobile network, which is now capable of reaching over 200 million Americans with 5G voice and over 250 million Americans with 5G mobile broadband. As we had referenced earlier, we continue to add on that customers at a high success rate when activating network compatible devices in our 5G voice markets.
Speaker Change: We are adding a significant majority of the devices that are capable, unmet as they come, new devices that are coming. We have ported as many compatible devices as we can.
Hamid Akhavan: ... pull over without disrupting the customer. There are some trade-offs, there are some customers, their segments of customers that have compatible devices, but those devices, just because of their legacy, require us to have the customer take a step or two, you know, change the SIM card or do things because of their legacy. You know, sometimes we pass those, and we just accept the fact that it's better not to disrupt the customer by operating them on that, but really, the availability of devices is that. But the traffic is scaling very nicely on that. I think that we're very happy to see that.
Speaker Change: Port over without disrupting the customers. Is this some trade-off? There's some customers is
Speaker Change: Paul Gaske, Dean Manson, Hamid Akhavan, Paul Orban, Gary Schanman, John Swieringa, Paul
John Swieringa: Our on-net customers experience pure 5G on the boost mobile network, as well as nationwide 5G and 4G coverage via our partner networks. The acceleration of on-net traffic allows us to further optimize and improve the world's first open-ran cloud-eat-of-network, including speeds and coverage. In certain key markets, our third-party benchmarking shows that we have already moved ahead of some incumbents across key network stats and customer satisfaction, which allows us to confidently highlight our new network in the market. We are seeing a competitive network experience with rooms of run in the back half of the year, further accelerating our transition to owners like an on-net.
Speaker Change: It's better not to disrupt the customer and not bring him on net, but really the availability of...
Speaker Change: Devices is that but
Speaker Change: The traffic is scaling very nicely on that. I think that we're very happy to see that. I mean, usage, customer sat.
Hamid Akhavan: I mean, usage, and customer satisfaction. You know, for now, I just wanted to give you a glimpse of, you know, how rapidly we're putting some customers there, but I don't necessarily think that just looking at on-net customers will give you the full picture. We'll continue to give you more information about that as we go on, but the overall customer base is trending nicely. The business is growing in terms of the number of subscribers and ARPU and customer satisfaction.
Speaker Change: For now, I just wanted to give you a glimpse of how rapidly we're putting some customers there, but I don't necessarily think that just looking at unmet customers will give you the full picture. We'll continue to give you more information about that as we go on.
John Swieringa: Alex. Additionally, we were the first network operator to commercially launch simultaneous 2X coupling and 4X downlink carrier aggregation for compatible devices this past quarter. Disaccomplishment is a further testament of our efforts to provide our customers with the most advanced wireless experience in technology available. These are all positive developments and we are pleased with the network's progress and performance as we further position ourselves to compete with the incumbents. We have met all of our FDC milestones to date.
Speaker Change: But overall, customer base is trending nicely.
Speaker Change: The business is growing in terms of number of sales and ARPU and customer satisfaction.
Hamid Akhavan: It's both testament, more than anything else, that it's a testament to a good offer and a good network that we have. We have not been marketing ourselves that much, and you may have noticed that. This is just purely primarily word of mouth in some small marketing we have done, and just the fact that we have a very loyal base of remaining customers. I think, as much as you might be surprised to some, Boost has a very loyal following. People see a lot of great value, and they stay with us.
Speaker Change: It's both testament, more than anything else, that's a testament to a good offer, good network that we have. We have not been marketing ourselves that much, and you may have noticed that.
Speaker Change: This is just purely primarily, you know, word of mouth in some small marketing we have done and just the fact that we have a very loyal base of remaining customers, I think as much as you might be surprised to some, Boost has a very loyal following. People see a lot of great value and they stay with us.
John Swieringa: In the next year, we have some additional milestones, specifically June 14, 2025. Our fully constructed facilities, along with our construction in process, will be sufficient to meet many of our build-out requirements over the next year, including our June 14, 2025 milestones. These facilities are for licenses comprising approximately 90% of the aggregate carrying value, including capitalized interest for our 600 megahertz, 700 megahertz, age block, and AWS 4 licenses. However, for the remaining licenses that we have not yet constructed facilities sufficient to meet our build-out requirements, we will need to raise additional capital to continue our 5G network deployment.
Sebastiano Petti: If I could ask one quick follow-up question, can you give us maybe a stat on, you know, when does that device compatibility issue, maybe, you know, normalize? And then one other quick question, I think, in the queue, related to just your overall network spend, I think, you know, obviously, I think Paul mentioned, right, CapEx would be down year on year, but in the queue, I think it does say that, as you prepare for the next build out requirements in 25, you do expect CapEx to increase as you kind of approach those deadlines, how, you know, just help on maybe thinking about the phas Thank you.
Speaker Change: If I could ask one quick follow-up, can you give us maybe a stat on, you know, when does that device compatibility issue?
Speaker Change: and maybe, you know, normalize.
Speaker Change: And then one other quick question, I think in the.
Speaker Change: Attendee, Dean Manson, Hamid Akhavan, Paul Gaske, Paul Orban, Gary Schanman, John Swieringa,
Speaker Change: Attendee, Dean Manson, Paul Gaske, Paul Orban, Gary Schanman, Paul Orban, Gary Schanman,
John Swieringa: Great. Both of those questions are great for John. John, maybe, perhaps you can comment on this. Thanks for the questions. It's John Swieringa.
John Swieringa: We've talked about device compatibility on earlier calls, and we're really starting to get ahead of it. So, as I mentioned on previous calls, our Android portfolio for new devices is now essentially all compatible with our 5G network. On the flip side, when you look at the Apple portfolio, we're really iPhone 15 and forward. And so if you look at the market, obviously, there's still older iPhones out there. We don't have an opportunity right now to put those on the net in our open market, and we still have a vibrant BYOD business.
John Swieringa: Thanks for the questions. It's John Swieringa. We've talked about device compatibility on earlier calls, and we're really starting to get ahead of it. So I think I've mentioned on previous calls, our Android portfolio for new devices is now essentially all compatible with our 5G network.
John Swieringa: In Q2, we invested 237 million in our network deployment, which is comparable to 802 million in Q2 of 2023. Our focus continues to be on capital investments and optimizations required to have a competitive network to lose mobile customers within our existing and future 5G voice footprint. As we discussed last quarter, this is a logical progression for us as we transitioned from an accelerated build to running and optimizing our markets with a P&O mindset.
John Swieringa: On the flip side, when you look at the Apple portfolio, we're really iPhone 15 and forward.
John Swieringa: And so if you look at the market, obviously, there's still older iPhones out there. We don't have an opportunity right now to put those on net in our open markets.
John Swieringa: And we view those activations as future leads for our network, so we're definitely getting ahead of it. Remember, just two years ago, we had one device. Now we've got well over 20, and that number is climbing. And we're really on the bus now. So you'll see that most devices entering the market are compatible with our network. So I think that was the first part, and the second part was on network capital and what we're doing. Obviously, in our prepared remarks, we mentioned that our CapEx is down significantly compared to the same quarter last year.
John Swieringa: And we still have a vibrant BYOD business.
Hamid Akhavan: Now I'll turn it back over to the V. Thank you, John.
John Swieringa: And we view those activations as future leads for our network.
Hamid Akhavan: In summary, liquidity is a key factor for our long-term success. Significant attention is focused on this critical area, and as I already mentioned, we are in constructive discussions with counterparts at this time. In parallel, we are continuing to expertly and diligently operate our business, develop long-term opportunities, and create value. Pay TV and Hughes today are generating operating free cash flow ahead of our expectation, and Boost Mobile has made good strides to find this footing this year.
John Swieringa: So we're definitely getting ahead of it. Remember, just two years ago, we had one device. Now we've got well over 20, and that's climbing. And we're really on the bus now. So you'd see most devices entering the market is compatible with our network.
Speaker Change: So I think that was the first part. And the second part was on network capital and what we're doing. Obviously, in our prepared remarks, we mentioned that our CapEx is down significantly compared to the same quarter last year.
John Swieringa: When you think about what the back half of the year looks like, we do have some work to do, obviously, to prepare ourselves and get ready to meet our June 2025 commitments. We're doing all the work right now that's not capital-intensive to buy down timelines on those sorts of things to get ready to go. We have good plans. It's not our first rodeo. We certainly have the ability to hit the gas where needed.
Speaker Change: When you think about what the back half of the year looks like
Hamid Akhavan: We have improved our pool and reduced turn across both the pay TV and wireless business units, and will keep our focus on attracting and retaining high quality subscribers. The operational momentum we have established over the first half of the year is promising, and we will work to maintain an accelerated in back half of the 2024.
Speaker Change: We do have some work to do, obviously, to prepare ourselves and get ready to meet our June 2025 commitments.
Speaker Change: We're doing all the work right now that's not capital intensive.
Speaker Change: to buy down timelines on those sorts of things to get ready to go. We have good plans. It's not our first rodeo. We certainly have.
Unknown Executive: With that, we will open it for Q&A from the analyst community. Thank you.
Speaker Change: The ability to hit the gas where where needed and some of our capital quite frankly is pushed in the second half of the year
John Swieringa: And some of our capital, quite frankly, is pushed into the second half of the year pending those outcomes. And on top of that, we're really focused on making sure that the 5G voice markets we have are open. We'll look to 2025 to have a good capital plan that's really focused on competition and making sure that we can compete in our 5G voice markets with booths.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star. Thank you. One moment please while we pull for questions. Thank you.
Speaker Change: pending those outcomes.
Speaker Change: And on top of that, we're really focused on making sure that the 5G voice markets we have are open, right? And we'll look to 2025 to have a good capital plan that's really focused on competition and making sure that we can compete in our 5G voice markets with boost.
John Swieringa: Thanks, John. Thanks, Tom.
Operator: Thank you. Our next question comes from the line of Walter Piecyk, with lights shed. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Walter Pike with light shed. Please proceed with your question.
Rick Prentiss: Our first question comes from a line of Rick Prentiss with Raymond James. Please proceed with your question. Thanks. Hi, everybody. A couple of quick questions for me. First area, obviously you're in constructive discussions, but I think actually you can help us. When do you need slash want to have the cash on hand and related to that? Can you remind us how much unencumbered spectrum you have and is that securitization market open?
Walter Piecyk: Thanks. I'm going to go back to the prepared comments I think you referred to.
Walter Pike: Thanks. I'm going to go back to the prepared comments I think you referred to.
Walter Piecyk: Spectrum being 90% of the carrying value, um, I assume that's not necessarily 90% of the total spectrum owned, just based on how you're valuing maybe city pops versus rural pops. Can you kind of give a little bit more color on what you would like what you are funded for in terms of those build out requirements in terms of maybe percentage of megahertz pop? Are there certain bands that you'd be willing to kind of not meet in that scenario versus other bands that are more important?
Speaker Change: The spectrum being 90% of the carrying value. I assume that's not necessarily 90% of
Walter Pike: This the total spectrum owned just based on how you're valuing maybe city pops versus rural pops Can you kind of give a little bit more color on?
Speaker Change: What you would like what you are funded for in terms of those build out requirements in terms of maybe percentage of megahertz pops.
Rick Prentiss: Rick, good to hear from you. I would pass on the question regarding cash to Paul and then comment on unencumbered spectrum. Thanks Rick for the question. Yeah, we're going to have sufficient cash on hand to pay all of our bills as it becomes due through the day before we actually have the $2 billion view. So we love to raise the money. This is possible, but we have latitude. We have to wait to basically the day before and if we have to.
Speaker Change: Are there certain bands that you'd be willing to kind of not meet in that scenario versus other bands that are more important? And then I guess the overriding on this is, in the discussion with the bondholders,
Walter Piecyk: And then I guess the overriding point on this is in the discussion with the bondholders, is it, you know, given that this is an underlying asset overall, that's extremely important to the company is obtaining the funding, to get to 100% a critical item to coming to some resolution, at least in terms of this first maturity that you're hitting.
Speaker Change: Is it, you know, given that this is an underlying asset overall, that's extremely important to the company is obtaining the obtaining the funding to get to 100%
Speaker Change: a critical item to coming to some resolution, at least in terms of this, this first maturity that you're hitting.
Rick Prentiss: And the unencumbered spectrum and securitization market. Yeah, so there are. You know, in terms of spectrum, we certainly have a sit an amp on amount of a spectrum that we have not really valued in terms of income and see, but go ahead and Paul maybe. Yeah, so right now the only spectrum that is encumbered is the 600 megahertz today. There is an internal note on the 3.45, but there is no third party debt on that. So everything else is unencumbered and we can use that to secure ties to raise capital.
Hamid Akhavan: Thank you all for the questions, Walter. First of all, it's not our intention to lose any of the spectrum, so I want to be clear. We are not planning, we're not in the process of, or in any way looking to dispose of any of the spectrum or relinquish the ownership of any of the spectrum. Having said that, maybe I'll ask Paul to comment on the 90%.
Speaker Change: Thank you for the question, Walter. First of all, it's not our intention to lose any of the spectrum. So I want to be clear, we're not planning, we're not in the process of or in any way looking to dispose of any of the spectrum or relinquish the ownership of any of the spectrum.
Speaker Change: Having said that, maybe I ask Paul to comment on the 90%.
Paul Orban: Yeah, the 90% really relates to a spectrum that has a June 25 deadline. So it includes the carrying values of the spectrum that has that deadline as well as the capitalizing percent. And so, as you can imagine, most of that probably skews towards cities and larger populations, the 90% does, and obviously, the 10% is probably rural America.
Paul: Yeah, the 90% really relates to spectrum that has a June 25 deadline. So it includes the carrying values of the spectrum that has that deadline as well as the capitalizing interest on that.
Hamid Akhavan: Okay, and then operation on the wireless side help us understand what's the path to positive net ads. Obviously you had some XACP, but more importantly, what's the path and timing to getting the retail wireless business to producing positive EBITDA? That's not something that we have announced and obviously in due time, we will be more specific about guidance in the market. That's not something we have published today, but I want to say that what we have seen, what I have seen on the first half of the year, what we have been managed to achieve is exceeded my own expectation candidly.
Paul: And so, as you can imagine, most of that probably skews towards cities and larger populations, the 90% does, and obviously the 10% is probably rural America.
Paul Orban: I don't, sorry, I don't understand. You're saying I think the comments were saying you're going to hit 90%, no problem, and then you're just going to need incremental financing to get the last 10%. Did I understand the prepared comments correctly?
Speaker Change: I don't, sorry, I don't understand. You're saying.
Speaker Change: I think the comments were saying, well, you're going to hit 90%, no problem, and then.
Speaker Change: Unknown Speaker You're just going to need incremental financing.
Unknown Speaker: to get the last 10%. Did I understand the prepared comments correctly?
Walter Piecyk: No, you have that correct. So right now, we believe we're going to hit 90% with where we're at. So I guess my question is, I get 90% of the carrying value. I'm saying, in terms of, is it kind of comparable to POP's own? Because it could be 90% of the value, but 50% of the POP's coverage, right? To exaggerate, obviously. We don't disclose that, but based on the comments that I said where we're going to complete most of our large cities and so forth, you can imagine the POPs would be large.
Speaker Change: Unknown Speaker No, you have that correct. So right now we believe we're going to hit 90% with where we're at. Unknown Speaker So I guess my question is, I get 90% is carrying value.
Speaker Change: I'm saying like, in terms of, is it kind of comparable to POP's own, because it could be 90% of the value, but 50% of the POP's coverage, right? It's a bit too exaggerated, obviously.
Hamid Akhavan: We don't mean to be too bullish year about just a couple of quarters in a row, but we have made some fundamental changes in the business. This business was usually declining in terms of number of subscribers. The first thing about a growth is to arrest the fall and we have managed to do that and has not been an accident and I don't see that as a one time thing. Now let us have to end of the year.
Speaker Change: We don't disclose that, but based on the comments that I said where we're going to complete most of our large cities and so forth, you can imagine the POPs would be large.
Paul Orban: We don't have a precise math to share with you, but when we talk about 90% of the value, you can imagine that larger markets, all the metros, and all the places where the population is in any way significant would already be there.
Speaker Change: I mean, we don't have a precise math to share with you, but when we talk about 90% of the value, you can imagine that, you know, larger markets, all the metro and all the places where
Hamid Akhavan: I wanted to get through this year just to see first of all how our progress is in terms of getting our team focused, getting our strategy sharp and getting our execution honed before I put projections in the market. I certainly do not want to put projections in the market that I cannot understand behind. In addition, this is the very exception of the year for us. I mentioned that other than the fact that we have a merger and the fact that we have brands that we are bringing together, we also have these financing activities that are taking significant amount of our energy and attention.
Speaker Change: The population in any way significant would be already protected.
Unknown Speaker: Unknown Speaker Okay. And then you can obviously rely on the wholesale agreements for the rest, which kind of goes into the second question, which is, do you need, I know you're talking about securitization, but there's another potential way to monetize rather than using the spectrum to borrow against is just selling it. You know, I understand that maybe under existing regulations, that's not possible, but we have a potential administration change coming up. Do you need all of the spectrum that you currently own in order to operate on your mobile business plan?
Speaker Change: Understood. And then you can obviously rely on the wholesale agreements.
Speaker Change: For the rest, which which kind of goes into the second question, which is.
Speaker Change: Do you need, I know you're talking about securitization, there's another potential way to monetize rather than using the spectrum to borrow against, it's just selling it, you know, I understand that maybe under existing regulations, that's not possible, but we have a potential administration change coming up.
Hamid Akhavan: I would say to some degree limit our ability to participate in the market in some regards. We are just targeting most profitable customers and some of the other segments that at the time we can afford to be in the market for. All of that makes this a very special year. It would not be proven for me to put a heart projection out there.
Speaker Change: Do you need all of the spectrum that you currently own in order to operate on your on your mobile business plan?
Hamid Akhavan: So, several assumptions and questions. I hope I can parse them each.
Speaker Change: So, several assumptions and questions. I hope I can parse them each.
Hamid Akhavan: We have more spectrum that we need to execute on this. We, you know, in our wildest success dreams. We probably won't need all of the spectrum that we've acquired. Do we want to sell that spectrum today, even if you have the opportunity to do that? No, we do not.
Speaker Change: We have more spectrum that we need to execute our business plan.
Speaker Change: In our wildest success dreams, we probably won't need all of the spectrum that we've acquired.
Hamid Akhavan: But I am very encouraged by what we have done so far under the circumstances and hopefully starting next year we can be more specific about how our business is going to develop.
Speaker Change: Do we want to sell that spectrum today, even if we have the opportunity to do that? No, we're not. We are looking at...
Hamid Akhavan: We are looking at refinancing options and liquidity options that do not require the sale of the spectrum. Even if that was available today, that would not be something we'd potentially be working on right now. We think that there are other avenues that we're making progress on that are constructive and are moving forward. Will there be opportunities in the future for spectrum trades? That is always the nature of the industry. We don't know how the world will develop.
Hamid Akhavan: Excellent, the last one for me is, any update on 5G, private networks? That was obviously a big part of the best use of the spectrum and the network you're building, any update on how that market is starting to gel? Yeah, that's a nation market. Again, we have enormous hope and expectation for that market. Nothing in the immediate future though. I mean, as you know, in enterprise sales and particularly in a brand new category where, you know, the customers and there is no precedent, strong precedent in the market.
Speaker Change: Refinancing Options and Liquidity Options that are
Speaker Change: Unknown Speaker . .
Speaker Change: that are not requiring cell of the spectrum, even if that was available today, that would not be something we potentially be working on right now.
Speaker Change: We think that there are other avenues that we're making progress on.
Speaker Change: that are constructive and be moving forward. Will, in the future, be opportunities for spectrum trades? That is always the nature of the industry.
Hamid Akhavan: We don't know what areas of wireless we are going to further develop, whether it be fixed wireless, whether it be additional coverage, additional services. That's not the immediate focus right now. The immediate focus is using the spectrum we have potentially as collateral and in a prudent way to address our liquidity issues, and then certainly, spectrum ownership is very strong right now, and you should expect that we'll continue to have a strong spectrum position going forward.
Speaker Change: We don't know how the world develops. We don't know what areas of wireless we are going to.
Hamid Akhavan: There's a bunch of business and development activities that have to go on before, you know, you know, you can see how it's going to be made. We already have a couple of things, you know, we have now been participating in the spiral for the DOD and I think that came through Navy contract, it's about $2.7 billion over 10 years, multiple operators are there, we are there. So we see that coming in, we do have a couple of deployments that we have talked about in the past, I don't want to repeat those, you know, with the island, why a few other places.
Speaker Change: Unknown Speaker Further develop, whether it be fixed wireless, whether it be additional coverage, additional services. Transcription by CastingWords
Speaker Change: You know, that's right now that not the immediate focus, the immediate focus is.
Speaker Change: Using the spectrum we have potentially as collateral in
Speaker Change: Unknown Speaker in a prudent way to address our liquidity issues, and then certainly the spectrum ownership is very strong right now, and you should expect that we will continue to have a strong spectrum position going forward.
Walter Piecyk: Okay, and then just one last one. The language in the 10-Q basically says having enough cash for future cash flows or the maturity of the debt, it's not, and so when I look at your free cash flow, especially given the asset sale that's going to be completed in the third quarter. Unknown Speaker Assuming you don't have a big working capital need coming up, you should be able to have cash going into next year. So, are there things, are there working capital payments that are required between now and the end of the year that you can highlight for us, if any?
Speaker Change: Okay, and then just one last one. The language in the 10-Q basically says having enough cash for future cash flows or the maturity.
Hamid Akhavan: You know, those are early signs and we've seen success on all of those, but I'm not at the point yet that I can put a big forecast out there for it. I just want to say that with all of this AI news that is in the market, much of it may be hype, but certainly there is some truth to it. And we believe you have the network that is absolutely optimized. To take advantage of that and we have plenty of great spectrum also for that.
Speaker Change: It's not and so when I look at your your free cash flow, especially given the asset sale that's going to be completed in the third quarter
Speaker Change: Assuming you don't have a big working capital need coming up, you should be able to have cash going into next year. So is there, are there things, are there working capital payments that are required between now and end of year that you can highlight for us, if any?
Hamid Akhavan: So we like it. We like that and we're very excited about making a business that is very significant out of that. But I want to, you know, preach a bit of patience there, not because we are not moving fast enough or able to move fast enough. It's just that the market has to develop and that takes a bit of time. Thanks. Thanks guys. Thank you.
Paul Orban: Well, so to clarify, we don't have cash on hand or future cash flows to fund the fourth quarter operations, as well as the $2 billion maturity passed on November 14th. So if you read that in there, I think you... It says or, though, meaning like, I get it, like, if you don't have $2 billion, unless it's refinance, but or implies both as opposed to combined. It would otherwise be add, no? Maybe I'm overreading that, but I think you're overreading that.
Speaker Change: Well, so to clarify, we don't have cash on hand or future cash flows to fund the fourth quarter operations as well as the $2 billion maturity passed November 14th.
Speaker Change: So if you if you read that in there that I think you it says or though meaning like I get it like if you Don't have two billion unless it's refined but or implies both as opposed to
Sebastiano Petti: Our next question comes from the line of David Barton with Bank of America. Please proceed with your question. Great. Thanks for bringing the question. This is Shibra just calling in for David right now. Just two questions if I could looking at the company holistically and collateral buckets that you have left and spectrum licenses that you just touched on. What is left within the company that can still be levered? What LTV can they be levered at and how are the current fraudulent conveyance lawsuits and other legalized liabilities impacting your collateral pool and ongoing refinancing talks that you're in right now.
Speaker Change: combined. It would otherwise be add now. Maybe I'm over reading that, but I think you're over reading that that that's disclosed in the same way for a couple quarters on that. But again,
Walter Piecyk: That will be disclosed in the same way for a couple quarters on that. But again, we have ample cash on hand to get us through the debt maturity fund operations as well as run the business. However, we don't have cash subsequent to the November 15th debt maturity payment.
Speaker Change: We have ample cash on hand to get us through the debt maturity fund operations as well as run the business. However, we don't have cash subsequent to the November 15th debt maturity payment.
Hamid Akhavan: Look, as it comes to cash, I want to make sure everyone on the call realizes that we are fully cognizant and aware of how important it is for us to address our liquidity, and it is not a second, third, or fourth priority for us.
Speaker Change: Look, as it comes to cash, I want to make sure everyone on the call realizes that we are
Speaker Change: Fully cognizant and aware of...
Sebastiano Petti: And my next question. The company this year reshuffled some of its assets to create new pockets of collateral to borrow again to extend the life of the equity that wasn't welcomed by existing creditors. We asked this last quarter, but with the business cash performance where it is and the maturity wall where it is right now. What are the circumstances where management's obligation shifts from trying to extend the life of the equity market cap to maximizing the recovery for the $20 billion of debt outstanding.
Speaker Change: Unknown Speaker.
Speaker Change: How important it is for us to address our liquidity, and it is not a second or third or fourth priority for us.
Speaker Change: But having said that, you know, I just want to reiterate that.
Hamid Akhavan: You know, we are focused on it. We're making progress, we're having constructive discussions, and we're not allowing it, with good judgment, to impact our operating business beyond, you know, a certain level that we can't control. What I mean by that is that, you know, our team is really heavily focused on, you know, success. You know, we run a business of success. Would I have done a better job?
Speaker Change: You know we we're focused on it
Speaker Change #100: We're making progress, we're having constructive discussions, and we're not allowing it.
Speaker Change #100: You know, with good judgment.
Speaker Change #101: Unknown Speaker We're not allowing it to impact our operating business beyond a certain level that we can't control. What I mean by that is that our team is really heavily focused on success. We run a business for success. Would I have done a better job, would we have done a better job in terms of ad subscribers or develop additional growth if we had access to additional cash? Yes. But is that it?
Hamid Akhavan: Thank you. Several questions. I don't know if I'm going to be able to answer all of them, but if I don't, please repeat some of it. So I want to make sure I hit all the point. First of all, I sense that you believe Our spectrum assets are not monetizable or not able to use as collateral and then we need to refer to other and I want to say vehemently and strongly that that is absolutely not the case.
Hamid Akhavan: Would we have done a better job in terms of ad subscribers or developed additional, you know, growth if we had access to additional cash? Yes. But is that a, but are we damaging the business just because, or is the business opportunity getting damaged, opportunities being fundamentally lost because we don't have additional cash at hand? I would say absolutely not.
Speaker Change #101: Unknown Speaker But are we damaging the business just because that is the business opportunity getting damaged opportunities being fundamentally lost because we
Walter Piecyk: We're not there. We focus on success, and, you know, we hope that with the constructive discussions we will find all of this will be behind us. We hope, and we certainly are laying the foundation for a very successful operating business.
Speaker Change #101: We don't have additional cash at hand. I would say absolutely not. We're not there.
Hamid Akhavan: Zero. Our spectrum assets are encumbered. We can and we will use those as collateral and the fact that we haven't done it yet is because we have not arrived, as I mentioned in constructive discussions, we have not reached a point that we believe that the right deals can be made and this is a matter of negotiations and progress is being made. No guarantees they are still done and we certainly will use the necessary time to make sure that we make opportunities and deals that are great for our long-term success and maximize our value.
Speaker Change #101: We focus on success and, you know, we hope that with the constructive discussions we are having, all of this will be behind us, we hope, and we certainly are pouring the foundation for a very successful operating business.
Hamid Akhavan: Okay, can I just get one operational one? I mean, the growth dads for wireless... You know, that seems to be the thing that, you're obviously turning your trajectory in the right direction. But you know, what I guess are the major friction items? You're an early company; obviously, everyone's got their early learnings dealing with Amazon, whatever it is. What are the major friction items that are preventing your gross ads from ramping?
Speaker Change #102: Okay, can I just give one operational one? I mean, the growth ads for wireless.
Speaker Change #103: You know, that seems to be the thing that you know, you're obviously turning trajectory in the right direction. But you know, what I guess what are the major friction items?
Speaker Change #104: You're an early company. Obviously, everyone's got their early learnings dealing with Amazon, whatever it is. What are the major friction items that are preventing your gross ads from ramping and what are the plans?
Hamid Akhavan: And what are the plans? specifically, I guess, to get rid of that friction in order for you to get to this positive growth by the end of the year. Well, there are a number of things that have to be
Hamid Akhavan: We certainly focused on that. So other collateral that we could use is not relevant relative to the size of the spectrum. We have significant ability to lever our spectrum in creative liquidity for many, many years and to come in a long runway. I wanted to first position that because it would make no sense for me to talk about other collateral when we have so much drive powder per se. There was a question about cash position and materities.
Speaker Change #104: Specifically, I guess, to get rid of that friction in order for you to get to this positive growth by the end of the year.
Hamid Akhavan: Well, there are a number of things that have to be developed for us to go from what the company has been, which has been an MVNO, and to a company that is, you know, MNO has its own network, probably the best network, you know, if you look at it, you know, even in the earlier stages of its life, which has not even been fully optimized for the load, is already performing better than competition in many areas. So there are many, but I can highlight just a couple of them, and none of them are fundamentally unsolvable or, in any way, you know, issues that we cannot address in due time.
Speaker Change #105: Well, there are a number of things that have to be developed for us to go from what the company has been, which has been a MVNO, and
Speaker Change #105: to a company that is.
Speaker Change #106: MNO has its own network, it's probably the best network if you look at it.
Speaker Change #107: You know, even on earlier stages of his life that he's not even been fully optimized on the load.
Speaker Change #107: is already performing better than competition in many areas. So there are many, but I can highlight just a couple of them. And none of them are fundamentally...
Hamid Akhavan: Look, we have believed that obviously we want to meet and we continue to work on meeting all of our obligations. I will not be able to say much more about it till refinancing is there. I think that there may be a misunderstanding in a market that certain lawsuits filed may prevent us from making progress. We do not believe that is the case. We have not seen any evidence for that today. I mean, the wrong way for us to make a transaction is really dependent on us being able to arrive at a satisfactory landing point with the parties that we are counting parties we negotiate with.
Speaker Change #107: Unanswerable, or in any way, you know, issues that we cannot address in due time. But let me say that, you know, first of all, our distribution is less than, you know, competition.
Hamid Akhavan: But let me say that, you know, first of all, our distribution is less than the competition. They have, you know, I don't know, five times more stores than we have, and we will focus heavily on digital experience, the digital experience, you know, we just launched our combined prepaid and postpaid app and website, and I'll ask you to, you know, so anyone who's interested, I'll challenge you, ask you to please go ahead and download our app, use our app, and see if you have seen any better, whether you have seen anything better in the marketplace, and please send me feedback, and I'll take it.
Speaker Change #107: They have, you know, I don't know, five times more stores that we have, and we will focus heavily on digital experience, the digital experience, you know, we just launched our
Speaker Change #107: Combined pre-paid and post free app and website and I'll ask you to you know, so anyone who interested I'll challenge your asking please go ahead and download our app and
Hamid Akhavan: I think I use probably more words than necessary to explain the situation, but I think I anticipated some other questions related to that. I thought this would be a good opportunity to address all of it. Did I miss any portion of your question? Please repeat that if I have. Next up, great.
Speaker Change #107: Use our app and see if you have seen any better.
Speaker Change #107: Whether you have seen anything better in the marketplace and please send me feedback and I'll take it.
Unknown Executive: Thank you.
Hamid Akhavan: The other issues we have is that, you know, the phones are locked today to the other carriers, and unlocking is a very big issue for us, and I think FCC is heading in the right direction by giving customers and consumers in a market a competitive choice by asking that, you know, the carriers unlock the phones after 60 days, and we'd be very supportive of that competition. We think, you know, we're willing to go head-on and hand-to-hand competing in a fair and open market, as opposed to a market that is locked to three, you know, oligarchs essentially, you know, oligopoly, you know, the three carriers are keeping the customers in a locked position for a market this size, that just, in the number one market in the world, I think that's just, it's not appropriate, not an appropriate level of competition, so that's, to me, that is an unfair placement for both the consumers and us.
Speaker Change #108: The other issues we have is that, you know, the phones are locked today to the other carriers and unlocking is a very big issue for us and I think FCC is heading in the right direction by giving customers and consumers in a market a competitive choice by asking that, you know, the carriers unlock the phones after 60 days and we'd be very supportive of that competition. We think, you know, we're willing to go head on and hand to hand.
Walter Piecyk: Our next question comes from the line of the Bastino Petty with J.P. Morgan. Please proceed with your question. Hi, thanks for taking the question. I made you sound very positive on the retail wireless efforts. Obviously, the second quarter, you know, X-A-C-P would have been positive and it seems as though we are with the boost mobile rebrand that should persist. But I think last quarter, you did mention that you would, you anticipated, you know, retail wireless net additions to be positive for the year.
Speaker Change #108: competing in a fair and open market as opposed to a market that is locked in three You know, oligarchs, you know oligopoly, you know, the three carriers are
Speaker Change #108: Keep in keeping the customers in a locked position for a market this size
Speaker Change #108: that just in the number one market in the world. I think that's just
Speaker Change #108: It's not appropriate, not appropriate level of competition.
Walter Piecyk: Obviously, you have a little bit of ACP noise in there in the second quarter and uncertainty on that in the backup. Should we still expect that to be the case, we maybe strip out any potential ACP losses that you're, you still feel confident in hitting that goal. And then on the wireless network, I think you mentioned and not the number of subscribers served on your network at doubles quarter on quarter. Is that the right way to perhaps think about maybe your on-net versus off-net traffic as we're trying to think about, you know, the ability and the cost-save opportunity on a go-forward basis?
Speaker Change #108: So that's
Hamid Akhavan: I think to develop our brand is yet another one, you know, our brand has not been a post-paid brand, but it's been a prepaid brand in a community of other prepaid brands. We need to elevate ourselves, and you will see some of that to the second half of the year, where we show up and how do we position our brand, we're going to have to fix that. So, you know, the multitude of, you know, areas to develop, every one of those, by the way, have been experienced by other companies, if you go back, look at the incumbents, if you go back 20 years, even, I would say one of the incumbents was in exactly the same position, and now, you know, they're in a much better position, so there's recipes for doing that, we're looking forward to doing all of that, and, but, by the way, I want to say that, you know, we have a network that is excellent and is empty, and I continue to say there's nothing more dangerous than an empty network, and we certainly intend to take advantage of the available capacity we have, just, you know, the quality and the offers we have in the market, I think we have a path that we have charted for capturing proper market share.
Speaker Change #109: To me that is an unfair placement for both the consumers and us. I think to develop our brand is yet another one. You know, our brand has not been a...
Operator: Thank you. Our next question comes from the line of Jonathan Chaplin with New Street. Please proceed with your question.
Speaker Change #110: and Unknown Speaker. Thank you. Thank you.
Speaker Change #110: Some of that to the second half of the year where we show up and.
Unknown Speaker: Unknown Speaker How do we position our brand? We're going to have to fix that. So, you know, the multitude of, you know, areas to develop, every one of those, by the way, have been experienced by other companies, if you go back to get the incumbents.
Walter Piecyk: Any color around that, to the extent you would like to share would be great. Thank you. Yes, two questions I'll have to ask both. On the net positive aspect of the year, yes, absolutely. That's our expectation, that's our plan, and we are very much seeing that we are able to execute on a plan, so item and bullish on positive that we're going to be that objective. As it comes to the number of subscribers that are on net, you know, we are really limited.
Speaker Change #111: If you go back 20 years, even, I would say one of the incumbents was in exactly the same position and now...
Speaker Change #112: Unknown Speaker, Gary Schanman, John Swieringa, Paul Orban, Gary Schanman, John Swieringa,
Speaker Change #112: You know, we have a network that is excellent and is empty.
Speaker Change #112: Ben, John Swinburne,
Speaker Change #113: I continue to say there is nothing more dangerous than an empty network.
Speaker Change #114: and we certainly intend to take advantage of the available capacity we have. With the quality and the offers we have in the market, I think we have a path that we have charted for capturing proper market share.
Walter Piecyk: The only limitation that stands in our way is the availability of compatible devices. We are adding a significant majority of the devices that are capable on net as they come. New devices that are coming, if you're ported as many compatible devices as we can port over without disrupting the customers. There's some trade-offs, there's some customers, there's segments of customers that have compatible devices, but those devices require, just because the legacy, they require us to, you know, have the customer take a step or two, you know, change the SIM card because they're legacy.
Speaker Change #114: Thank you. Our next question comes from the line of Jonathan Chaplin with New Street. Please proceed with your question.
Jonathan Chaplin: Thanks. Thanks, guys.
Jonathan Chaplin: Thanks guys. Hamid, first just a quick process question on the lawsuit. So it looks like the trustees amended the complaint. Do you have to refile a motion to dismiss?
Walter Piecyk: You know, sometimes we pass those, and we just accept the fact that it's better not to disrupt the customer and not bring them on net, but really the availability of devices is there. But the traffic is a scaling very nicely on net. I think that we're very happy to see that. I mean, usage, customer sad. From now, I just wanted to give you a glimpse of, you know, how rapid do you put in some customers there?
Jonathan Chaplin: And if so, can that be, can that be sort of filed and decided on before November? And I'm wondering how.
Speaker Change #116: The potential to get that resolved quickly may be impacting your discussions on refinancing.
Speaker Change #117: And then I was really curious about your comment about there being nothing more dangerous than an empty network last quarter.
Walter Piecyk: But I don't necessarily think that just looking at on net customers will give you the full picture. We'll continue to give you more information about that as we go on, but overall customer base is trending nicely. The business is growing in terms of number of sales and our poor and customer satisfaction. It's both testament, more than anything else, that's a testament to a, you know, good offer, good network that we have.
Speaker Change #118: It sort of suggested the potential for something really disruptive on the pricing front and the new plans that you guys launched on July 17th.
Speaker Change #119: The pricing looked pretty similar to pricing you had in the market already, not that disruptive. I'm wondering if there could be something more disruptive on the way.
Speaker Change #120: Let me take the second piece first and then I'll pass the lawsuit to Dean or General Counsel to comment on. Look, I mentioned that not as a...
Walter Piecyk: We have not been marketing ourselves that much, and you may have noticed that. This is just purely, primarily, you know, wore them out in some small marketing we have done. And just the fact that we have a very loyal base of remaining customers, I think as much as it might be surprised to some, who has a very loyal following, people see a lot of great value and they stay in with us.
Speaker Change #120: As a prediction of things to come, I certainly would not want to do that. But I just wanted to say that, you know, this is a marketplace where we do expect, you know, a fair playing field.
Hamid Akhavan: If I could ask one quick follow up, he gives me this bad on, you know, when does that device compatibility issue maybe, you know, normalize? And then one other quick question, I think in the queue and related to just your overall network spend, I think, you know, obviously, I think Paul mentioned Ray CapEx would be down year on year, but in the queue, I think it does say the, as you prepare for the next build out requirements in 25, you do expect CapEx to increase as you kind of approach those deadlines.
Speaker Change #120: and I hope that that fair playing field is established by FCC and
Speaker Change #121: Unknown Speaker by, you know, and the environment that we are playing in and there's, you know, many constituents in the environment, but but certainly it is not.
Speaker Change #122: It is not beyond the options on the table, possibilities on the table for us to...
Speaker Change #123: You know, provide service.
Speaker Change #123: to consumers with a much greater value.
Speaker Change #123: We certainly have no intention of...
Speaker Change #123: Destroying Marketplace, that's not, we're not trying to do that, but I think there's plenty of room for...
Hamid Akhavan: You know, just help on maybe thinking about the phasing of CapEx here on the wireless side would be helpful. Thank you, Ian. Great. Both of those questions are great for John. John, let me pass you a comment on this. Thanks for the questions. It's John Sparger. We talked about device compatibility on earlier calls, and we're really starting to get ahead of it. So I think I've mentioned on previous calls, our Android portfolio for new devices is now essentially all compatible with our 5G network.
Speaker Change #123: Fair Competition in the Marketplace.
Speaker Change #123: We are very measured with our approach, but we do have a network that can support a great portion of the marketplace today, and we are hoping that under fair conditions and fair conditions, you know, we will be able to support a great portion of the marketplace today.
Speaker Change #123: Rules of Engagement and Play at FCC.
Hamid Akhavan: On the flip side, when you look at the Apple portfolio, we're really iPhone 15 and forward, and so if you look at the market, obviously there's still older iPhones out there. We don't have a opportunity right now to put those on net in our open markets. And we still have a vibrant BYOD business and we view those activations as future leads for our network. So we're definitely getting ahead of it. Remember just two years ago we had one device and now we've got well over 20 and that's climbing and we're really on the bus now so you'd see most devices entering the market is compatible with our network.
Speaker Change #124: Others allow us to operate in, make it available for us.
Speaker Change #124: that we captured a fair market share.
Speaker Change #124: I can't be more specific today, but you should expect that we continue to remain one of the
Speaker Change #124: Most Competitive Offers in the Market, we continue to provide great service, and our recognition in the marketplace will certainly rise in the next six months.
Speaker Change #124: By the end of the year, we'll be in a better position.
Speaker Change #124: Hopefully next year will be a much better year for us. I know that that's somewhat of a softer answer that you expect, but you would not expect me to give you all of our strategic planning and all of our pricing and any plans we have on this call.
Hamid Akhavan: So I think that was the first part and the second part was on network capital and what we're doing obviously in our prepared remarks. We mentioned that our CAP-X is down significantly compared to same quarter last year. When you think about what the backup that you're looks like we do have some work to do obviously to prepare ourselves and get ready to meet our two 2025 commitments. We're doing all the work right now that's not capital intensive to buy down timelines on those sorts of things to get ready to go.
Dean Manson: That would be inappropriate. So I hope I gave you some feel for it, but I realize it's probably not as precise as you'd like. Dean, maybe you can answer, please, the lawsuit question. Sure. Hi, Jonathan. Dean here.
Hamid Akhavan: I mean, first, just a quick process question on the lawsuit. So it looks like the trustees amended the complaint. Do you have to refile a motion to dismiss? And if so, can that be, can that be filed and decided on before November?
Jonathan Chaplin: And I'm wondering how the potential to get that result quickly may be impacting your discussions on refinancing. And then I was really curious about your comment about there being nothing more dangerous than an empty network last quarter. It sort of suggested the potential for something really disruptive on the pricing front. And the new plans that you guys launched on July 17th, the pricing looked pretty similar to pricing you had in the market already, not that disruptive. I'm wondering if there could be something more disruptive on the way.
Hamid Akhavan: Let me take the second piece first and then I'll pass the lawsuit to Dean or General Counsel for them to comment on. Look, I mentioned that not as a prediction of things to come. I certainly would not want to do that.
Dean Manson: I know that that's somewhat of a softer answer than you expect, but you would not expect me to give you all of our strategic planning and all of our pricing and any plans we have on this call. That would be inappropriate. So I hope I gave you some feel for it, but I realize it's probably not as precise as you'd like. Maybe you can answer, please, the lawsuit question. Sure. Hi Jonathan. Dean here.
Hamid Akhavan: But I just wanted to say that, you know, this is a marketplace where we do expect a fair playing field. And I hope that that fair playing field is established by the FCC and by the environment that we are playing in. And there are, you know, many constituencies in the environment, but certainly it is not beyond the options on the table, the possibilities on the table for us to, you know, provide services to consumers with a much greater value. We certainly have no intention of destroying the marketplace. That's not, we're not trying to do that.
Hamid Akhavan: But I think there's plenty of room for fair competition in the marketplace. We are very measured in our approach, but we do have a network that can support a great portion of the marketplace today. And we are hoping that under fair conditions and fair, you know, Rules of Engagement and Play that FCC and others allow us to operate in, make it available for us, that we capture a fair market share. I can't be more specific today, but you should expect that we continue to remain one of the most competitive offers in the market.
Hamid Akhavan: We continue to provide great service, and our recognition in the marketplace will certainly rise in the next six months. By the end of the year, we'll be in a better position. Hopefully, next year will be a much better year for us.
Dean Manson: So, yeah, on your question about procedure, yes, we'll have to either file a motion to dismiss or answer that amended complaint. We don't see it as significantly changing the scope of allegations.
Dean Manson: So, yeah, on your question about procedure, yes, we'll have to either file a motion to dismiss or answer that amended complaint. But we don't see it as significantly changing the scope of value that this group of lenders is asserting. But more to the point, or to the other part of your question, we don't see the need to have that resolved before November as critical, as Hamid alluded to earlier. It's not really getting in the way of the discussions that we're having.
Hamid Akhavan: We have good plans. It's not our first rodeo. We certainly have the ability to be asked where we're needed. And some of our capital quite frankly is pushed in the second half of the year pending those outcomes. And on top of that we're really focused on making sure that the 5G voice markets we have are open. We'll look to 2025 to have a good capital plan that's really focused on competition and making sure that we can compete in our 5G voice markets with boost. Thank you. Thanks.
Speaker Change #125: that this group of lenders is asserting. But more to the point, or to the other part of your question, we don't see the need to have that resolved before November as critical, as Hamid alluded to earlier. It's not really getting in the way of the discussions that we're having.
Hamid Akhavan: So we'll deal with the lawsuit in due course, which we're in the process of doing. Yeah, just adding to that, not from a legal language point of view but from my own personal view, certainly there are multiple parties in the market that are working constructively with us to make progress and work with us. Each party that we've been working with, collaborating with, has taken a different approach. Some parties have taken the approach of trying to go through a legal process and be more using the.
Speaker Change #126: Unknown Speaker
Speaker Change #127: We'll deal with the lawsuit in due course.
Unknown Speaker: which we're in the process of doing.
Speaker Change #128: Yeah, just adding to that, not from a legal language, but from my own personal view, you know, certainly there are multiple parties in the market that are working constructively with us.
Speaker Change #129: to make progress and be working with them. You know, each parties that we've been working with, collaborating with, has taken a different approach. You know, some parties have taken the approach of trying to, you know, go through a legal process and be more using the...
Unknown Executive: Thank you. Our next question comes from the line of Walter Pike with light shed. Please proceed with your question. Thanks. I want to go back to the prepared comments. I think you referred to the spectrum being 90% of the caring value. I assume that's not necessarily 90% of the total spectrum owned just based on how you're valuing maybe city pops versus rural pops.
Hamid Akhavan: They received legal options, and you know this is the group that you're speaking about, but that doesn't prevent other groups who are much more constructive, and they're not concerned about this to the degree that you expect. Alicia, we'll take one more.
Speaker Change #130: Unknown Speaker, The Cool Guys, Gary Schanman, Paul Orban, Gary Schanman, Paul Orban, Gary
Unknown Speaker: Alicia, we'll take one more question here.
Paul Orban: Can you kind of give a little bit more color on what you would like what you are funded for in terms of those buildout requirements in terms of maybe percentage of megahertz pops are there certain bands that you'd be willing to kind of not meet in that scenario versus other bands that are more that more important. And then I guess the overriding on this is in the discussion with the this is an underlying asset overall that's extremely important to the company is obtaining the funding to get to 100% a critical item to coming to some resolution at least in terms of this this first maturity that you're heading.
Operator: Okay, thank you. Our next question comes from the line of Marlene Perreiro with Bank of America. Please proceed with your question.
Speaker Change #131: Okay, thank you. Our next question comes from the line of Marlene Perrero with Bank of America. Please proceed with your question.
Marlene Perreiro: Hi, thank you for taking the question. Just a quick one on your working capital. It looks like your trade payables increased by about $85 million. So I'm just curious how, one, we should think about EchoStar's working capital, give us a sense of the seasonality within that, and can you continue to extend payables? Some color and how we think about that. And also, if you can provide maybe perhaps some of your larger event.
Marlene Perrero: Hi, thank you for taking the question. Just a quick one on your working capital. It looks like your trade payables increased about $85 million.
Marlene Perrero: So I'm just curious how, you know, one, we should think about Echostar's working capital, you know, give us a sense of the seasonality within that. And, you know, can you continue to extend payables?
Speaker Change #133: Some color and how we think about that and also if you can provide maybe perhaps some of your larger vendors.
Paul Orban: Yeah, this is Paul. So we won't provide our largest vendors, but I mean, it's pretty apparent who our biggest customers are. We continue to pay in the same pattern and practice that we have historically. The changes that you are seeing are all timing-related seasonality, when things are due, and so forth. But again, we have not changed anything about how we pay people historically. It's the same pattern and practice.
Paul Orban: Thank you for the question. First of all it is not our intention to lose any aspect. So I want to be clear with that planning we're not in a process of or in any way looking to dispose of any of the spectrum or relinquish the ownership of any of the spectrum. Having said that maybe I asked Paul to comment on the 90% The 90% really relates to spectrum that has a June 25 deadline.
Speaker Change #134: Paul Gaske, Dean Manson, Hamid Akhavan, Paul Orban, Gary Schanman, John Swieringa, Unknown
Paul Orban: So it includes the carrying values of the spectrum that has that deadline as well as the capitalized interest on that. And so as you can imagine, most of that problem is skewed towards cities and larger populations. The 90% does and obviously the 10% is probably rural America.
Paul Orban: Got it. And I'm sorry, in terms of any seasonality?
Speaker Change #135: Got it. And I'm sorry, in terms of any seasonality?
Paul Orban: Yeah, it obviously depends on, there's all kinds of purchases when we're buying devices, whether it be for the 5G bill, for instance. Obviously, our CapEx and operating costs are down, so obviously your payables are going to be down from that, or could fluctuate if we're buying more CapEx. Also, it depends on retail wireless, on the devices that we purchase to put in the channel, things of that sort. So there is seasonality that goes into it, as well as the timing of when the payments are made, and so forth.
Speaker Change #136: Yeah, it obviously depends on, there's all kinds of purchases when we're buying devices, whether it be for the 5G bill, for instance, obviously our CapEx and operating costs.
Speaker Change #137: Our CapEx is down. So obviously, your payables are going to be down from that, or could fluctuate if we're buying more CapEx. Also, it depends on retail wireless, on the devices that we purchase, to put in the channel, and things of that sort. So there is seasonality that goes into it, as well as timing of when the payments are made, and so forth.
Paul Orban: I don't, sorry, I don't understand. You're saying, I think the comments we're saying was you're going to hit 90% no problem. And then you're just going to need incremental financing to get the last 10%. Did I understand that prepare correctly? No, you have that correct. So right now, we believe we're going to hit 90% with where we're at. So so I guess my question is, is the night I get 90% is carrying value.
Paul Orban: Unknown Speaker Okay. And I mean, can you just give us a sense of where you think working capital will kind of shake out for the full year?
Speaker Change #138: Got it. And, I mean, can you just give us a sense of where you think, you know, working capital will kind of shake out, you know, for the full year?
Paul Orban: Um, you know, I believe where we are today, you'll probably see working capital get a little bit better for us as we move throughout the year. I think our inventory balances will probably end up coming down slightly, both on the retail wireless and on the pay TV side. So it gets slightly better. But I think what you see today is probably what you're going to see come year three down, close.
Speaker Change #139: You know, I believe where we're at today, you'll probably see working capital get a little bit better for us as we move throughout the year. I think our inventory balances will probably end up coming down slightly, both on a retail wireless and on a pay TV side. So it gets slightly better, but I think what you see today is probably what you're going to see come year end.
Paul Orban: I'm saying like in terms of is it kind of comparable to pops own because it could be 90% of the value, but 50% of the pops coverage, right to be to exaggerate, obviously. We don't disclose that, but based on the comments that I said where we're going to complete most of our large cities and so forth, you can imagine the pops would be large. Yeah, I mean, if you don't have a precise map to share with you, but we talked about 90% of the value, you can imagine that, you know, larger markets, all the metro and all the places where your population in any way significant would be already protected.
Paul Orban: Got it. Thank you. That's all I have. Great. Thanks, everyone.
Speaker Change #140: Bring it down close to it
Unknown Speaker: Thank you everyone for participating; that will bring our call to a close. Alicia, do you want to...
Speaker Change #141: Got it. Thank you. That's all I have.
Speaker Change #142: Thanks everyone for participating, that will bring our call to a close.
Operator: Yep, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #142: Alicia, do you want to?
Alicia: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Hamid Akhavan: Understood, and then you can obviously rely on the whole sale agreements for the rest, which kind of goes into the second question, which is, do you need, I know you're talking about securitization, there's another potential way to monetize rather than using the spectrum to borrow against. It's just selling it, you know, I understand that maybe under existing regulations. That's not possible. We have a potential administration change coming up. Do you need all of the spectrum that you currently own in order to operate on your on your mobile business plan?
Alicia: [inaudible]
Hamid Akhavan: So several assumptions and questions, I hope I can parse them each. We have more spectrum that we need to execute a business plan. We, you know, in our wildest success dreams, we probably won't need all of the spectrum that we require. Do we want to sell that spectrum today, even if you have the opportunity to do that? No, we're not. We are looking at refinancing options and liquidity options that are not requiring a set of spectrum, even if that was available today.
Hamid Akhavan: We're potentially working on right now. We think that there are other avenues that we're making progress on that are constructive and moving forward. We'll, in the future, be opportunities for spectrum trades. That is always the nature of the industry. You know, we don't know how the world develops. We don't know what areas of wireless we are going to further develop. But there will be fixed wireless, there will be additional coverage, additional services.
Hamid Akhavan: That's right now that not the immediate focus. The immediate focus is using the spectrum we have potentially as collateral and in a prudent way to address our liquidity issues. And then certainly that the spectrum ownership is very strong right now and you should expect that we will continue to have a strong spectrum position going forward.
Paul Orban: Okay, and then just one last one. The language in the 10Q basically says having enough cash for future cash flows or the maturity. It's not bad. So when I look at your free cash flow, especially given the asset sale that's going to be completed in the third quarter, assuming you don't have a big working capital need coming up, you should be able to have cash going into next year. So are there other things?
Paul Orban: Are there working capital payments that are going to be required between now and end of year that you can highlight for us, if any? Well, so it's not a clarify. We don't have cash on hand or future cash flows to fund the fourth quarter operations as well as the two million maturity past November 14th. So if you read that in there, I think you it says or though, meaning like I get it.
Paul Orban: Like if you don't have two billion, unless it's refined, but or implies both as opposed to combined. It would be otherwise the end now. Maybe I'm over reading that, but I think you're over reading that that's the same thing for a couple quarters on that. But you know, again, we have ample cash on hand to get us through the debt maturity fund operations as well as a run the business. However, we don't have cash subsequent to the end of November 15th at the maturity payment.
Paul Orban: But as it comes to cash, I want to make sure everyone I call realizes that we are fully cognizant and aware of how important it is for us to address liquidity. And it is not a second or third of food priority for us, but having said that, you know, I just want to reiterate that, you know, we are focused on it. We're making progress, we're having constructive discussions, and we're not allowing it, you know, with good judgment, we're not allowing it to impact our operating business beyond, you know, certain level that we can we can't control.
Paul Orban: What I mean by that is that, you know, you know, our team is really heavy focused on, you know, success, you know, we running a business of success. And would I have done a better job when we have done a better job in terms of add subscribers or develop additional, you know, growth if we had access to additional cash. Yes, but is that it, but are we damaging the business just because or that is the business opportunity getting damaged or opportunities being fundamentally lost because we don't have additional cash at hand.
Paul Orban: I would say absolutely not, we're not, we're not there. We focus on success and, you know, we hope that we the constructive discussions we're having, all of this will behind us, we hope, and and we certainly are pouring the foundation for a very successful operating business.
Hamid Akhavan: Okay, can I just give one operational one, I mean, the growth ads for wireless, you know, that seems to be the thing that, you know, you're obviously turn its trajectory in the right direction, but, you know, what I guess what are the major friction items. You're in an early company, obviously, everyone's got their early learnings dealing with Amazon, whatever it is, what are the major friction items that are preventing your growth ads from ramping.
Hamid Akhavan: And what are the plans specifically, I guess, to get rid of that friction in order for you to get to this positive growth by end of the year. Well, there are a number of things that have to be developed for us to go from what the company has been, which has been a MVNO, and to a company that is, you know, MNO has its own network, it has probably the best network, you know, if you look at it, you know, even on earlier stages of his life that he's not even been fully optimized on the load, he's already performing better than competition in many areas, so there are many.
Hamid Akhavan: But I can highlight that this is a couple of them, and none of them are fundamentally unsolvable or in any way, you know, issues that they cannot address in due time, but let me say that, you know, first of all distribution is less than the competition. They have, you know, I don't know, five times more stores that we have, we will focus heavily on digital experience, the digital experience, you know, we just launched our combined prepaid and post-paid app app and website, and I'll ask you to, you know, so anyone who interested, I'll challenge you ask, please go ahead and download our app, use our app, and see if you have seen anything better in a marketplace, and I'll please send me feedback, and I'll take it.
Hamid Akhavan: The other issues we have is that, you know, the phones are locked today to the other carriers, and unlocking is a very big issue for us, and I think FCC is heading in the right direction by giving customers and consumers, you know, market a competitive choice by asking, you know, the carriers unlock the phones after 60 days, and we're very supportive of that competition. We think, you know, we're willing to go ahead and hand-to-hand competing in a fair and open market, as opposed to a market that is locked to three, you know, all of our identity, you know, all of our three carriers are keeping the customers in a locked position for a market this size, that just in the number one market in the world, I think that's just, it's not appropriate, not appropriate level of competition.
Hamid Akhavan: So that's, to me, that is an unfair placement for both the consumers and us. I think to develop our brand is yet another one. You know, our brand has not been a post-paid brand, but it's been a pre-paid brand in a community of other pre-paid brands, we need to elevate ourselves, and you will see some of that to a second half of the year where we show up and how to be positioned our brand, we're going to have to fix that.
Hamid Akhavan: So, you know, the multitude of, you know, areas to develop, every one of those, by the way, have been experienced by other companies, if you go back to the incumbents, if you go back 20 years, even, I would say one of the incumbents was in exactly the same position, and now, you know, they're in a much better position. So there's a recipe for doing that. We're looking forward to doing all of that.
Hamid Akhavan: But, by the way, I want to say that, you know, we have a network that is excellent in these empty, and I continue to say there's nothing more dangerous than an empty network, and we certainly intend to take advantage of the available capacity we have. With the quality and the offers we have in the market, I think we have a path, although we have charged it for capturing proper market share. Thank you.
Jonathan Chaplin: Our next question comes from the line of Jonathan Chaplin with New Street. Please proceed with your question. Thank you. Thanks, guys. Hamid, first just a quick process question on the lawsuit. So it looks like the trustee has amended the complaint. Do you have to refile emotion to dismiss? And if so, can that be, can that be sort of filed and decided on before November? And I'm wondering how the potential to get that resolved quickly, maybe impacting your discussions on refinancing?
Hamid Akhavan: And then I was really curious about your comment about there being nothing more dangerous than an 19 network last quarter. It sort of suggested the potential for something really disruptive on the pricing front. And the new plans that you guys launched on July 17th, the pricing looked pretty similar to pricing you had in the market already, not that disruptive. I'm wondering if there could be something more disruptive on the way.
Hamid Akhavan: Let me take the second piece first and then pass the lawsuit to Dean, our General Council to comment on. Look, I mentioned that not as a, as a prediction of things to come, I certainly would not want to do that. But I just wanted to say that, you know, this is a marketplace where we do expect, you know, a fair playing field. And I hope that that fair playing field is established by FCC and by, you know, and the environment that there we are playing in and there's many constituents in the environment.
Hamid Akhavan: But certainly it is not, it is not beyond the options on the table of possibilities on the table for us to, you know, provide service to consumers with a much greater value. We certainly have no intention of destroying marketplace. That's not, we're not trying to do that. But I think there's plenty of room for fair competition in the marketplace. We are very measured with our, with our approach. But we do have a network that can support a great portion of the marketplace today.
Hamid Akhavan: And we are, we are hoping that on the fair conditions and fair, you know, rules of engagement and play that FCC and others allow us to operate in, make it available for us, that we capture the fair market share. I can't be more specific today, but you should expect that we continue to remain one of the most competitive offers in the market. We continue to provide great service in our, our recognition in the marketplace will certainly really rise in the next six months by end of the year will be in a better position. Hopefully next year will be a much better year for us.
Dean Manson: I know that that's somewhat of a softer answer that you expect, but you would not expect me to give you all of our strategic planning and all of our pricing and any plans we have on this call that will be in appropriate. So I, I hope I give you some feel for it, but I realize it's probably not as precise as you like.
Dean Manson: Dean, maybe you can answer please the, the loss of question. Sure. Hi, Jonathan. Dean here. So yeah, on your question about procedure, yes, we'll have to either file a motion to dismiss or answer that, and his complaint. We don't see it as significantly changing the scope of allegations that this group flunders is asserting. But more to the point or to the other part of your question, we don't see the need to have that resolves before November as critical as I made alluded to earlier. It's not really getting in the way of the discussions that we're having on the refinancing front. So we'll deal with a lawsuit in due course, which we're in the process of doing.
Hamid Akhavan: Yeah, just adding to that, not from a legal language, but from my own personal view, you know, certainly there are multiple parties in the market that are working constructively with us to make progress and be working with them. You know, there are each parties that we have been working with, collaborating with, has taken a different approach. You know, some parties have taken the approach of trying to go to a legal process and be more using the perceived legal options. And, you know, this is the group that you're speaking about, but that doesn't prevent the other groups who are much more constructive and they're not concerned about this to the degree that you expect.
Unknown Executive: Alicia, we'll take one more question here. Okay. Thank you.
Marlon Perrero: Our next question comes from a line of Marlon Perrero with Bank of America. Please proceed with your question. Hi, thank you for taking the question. Just a quick one on your working capital. It looks like your trade payables increased about 85 million. So I'm just curious how, you know, one, we should think about Echo Star's working capital, you know, give us a sense of this seasonality within that. And, you know, can you continue to extend payables? Just some color on how we think about that. And also if you can provide maybe perhaps some of your larger vendors. Yes, this is false.
Paul Orban: So we won't provide that our largest vendors, but I may as pretty apparent to who our customers are. We are, we're continuing to pay in the same pattern of practice that we have historically. The changes that you are seeing are all timing related, seasonality, one things are doing so forth. But again, we have not changed anything on how we pay people historically. It's the same pattern in practice. God, and I'm sorry, in terms of any seasonality.
Paul Orban: Yeah, it obviously depends on there's all kinds of purchases when we're buying devices, whether be for the 5G bill, for instance, obviously our catbacks and operating costs are the catbacks is down. So obviously your payables are going to be down from that or could fluctuate if we're buying more catbacks. Also, it depends on retail wireless, on the devices that we purchase to put in the channel, things of that sort. So there is seasonality that goes into it as well as timing of one of payments are made and so forth.
Paul Orban: Not it. And I mean, can you just give us a sense of where you think working capital will kind of shake out for the full year? You know, I believe what we're at today, you probably see what can capital get a little bit better for us as we move throughout the year. I think our inventory balances will probably end up coming down slightly, both on a retail wireless and on a- Pay TV side, so it gets slightly better, but I think what you see today is probably what you're going to see come year-end, breathe out close to it.
Operator: Thank you, that's all I have. Great, thanks everyone for participating, that will bring our call to a close. Alicia, do you want to do any further? Yep, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.