DISH Network Q2 2021 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2021

There are 18 speakers on the call.

Operator

Good day, and welcome to the DISH Network Corporation Quarter 2 2021 Earnings Conference Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Tim Messner. Please go ahead, sir.

Speaker 1

All right. Good morning, everyone. Thanks for joining us. We're joined on the call today by Charlie Ergen, our Chairman Eric Carlson, our CEO Tom Cullen, our EVP of Corporate Development Paul Orban, our CFO. On the wireless side, we've got Jeff Blum, our EVP of Regulatory Affairs Stephen By, our Chief Commercial Officer Dave Mayo, our EVP of Network Development.

Speaker 1

We're not going to be making any opening remarks today, but we will start with the standard safe harbors.

Speaker 2

Statements that we make during

Speaker 1

this call that are not statements of historical fact constitute forward looking statements that are subject to risks, uncertainties and other factors That could cause our actual results to differ materially from historical results and or from our forecasts. We assume no responsibility for updating forward looking statements. For more information, please refer to the risks, uncertainties and other factors discussed in our SEC filings. That's it. And with that, operator, we'll open it up

Operator

Thank you. Now we'll take the first question from David Barden of Bank of America. Please go ahead.

Speaker 3

Hey, guys. Good morning or good afternoon. Thanks for doing the call again. I guess a couple of questions if I could. Congratulations on the AT and T Network Services Agreement.

Speaker 3

Obviously, there's a lot of talk about it. Or above, if maybe Charlie could give us a little Background on how that deal came together, why it came together? And I think specifically, is this a vehicle for DISH to Achieve its SEC coverage requirements, specifically the 70, I think, Percent coverage by June 2023. I think the second question I would have is, obviously, We're obviously waiting for the Las Vegas network launch. I was wondering if you could kind of give us a little bit of a roadmap Between now and say, the first half twenty twenty two, what the network build is going to look like and what we I guess some of your partners in the infrastructure side have suggested that you've been contemplating a broad geographic Bill, and it would be great to get some more color on that.

Speaker 3

Thank you, guys.

Speaker 2

Good day. I'm going to have Dave May will talk about your second question on deployment and how that looks. And I'm going to make just an opening comment and go over Steven by on the AT and T question. But obviously, we're always looking for ways to And, Pruv, thanks for our customers and it's no secret that the CDMA shutoff, Premature shut off from T Mobile was not helpful to the relationship. So It was an opportunity for one of their competitors to work with us.

Speaker 2

And so That led to discussions that probably otherwise might not have happened. But make no mistake, T Mobile is still super important to us And we're happy to have 2 really good companies that we can work with. It doesn't help us in the AT and T or T Mobile, either one of those agreements do not help us with our Do not help us in the CDMA shut off timeline and they don't AT and T doesn't help us in terms of meeting SEC milestones. So but it does but I do think the agreement with AT and T is from a big picture certainly moderately I let AT and But I view it as certainly moderately positive for both companies and potentially extremely positive for both companies. And with that, maybe I'll throw it over to Stephen And maybe give you a little more color on it.

Speaker 4

Yes. So just to add some more color to Charlie's comments, this is, as you've seen, a long term Strategic partnership that we have with AT and T. It really we went into it with sort of a win win approach for both companies. It certainly It's value for both of us, which we feel is very important as companies, but also for our customers. And so one of the things that's very important in this relationship is Quality of the AT and T network.

Speaker 4

As it relates to supporting our customers and particularly our DISH customers, they skew I tend to skew more rural, so they have a much better network and the quality of network and reliable network in those markets. It allows us to go beyond our existing footprint that we serve with Boost today to broaden our distribution and address a different part of the market Given the quality of their network and the coverage, I think the other part of the relationship is beyond being strategic, it is a long term partnership. And we've been working with them on how we manage the customer migration, as well as the support for those customers, both On our network as well as the AT and T network, but in addition to that also with the Timo network. And so it is a good relationship and one that we're Working towards operationalizing as we go forward. The other thing to add in the relationship with AT and T is, It is a broad roaming agreement.

Speaker 4

So it does give us in market roaming in addition to out of market roaming for a long time. As you've seen, it's a 10 year agreement. So That's very important as it helps to support our build, but doesn't remove any of our obligations on the build. And so with that, I'll hand it to Dave.

Speaker 5

Great. Thanks, Stephen. David, with respect to our build program, you might be aware we've implemented a very decentralized approach. We have 4 regions in 36 markets. And the early markets that we'll be building are substantially all colocation, hence The activity that you saw in some of the tower company calls this last couple of weeks.

Speaker 5

In that regard, we've signed Substantially all the leases that are required to meet our 20% mandate for next June And has received notices to proceed on close to a third of the sites. As we've commenced Construction on close to 30 markets in 30 geographies within those 36 markets. So in some cases, there may be multiple geographies within a market that we will have that we've commenced construction on. And then as Your Vegas question will be substantially complete with the construction activities this next this in the next 60 days by the end of Q3 and we'll and as we've talked about beta testing customers in the Q4.

Speaker 3

Great. Thank you guys so much for the call.

Operator

We'll now take the next question from John Holbyulik at UBS. Please go ahead.

Speaker 6

How quickly will you guys be able to migrate the traffic From the T Mobile network to the AT and T American network. And we'll I guess all new gross adds go right onto the AT and T Network. And then as part of the announcement, you talked a little bit about cooperation on the infrastructure side. Could you talk about Whether

Speaker 2

AT and

Speaker 6

T will be helping you guys light up spectrum. I know the 700 in particular fits well with what they're doing with their box And then lastly, on the Las Vegas launch, just anything you could tell us about what that will look like once that network has been up? Will you guys have Sort of retail pricing plans in the market or will you sort of be establishing a sales force to talk about Distribution in the wholesale side and the business side are just sort

Speaker 2

of what we should we

Speaker 6

expect once that network gets turned on? Thanks.

Speaker 2

Yes. This is Charlie. I'll try to take some of those and maybe somebody else will want to jump in. In terms of transition from AT and T, I mean, obviously, Going forward, but that doesn't mean that we're transitioning our customers off of T Mobile. They again remain important Part of what we're doing to the extent that they want to be an important part of what we're doing.

Speaker 2

So One of the things that we'll do that relate to Las Vegas is obviously we have to be able to provision on AT and

Speaker 3

T, so that's going to take us a bit of

Speaker 2

So we hope maybe somebody else on this call or maybe one of our guys can talk about that. And obviously, the Some customers will want to move to AT and T to get a better network. Some people, the T Mobile network will be better and they'll want to stay Where they are. And then for new customers, big picture kind of thing is, our customers Today and for the most part, I think most customers across the United States that we talk to, they really want consistency And coverage is a priority and the speeds on 4 gs and LTE are normally fast enough for them. And they don't really see a difference in 5 gs when 5 gs pops up on phones, so they're a little confused.

Speaker 2

Nobody can charge more for 5 gs in the United States today. And so obviously, We think the AT and T has a tremendous coverage advantage that we don't have today, although T Mobile is going to be a fast follower there As they build out rural America further FCC milestones. The other part of it is that the T Mobile today probably arguably has an advantage Certainly in perception of 5 gs and probably in 5 gs build out of 600 megahertz. And while it doesn't really show up as a particular feature on the customers I can point to it, it's still from a marketing perspective, I think they're considered the leader in 5 gs. That's where 5 gs is important for our customers, that's going to be The key is going to be the 5 gs development, both our own development, which we think we're doing a little bit differently, but also as you get The big 100 megahertz blocks in C band 5, the team will still raise for those guys And we'll see if it does the best job of something that can differentiate 5 gs to consumer.

Speaker 2

That will be the key. We're well positioned with both Tmall and AT and T depending on who kind of wins that race, plus what we think that we're going to do different within 5 gs And our architecture that might be different than either one of those 2. So, we're just well positioned. We get The best coverage and quality and value for that, but AT and T is going to get the Be the primary going forward. With AT and T in terms of Stephen touched on it, but there's other things beyond I said some it's probably moderately positive for both companies, but it could be Extremely positive.

Speaker 2

You mentioned 1 spectrum. We have spectrum both at Mirror images of 700 megahertz, there might be some interesting things you could do there and save some and get Scale and save cost if companies are so inclined. We share interest in the 12 gigahertz spectrum. We have some spectrum that as we build out will lay fallow for a bit until we build it out. And It probably could be put to use sooner rather than later by AT and T.

Speaker 2

So I think There's technology where things are going that our teams have committed to working together on and we're buying other services from AT and T like backhaul That we have to buy from somebody and since they're our partner now, they get the benefit of the doubt on a lot of those deals. So and we're both in listen and we have common interest there. So you can see this potentially could be A much better deal than the $5,000,000,000 that we're committed to. It may not. The companies may not get along, but I think both parties realize that there are things that we can share that have

Speaker 7

been beneficial to both companies and we can

Speaker 2

do that. We will I'm sure we'll Remain frenemies. We obviously will compete with each other as well. And then as far as I forget the question about Las Vegas.

Speaker 7

Distribution. Distribution.

Speaker 6

Yes. Just what the service looks like when you guys turn that network on? Or is it going to be

Speaker 2

in beta for the rest of the year? Or do

Speaker 6

you actually start adding customers to it?

Speaker 2

I think we'll be in beta for a minimum of 90 days. You got to realize what kind of the things have changed maybe in the last 6 months, but We're going to put our network in the cloud, our core in the cloud and start that way. Even though we have a quarter working today, it is not in the cloud. We decided we don't want to change and we want to put the net start with the quarter in the cloud, It hasn't been done by anybody here at the floor. We obviously are doing O RAN, so our baseband and radio vendors Had to make sure those things work together.

Speaker 2

And so and now we're adding AT and T Integration to the network that we hadn't planned on doing in addition to the integration of T Mobile. So we've got a lot of so we think that's going to be At least a 90 day kind of beta integration. Things work in the lab today, but When you take them out of the lab and we get them on Dave's network, that will be deployed by the end of September, we can line up Vegas in total. That That goes from the lab to reality. In my experience is, things don't work exactly right The 1st month or 2 and you've got to integrate that, but and then we'll go from there.

Speaker 2

We'll have retail, Obviously, Vegas, as in other cities, it will light up very quickly after Las Vegas. We'll have a retail presence and we'll have offers for consumers that we think will be competitive.

Speaker 6

Got it. Thanks, Sharon.

Operator

We'll Now take the next question from Jonathan Chaplin at New Street Research. Please go ahead.

Speaker 8

Hey, guys. It's actually Phil Burnett for Jonathan.

Speaker 6

Quick one, will the in market roaming element of the AT and T deal lead To a more efficient and quicker network. So for you guys, I understand that it won't change the SEC requirements, but does it

Speaker 9

change the way you think about the build?

Speaker 6

Thank you.

Speaker 4

Yes. So I'll start and then I'll let Dave wrap it up. But the in market roaming is important in terms of customer experience And the ability to manage our customers, but it really doesn't impact the bill plan that Dave and his team are working on.

Speaker 5

Yes, we won't we're not doing anything differently as a consequence of the AT and T deal with respect to the

Operator

We'll now take the next question from Phil Cusick at JPMorgan. Please go ahead.

Speaker 6

Hi, guys. Thanks. Charlie, you alluded to this with the AT and T comments, but any updated thoughts On a DBS merger now that DirecTV separated, does that separation change anything? And what's lost as time passes? And then just quickly as well, what's the exposure on the CDMA shutdown still?

Speaker 6

Thank you.

Speaker 2

In terms of DIRECTV and DISH, I mean, obviously, I've said it the last year. I think that those two companies go together, that's inevitable. Really, there's another party involved in terms of TPG. So whether that's positive or negative, I don't know. But from a regulatory point of view, obviously, it's less and less reality to objections to it because obviously, 100 of 1,000,000,000 of dollars for broadband deployment and continued competition The programmers themselves in the marketplace.

Speaker 2

So I think that's just we'll just have to wait and see whether there's Desire on everybody's part to do that, but I think it's a timing issue more than anything else. In terms of I think the customer seat you may shut off. Yes. Look, I said early this year that, that was that, that's kind of a false T Mobile Underrow talked to regulators in California that they would be a minimum of 3 years. I think there's kind of a I think it's a false artificial deadline to Turn it off in January this year.

Speaker 2

We view that as a very anti competitive move because that's a situation where The people that we rope, that we pay, that are partners from an MVNO are actually obviously challenging outwardly challenging to get our customers And that was a convenient way to do it. You may notice that they've got and I think they've kind of smoked out now, Right. They have extraordinary offer in marketplace for a free upgrade to a 5 gs phone and 50% off for service For 2 years, extraordinary offer. So that's obviously aimed at customers to upgrade to their network. And I think that's not it's the bottom line is that they're really sore what I call sore winners.

Speaker 2

It's hard to be a good winner sometime. And they got $70,000,000 of synergy. The government the $70,000,000,000 of synergy the government allowed them to have, and now they want 71,000,000,000 By getting some customers that we already paid them for. So you've all met that guy in grade school Who won and brag about himself and brag how good he was and spiked the ball in front of you and Sometimes it takes a bit of maturity to be a good winner and they're kind of a they're a sore winner. And so It's but it's good.

Speaker 2

On the other hand, the fact that a consumer could upgrade, that may not be good for Boost, but At least the customer, our main objective at DISH and Boost is to make sure customers don't lose their service. And to the extent that the customer upgrades that's And doesn't lose their service, I'd much rather have that than the customer lose their service. So I think that We expect that they'll continue that promotion through January 1. I think that they probably they've been in the business. They went on TV and their CEO went on And said that nobody would be impacted, that everybody was going to be upgraded by January 1.

Speaker 2

And I expect that they're going to continue that promotion. They're going to upgrade everybody by January 1. And if they do that, then there's probably no controversy other than competition. But we'll have to wait and see How

Speaker 6

many customers

Speaker 7

do you still have

Speaker 6

who would be exposed to that to the initial shutdown, Trevor?

Speaker 2

Well, I think our last disclosure was majority of our customers a quarter was that a quarter ago, majority of our customers that We are making we are taking all reasonable efforts to migrate customers and we've made good progress on that So that people don't suffer from a premature shutdown. And I think that the number is now Smaller, but I would say this that our projections show a material amount of customers on January 1, we'll still Have CDMA phones and we'll lose our service. And again, this is the most economically challenged group in America. Boost These aren't the customers that have bank accounts and high paying jobs And these are people that are challenged and so economically challenged. So I think it's even more important

Speaker 5

that these people don't lose their service.

Speaker 8

Thanks, Charlie.

Operator

We'll now take the next question from Doug Mitchelson at Credit Suisse. Please go ahead.

Speaker 10

Thanks so much. A couple of short ones and then one for Charlie. In terms of the NSA and AT and T to use portions of the DISH spectrum. Would AT and T be able to use that DISH spectrum to serve their own customers in addition to The reason I ask is the language in the 10 Q wasn't quite clear since it noted AT and T would be able to deploy the spectrum to Support DISH customers. So that's the first quick one.

Speaker 2

Yes. I'm going to let Steven answer that.

Speaker 4

Yes. So Doug, Basically, ATT can deploy that spectrum for not just our customers, but through all customers on their network. And part of the reason we looked at that was as we load up capacity on their network is just making sure that our customer experience and their customer

Speaker 11

experiences continue to be market leading.

Speaker 4

Okay. That's clear. And then,

Speaker 10

Okay, that's clear. And then given the Las Vegas wireless network coverage you are building, Would you anticipate what would you anticipate would be customer usage in the Las Vegas area on the DISH network versus needing to roam on AT T Mobile.

Speaker 4

Yes. So the majority of the usage will be on our network, but complemented by the coverage and the network that we have access Just 2 with AT and

Speaker 2

T.

Speaker 10

Okay. Thanks. And then, Charlie, I was just hoping to gauge you on longer term capital needs. Maybe this won't go anywhere, but you've talked in the past about achieving O RAN and now I guess CloudCore proof of concept as a driver of cheaper access to capital for DISH. At this point, are you contemplating a wireless strategy that's aggressive enough that you think you will need?

Speaker 10

I'll take capital. I know you've talked about self funding most or all of this sort of Phase 1 initial build, but I imagine you've got multiple scenarios where You could be a lot more aggressive with Spectrum and customer acquisition and pace of build and other things to go after wireless quickly or you could go after wireless at a pace that you Just internal capital. Any thoughts on accessing capital in the future post Las Vegas?

Speaker 2

Well, I mean, I think historically we've accessed the capital market, so our 4 year history, so I don't and obviously we have obligations we need to pay back. So we continue to as always, we're opportunistic in the capital markets If there's reasonable ways to raise capital and we plan our business accordingly that and We've been pretty innovative and obviously we've never had the kind of capital that some of our competitors do. And so we've had to be more innovative and I think that we're We're comfortable in that space. But we have the capital to I think Dave sleeps at night knowing that he has Capital available to meet his deployment guidelines for now and obviously Eric has Run the business in a positive cash flow manner. So but if there's opportunity out there With partners or with the markets themselves, we obviously look to take advantage of those things.

Speaker 10

Maybe I could try it this way, Charlie. Is there sort of line of sight on this network will take 4 to 5 years to build and it will be in a pretty good place? It's Can take 10 years, 15 years? Is there sort of a sense of time to get stand this business up and get it running the way that you like?

Speaker 2

Well, I mean, I think we're less than 2 years away from critical, what I would call critical mass. We're going to cover 70% of the country For the next 2 years of population and that's critical mass. We're that's enough critical mass. That's on par with where Sprint was. And I think they had 50,000,000 or 60,000,000 customers.

Speaker 2

So, and we're going to have a better network than they had and we're going to have a differentiated network. So And better roaming than Sprint had. So this isn't a 5 year project. This is, I think, obviously, our first milestone of 20%, I think you'll have a pretty good feel and you'll be able to we'll be able to start helping you develop models of where this goes. But clearly, the 70% milestone will be enough to compete at a very high level In the marketplace, both for consumers, but maybe for our in our case, more importantly for enterprise business.

Speaker 2

All right.

Speaker 10

Thank you. I'm looking forward to that Las Vegas pricing. That will certainly help with the model. Thank you.

Operator

We'll now take the next question from Brett Feldman. Please go ahead.

Speaker 8

Thanks. It's actually a follow-up to exactly what you were talking about. For a while, you have flagged the enterprise space as a key opportunity for the advanced capabilities of the network you're building. You've talked about Networks, Swycene and AV Private Networks. Typically in the enterprise market, particularly when you're deploying infrastructure In response to a customer win, it's not uncommon for those enterprise customers to help fund the deployment of that infrastructure through large upfront payments.

Speaker 8

Are you contemplating that, that is a part of how you're going to fund the business going forward? Meaning, as you think about that $10,000,000,000 budget you outlined, is Plausible that some of that could be financed by enterprise customers? And then the flip side of the question would be, if that's not the case, how are you thinking about Pricing your services in the enterprise space, particularly when you're deploying network in response to contract wins. Thank you.

Speaker 2

I'm going to throw that to Steven other than say that the that I think there's a lot of models in enterprise business. And you can imagine enterprise customers who want a slice of the network and they want a certain level of quality And they want it to happen in the geographic region that we haven't built out, they want built out. You can certainly Your scenario is certainly plausible. Or you can imagine just straight business deals where people pay by the drink Pay by the gig and but I'll let I think the broader answer is, I'll let Steven answer is really So why the architecture that we're building is so enticing for enterprise customers and why it differentiates maybe from what they can get with the incumbents?

Speaker 4

Yes. So adding to Charlie's comments, we're seeing significant traction and interest today in private networks Private 5 gs Networks and the architecture that we're deploying really enables a level of control and a much deeper level of security That allows the enterprise to utilize that network for their own business operations. So we're seeing significant interest there. We've been responding to Multiple RFPs, RFIs, we're working on proof of concepts right now. And we're partnering with a number of different SIs as we bring The services to market.

Speaker 4

And so there are different business models depending on the customer, depending on the geography. And the good thing about these private networks that we're working on They're not constrained by the geography of building our macro network. So we're able to serve customers in different geographies within And then the other thing which is also important to highlight, it's across all verticals. There isn't a specific vertical that has an interest in We're seeing interest across every vertical and every industrial segment. And we're very well positioned to take the architecture that we're deploying, being cloud native, but also the open architecture, Sure.

Speaker 4

The ability to do slicing, it is distinctively unique compared to what the other operators have in the market today. It's not to say that they can't get there in the future, but we clearly have an advantage today that we're taking advantage of. I think it's also important that To add that even in the DISH business today, we do a great business in serving hospitality. And so we're able to partner With the systems integrators we have within that business to augment what we're doing on the video side. And so that's really a terrific model where We can integrate kind of the capabilities and the assets that we have across the whole company to serve other verticals as well that some people may not have on their radar screen today.

Speaker 7

Thank you.

Operator

We'll now take the Question from Craig Moffett. Please go ahead.

Speaker 12

Yes. Hi. Thank you. Let's stay with the same topic if we could, Charlie. The enterprise market today is mostly national sales for devices that really aren't Yes, it's similar from the consumer market.

Speaker 12

But I think what you're describing is quite different. Can you talk about some of the Particular opportunities, if not by verticals and by applications, that you see in the enterprise market That you can uniquely serve and how large you think they are as businesses and which ones in particular You envision being regional rather than national sales, because I think a lot depends, I guess, On whether companies are interested in buying services that are really on a much more localized or regional basis wirelessly than they are today?

Speaker 2

Yes. So and Stephen may jump in, but they're clearly our national enterprise There are areas where we wouldn't be in Tennessee today, but there's but even with the national companies, there's much there's very much of it that's localized. So you can imagine that the hospitality industry where that your hospitality is still localized, But in the hospitality industry, you're going to differentiate yourself from your customer service because that's the hospitality industry And you want to do that in a market by market basis. You can imagine things like mining, right, that aren't That need private networks and they probably have to get built because they're probably not in anybody's footprint today on the other extreme. So There's just a lot of different areas there.

Speaker 2

And I would contend, Greg, that the profitability on a per bit on a per Dollar CapEx on a per gig basis is going to be much higher in the enterprise business than it was in the consumer business. The consumer business is quite competitive and with 3 big players And us entering the marketplace, so it's quite competitive. Enterprise business, Each company is going to have different needs. And in some cases, we won't be able to fulfill those needs. 1 of the other 3 carriers will be able to do it.

Speaker 2

But in many cases, we're the only guys that can really in the foreseeable future fit their needs. And that's going to be a good business Those are long term contracts. They are long term sales process. So from a revenue If you're not looking for that to be a big revenue item next year. But Yes, prayerfully, we just know by the interest that there's never a conversation with the company at high levels where they don't want What we're building, I guess, is what I'd say it.

Speaker 2

We may not be the right company for them. It may be one of our competitors that It's better suited, but they want where things are going. And you just can't get there with legacy networks because you have to automate. And to automate, you have to be in the cloud and we're going to be there. And then, O RAN, Nobody wants to build Last Century's network.

Speaker 2

They want to build the 21st Century network and that's what we're building. And so that's where People are going to spend their money from an enterprise perspective are going to want to go.

Speaker 12

Sorry, I was saying if

Speaker 2

I could ask a quick follow-up.

Speaker 12

Do you envision bringing those same capabilities to wholesale And for being a network provider for other MVNOs and are there any limitations under the AT and T agreement And you're doing that?

Speaker 2

There's no limitation in the AT and T agreement. I mean, you could imagine that if Another network provider, let's take AT and T since obviously we have a long term relationship now. And they wanted to wholesale from our network Because they had an enterprise customer and we had maybe some architecture that helped them get there, that's an interesting conversation to have Because we both would win. And again, I've said it for 2 years now. We're interested in working with those companies.

Speaker 2

Well, we how we define a partner, working with companies who want to help our company get better and we're going to in return, they should expect that we're going to help their company get And that's not always the way business works, right? So some companies, it's a zero sum game, Where I win and only if I win and you lose am I willing to do a deal. And I understand that. I thought 30 years ago that Probably sounded like me. But I'm kind of a gentler now as people around you know.

Speaker 2

At least I'm more experienced and more materialistic that way. I think I just think that particularly in capital intensive industries, I think that Where people can where people decide that they could take the approach where a more partnership approach that I think that's a competitive Potentially competitive advantage. And I'm sorry we're so conceptual, Craig, at this point, but that all those concepts Turning into real business models that ultimately You can see the cash flow generation in the future. But strategically, we're kind of my job strategically is to make sure that the concepts can Then turn into that.

Speaker 12

That's really helpful. Thanks, Charlie.

Operator

We'll take the next question from Ric Prentiss, Raymond James. Please go ahead.

Speaker 9

Thanks. A couple of follow-up questions. Obviously, a lot of discussion on the MVNO agreement. To provide the best network to your customers, could It makes sense to do other network sharing agreements with people that have better networks in rural America than maybe AT T Mobile have, I. E, maybe a U.

Speaker 9

S. Seller relationship. Would that make sense maybe?

Speaker 2

The answer is yes. Would we be prevented from doing some of U. S. Cellular for the AT and T Group?

Speaker 4

No, no. We're not prevented. And in fact, we've talked to a number of regional and rural operators about how do we do things, To Charlie's point earlier about partnership, how do you do it in a capital efficient way that both parties benefit. So we've had a number of those conversations.

Speaker 2

Certainly, so you can imagine that part of our rural strategy would be work with those people that are already in rural Now AT and T, as much as geographies they cover, which is a lot, they still don't cover There are still rural carriers and including U. S. Cellular that cover areas that AT and T does not or T Mobile does not.

Speaker 9

Excellent. Second question, you mentioned on Vegas, Dave's busy at work there, the consumer data trial, How should we think about why not a wholesale enterprise beta trial or is that something that would also be occurring in the fall winter timeframe?

Speaker 4

Yes. We're in active discussions on enterprise and wholesale. Not all wholesale is national, and a lot of business services are local. And so We are actively pursuing a number of opportunities, not necessarily just in Las Vegas either for that

Speaker 2

But I would say that the bar is a little bit higher in the enterprise business in terms of quality, and we're going to walk before we run. So I wouldn't expect that Enterprise happens. And just so you know, Enterprise is a 2022 kind of thing because we got to get Vegas right 1st.

Speaker 9

It might make sense to have a show enterprise what you're doing in Vegas, so they can really see what the next topography looks like.

Speaker 2

No, we'll definitely do that as well everybody in this call. We'll Part B at Consumer Electronics Show, you'll get a phone and I know you'll do 2 things. You'll measure speed and you'll see if you drop any calls. Exactly. Right.

Speaker 2

You'll check coverage and you'll check

Speaker 9

That's it for me. You guys have done a bunch of tuck in acquisitions. Are there other opportunities out there to kind of add Scale into your business and related Shenandoah's YOLO CL to T Mobile close, Do those Boost customers come on to the place that you guys, if you want them?

Speaker 2

We We always look for any kind of acquisition that makes our company better or any sale that we can sell that is more beneficial to somebody else than us. So we always look at that. And then Shannon, you want to take that one, Tom? Because you know more about that than I do.

Speaker 13

Yes. The Shenandoah customers were purchased by T Mobile. By T Mobile.

Speaker 8

Okay. Very good. Thanks guys.

Speaker 2

We own the brand,

Speaker 13

Yes, they're operating under a reverse TSA similar to the transition services agreement that we operate with T Mobile. So they're supporting the Boost customers on behalf of T Mobile in that region.

Speaker 9

We shouldn't expect maybe a sale of that to you guys.

Speaker 13

Nothing to report there.

Speaker 2

Okay.

Speaker 9

Thanks guys. Stay well.

Operator

We'll now take the next question from Walt Piecyk at Chad, please go

Speaker 11

ahead. Thanks. Hey, Charlie, your 10 ks has a letter that the DOJ sent you guys In early July. I'm just curious if there's been any follow-up dialogue with the DOJ, the FCC. And similarly with Verizon, I think also may have interest in

Speaker 2

Well, again, The conversations that we have with regulators, absent meaning to publicly disclose like we did because it's material to our business, We're going to stay confidential. So but I think it's We take regulators and regulations seriously, right? So You can read the letter from the DOJ and obviously, we're going to continue to take all reasonable steps to mitigate the expected harm From the CDMA shutdown, but we're not able to do everything and we do think it's an issue and obviously the regulators are paying attention to it. So I think that's probably what they should be doing. And I think we all knew when we At the T Mobile Sprint, we all knew the conditions that were going to be part of that agreement, and we just

Speaker 10

all had to live up

Speaker 2

And I forget the other part of your question was

Speaker 14

The other part was basically Verizon.

Speaker 11

Verizon. Verizon. Because and by the way, T Mobile on their call claim that you're only paying them Or less than $2,000,000,000 So whether it's Verizon or AT and T, just kind of, A, are you talking to Verizon? And then B, like how much of the $2,000,000,000 you think remains after 2 years?

Speaker 2

Yes. I won't get into those details, Paul. But look, we're a large M and O. And if Verizon is successful on TracFone, acquisition TracFone, we're The largest guys out there and it's disappointing. This is personal, but we've been T Mobile's largest customer for the last year, Not named T Mobile, right?

Speaker 2

And I

Speaker 11

don't know that I've

Speaker 2

been treated like the largest customer. Let's put that one.

Speaker 11

Richard Chomping at the bid to ask about Sinclair, but let me just get one more Spectrum one in.

Speaker 10

Any agreement you have with AT and T,

Speaker 11

is this going to be in the form of a lease or

Speaker 14

you're just going to basically give them

Speaker 11

the spectrum and to make their network work better? Because I think that Band 60 6 stuff they've Verizon, at least as shown in the past, can be flipped on within a matter of days. So how do we conceptualize AT and T using that spectrum? Is it a lease agreement? Is For free and how does that work?

Speaker 2

Well, I think first of all, any I think they'd be interested in they'd only be interested It's Spectrum that they could utilize pretty quickly. In other words, they have the equipment ready to do it. And then like in partnership, that could be mutually beneficial to the companies. And so far, the relationship with AT and T, we've been able to work through those issues.

Speaker 11

Got it. All right. Rich, you want to hop on?

Speaker 14

Yes. Thanks, Walt. So Charlie, Tom, I guess, When you dropped Sinclair's RSNs, you basically said that just sort of given how long they've been gone, it sort of felt permanent. From what The press release, Sinclair just put out a press release saying that they expect their TV stations to get dropped due to a retrans impasse in a week. I guess it feels like they're trying to tie RSN carriage to retransmission consent, which I don't think is allowed.

Speaker 14

I'd be curious like Don't they have to treat these separately? I mean, it seems sort of crazy for your customers who don't even have the RSNs. This isn't an RSN renewal. It seems like to be forced as part of a retrans renewal to take on channels that cost an extra $4 to $6 a month seems pretty crazy For DISH without a lot of upside, could you just give us some sense of like how these whether this is being tied, whether it can be tied and what your recourse is?

Speaker 2

Well, that's a loaded question. First of all, I'm disappointed that they put a press release out They expected the networks to come down since I think we got to August 16. So, and obviously Many negotiations come down to the wire. So we're still going to bargain in good faith and hope that Disappointed that they seem to come to conclusion channels are coming down at this point. But the good news for our customers are They have other ways to get their channels.

Speaker 2

First of all, they watch them less, the networks less and they have other ways To get those networks, that they didn't that they haven't had all those ways in the past. And But we're empathetic to Sinclair because they are having to compete against their own content providers And we've had a long term relationship with Sinclair and it's been good. And we've been able to work through Issues at least as tough as this one over the years. The regional sports question that realized that Sinclair didn't own the regional sports networks. When those networks came up for renewal, by the time Sinclair owned it was able to negotiate in the part we thought Our customers that wanted regional sports had left.

Speaker 2

And so there was no way that in fairness to our customers, we could tax them In a basic package and tax customers who almost nobody that was left, The one regional sports was left on our network, they've gone to somewhere else to get them. So I think there's innovative ways to reinvigorate the regional sports networks. Sinclair themselves have talked about it in a direct to consumer product.

Speaker 5

So I

Speaker 2

think there's other ways to do that And we'll continue to work with Sinclair to the extent that they want to try to work with us in a win win situation. But if not, Bill, I don't I'm not going to speak to all the legalities and regulations. Sinclair Pretty savvy about those things and so they'll work their way through that. But my expectation and hope would be that ultimately The companies find a way to resolve all the issues of concern to both parties and if not And we go our separate ways. We'll work to mitigate that for our customers.

Speaker 14

And just to be clear, Charlie, when you say work to mitigate those Get to a mutually satisfaction. You're talking about a deal for the TV stations not to carry RSMs. Is that just to be clear?

Speaker 2

Well, I mean, our folks we don't have any customers calling us on RSNs today. To the extent the local channels were to go down, we would have more than one customer call us the next day and say, Where is my local channel in this particular market? So our focus is on making sure That our customers aren't disenfranchised for the local channels. If there's some opportunity on regional sports, it makes sense for us and Sinclair? We're not we're happy to talk about anything that's creative and doesn't harm our customers, but we're not interested in Action our customers when they don't watch the channel.

Speaker 2

That doesn't make any sense. And our customers will understand that. And we would lose some customers if the networks go down and some customers just quit watching networks. You may want to jump in on this, Eric, but we've been through this before. The impact Of local channels is used to be devastating.

Speaker 2

It's still pretty bad, but not the same. And there's other

Speaker 9

Rich, as you know, I mean, this is Eric. But as you know, I mean, obviously viewership on broadcast is declining. I mean, we just ended the Olympics and I think you've done decent reporting on viewership on Olympics. And I think Charlie's point on us being sympathetic to some of these folks It's true. I mean, they're also in competition with their big owners.

Speaker 9

I think, NBC announced that they're moving Notre Dame football game To Peacock, the home opener, right? So I mean, whether it's award shows or whether it's sports or whether it's Big tuner defense like the Olympics, I mean you're seeing viewership decline. And so the local broadcast networks do become less important for our customers. And as you know, Rich, I mean, there's other ways to get the networks, right? Whether I mean, We've obviously helped our customers with either offering antennas or new technologies like low cast or technologies like CBSL Access, which is now Paramount or Peacock, right?

Speaker 9

So just it kind of depends on the customer's viewership habits and some of those are changing.

Speaker 2

Thanks very much. Customers figured out that If they get disenfranchised, they'll leave the networks. That's why Netflix has viewership and Prime has viewership and Disney has viewership because they get taken down and customers get frustrated. And then as things get online, they learn how to they know how to steal it. And the piracy is a huge problem with online.

Speaker 2

There's not a network you can't get online if you're savvy. So young people Already know how to get it if they want to watch it. So it's not always the most rational thing To take a network down from a net no matter forget going down is not good for anybody. Let's put it that way. But we'll see what happens.

Operator

We'll now take the next question from Kanan Venkateshwar at Barclays. Please go ahead.

Speaker 7

Thank you. So, Tali, on the wireless front, I mean, one part of it is the network build out deadlines, Which obviously are cast in stone in some ways. But the rest of it is the organization build out with respect to scaling the service and Telecom organizations are obviously significantly bigger than where you are in terms of number of people and so on. So could you help us think through how the scaling of the rest The wireless organization is growing and if you basically plan to pivot some of the resources away from the DBS business to the wireless business And how long does it take to scale that whole thing up in terms of people? And secondly, on the That's right.

Speaker 3

It would be great if you

Speaker 7

could give us some kind of an update on the thought process there. It's been a while since we heard from you on that. Thanks.

Speaker 2

Okay. Yes, won't take us back question on here, but Netflix I have a fraction of Blockbuster employees to have that workout. I mean, we're we've built We had a good base of engineering already at DISH and obviously we There's a lot of talented individuals, some of which are on this call, some of which are not on this call. So we feel and a set of Executives who are working on where things are going, not where it's been in the past. So I think there's plenty of resources out there and for what we need to do in wireless and I think we can walk and chew gum At the same time, and Eric is able to run DISH and Sling in a highly efficient manner As well as work under retail wireless and I don't see a conflict there.

Speaker 2

I mean, don't get me wrong, it's always hard to find good people and it's probably a little tougher in this environment today with unemployment being low. But When you're building the future, people with ambition and people who are curious, that's where they want to go and We're fine. This is a great place to come work and help us do something and we're finding a good flow of people.

Speaker 13

So operator, we have Time for one more analyst call before we take a few press calls.

Operator

Thank you. We'll now take The next question from Michael Rollins, Citi. Please go ahead.

Speaker 8

Thanks and good afternoon. Just two questions, if I could. First, Curious how you see the opportunities to leverage your 5 gs network for fixed wireless broadband services over time? And how you view the potential funding for broadband in the proposed infrastructure bill as an opportunity in which DISH may want to participate? And then just separately a question on Sling.

Speaker 8

It returned to positive growth in the quarter. What are your learnings on the customer interest to migrate from Legacy video platforms to live streaming platforms. And just curious for your latest views on the opportunities to move A larger portion of your historic DISH video base to your streaming Sling service.

Speaker 2

I'll let Eric take the Sling question. I think fixed wireless, I think, is a place where The wireless industry can go. And Verizon and T Mobile have already gone there, maybe AT and T some as well, but certainly T Mobile and Verizon have gone there. And so I think that's As they light up more of their spectrum, there are certainly places that we can go there. And obviously, I do think you bring up a good point.

Speaker 2

I think that all of us in the connectivity business are going to have to look and see What the subsidy of the government infrastructure, where the government wants to go And whether your particular company or whether strategically fit into that and whether that's good business for you. So obviously, we continue we will look at that, But I think that's I think the infrastructure the amount of infrastructure that the government is talking about is probably a positive for All connectivity companies and certainly potentially for Americans that don't have service today. With that, I'll give it to you in the line.

Speaker 9

Michael, maybe just a few points on your questions there. I mean, one is, the traditional DISH TV satellite business, as you know for some time, we've really been pointing our efforts towards both acquiring and retaining Those profitable customers that are in a more rural geography and that strategy has been working well for us. So as the opportunity presents itself as broadband continues to densify, obviously, Sling can be an for those customers that want to cut the cord there and maybe have a couple of SVOD services along with a service like Sling, which can be very complementary to Obviously, Netflix or Peacock, etcetera. On the Sling side, there's a couple of things we've been talking about over The past few quarters, one is there is a touch of seasonality obviously to the OTG business It is a low barrier of entry and it's easy to cancel. But with that said, we also put the onus on ourselves to create a better customer experience.

Speaker 9

And In Q2, you've seen us deploy now kind of some new technology and a new app to most of the Amazon base And about half the Roku base now. So you're seeing us provide a better customer experience. We're seeing Obviously, better key metrics that you would follow associated with kind of customer engagement, We're seeing those all improve and so we're optimistic heading into football about our ability to deliver a better customer experience. And then obviously, you had a couple of tune in events like either Euro 2020 or NBA, which obviously helps them to swing numbers In Q2, so.

Speaker 2

All right, operator,

Speaker 13

now we'll take questions from the press. Not sure how many are in queue.

Operator

Thank you. We'll now take questions from the media. And our first question from the media will be from Scott Morrison at Bloomberg. Please go ahead.

Speaker 5

Great.

Speaker 10

Thanks. Charlie, on the 5 gs launch in Vegas, just trying to get an understanding of how that It's going to work.

Speaker 15

I'm calling it a 90 day beta, I believe.

Speaker 10

But what's the who's Coming on

Speaker 15

to it, is it going to be

Speaker 10

Boost customers or are these new customers? And if it's a new customer, is this a new

Speaker 2

Consumer plan? Yes. So the beta test will be We have something called Project Genesis where people are signing up today to be online to be paid to customers. So it will come From it may be some of our employees, but it will be random in terms of it's basically set for people to give us feedback. We expect that the network is not going to work perfectly, so we're looking for people that To give us feedback and add improvement, we'll find areas.

Speaker 2

We have to tune the network, for example, or to so We need to know location and service, and so we'll just have people that are regular customers are using it that are willing to give us feedback. And so, that's how we'll start. We've been through that with when we've rolled out high definition television or DVRs or Any kind of new service, that's the approach that we've taken in and it works quite well. And it allows us to move pretty quickly to improve our network because it's not going to be perfect The first day.

Speaker 10

So it's a 90 day beta launching in September, I believe you said. And after that 90 days, it becomes a full fledged product, which is probably what, early next year?

Speaker 2

I mean, I think the way I'd say it is, if our normal expectation would be that, yes, we've turned into a full fledged Product early next year, right? And it's commercialized, but we'll have to see how our beta goes, right? I'm in a beta test now for a service of a different sort that I think I'm about 9 months So it depends on we don't think that that's where we are, but we have to get more data on the beta to know when We get a first impression and we want it to be a good first impression. Obviously, we have we do And as soon as we everything we learned in Vegas rolls directly into the other networks that we can line up at the same time. So The bottom line is that it's going to be a minimum of 90 days.

Speaker 2

And if we do our jobs correctly and our vendors do our jobs correctly, then we're going to be Ready for prime time at the 1st of the year.

Speaker 10

Great. Thanks.

Operator

We'll now take the Question from Mike Farrell of Multichannel News. Please go ahead.

Speaker 16

Hi, guys. Just a couple of quick things about Sinclair, just wondering if there's any way you can kind of comment on what you might think is the kind of sticking point And this whole thing, I mean, is it beyond just the they're asking for too much The money is regarding fees and there has been a lot of talk before because you haven't had your RSN for About 3 or 4 years that you were at a competitive advantage here and that maybe you guys would have been looking to To hear those channels and maybe they're pushing back on that and you probably won't be able to talk too much directly about that for this contract, but is hearing something that you're looking at When you do RSN negotiations going forward?

Speaker 2

Yes. I mean, it's at the end of the day, it's about money, it's about economics. That hasn't changed. That hasn't changed in any programming negotiation that I've ever been involved in, And one thing that we do differently is we have viewer metrics and We know what the cost to the viewer is and how and we have knowledge in how the customer values the channel. And if you get real time viewing data as we have for the last 7 or 8 years, you can be Pretty precise on what a channel is worth and that's the metric we use.

Speaker 2

If you're on the other side of it, Most programmers just have a budget and they have a number they gave Wall Street or whatever it is and they just say here's the number we want. And sometimes those are pretty far apart. But obviously the specific commercial terms of

Speaker 13

any negotiation aren't something we're going to talk about publicly. Operator, we have time for one more from the media.

Operator

Thank you. We'll take our final media question from John Santiapiano at Insight Towers. Please go ahead.

Speaker 17

Thanks for taking my call. This is the first time I've been on your call. Insight Towers, if you're familiar, is a daily newsletter that covers the wireless infrastructure business. And up to now, we really haven't covered DISH, but once you decided to build your own network, And we took an interest. But let me ask a broad question that doesn't necessarily apply to DISH, but I think has implications across the industry.

Speaker 17

For all the planning and studying that you've done in building the network, do

Speaker 3

you think it's feasible that

Speaker 17

a carrier Does not have to own its own infrastructure aside from, say, spectrum and software?

Speaker 2

I mean, Jackfone proved you didn't have to own anything. Very successful business. They bought for 1,000,000,000 of dollars or have 1,000,000,000 of dollars mark up. They were very successful with no infrastructure. And when you start looking at I think the world will change.

Speaker 2

I think the kind of architecture we're using, the fact that Technologies in terms of cloud and O RAN and virtualization are going to change things and We're open minded about it. I don't think I think we're open minded about the fact that things could change maybe in a way We can't predict today or maybe in a way that's not even beneficial to us, but our bet and our bet and everything we know that It's changing. It's very we're helping change it. And when you help change it, when you are part of the future, then You usually win. It's the people who fight the future that usually have problem and we're embracing the future And we think that gives us competitive advantage.

Speaker 17

Great. Thanks very much.

Speaker 13

All right. Thank you, operator. Thanks, everyone. Talk to you again next quarter.

Operator

That concludes today's call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
DISH Network Q2 2021
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