DISH Network Corporation (NASDAQ:DISH) Q1 2023 Earnings Call Transcript

DISH Network Corporation (NASDAQ:DISH) Q1 2023 Earnings Call Transcript May 8, 2023

Operator: Good day, and welcome to the DISH Network Corporation First Quarter 2023 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Tim Messner. Please go ahead.

Tim Messner: All right. Thanks, Rachel. Good morning, everyone. Thanks for joining us. On the call today, we have Charlie Ergen, our Chairman; Erik Carlson, our CEO; Paul Orban, our CFO. On the Wireless side, we have John Swieringa, President and CEO of Wireless; and Dave Mayo, EVP of Network Development. Before we start, I need to remind you of our safe harbor, as usual. During this call, we may make forward-looking statements, which are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results or from our forecast. We assume no responsibility for updating forward-looking statements. For more information on factors that may affect our future results, please refer to our SEC filings. And with that, I’d like to turn it over to Eric for opening remarks.

Erik Carlson: Thank you, Tim, and welcome, everyone, and thank you for being here today. I’m going to begin with a few brief comments before opening it up to your questions. As most of you are aware, it’s been a busy few months, some planned and some not. On our last earnings call, we announced we had experienced a network outage that affected our incident response and business continuity plans. Once we determined the outage was due to a cybersecurity incident, we promptly notified the appropriate law enforcement authorities. On February 28, we further disclosed that certain data had been extracted from our IT systems as part of the incident. Our investigation to the extent that the incident is now substantially complete, and we have determined that our customer databases were not accessed in this incident.

However, we have confirmed that certain employee-related records, and a limited number of other records containing personal information were among the data extracted. We’ve taken steps to protect the affected records and personal information and we have received confirmation that the extracted data has been deleted. While we have no evidence this data has been misused, we have started the process of notifying individuals whose data was extracted. We restored the systems affected by the cybersecurity incident, our websites, customer care functions, self-service applications and payment systems are operational and have been since March. Our customer care operations are up and running and service times have normalized. Our DISH TV, Sling TV, Boost Mobile and Wireless services all remained up and running throughout the duration of the incident.

We sincerely regret the inconvenience to our customers and team members, and certainly appreciate their patience while we work to restore systems and return our customer care operations to normal. Data security is extremely important to us. Our team, including third-party cybersecurity experts has been working to enhance our cyber defenses and overall security posture. We’ve upgraded our endpoint detection and response system and we’ve taken other measures to further secure our data and systems. We’ve also refined and will continuously improve our business continuity and system restoration processes. Now with respect to the financial impact of the incident, we disclosed in our 10-Q today that we incurred about $30 million of expenses, mainly related to remediation, additional customer support and consulting and IT costs.

This amount is included in cost of sales in our financial statements. We also disclosed that the outages related to the incident negatively impacted our disconnects and churn for DISH TV. The outages did not materially affect our Boost Mobile or Sling TV subscribers. During the incident, we undertook extensive efforts to support and protect our customers and employees and to further enhance our cybersecurity practices. Due to the commendable efforts by our team at DISH, we do not expect any additional material future costs or further impacts to our subscriber base from the incident. Look, I want to thank our customers, employees, partners, suppliers and vendors for their support, patience and understanding. And with that, I’m going to hand it back to the operator to start taking questions from the analyst community.

Operator, please open the phone lines.

Q&A Session

Operator: Thank you. Our first question comes from the line of David Barden with Bank of America Securities. Please go ahead.

Unidentified Participant: Hi. This is Marlene Piero (ph) on for David Barden at Bank of America Securities. I wanted to start off the questions regarding CapEx. Can you talk about the run rate CapEx post the June 2023 build-out? And then if possible, provide what potentially could be a new run rate when that run rate would start and then potentially when CapEx would ramp again heading into 25 for build-out requirements?

Paul Orban: This is Paul. I’ll jump in. That’s a good question. I think we’ll come in slightly lower than last year’s CapEx, but unlike last year, it will be front-end loaded with the dropping off after we hit our June milestones. But other than given future CapEx guidance, we’re not going to — we don’t provide that.

Unidentified Participant: Got it.

Charles Ergen: This is Charles I think, to add a little more color to that. I think that, obviously, we had two back-to-back milestones in ’22 and ’23 with the vast majority of the population. 70% of the population. So you can look for us to be able to — two things that we really would do from a CapEx perspective. One is, we can go — we certainly will be able to take a little bit of a pause in terms of some of the new markets, but we’ll continue some CapEx to densify the current markets that we have. Once we’re — with customers, you always find you have some gaps and things. So we will have some CapEx in current markets. But future markets, we’ll be able to take a bit of a pause until the — really the late 2024 or early 2025 time frame.

Unidentified Participant: Got it. And then as you build out the licenses to meet the mid-’23 requirements, is it possible to give any update on the build of the 600 megahertz that you might be building out concurrently with the other licenses?

Dave Mayo: So yeah, this is Dave Mayo. We’ve started construction on about 18,000 sites as of the end of the first quarter. It will take approximately 16,000 sites for us to meet the objective, and those sites will have to be fully fibered and powered and we’re well on our way to achieving that.

Charles Ergen: Yeah. I think on the second part of that question is the 700, the 700 megahertz is in those numbers, but additional — more — excuse me, 600 is in those numbers. But in terms of new cities for 600, that’s something that will take a kind of case-by-case basis as you find that you have more roaming charges than you could do by putting something on your own network, you’ll make that — you’ll build for success. Ultimately, you’ll build for the FCC.

Dave Mayo: We are well on our way

Charles Ergen: In addition to that.

Dave Mayo: Yeah. We’re well on our way to meeting the 70% with respect to the 600 megahertz licenses.

Unidentified Participant: Got it. Thank you. And then once if you do hit the mid-June requirements, is it possible to give us a sense of how much this will make in terms of the business operations and your go-to-market strategy? It was 20% last year, 70% this year. So just trying to think about the impact it could have on the business now with a much broader offering.

John Swieringa: Good morning. It’s John Swieringa. I’ll take that part of the question. So at the end of the first quarter, we’re now serving 70 million people with commercial bonder, DISH 5G network through Boost Mobile, that’s a little bit more than 50 cities. So as we build out 5G broadband, we then come in and optimize the network, densify it and move those markets towards commercial launch. So we would expect that, by the end of the year, we’ll be serving the majority of the U.S. population with commercial bonder (ph) and loading retail customers onto that network. We’re making steady progress with getting bonder (ph) and the SMB devices into our distribution in our supply chain and we expect that to pick up as the year continues.

Unidentified Participant: Got it. And then just turning to your cost of capital, just given the current cost of capital, can you walk us through maybe what the levers are that you could have pulled — put hold (ph) to address one upcoming maturities? And, two, other funding needs, including additional CapEx?

Charles Ergen: Hi. It’s Charlie. Well, obviously, we focus on our maturities with obviously the next one coming up in March of next year, so for $1 billion and that’s a convert. So we look at the levers there and say that needs to — that idea it would be equity or equity light in terms of nature because it’s kind of equity like today. And we think there’s a number of levers. Obviously, we’re liquidity poor in the sense that the market is probably, from a debt perspective, just really aren’t open to us and — but we’re asset rich. And so we look at all the different levers we have. I’m not going to give you those on the call. But over the years, we’ve been a good steward of capital and we think that there’s — there are many things that we can do and some that we can do to meet those maturities.

And so we’re focused on two things. One is the operations of our business. And obviously, to the extent that we operate our business efficiently, start putting people on our network and start competing a little bit stronger way with postpaid, which is a more profitable customer on our network, liquidity becomes a little bit easier to attack because people will see the growth and the profitability of what you’re doing. If you’re not able to do that, then that’s a different story. And obviously, we have to wait and see where the markets are next year. Even the government having a debt crisis. So obviously, there’s market — there is money available today out there in the marketplace. There is a fair amount of capital in the marketplace. We hope that doesn’t change.

But like we’re everybody else, we don’t control where the economy goes.

Unidentified Participant: Thank you. And then one final one, if I could. Can you provide any update on the 800 megahertz spectrum auction? Is there anything there that you could share in terms of timing or potentially what you’ll do with that?

Charles Ergen: I think I can repeat what the CEO of T-Mobile said, we did get an extension of 60 days on that and — at a minimum and we think it’s 600 — 800 megahertz is extremely important for us to be able to compete. And so, obviously, capital wise, we’re challenged to be able to do that transaction today, but we think that there’s ways that we can make that transaction happen. And we think it would be — from a competitive point of view that’s important low band, particularly uplink spectrum.

Unidentified Participant: Thanks. I’ll leave it there and pass it on. Thank you.

Operator: Our next question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Ric Prentiss: Thanks. Can you hear me okay?

Charles Ergen: We can, Rick.

Ric Prentiss: Okay. And I want to follow up on that, if I could. With the 800 megahertz spectrum, are you — is there any regulatory requirements to build that? Is it possible to resell it. Also, the spectrum securitization market typically what means at about 35%, 40% of value. Just wondering, if you could elaborate a little further on what the requirements are with that 800.

Charles Ergen: The requirement is to build it, but we have built it. So part of what Dave and his team have done is to build 800 megahertz. And it’s my understanding that T-Mobile for the — has turned that network down for the most part. There’s still some statutory requirements that they keep a couple of towers up, but they pretty much turned that network down. So we basically have a functioning 800 megahertz from a transmission point of view, it will be at 70% of the population in a few weeks. So we wouldn’t have a regulatory problem for meeting the commitment to — for build-out. If we don’t — if, for some reason we weren’t able to exercise the option, we would have a penalty of $72 million to T-Mobile. That’s the other piece of it.

Ric Prentiss: Were you able to take over any of those old Nextel antenna sites then to help with the transmission?

Charles Ergen: We did not take over — I don’t — Dave, did we take any?

Dave Mayo: We’ve taken some sites, Ric, but not a — I wouldn’t call it a significant number, but it’s not the Nextel radio gear that we would use. The 800 megahertz frequencies are in the radios that we’ve deployed — below band radios that we’ve deployed.

Charles Ergen: But to put that in perspective, if you were to do a new build of 800 megahertz, you’re talking several billion dollars to do it. If you were to go out on your own and build 800 megahertz to the extent that we have that would certainly be — that would potentially be a multibillion dollar bill. It’ll cost you as much to build as we’ve had to build for all our frequencies.

Ric Prentiss: Last one, Charlie…

Charles Ergen: I leave it up to the analyst on here to figure out if that’s positive or negative, but I think that’s a big positive for an asset we have that people just don’t recognize.

Ric Prentiss: Sure. Last one for me is on the private network side, I think you said several times that the best use of the network might be for wholesale business, enterprise kind of private network type applications. Update us as far as what you’re seeing in the marketplace? I know it’s a long sales cycle. How is the team performing there? What are the hurdles in pulling that revenue stream? And are there any opportunities for financing with potential strategic partners in that area?

Charles Ergen: So I think you’re talking about the enterprise side of the business?

Ric Prentiss: Exactly.

Charles Ergen: Yeah. We haven’t made substantial progress in terms of the enterprise business in terms of announcements. But behind the scenes, obviously, they are really — and you mentioned it a couple of ways that we would approach the market. One would be we’d actually build it out and lease it, which would take CapEx. That obviously is a bit less attractive to us. The second is people just pay for it from the get-go. So it’s cash positive from day one. And the third is that some of our partners in our build, whether it be Cisco or Dell or AWS come to mind, where they already have a big enterprise business that they just had our spectrum into their thinking about how they would design private networks. And at that point, we would be more of a wholesale provider of spectrum.

So any of those three things are possibilities of how you would go ahead and build an enterprise business. But it’s going to be a huge market for all the players. I just think we’re — I think we’re a little bit better positioned because I think the kind of network we have is the kind of network that companies when they really become omniscient about what a private network can do for you and what it should do for you, the architecture of what we have is just — without the legacy, it’s just a better — if you’re going to build it new that you should build it right.

Ric Prentiss: Any idea when we deliver it formally announced, so we can see it on our side of the fence?

Charles Ergen: Don’t have a time frame for you. I mean, we said before that we think you’ll see 2024 event for us.

Ric Prentiss: Thanks a lot guys.

Operator: The next question comes from the line of Michael Rollins with Citi. Please go ahead.

Michael Rollins: A couple of questions. The first one is, I was just reading the 10-Q this morning, there was a comment in there, the DISH plans to implement one or more of the following options: raise additional capital, pursue strategic transactions, and/or advance additional cost reduction initiatives. Just curious if you can unpack that a little bit more and what investors should expect over the next number of months from that?

Charles Ergen: Well, I mean, I think we’re good stewards of capital, and we obviously realized that we’re more of a — right now, we’re more of a liquidity story than anything in the market. And obviously, we have to address that. And I think there’s two ways, I don’t know what else I can say about the options out there. But obviously, we — the first thing we do is focus and I’ve really focused the team on executing to build the best network in the world and to enter the postpaid business, which is more profitable. And to make sure we get more devices that we can put on our network because that makes liquidity that much easier because, obviously, you’re proving you could compete. And we really haven’t proven that yet. So that’s kind of number one.

The second thing is that to meet our milestone with the FCC we just have to do that. And the third thing, which is a little — maybe a bit more nuanced for people on this call, but we’ve been on the TSA agreement with T-Mobile since the inception, which is basically our billing and provisioning and all our back-office functions. And we have to be off of that by the end of this quarter. So those are big things that we need to do. And if we do that, then — and we’re successful with that, then you get — you start to see the growth that everybody has been hoping for and expecting probably a year earlier than this. And then that obviously helps you in your liquidity side of it because you’re showing you could compete. John, there’s one other thing we need to this quarter, which we actually have done.

There’s two things. One was to get the cybersecurity behind us, and that was a massive effort. And I wouldn’t say it was a record time based on — but certainly, for us, it was, I think, right up there, the best-in-class in how you recover from an incident. And a lot of real solid effort on our team, and it gives you a lot of confidence going forward that your team can — when under pressure can operate. And the other part, maybe John can talk about.

John Swieringa: Well, there’s been a lot of focus on getting Boost Infinite ready to go, and we’ve made a lot of progress there. You’ll see us ramping up marketing later in the year as well as distribution. And one of the big things there that’s been a focus for us is bringing the iPhone to Boost Infinite, and you’ll see it come later this year, a big effort there across the teams to make sure we’re ready to go in postpaid.

Charles Ergen: Yeah. And I think that iPhone is important because it’s obviously a big part of the market share out there. And I think it would be very difficult to be successful in the postpaid business without it. And so we’re pleased that we have — that we will be able to bring the iPhone to the market actually within the next few months. So we’re — we’ve done a couple of things already this quarter that we needed to do, and we got two more things to do. And then I think we get to go a bit more on offense and it’s been a little bit frustrating to play defense as long as we have.

Michael Rollins: And then just shifting gears to the video side. I’d also read that you entered into a contract to build and launch another satellite. Can you share a little bit more details on the cost and just the thoughts around continuing with the satellite side if there is an opportunity, at some point, to maybe take these customers and leverage the Sling product and accelerate migration to streaming?

Erik Carlson: Yeah, Michael. This is Erik. I’ll take that and maybe Charlie has a few comments. But we did enter into an agreement to build what we would call EchoStar 25, so the 25th satellite and we entered into that agreement with Maxar. We fly Maxar satellites today and so we’re at a satellite that we’re familiar with. Obviously, as we’ve been talking about on the call for quite some time, from a DISH TV perspective, we’ve really been focused on adding profitable subscribers in rural America. And we’ve had some success there, and we’ve had decent success in retaining some of those customers. And so as our fleet continues to age, we’re in a position where we need to and add a satellite in order for us to continue to operate the service with appropriate backups within the latter half of this decade. And so that satellite is under construction now. We’re under contract with Maxar and we would expect to launch that somewhere in the neighborhood of 2026.

Charles Ergen: Thanks. The one thing I’d add is that we don’t think that the DBS business is going away. It’s still preferred choice for a lot of Americans in terms of an efficient way to watch TV. And obviously, there’s been — obviously, we’re able to add apps and things to the set-top-box for a seamless experience. So really good business going away. We just want to make sure that we have the right facilities in place for our customers. And to some extent, some of these satellites — you have to have a satellite for insurance policy insurance purposes, too. So that’s the reason.

Michael Rollins: Is there a rough cost that we should just keep in mind for this?

David Barden: We don’t disclose that. But if you take a look at the capital commitments footnote in the Q, it’s included in there. So…

Charles Ergen: So what is it. Don’t make them real. Just tell me what it is.

Dave Mayo: We don’t disclose. It’s including total capital and then it’s stable.

Michael Rollins: Thanks.

Operator: Our next question comes from the line of Walter Piecyk with LightShed. Please go ahead.

Walter Piecyk: Thanks. Charlie, when you look at the sub losses in DBS and Boost, what would they have been if you hadn’t had the cybersecurity event? And then similarly, to the extent there wasn’t collected revenue, how do you account for that? Is it show up in ARPU and then like a receivable that gets written off as you just not reported in revenue? And then kind of a third part to the same question, which is, what’s been the impact? I know you said as of March, it’s been — the systems have been repaired. But given the impact it had on customers, what have you seen in April and early May in terms of any lingering impacts to subscriber churn or usage or anything?

Charles Ergen: All right. Let’s unpack that. Probably a couple of different people here to answer that. I’ll take the Boost really quick. Not a material impact on Boost Mobile. We’re in a situation, Walter, as you might expect, where we realize we’re entering the postpaid business now as we bring up our network, and a postpaid customer is just a lot more profitable than prepaid customer. So if you have limited capital, you’re going to spend your capital on the most profitable customers. And so we haven’t been perhaps as aggressive in Boost as just knowing that we get better things coming, better economics coming. So $1 spent today that makes a small return, you’re better off waiting until next quarter to spend that money where you have a much better return, at least that’s our theory.

And then for Boost Mobile, we also know that there’s another benefit of putting those people on our network, and that’s starting to happen now, too. So that’s — I wouldn’t read too much into Boost. As it relates to the accounting question about revenue, you may take that. Can you take that, Paul.

Paul Orban: I’ll jump in, and this is Paul. The revenue impact was really immaterial. So — and you are seeing it the immaterial amount show up in ARPU to answer your question.

Walter Piecyk: How is that possible? Because I mean, if you weren’t able to collect revenue from customers and there’s reports that people had to like go to stores and bring cash to stores, how is that possible? Like, did you go back and like people that wouldn’t able to collect when you did collect?

Charles Ergen: A lot of that — a lot of the press stuff is exaggerated. It’s just really hard to — it’s really hard to comment on every exaggeration that’s out there. But in case, I think the more cases maybe you didn’t collect a late fee or something like that. I think there’s a little bit of that. Maybe, Paul, you can maybe…

Paul Orban: Yeah. No, we’re up and running, collecting all amounts by the end of the quarter. So that did get all caught up. So you would have seen it, to answer your specific question, I would have been sitting in AR. But as you can see, our AR balances are down from year end.

Charles Ergen: Well, there might — we might have waived the late fee. You’re probably a little down on the margin because you waived the late fee. Are you extended somebody three more days than you would have because you knew you’d be able to collect it — there’s some stuff around the margin there, Walt, but nothing material. The third part of the question…

Erik Carlson: I mean I think, Walt, I mean, this is Eric. Just to add a little bit more color. I mean, obviously, my opening statement, we talked a little bit about it, but on the DISH side of the business, that’s where most of the impact was really felt, right? The legacy I want to explain why that was. Yes. Legacy infrastructure — as you can imagine, we’ve talked about it here, we’ve definitely modernized kind of our tools and staff associated with Sling. Obviously, we’re on a TSA for some of the business through T-Mobile for Boost. And then obviously, we’re building out our new digital operator platform for our new Boost and Boost Infinite businesses. And so the modern architecture really wasn’t as impacted as much, right?

We have different principles, about DISH and the legacy side of the business, that’s where the impact happened. And, quite frankly, we’ve been giving award-winning customer service. We’ve talked about our J.D. Power awards here, which are five in a row, and we’re quite proud of them. And so, quite frankly, we just didn’t live up to the expectation. And so there were long hold times, and we weren’t able to process payments in DISH. I mean, obviously, we’re in a postpaid billing cycle. And so, as Paul mentioned, we caught up on some of that. So there might have been a late fee here or there, which benefits the customer. But in some cases, obviously, we weren’t able to answer a phone call or answer a customer issue where they had a technical issue and they may have disconnected.

And you’re seeing that in the Q1 numbers. But essentially, we put that past us. Like I said in the opening remarks, Boost and Sling, not really materially affected DISH on the legacy side of the business is where we had the impact, and that’s generally behind us now.

Charles Ergen: Yeah. Just because I know the way you got way maybe you guys — to answer your question, almost two things that happened on the DBS side of the business, which is; 1 is we had elevated churn — but the second thing is we didn’t market. I mean we didn’t make sense to go out and try to get — so we had lower gross adds, and we had higher churn. We would expect, obviously, that we return with the outage behind us.

Paul Orban: More normal run rate.

Charles Ergen: To more normal run rates.

Walter Piecyk: And that’s what you’ve seen thus far in the first month of the quarter that I don’t think.

Charles Ergen: Thanks for asking the question again. But we don’t give guidance, but I think we expect that we would return to operation. How about that?

Walter Piecyk: That’s fine. So let me just do one different one, if you don’t mind. You hit the 70% or whatever it is, I don’t think the FCC has an obligation to do anything, but clearly, it’s going to help you in terms of raising capital and becoming the fourth competitor of the market, . Like have they given you any indication that when you’re done and you submit whatever you got to submit in terms of engineering studies, that they’re going to give you some formal stamp? Or is it going to be normal standard — or normal procedure, which is like they don’t really have to say anything?

Charles Ergen: Yeah. I think — it would be very helpful if they would give some indication to the market. They did not do that with the 20%. It would be helpful. It’s one of the things we don’t control, which is the regulation and the government and so forth. It’s probably one of the more frustrating things because I think everything that we can control, we just worked really, really hard to be successful at, and we’ve done that for 40-something years, right? But the — from a regulatory point of view, as an example, my congratulations to SpaceX, but there was a 12 gigahertz study that was out there that we came on the short end of that stick. SpaceX was allocated the spectrum, and we were not able to — even though we paid an option for that spectrum, we weren’t able to access that spectrum for mobility.

So it’s — we’re a bit of a losing streak there, but we’ve had — we’ve been on both sides of that. And I hope that It’d be helpful, but I don’t think we should expect that the FCC will say anything in part because it will take — they’re going to have to do their study to verify our team will certify under penalties of perjury that we’ve made it, but they have to certify that themselves. So — which they should do. They’re going to it will take them some time. So I think — from an expectation point of view, I don’t think anybody should expect that the FCC is going to — sometime in 2023 is going to say, DISH has made their build-out requirement, but we will be certified to the extent we do, we will certify that under . So take that…

Walter Piecyk: Charles, does that all inhibit your ability to reduce CapEx and to the extent that, let’s say, hey, you believe you hit the 70%. You pull back on CapEx and then T-Mobile or whatever and their reg people are like, look at Charlie’s cutting CapEx and trying get the FCC to hold your feet further to the fire or do you think these are two different things, and you shouldn’t have to continue to spend, which is unrelated to hitting that milestone with the FCC?

Charles Ergen: No, I don’t think we’re — first of all, you can expect our competition to always go to the FCC. We were horders, we were speculators, none of that was true. But when you’ve got three or four companies coming in and saying the same thing, that punch is — we don’t quite punch above our weight versus three or four people at the FCC. So you can expect that there will certainly be a lot of — you’re going to hear about OpenRAN — and you get — three years ago, OpenRAN didn’t work. And then, well, maybe it or then it was like a dish maybe it worked dish never make it work and now it will be well. Well, maybe DISH made it work, but it’s still a decade away. So you’re always going to have that noise from people who aren’t doing it.

But I don’t think that we’re required to continue to spend on CapEx once we believe we’ve made our milestone with the exception of the third milestone, which is we’ll have to continue, which we will, a little bit, continue to ramp up in late ’24 and early ’25.

Walter Piecyk: Understood. Thank you.

Operator: Our next question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.

Douglas Mitchelson: Thanks so much. I think two questions. I’m curious if you’re willing to share what percent or maybe ballpark, what percent of Boost traffic is running on your own network at this point versus T-Mobile or AT&T’s network. And, Charlie, we booked around it a little bit, so I’m trying to figure out how to ask the question in the most constructive way. But my experience with you historically has been pretty conservative approach to operating the company. But the markets obviously think you’re flying pretty close to the sun on your capital structure. And I guess I’m just wondering if you feel like you’re in a pretty conservative position, or if you sort of sympathize with the market’s views that things are pretty tight here? Thanks.

Charles Ergen: Yeah. I would say that I do think we operate pretty conservatively, but I do think the markets had historical rate changes in the last year. So that certainly has pushed us more into — that has pushed us closer to the sun, but not to the sun. So we haven’t — look, we have a narrow window of opportunity here. We have a narrow window to perform and execute and address our capital structure. So we have to do a lot of things right. We have a small margin of error, but it’s all doable. And it’s not a place that’s unfamiliar to us, right? So we started in 1980, I think mortgages were 15%. I mean the capital markets were much worse than they are today. We started the business from scratch with no money. So — or very little capital.

So we had a merger denied with DIRECTV by the just department. We were in — and we had a very narrow window back then. So we’ve been there before. And again, the things that would worry me would be, do the markets get worse, and where are they next year? We don’t know that for sure. And obviously, from a regulatory point of view, there’s obviously a lot of things, from a regulatory point of view, that we have or continue to have in front of the regulators. And how do they rule on those things. We haven’t — we didn’t do very well on the CDMA shut off, which was pretty bad. We haven’t done — we didn’t do very well in the DE litigation. We haven’t done very well on some things, but my experience is you don’t — you win some, you lose some. We’ve been on both sides of it, but they lose — you don’t have a losing street forever.

And so I’m hopeful that, that lease will be a positive, but we’ll see. But again, we focus on the window of opportunity we have to control the things that we can control. And we have a good — we have a path. And it’s not evident to the people on this call, but we have a path, and we have to execute on that and hope that nothing gets any worse in the marketplace.

Douglas Mitchelson: Got it. And then on Boost traffic?

Charles Ergen: We don’t disclose that, but it’s not a material amount yet, in part because we only have five — we only have five — maybe John can talk about it, but we have — we only have five handsets now that have Band 70, which is a major part of our spectrum.

John Swieringa: Yeah. As Charlie says, it is early days. We’re going to continue to have a growing portfolio of products. They’re going to be available for Boost Mobile and Boost Infinite on our own network, including iPhone. We’re really just getting ready to support that business from a supply chain perspective. Networks up and rate a role in those markets, and we’re going to be loading customers. And then once we clear the 70%, and we’re on track to do that, we’ll then start optimizing those markets and loading on our network there as well. So we’re ramping this year.

Charles Ergen: And we should make one distinction. Realize one of the things that we’ve done has built a network with voice over new radio. So we’re the only person in the United States really in the world other than Chinese partly that does that at scale. So that’s the new way to do voice. And our goal is to have the vast majority of — have the majority of the population be able to utilize our network with by year end. And obviously, to the extent that you do that, then our next step is the majority of all your traffic is going on your network. So that gives you a feel for where we think it goes. But we’re not there yet.

Douglas Mitchelson: Great. Thanks so much.

Operator: Our next question comes from the line of Jonathan Chaplin with New Street. Please go ahead.

Jonathan Chaplin: Thank you very much. A couple more questions on the 800 megahertz auction. So based on the value ascribed to the auction, it looks like the underlying spectrum is being valued at about $5.3 billion. Does that value assume like a certain exercise of the option or is it still probability weighted? And if not, what would the value of the spectrum can be if it was certain?

Paul Orban: This is Paul. Yes, it’s still a probability weighted at this point in time. They change that you saw quarter-over-quarter from year-end and the valuation is really just the time value of money impact.

Jonathan Chaplin: Got it. How much…

Charles Ergen: And we don’t give — we’re not giving the amount non-probability.

Jonathan Chaplin: Correct. Can you give us what the sort of the reference transaction or the reference value that establishes establish a $5.3 billion value?

Charles Ergen: We look at other auctions and so forth out there. We won’t give you the numbers specifically, but that data is out there. And I’m sure you know who you can compare it to.

Jonathan Chaplin: Got it. Okay. So it would be something like the T-Mobile’s purchase from Colombia Capital or something like that for 600 megahertz that you might look at?

Charles Ergen: It could be something like that.

Jonathan Chaplin: Got it. And then the — can you tell us when the exercise data has been extended till? Is that July 1 or is it September 1? And do you still have to notify the FCC of your intention by June 1?

Charles Ergen: It’s a little complicated because they haven’t ruled on the — actually they haven’t ruled on the extension request, but the exercise data, as I understand is July 1.

Jonathan Chaplin: July 1. Got it.

Charles Ergen: We’re still awaiting the formal really.

Jonathan Chaplin: And then one last one on the 12 gigahertz it looks like there’s a prospect that you might use that for fixed wireless broadband given that you can’t use it for mobile use. Can you give us some more context for your thoughts around that?

Charles Ergen: Well, I mean, I think for us, for us, mobility is really the key use, and we’re disappointed that we weren’t able — we believe that we could have used it on a non-interim with mobility. But look, the engineers are good at the FCC, and I respect their decision because they had enough information. They did their own analysis. So I think the FCC is opening comments on the 13.2 to 13.75 frequency. And again, given that we paid at auction, given that we believe mobility is imperative for us to compete, that would be — you can imagine that, that would be another place to go, but we’ll just have to wait and see.

Jonathan Chaplin: Got it. Thanks very much, guys. I appreciate it.

Operator: Our next question comes from the line of Kannan Venkateshwar with Barclays. Please go ahead.

Kannan Venkateshwar: Thank you. Firstly, in the 600 megahertz spectrum, I just wanted to clarify something. I think last week, you guys — or maybe the week before there was an application to cancel some of these licenses. I just wanted to get some clarity on why cancel instead of just waiting out the license period? And then secondly, when we think about the 60-day extension for the 800 megahertz spectrum, is that based on some concrete discussions you may be having with maybe potential partners in terms of funding it or is this just an extension of an option to see what else is out there that you can go out and explore? That would be helpful. And I have one follow-up on funding.

Charles Ergen: Yeah. On 800 megahertz I just don’t want to comment on strategically where we are there other than we believe it’s spectrum that we need to compete, and we think it’s valuable spectrum, obviously. On the cancellation of 600 megahertz, we made a mistake. So when you go to the SEC website, we had a lease with T-Mobile for some markets. And that lease, we can’t — that lease was up by the terms of the lease. So we went in to cancel the lease, then it advertently canceled the license. So that was a footfall on our part. But again, we believe that, that will — that the FCC will have to put that on plug notice and to not cancel the lease, and we don’t think that’s going to be an issue.

Kannan Venkateshwar: Okay. And does this trip anything on the secured debt because I think 600 is the collateral for that?

Charles Ergen: The answer is no because I believe the mistake is going to get rectified.

Kannan Venkateshwar: Okay. All right. And then on funding, I just wanted to — I mean, you have maturities, which obviously are the evident need as you go into next year. But then if you really want to be aggressive competitively, I mean this is a working capital-heavy business. So you potentially need capital for that as well. And so when we think about the scale of funding, you might be — you might go to market for, how should we think about that as you go into next year? Is that mainly to fund the debt maturities early in the year or might you be proactive and maybe access the market for more than just a maturity amount?

Charles Ergen: I mean, look, I guess when we look at it, you — the first priority is to fund the debt. So that’s — and then we’ll be opportunistic beyond that and creative. I mean I think, again, that’s why management gets paid is to make sure that you can navigate when you have narrow windows and you can navigate those narrow windows. And teams that are really good, they do really well when they have to focus. And I’m quietly confident here that this team can navigate that, right? And we just have to focus on the things we control and do that. The way I’d say it is, I think the market looks at us is half empty, maybe even 90% empty today, right? And I think the truth is that the glass is more than half full, right? This is a company that’s been around — we’re in our 43rd year.

So we didn’t start yesterday. So we’ve had a lot of experience in similar situations. It’s a seasoned management team. We’re not starting from scratch here. So we know how to work together. We know how to assess risk, right? And we’re asset rich. So, arguably, we have spent $34 billion for spectrum that has gone up in value. We’re building a world-class network. There is not another network in the world that is as advanced as ours. So you’re — and again, I’ve traveled the world. There is not another network as advanced as ours, and it’s up and operating in 50 markets today and working. So cloud-based, OpenRAN with voice over new radio, it just doesn’t exist. So we have some advantages in the architecture. And I think 1 thing people don’t — and we’re getting a little lucky which is nice, but you read a lot about AI.

And AI, the most needs data. And the most data-rich place is a wireless network. And if you want to access data, you better be in the cloud and you better have a very sophisticated network that works more like an IT network. In other words, we’ve built an IT network that kind of operates as a telco. Our competition is a telco that has to start operating like an IT network. That’s a tough transition for them. They’ll get there. It’s going to take a decade to do it, but we’re already there. And so if you think — if you think AI is going to have an impact, it’s not going to have — probably the first place you’re going to see it is when you’re talking to your phone because you’re just asking the questions. And now you have access to the world’s information at your fingertips in a way that you didn’t have before, but you need a network to be able to do that.

So we have a lot of things going on from a half-full perspective that, from a short-term Wall Street perspective, obviously, it’s probably not that relevant. But when you look at strategy and your long-term investor and your long term — we think that, that — we think we — that the killer application ultimately will be AI and all that goes with it, and we’re fortunate that we’ve designed the network to take advantage of that.

Kannan Venkateshwar: Okay.

Tim Messner: Rachel, this is Tim. We’ll take one final analyst question here before we go on to the media.

Operator: Thank you. We will now take our final question from the analyst community. And our question comes from Craig Moffett with SVB MoffettNathanson. Please go ahead.

Craig Moffett: Yeah. Hi. Thank you. Charlie, I want to go back to something you said earlier in the Q&A session, where you said the debt markets look like they were effectively closed and — but you are asset rich. Am I correct in reading that as you’re saying that you would be open to selling some portion of your spectrum as a way to finance your build? And if so, are you referring to the 800 if you exercise the option or are there other spectrum bands that you think of as less critical for your build that you would be willing to consider an offer for if they were available? And I mean I guess I’m also thinking you could presumably use spectrum as collateral, but it sounds like since you already have done that, that you were saying that, that’s not sufficient in saying the debt markets are closed. Am I reading that correctly?

Charles Ergen: Well, I mean, I think that our debt is trading for literally 20% returns, right, yield to maturity. So it doesn’t bode well for our ability to access in a competitive way to the debt markets. That could change, but that’s the way it is today. So when you look at the financing need to do for debt repayment and growing our business, I think there’s levers that we have. Obviously, we have assets. Obviously, anything is on the table when it comes to — as a business person to get to where you want to get to run a successful business. But we’re certainly not going to go into strategies and all the levers that we would pull there. I just think that it’s — I think there’s more opportunity for us than people realize, let’s put it that way.

Craig Moffett: All right. Thank you.

Charles Ergen: Yeah. Thanks.

Operator: Next we will now take questions from members of media. And we will take our question from the line of Scott Moritz with Bloomberg News. Please go ahead.

Scott Moritz: Yeah. Hi. It is Scott, Bloomberg News. A question about Boost. The — it sounds like there’s a ramping going on towards possible launch. You have the iPhone coming in a few months. Curious about the voice over new network and know what that’s the gating factor here. But is there a date on the calendar where you would call with a full launch?

John Swieringa: Hey, Scott. It’s John. So I’m going to interpret your question as meaning Boost Infinite, which would be our postpaid offering.

Scott Moritz: Yes.

John Swieringa: So we’re bringing iPhone to Boost Infinite, and we’ll be looking to ramp our marketing distribution opportunities in the back half of the year. We certainly do have our own network on the way. We’ve got sort of more progress there with Boost Mobile as of today. But we’re looking to launch devices and competitive products with Boost Infinite on our own network as well.

Charles Ergen: And realize the iPhone is on Boost Mobile prepaid today. It’s just coming to postpaid.

Scott Moritz: And did you have a date for launch?

John Swieringa: We’re not going to share a date right now. I mean, we – I mean, obviously, we are not willing to broadcast our strategy to our competition, but you’ll see us significantly ramp activity in the back half of the year.

Operator: Our next question comes from the line of Paul Kirby with TR Daily. Please go ahead.

Paul Kirby: Yeah. This is – Hi. Thanks for taking my call. Charlie, you said you’re disappointed at the — what the FCC plan to do in the 12.2 gigahertz, are you surprised that they rejected the technical studies submitted by the folks who wanted to open it up for 5G?

Charles Ergen: Well, I mean, I think having been on the inside to talk with staff and look at engineering studies, I think — look, I think they did a thorough job. I trust them to do a thorough job. Obviously, the — and SpaceX is doing a good job out there. So all I can do is congratulate them. We believe that it could have — we believe our studies were valid, but we didn’t win on that one. So it’s just disappointing, but it’s not — I don’t think it — I would call it surprising. And again, we’ll look and see where they go with other frequencies and other things. But that was something that, that and also getting — we haven’t been able to get the CBRS, higher power CBRS for study. That would be the other thing that we’re a little surprised that, that hasn’t — given that some of the commissioners have publicly talked about support for that to take a look at CBRS and trying to harmonize our C-band in the United States because we’re awkward (ph) versus the rest of the world.

As a country, we have to compete. We’re the only country that’s got this low-band kind of awkward CBRS in the middle of a C-band spectrum band that’s standardized around the world. So it’s — I think it’s imperative that we take a look at that and get all the — I don’t know what the decision should be in terms of if they should do something or nothing, but I think it’s imperative that the FCC take a look at that so that we can make the best — make the best decisions in the country, and we’ll continue to fight for that.

Paul Kirby: And just to clarify, when you talked earlier about the other band they’re looking at, you met the 12.7 to 13.25, right?

Charles Ergen: Yes, 12.7% to 13 — I might have said it wrong, but 12.7 million to 13.25 to the credit. The FCC is looking at perhaps opening that band up. Again, that is a band that could be mobility. And given the 12-gig decision and given the fact that we paid for spectrum at 12-gig, two ways, we paid for DBS and we acquired the spectrum from News Corp. That was auctioned, and we also paid for auction of the terrestrial rights to the 12-gig frequency. By contract, SpaceX didn’t pay anything for spectrum. So it’s a funny sort of situation where you pay for spectrum and somebody who hasn’t paid for it gets a priority. So — but they do a good job with it. So the FCC has got to look at the big picture and look at the public interest. And again, I think all I can say is I respect their decision, and it looks to me like they did a thorough analysis of that. And we’re just disappointed, but that it is what it is.

Paul Kirby: Okay. Thank you.

Tim Messner: All right, everyone, I think that’s it for today. Thanks for joining. Thanks for your questions, and we’ll see you back here in roughly three months.

Operator: This concludes today’s call. Thank you for your participation, and you may now disconnect.