DISH Network Corporation (NASDAQ:DISH) Q2 2022 Earnings Conference Call August 3, 2022 12:00 PM ET
Company Participants
Tim Messner – Executive Vice President & General Counsel
Charlie Ergen – Chairman
Erik Carlson – Chief Executive Officer
Paul Orban – Chief Financial Officer
Dave Mayo – Executive Vice President-Network Development
Stephen Stokols – Executive Vice President-Boost Mobile
John Swieringa – President and Chief Operating Officer-Wireless
Conference Call Participants
Phil Cusick – JPMorgan
John Hodulik – UBS
Doug Mitchelson – Credit Suisse
David Barden – Bank of America
Jonathan Chaplin – New Street
Walter Piecyk – LightShed
Ric Prentiss – Raymond James
Craig Moffett – MoffettNathanson
Michael Rollins – Citi
Mike Dano – Light Reading
Scott Moritz – Bloomberg
Andrew Fitzgerald – WSJ
Operator
Good day and welcome to the DISH Network Corporation’s Q2 2022 Earnings 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, Christina. Good morning everyone and thanks for joining us. We’re joined on the call this morning by Charlie Ergen, our Chairman; Erik Carlson, our CEO; Paul Orban, our CFO; Tom Cullen, EVP of Corporate Development; Dave Mayo, EVP of Network Development; Stephen Stokols, EVP of Boost Mobile; and John Swieringa, President and COO of Wireless.
Before we start, our safe harbors. During this call, we may make forward-looking statements which are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results or from our forecast. We assume no responsibility for updating forward-looking statements. For more information on factors that may affect future results, please refer to our SEC filings. We filed an application to potentially participate as a bidder in SEC Auction 108 because of the SEC’s anti-collusion rules we’re not able to discuss that auction and we won’t be answering any questions on it during the call today. We don’t have opening remarks this morning, so we’ll go straight to questions.
Christina, let’s start with the analyst. Thank you.
Question-and-Answer Session
Operator
And we will now take questions from the analyst community. [Operator Instructions] We will take our first question from Phil Cusick with JPMorgan.
Phil Cusick
Hi, thanks guys. I wonder if you can talk about, Charlie, funding requirements. You have a maturity in March and some others in 2024 while your CapEx is still ramping. Can you talk about that? Can you give us a little bit of an overview as well on the credit back in the first quarter – from the first quarter on the T-Mobile contract? And then just talk about the competitive environment in wireless overall.
Erik Carlson
Would you?
Charlie Ergen
I didn’t hear the third question. Did you please repeat it?
Erik Carlson
No, Phil, we didn’t get that third question. Could you repeat it?
Charlie Ergen
All right. We’ll answer the to
Phil Cusick
Competitive environment.
Charlie Ergen
Well, yes, I’ll take the first part and then – and Paul will take the second part. So, obviously, we’ve disclosed the last couple quarters that we will need to raise capital. We have $1.5 billion of debt come and due in March of next year. So obviously that’s a focus for ours. And we believe that the markets while they’re choppy are available to us today obviously more expensive than we’d like today. We’ll continue to monitor that as we have over the years for the right spot and the right strategy for that. On the accounting question, Paul?
Paul Orban
Yes, sure. A good question there. We did book the Q1 impacts from the new T-Mobile deal into Q2. The deal was effective 1/2022. So you see about a little over five months of that. If you look at the six months run rate, that’s disclosed in the Q that will give you a sense of what that may look like. Do keep in mind though that the Q2 numbers are – for the six months do have a negative impact of the CDMA migration costs in it.
Phil Cusick
Paul, can you quantify it all for us what that number might look like going forward just to help us…
Paul Orban
Well, we don’t disclose that.
Charlie Ergen
Oh, we don’t disclose…
Erik Carlson
We don’t disclose that.
Charlie Ergen
Okay. But if you look at the six month run rate…
Phil Cusick
If I can…
Charlie Ergen
Yes, what was the third question? I didn’t quite hear it.
Phil Cusick
I’m sorry. I – just trying to think about how you think about the competitive environment in wireless, whether that’s the prepaid business you’ve been in for a long time or the postpaid business you’re evolving into? And then any update on the handsets that are supposed to be coming in October to ramp up your…
Charlie Ergen
Okay. Okay. Thanks. The competitive environment is kind of interesting. The certainly one of our focuses is the prepaid business is a low margin business with higher churn. As a financial analyst, the former financial analyst always scratched my head a little bit of how the industry actually gives somebody without credit many times a better deal than somebody with credit. We’re probably the only country in the world where prepaid is actually the less expensive than postpaid. And I think that that’s a place that that as people – as inflation and people look and start thinking about raising prices, which we’ve seen a little bit in the industry, that’s a place that probably could be a bit more profitable than it is and I think people will look at that. The – we’re excited about – the competitive environment is good.
I mean, the big picture is phones necessity and your wireless connections necessity. So it’s after food and water and shelter, it’s just about next in line. So it’s a – and we’re the fourth biggest player there and we’re the ones that have the room to grow. So we like that part of the business. Now we’ve got a – many things we have to do to get there, but we’ve done a lot of them already. And we actually have a really good quarter in terms of the things that we accomplished that we needed to on our side to get to that spot. One of our problems as you correctly point out has been that we haven’t had devices with our Band 70 which is unique to DISH in those devices. And those devices – and John could talk in more detail about this, but for purpose of this answer those devices start to show up in the third quarter and every – every quarter we get more devices, which help us to be more competitive there.
Phil Cusick
Thanks, Charlie.
Operator
And we’ll take our next question from John Hodulik with UBS.
John Hodulik
Great, thanks. You guys signed a new MVNO agreement with T-Mobile in the quarter. Could you just talk about that in the sort of contrast that with the existing agreement you had with AT&T? And how that may change – how you guys go to market either from a network standpoint or a pricing standpoint? And so that’s number one. And then any other color you can give us on the launch of Boost Infinite and your strategy on the postpaid side later this fall. Thanks.
Erik Carlson
I’ll let Stephen talk about the second question. The first question is first let’s look at the big picture. We had an unhealthy relationship with T-Mobile. For them they’re under consent decree from justice department, which doesn’t work for them very well. And so, the good news, I think, for both companies was that – and we obviously had a big controversy and CDMA shutoff, which was very negative for Dish through the end of this quarter, end of last quarter, that was a bigger negative than the market property appreciated. And we certainly did our best to warn people about that and try to lessen the effect of that. But we were fairly unsuccessful in that. Regulators pretty much did not take a position other than California. So that was disappointing. But we’re through that now. And we were able to solidify our relationship with T-Mobile.
As people in this call know, they universally are claimed to have the best 5G network in the United States. But the reality of is that AT&T has more coverage than does T-Mobile. So in a funny sort of way, we have the best of both worlds to use both our partners, both of our MVNO partners in different ways and to arbitrage that in different ways the contracts have different sets of economics in some cases. And so, there are – when we have a customer the first place we’re going to want to put them is our in our network, but then depending on the customer, there may be – we have a little bit of machine learning that says, let’s put this person on T-Mobile or AT&T that’s the right place for them. Or perhaps as customers are going to be roaming and based on roaming, this is where we might put them.
So, it’s a factor that’s not understood by the Street. Obviously we can’t disclose our contracts. But strategically we’re in an interesting position there with owner economics coming and a really good coverage company with a really good network that is consistent and has broad coverage. And the up and coming network, which is not enough and coming network anymore, but a technically elite network in 5G, in T-Mobile.
So I think we’re in a position to succeed here.
With that, I’ll turn it over to Stephen on the Boost Infinite question.
Stephen Stokols
So, Infinite, we’re not going to talk too much about what we’re specifically doing on the proposition side today, more will come out later in the year. But it is exciting. I mean, it’s a big focus, it’s more aggressive expansion into postpaid for us.
Two points I will highlight. Obviously this opportunity to come in fresh and do things in a slightly different way and in a more aggressive way. And two it’s on our own platform. So unlike what we’ve been doing with Boost, we’re tied to a vesicle T-Mobile platform with limited capabilities, since the angle is around our waist we are now operating on our own platform to launch our own digital centric platform that allows to far more aggressive, nimble, and flexible was translates into competitiveness as well.
So Boost Infinite is a big focus internally. There will be more coming out on that later in the year. And then Charlie alluded to some of the network economics that allow us to be also competitive as well.
Charlie Ergen
And I want to just highlight the economics. I mean, the postpaid is, you guys always put a bigger value correctly on postpaid, but you are talking about 1% churn versus 4% churn in prepaid. Higher ARPUs, it’s materially different in terms of economics. So we haven’t been able to play in the red zone part of the field to score touchdowns. In prepaid, you are lucky if you kick a field goal once in a while. And I think we’re going to be able to start scoring some touchdowns when it comes to economics of that.
John Hodulik
Got it. Thanks Charlie.
Operator
And we’ll go to our next question from Doug Mitchelson with Credit Suisse.
Doug Mitchelson
Thanks so much. I’ve got a few, hopefully brief questions. I’ll just ask him one at a time. I mean, is Charlie and Dave, how is the network build going? And how well is the network working Charlie?
Dave Mayo
So build is going really well. I no doubt saw that we completed our 20% milestone on June 14. And we’re marching on towards the milestone for the middle of 2023. We’re at about 5,000 sites deployed and on air, and we’re on a pace of about a 1,000 sites a month, and we’ll continue on that rate for the balance of the year and into the next year.
In terms of quality, I think, we’re pretty happy with the data experience. I think we’ve continued to have work to do on the volunteer experience, as does the rest of the industry. We’re not unique in that respect.
I reflect back to VoLTE launches, it’s been close to a decade ago now, and it took some time to get VoLTE working, you so that you could use it as a standalone service. And even with VoLTE, the carriers had a circuit-switch fallback. And we don’t have that, but we will have a VoNR network that is standalone and will operate well. And we’ll launch VoNR when we have that capability fully optimized, and available and working really well for our customers.
We’ve got the, the MVNO deals to support us until we get to that point.
Charlie Ergen
Yes. I’ll just add some color to what Dave said. So, our milestone for next year is 15,000 towers. So, we’re a third of the way there, we’ll be two thirds of the way there, by the end of the year, we’re on a cadence to do that. You get a lot of economies to scale when you can actually have a cadence like we do on that. We had a strategic decision to decide on voice, whether we put a bunch of legacy in there that we’re going to live with forever, or just go with the better voice, the better voice of VoNR, that that has been a unexpected negative in the sense that that has taken longer, that many people in industry expected to have VoNR in their systems by the beginning of this year.
T-Mobile and Dish are the farthest along T-Mobile in two markets today, obviously we’re in over 100 markets with it. But it is not good enough in my opinion for the customer experience that you have to have in voice. And so it is hampering our ability to put users on a network, unless they are data users.
So, we’re a lot more of a data-centric network. And while we have voice, we go through some extra steps to make that work. And it’s a little bit clunky. And we’re looking forward to doing that.
On the positive side, real positive side, while our vendors are helping us with VoNR, the addition of Samsung as a vendor in the quarter with true O-RAN was kind of a threefer for us.
First of all, they gave us a second supply of radio. So we weren’t single source to Fujitsu. Second is, they have devices. They are a large device manufacturer. And so they are very attuned and very attuned to VoNR and Band 70 that helps us with probably the two biggest negatives we have, which is how do you get the bands and how do you get VoNR to work. So you’ve got a real technology leader that’s taken some of the system integration off our shoulders. They’re just better at it on those particular issues than we are, along with Mavenir. And those guys are – those companies are doing great work to solidify those parts of our business. So that was a huge positive for us that probably not appreciated by The Street.
Doug Mitchelson
And on that Band 70, I think at the Analyst Day, there’s some discussion that the same antenna form factor that’s already in phones for adjacent bands could add Band 70 at no additional input cost for the phone manufacturers. So that would lead to a very broad set of handset availability for DISH. Is that effectively, Charlie or John, the right way to think about, you talked about Samsung helping you with Band 70? Is Band 70 going to effectively be in most phones in relatively short order, because doesn’t cost more to put it in.
John Swieringa
It’s John, so I mean, we talked about this a little bit on the last quarterly call. I’d say we’re on track to get Band 70 into the devices with a broad range of manufacturers. Charlie mentioned we’d start receiving devices in Q3. We’ll start distributing them in the fourth quarter broadly across all of our markets.
But certainly as Dave said, is we get VoNR tuned, up and running in each market. We’ll focus having Band 70 devices with VoNR loading on our network as those markets open up. The key is that Band 70 plus VoNR is important, right. There are some Band 70 devices that exist today where we haven’t quite gotten to the VoNR software certification yet. So we really need to get both of those things, right. And we’ll be bringing those devices and starting with an expanded Android lineup here later this year.
Charlie Ergen
On the cost side I don’t want to speak for the handset manufacturers, but the extent there is a cost that’s I would say it’s immaterial.
John Swieringa
That’s correct, Charlie, immaterial.
Doug Mitchelson
All right. Thanks. And lastly I’m just curious if there was working capital headwinds in the first half of this year is, does that continue and is that related to the way you’re running prepaid or just the build out of 5G in some form. And then Charlie, just any further comments you have on financing needs and ability to finance and options to finance. Certainly one of the things I think the market is most worried about is a lot of maturity in the next few years and dishes sort of sources of capital to roll those over. Thanks.
Erik Carlson
Why don’t you take the…
Charlie Ergen
Yes. As it relates to working capital, we did have some headwinds in the first half of the year. Those should level out in the second half of the year. So hopefully won’t have as much of a drag, but it had to do with, obviously the 5G build, it’s costly. The timing of the payments, does cause the drag that you saw in the first half of the year.
Erik Carlson
And then on the financing stuff, I don’t have a lot of color to add to what I said. I mean, I guess I’m going to give you general, the markets are choppy. So they’re certainly not at the same level they were a year ago. Having said that, you can raise – the markets are, there’s a lot of liquidity in the marketplace, so and you can raise capital with a good business plan. And I think we have a great business plan. So and I think we have a variety of things that we could do in terms of raising capital. And obviously our board and our advisors are heavily involved in that. And like anything else I think it’s going to – I think it’ll be obvious where we need to go internally.
I think it as we go through the different options and as the market moves around, I think that’s the case. But when you look at the quarter, we accomplished probably more in the last quarter than we historically have ever come close to. We made a build out milestone that many people didn’t think we could make. And in the backdrop of COVID and supply chain was an A plus. I mean, it just very few companies could have done what we did there.
We were able to build a strong relationship with T-Mobile that was unhealthy before and now is a healthy relationship. We got the CDMA, huge negative and got behind us in terms of the CDMA shutoff and our phones were jammed with people about upgrades and why did they lose their service?
And our marketing money had to go to convert people. And now our marketing money gets to go to new customers. We talk to people on the phone, it’s about becoming a customer, not about how they – their phone’s going to be shut off. So it makes a big difference. And then we strengthen probably our biggest weakness, which was on the supply side. And on the technology side with Samsung. So those are really big things for us. And then, because we know we’re raising. So if you look at the next half of the year, what are we focused on? We’re really good at focusing on things and accomplishing them.
So we do need to raise capital. And obviously you’ll read about it when we raise capital, I guess is what I’d say. And we realize that that’s an overhang, and we realize that there’s many out there that don’t have confidence in this to be our ability to do that. So we’re certainly aware of that. Obviously we’re going to significantly expand postpaid. That’s a much more proper business for us. There’s a lot more customers in postpaid. There are avenues in postpaid that we think we can compete in that aren’t available to us in prepaid.
We have another milestone. Dave and his team are focused on that. We’re going to make that build out and improve the network as we go along. And then we’re finally in a position second half years deploy our own digital marketing billing platform. You guys don’t have visibility to this, but we’re – but all of that’s done today by T-Mobile. And we have to go through the department to change something. We have to go through the Department of Justice and we change something. It takes months and months and months. If you want to change program for the consumer, it takes months and you can’t be competitive in that environment.
With our own platform, we can change in hours. So it’s – there’s just a lot of things going on. We still have two headwinds out there other than raising capital, which I put in that category, certainly Bonner and making sure technically Bonner works and our vendors are helping us with that. And have made Bonner work, so I don’t want to discount that.
But we just have – we’re just not making it work as well as LTE as a current voice, we just got to get better and obviously get a bigger supply devices and some lower cost devices. And so we’re – I don’t know that we exact have a time, we know the date we’re going to make all those things work, but we know we have devices in the second half of the year. And we’re confident we can make Bonner work. So that’s kind of where we are. And behind all, that’s a pretty good business, not a pretty good is a really good business plan then I think we can raise capital off of.
Tim Messner
Next question, operator?
Operator
Yes. We’ll take our next question from David Barden with Bank of America.
David Barden
Hey guys, thanks so much for taking the questions. Charlie, at the risk of antagonizing you with another financing question, the March 2023 paper has a 5% coupon. If you want to refinance it five years out, it’s 15% coupon right now for DISH. So you’ve got kind of two options. One is to try to take down the 2023, 2024, 2025 and clear the decks and make sure your business plan is funded based on the strengths of what you’ve executed on to date or you can maybe simply kind of chip away at it, hitting singles hoping that the rate market improves.
I was wondering if you could at least share your thinking on that. And then if I got to ask a second question, which would be when we were at the Analyst Day, we kind of held up Vegas is the flagship market. Could you tell us a little bit about what’s happened in Vegas? What’s the retail strategy? How many subscribers? How fast is the network? What’s the uptime? What can we look forward to as we continue to get the build deployed? Thanks.
Charlie Ergen
Okay. The – so obviously the – we have to raise capital be a bit more – it’s going to be more expensive than the 5%. No matter what probably given today’s market. Having said that, that’s unsecured paper, it’s a little bit different. There’s other opportunities to raise capital besides that, that I wouldn’t expect it. I never – I don’t – I wouldn’t expect it to be 15%, right?
Obviously, it depends on the markets as whether you’re hitting singles, doubles, or home runs. Again, we’re competent as management when it comes to looking at the different financing options and making the right choice for this company long-term. As far as the Vegas market, the number subscribers, and we’re not obviously disclosing that, but most of the customers we have not all, but most of the customers are data customers, and they’re not material to our business yet.
David Barden
Thanks, Charlie.
Operator
We’ll go to our next question from Jonathan Chaplin with New Street.
Jonathan Chaplin
Thanks. So again, at risk of antagonizing with another financing question, Charlie, I’m wondering if you can give us a sense of where you are thinking of raising capital, would it be at DBS or at networks? And then a more important question with the new MVNOs that you got with AT&T and T-Mobile that allow in-market roaming, I think that allows for a much more capital efficient network build than you were initially planning. And with some of the other benefits from the MVNO lower rates on the MVNO, I would imagine that’s helped cash flow. So is the funding gap at networks to get you through to your build out requirements still $10 billion? Or is it something lower than that now?
Charlie Ergen
Well, nobody’s going to be mad at us if we come in below $10 billion. So I think we’re looking at the – we’re looking at the build that maybe this is misunderstood, but we’re looking at the build that cost through 2025, which is our final milestone. So obviously, when you get to more rural America there’s costs there that, that you don’t have for the next milestone. I think you did a report that probably was in the ballpark of funding and maybe not everything and there was completely accurate, but you’re in the ballpark give or take in terms of where we’d go.
You’re correct, that the new deal with T-Mobile and other things are make our business from a profitability perspective, better shape than it than otherwise was before. And certainly in-market roaming is good for us for a variety of reasons. We have that both with – and we didn’t have that with T-Mobile before. So there is just – there’s things around the edges that, that have improved, but again, and then when it comes to funding, we look at all the options, Jonathan, so there’s nothing that we don’t look at.
So we look at every business. We have – we look at every – structurally and we look at every kind of financing that can be out there. And I mean, I guess, people in the call will have confidence one way or the other, right. But assuming the marketplace is doesn’t get materially worse than our today. Then we’re going to get our network built. We’re going to – we – the only guidance I gave you, we gave you at Analyst Day, we’re going to become a Fortune 100 company. And that means we’re twice as big and twice as profitable as we are today. I don’t have timeline on that, wish that was tomorrow, but that’s where we’re headed.
Jonathan Chaplin
Got it. Thanks, Charlie.
Operator
We’ll go to our next question from Walter Piecyk with LightShed.
Walter Piecyk
Thanks. Charlie, earlier you were talking about touchdowns and field goals and postpaid and prepaid. And I’m just – I’m curious, I think there was a DOJ or maybe SEC requirement that said you had to basically sell some service to customers. Now that you’re offering service on postpaid. Do you continue to have to own boosters? Is this something that since it’s only scoring field goals in a division where you get the chiefs putting up a lot of touchdowns, can you just punt that and just go with the postpaid business.
Charlie Ergen
I guess, that really antagonizes me. No, I’m kidding. I’m kidding.
Walter Piecyk
One prompt to say and my questions worried about antagonizing a CEO that’s for sure.
Charlie Ergen
Yes. Well, most people don’t even take your questions, because you’ve already antagonized.
Walter Piecyk
That’s true.
Charlie Ergen
It’s impossible. I’ve been married.
Walter Piecyk
He doesn’t want a tough question.
Charlie Ergen
Yeah. I’ve been married for 40 years, so it’s tough to antagonize me. The answer is it’s – anything’s possible. We look at everything, right. And if you look at a list of options owning all boost prepaid is not a necessity. I think there’s a lot of synergies and owning that, but the real value of our company is our network, right. And all the things that are going to come on in that network. And again, we’re – we’ve said that we’re in the wholesale business, so our capacity can be sold to others in the industry. So it’s – we’re not trying to monopolize our network, right. And so, I guess, the answer is it’s not a necessity, but we believe it belongs with today, we’d preferred that it belongs with us.
Walter Piecyk
And the division got a lot more competitive.
Charlie Ergen
More touchdowns, please.
Walter Piecyk
So the outlook there Stephen did a good job at kind of talking about I think after the whole technical team did, and talking about the power of having kind of an open network, network slicing all that kind of stuff. How long has the enterprise sales cycle and when you anticipate maybe having some kind of, I don’t know what the term is, maybe flagship customers to demonstrate why the flexibility of your network might offer something unique compared to what’s in the market today.
Charlie Ergen
Stephen Bye would be the right guy to answer that. He’s on well deserved vacation today. And I don’t know, John, if you want to jump in here. But the sales cycle is pretty long – is longer on that, because you’re talking to companies that are making long-term pretty large commitments in some case. And they have to see how it saves the money. They have to see how it makes their product better. They have to see how they make their product safer, et cetera.
So we have really two strategies there that I think Stephen talked about. One is, there are places where we think, we probably could be the system integrator and add the greatest value. And it may be – the example might be in hospitality, we’re already delivering video to the customer.
So our customers, we’re having a relationship. There’s a few others. But there’s also a lot of areas that we probably don’t have as much expertise or connections. And the three largest players in the enterprise business today are people like Cisco and Amazon and Dell for hardware and optical and Wi-Fi and those kind – and cloud. And so we have an opportunity to partner with them as a – what I would call subcontractor, where – they already have sales forces and relationships.
So there’s a way for us to get into businesses as they get into business. And those companies want to move beyond Wi-Fi into more licensed spectrum and more secure spectrum and more control over their spectrum. So the sales cycles are longer than we like, but the deals are big and we continue to have – continue increased interest in what we’re doing there. And we were a little bit – we now are up for air a little bit after the first milestone, and we’re able to spend more time on those deals, but they’re not eminent and they’re not in the second half of this year.
Walter Piecyk
Got it. And then lastly, if you could just give us any update on whether you plan on purchasing the 800 megahertz spectrum and same thing on direct TV. I mean, I asked this kind of as a quarter, it just feels like, TPG is not AT&T meaning that, I think it’s a company that can be effective at cutting costs. Therefore it potentially reduces some of the synergy potential. Just curious what holds back you guys from proactively trying to pursue coming to some agreement to take to regulator on that deal?
Charlie Ergen
Yeah. So on DIRECTV, I say the same thing, we think that’s inevitable, but I do think you’re close enough to the election today that I think regulatory is your biggest risk. And I think you’d wait and see could, which way the wind’s blowing, and you’re going to know that in the next couple months.
What was the other question? Oh, 800 MHz. We have an – we essentially have an option to buy that. So obviously that’s going to depend on now we are financially. We like the spectrum. We think there’s a lot of good uses for the spectrum. We’re building out the spectrum in terms of our network, so that they’re in our radio, it’s in our radios. We had a potential fine from the FCC, but because we believe we met our first milestone. That’s off the table. There is a payment to T-Mobile, if we weren’t to purchase it, I think it’s around $72 million. So it’s not a must have for us, it’ll depend on where are, but it – we, it’s a nice to have for sure.
Walter Piecyk
Okay. Thank you.
Operator
And we’ll go to our next question from Ric Prentiss with Raymond James.
Ric Prentiss
Thanks. Couple of following questions, Charlie, you touched on a couple times a day, the irritant of the CDMA shutdown, help us understand how much productivity was maybe lost with that effort. Is there dollars that come back in? Or is it just dollars get refocused actually being productive as you think about where you head now that you’re through that pain?
Charlie Ergen
Yes, I mean the hard cost was over $500 million. The indirect cost was probably another $1 billion. I mean, just – I mean it, you just, – I guess – the way I’d say it is, we’ve been playing defense for two years. And every day we come in, now we get to think about offense, and that’s a whole different mindset and it’s a heck of a lot more fun to play offense and defense. So, and when you’re playing defense, maybe you’ll intercept a pass, but you don’t score a lot of points on defense, as many as you in offense and so. And then hope – what you hope to do is like the University of Tennessee, get to hurry up offense, then you score more points. So, I got to hurry up from this management team here – there, I go to hurry them up a little bit, give them some more coffee, I don’t know, but…
Ric Prentiss
Another interesting area has been fixed wireless, right? People going in the offense to take share from cable operators and broadband, what do you all, one, do you see an opportunity for DISH with fixed wireless access, and what do you need to kind of go after that market?
Charlie Ergen
The answer is yes, we do see fixed access on a number of fronts. And the best use of our network is going to be enter – the best most profitable side is probably enterprise first, postpaid customer second, probably fixed wires third, and prepaid fourth. Right? And we’ll kind of stack rank in there. It lot depends on how – we’re obviously watching what T-Mobile and Verizon are doing with that. I think there’s some interesting things we could do with fixed wireless, particularly as you get more into rural America, we have distribution.
So, and obviously there’s government funding there and other things that government funding goes to your competitor, you don’t have the right set of economics to play. If there’s no government funding, we’re probably pretty competitive. And obviously to the extent we have government funding, we’re obviously really competitive. So it’s a bit of a unclear market. How it shakes out, but certainly our network is capable of it. In fact, our network’s capable of it today. And in fact, many of our customers are in a funny sort of way fixed wireless.
Ric Prentiss
And last one to me is, I think your SPAC is coming up on the November date, any updated things you can share with us on the DISH call about what’s going on with the with the SPAC company?
Charlie Ergen
No, I can’t.
Ric Prentiss
How about – there’s [indiscernible]
Charlie Ergen
There’s a CEO over there. You can always call.
Ric Prentiss
Any updates to get an IR team, so you can quit getting antagonized by all of us?
Charlie Ergen
What’s that?
Ric Prentiss
Any update on an IR team. So you can quit being antagonized by all of us?
Charlie Ergen
Oh, an IR, well, I think we realize that we have to be more communicative and responsive to the street. Obviously one of the ways you most logical step is that you’ve got somebody in charge of IR. We obviously piecemeal together. Sometimes you talk to people in the company or Paul or whatever, but we also need the right person, right? So, and we have ideas in mind of what we think that looks like. And we’ve struck out a few times, and it’s on our list.
It’s probably not our highest priority, but it’s, I’d rather get the bill out done, and I’d rather get some other things done, but it’s on the list of things we’re looking at. And anybody in this call that really wants to be what work really hard, make no money, and talk to all you guys on a daily basis, give us a call. Make no money till we make money. I should say, you’re going to make a lot of money. It’s just going to make, it’s going to – it’s not going to be, it’s not a freebie, it’s delayed gratification. The Shawshank Redemption at this company.
Operator
We will take our next question from Craig Moffett with MoffettNathanson.
Craig Moffett
Hi, thank you. So I’m not going to antagonize you with answering questions anymore. I think we’ve learned what we can learn. So let me ask you what your network is going to look like. If – now that you have the in-region roaming agreement that was talked about before. You are one way to think about sort of meeting your network requirements is sort of a high canopy of macro cell sites that sort of meets the coverage requirement. But for enterprise customers, presumably what they’re looking for is kind of higher speed and greater density in more concentrated areas. How do you think you deploy your capital going forward? Is it first just check the box for coverage and then it’s just sort of spending your money on small cells and density or is it at the base of the tower because the mobile-edge compute is going to be a focus of your business. I’m just wondering kind of where you think about allocating capital in the network itself?
Charlie Ergen
Yeah, I think it’s a good question. So it’s much more nuance than that. So we certainly build in a macro network primarily because that’s most of the traffic that will go to our retail customers, but where our retail customer might go, i.e., a tunnel that might be a subway or something that would be very expensive for us to build without a lot of customers. Beyond our build out, we’ll continue to build out milestones, we will continue to build, but we’ll build on a success based basis.
So you can appreciate this Craig in the sense that once you reach a certain amount of roaming charges, it will be more advantageous to have owner economics, right? And we’ll have – we’ll see that long enough in advance and see trans long and advance to build that. The same whole truth for your commercial customers, the commercial customers where they might want more density, think about a college campus, well, that’s going to be success based for the most part. You have a contractor you’re going to go build it out because they want more density, but many – cut many of the and what they really want is something that our competition has a tougher time with, which is they want a slice of a network that they control and our architecture allows them to do it.
And then there are some advantages based on whether we architected for edge compute, right. There are some advantages that we have in terms of how we do that. So it’s a lot more nuanced. It’s a lot more detailed and we’re prepared to go with the street on how we’re doing it. But our net – but the answer is our networks. The consumer, it’s going to look as good or better than anybody else, but for other people, it’s going to be better in a lot of ways. There’ll be some hope. There’ll be some disadvantages in it. And we just won’t mark it to that. But as we deploy capital below, beyond the $10 billion it will be success based. So now are going to get a return on it. We’re not building it just to build it, Dave, you might want to add something to that?
Dave Mayo
I think you did. You got it, Charlie. I mean, I think the rolling deals really Craig give us an opportunity to really not build some, I think about all the venues. I mean, one of the first conversations and I had was about building SoFi and the cost of build SoFi and that’s just something that we won’t need to do because of the agreements that we have in place
Craig Moffett
SoFi is a good example. So you for example, would say, you’re probably not going to prioritize arenas and stadiums and things like that, which is more retail. But have you learned, for example from Las Vegas and talking to customers in a specific market that there – their demand is in need airports and for commuters and the executives of a corporation, or is it purely the data functions of the back office? I’m just, I’m trying to get more of a sense of how you match network topology to where the market opportunity is going to be for you guys?
Dave Mayo
I think it really comes down Craig to what it costs to build versus what it costs to roam and those places where you can create a customer experience that is contained. When you think about a stadium, you walk into the stadium and you use your phone in the stadium, you’re not – there’s not a lot of handover traffic in and out of the stadium. You’re actually captive for a long period of time. That’s a great example of where a network within a network we could leverage somebody else’s network to provide that coverage. That’s probably the most profound example I can think of because you’re captive as a customer for a very long period of time.
Charlie Ergen
But the customer doesn’t have a – the customer’s going to get the best at T-Mobile or AT&T in that case, sometimes T-Mobile’s not in the arena, but AT&T is or vice versa, or both of them are in there. And then we’d go with the better deal. And the customer doesn’t notice that, that’s not – there’s no customer, but we save capital.
So if you were to look at what I look at from a financial point of view, you’d say, wow, DISH has got a set of economics when it comes to network build and operation based on architecture and agreements in place that can allow them to be very, very competitive. And it will be difficult for people to match our cost in this marketplace, long term, as we continue to build and we’re literally 10 months away from the next milestone.
So and that’s a pretty big milestone. So we look – we got headwinds on the financing side, as everybody’s correctly pointed out today. But we have to get through those things. But if you’re on the inside and you see this – I don’t know, it’s compelling, right. But we’ll see. We have to prove it. And the way we focus the team every day is to build a great product. And we believe if we build a great product that we will be financially successful and that’s the way we approach it. And that allows us to take long term, have a long-term vision, take long – do it right the first time, think long term about it.
And as long as we get from here to there, the next year, then I think hopefully I believe our shareholders will be rewarded. But it’s – look, it’s not a 100% guarantee in life. But we believe that’s where we get to.
Tim Messner
All right, operator. We have time for one more from the analyst community.
Operator
We will now take our final question from the analyst community. [Operator Instructions]. We will begin the media portion of this call following the answer to this final analyst question. And our final analyst question comes from Michael Rollins with Citi.
Michael Rollins
Hi, thanks for taking the question. Two, if I could. First just pivoting over to the video side of the business, will the current macro environment accelerate linear in satellite cord cutting? And can you give us an update on the opportunity to turn SLING into a much larger live streaming platform in terms of subscriptions? And then the second topic or questions just on strategic partnerships and Charlie in the past, you’ve talked about partnerships in a variety of different ways. And just curious if there’s an update on the possible opportunity and timing for more strategic marketing or financial partners for the wireless strategy?
Erik Carlson
So Michael, this is Erik. I’ll take the first question. I think that as we’ve discussed in the past, both on the DISH TV and the SLING TV business, I mean, we really are heads down and you can see it and our slowing growth, but also some of the profitability that we’re focused on really still trying to acquire and retain customers that meet our targets for long term and profitable growth. There’s no doubt, most of you have written adequately about it that there is a decline in linear video. There’s more competition than ever. Folks that we’ve had long-term relationships with on the content side are more in [indiscernible] bucket today.
You’re seeing us on the DISH TV side, do unique things. And historically it goes back quite some time, like launching Netflix as an app on our service or Amazon or YouTube. We’ve talked a little bit about our Android TV box will help us done some of that from retention perspective and help really integrate the customer experience as it relates to additional apps on the DISH TV platform.
But the Pay TV market is obviously in a bit of chaos and is definitely linear, is declining a bit. It’s up to us as management to stem that decline. And as you saw in our Q2 earnings try to monetize the existing customer base as well as we can, well keeping the customer experience at an all time high. And I think the team has done, although our growth targets aren’t exactly where we want them to be. I think the team’s done a good job with their operational and financial discipline on that front.
On SLING, we’re – you talk about SVOD, you talk about the number of apps and opportunities, whether it’s a Peacock, a Discovery Plus, and HBO Max, and Netflix et cetera, et cetera, et cetera, et cetera. A lot of changes in consumer behavior there, you’re seeing obviously the effect on Netflix, the spend on content obviously stagnation and some of the providers and your spot on. I mean, we’re not happy exactly where SLING growth is. We spend a lot of time and effort in making the customer experience a top customer experience.
We now have to prove out that we can have value and we can earn a place in folks homes. We’re not the number one subscription there. But we can be very complementary with the best of cable and provide customers a great value experience for some content that they may not want to describe to from one of the SVOD folks. And as you see in the market today, it’s a very spiky market, right? There is very – there’s a limited barrier to entry, and there’s a very easy way to cancel. And so, one thing that we learned throughout the – almost 27 years that I’ve been here is that we have to earn customers’ business every day, and we have to do a better job of that at SLING.
Charlie Ergen
I just add to Erik [ph] the SLING, the OTT, there’ll be some fallout in that, and some consolidation in that. So – and we’re profitable. So not everybody, in fact, most people are not. So I think we’re well positioned there for things that might happen. But we’re smart enough not to chase customers who aren’t going to be profitable. So on strategic partnerships, obviously, I’m not going to talk about that in detail. The only thing I would say is that that a 5G O-RAN cloud-native network is where Telco is going and perhaps 10% of the people thought that a couple years ago, maybe 50% of the people think that today, but it’ll be a – this time next year it’ll be 100% of the people that that realize what I just said is true.
And it’s a wonderful opportunity particularly for our partners to grow their business in a way that they probably didn’t have, and their strategic plan a couple years ago, because that they are in our network, they work in our network, they work with our team and they can see where this goes around the world. The biggest growth for cloud providers is going to be Telco’s in the next decade, right as an example. So I think that, that we have good alignment there and we both have a lot to gain with each other. So that’s the big picture but I’m obviously not talking about details.
Michael Rollins
Thank you.
Tim Messner
All right operator we will move to the media now.
Operator
We will now take questions from members of the media. [Operator Instructions] Our first media question comes from Mike Dano with Light Reading.
Mike Dano
Yes. Hi, thanks so much for taking my question today. I wondered if you could just talk about your plans to – your phone plans and how you plan to sell phones, particularly as the fall comes around and you’ve got this boost infinite service that’s launching for postpaid. Are you going to sell phones like the other carriers do where they’re essentially free to the customer and build over two years or three years or whatever or is it going to be a bring your own device model? I’m just wondering what the thoughts are around? How you’re going to sell phones? Thanks.
Erik Carlson
I’ll take that, Mike. So I think the answer’s all the above, right? We’re going to be competitive. I think Boost that we’re going to have options that cover all of the gamut and we kind of segment – I’m not going to get too much detail on our segmentation and how we’re sort of launching our go-to-market strategy at this point. You and I have talked actually offline a little bit, so you have some background, but we’re going to go all above. We’re going to be competitive in the market. So we’ll be selling phones. We’ll be appealing [indiscernible] for those who want bring their own device and we’ll sell across the gamut, Android and iOS.
Mike Dano
Got it. Thanks.
Operator
And we will take our next question from Scott Moritz with Bloomberg.
Scott Moritz
Hey, great. Thanks. I don’t know if I speak for everyone here, but I’m looking forward to the day when we can conduct this call on your futuristic new network instead of this whole dial in method.
My question, can you give me – give us some Charlie, maybe some glimpse of what’s ahead for Boost Infinity in terms of maybe what the pricing might be or the date of the launch or maybe even the cities that you for both first target?
Charlie Ergen
Yes. I mean, Stephen, I mean, obviously we’re capable of being nationwide. So although there’s certain cities that we’ve built-out that would have a priority for us because we’d have better economics there, obviously. I think the thing that maybe that we focus on is obviously price is an issue for customers, but so is coverage. So there’s really only two things that I see customers when I talk to customers it’s price and coverage and they don’t – it weighed, I’d say it’s price 1, 2, 3 coverage 4, 5, 6, and maybe speed, they get is speed or some or something else. But it’s maybe they get a [indiscernible] on Tuesday or something. Maybe it’s something else down the list, but there’s reasons why people buy and it’s not always what’s marketed.
What we have to do ultimately is distinguish the user experience in a way that distinguishes us from other people. And that’s what – that’s what Steve and his team are focused on. And we think with our network architecture and the things that we’re doing, we have some ability to do that. And so it’s no different than we got satellite business and we had to distinguish ourself from cable and from our competitors. And it was things like interactive guides or DVR or skipping commercials automatically or being able to get Netflix out of the same box, Erik and his team changed the customer experience and therefore we gained market share and churn went down.
So that’s a similar – we don’t have 120 million customers like the other guys, so we have to be scrappier and more innovative and more entrepreneurial. And that’s the fun part of what we’re doing and I think you’ll see – I think you’ll see Boost and Boost Infinite come up with creative things in the marketplace that are – that both do things that give customers things they don’t know they want today and then improve on some of the pain points that they have. Did you want to add to that?
Erik Carlson
Yes, I just add two quick points on that. One is the Charlie alluded to it, but our network deals allow us to go nationwide out of gate at competitive pricing. And we are going to come out with aggressive pricing. There’s no point in coming out with a, we to play [ph]. And then two and again, Charlie alluded to it. But we do have, we have 8 million, not 120 million customers. So from our perspective, we are not worried about losing customers or doing anything disruptive in the marketplace that could sort of shake up the current dynamics. We have a lot more to gain than we have to lose. So that puts us in a position where we can definitely play offense, and take some big funds.
Tim Messner
Operator, we’ll take one more before wrapping up.
Operator
And our final media question will come from Andrew Fitzgerald with WSJ.
Andrew Fitzgerald
Hey, there. It’s Drew. Thanks for taking the question. Charlie, if you could go into a little more detail on fixed wireless and some of the, the lack of clarity that these upcoming government subsidy programs are providing, do you have any sense of what you would like to see that would bring more clarity in the market? And once that happens, what would fixed wireless opportunities affect any of your decisions in building out your network? i.e. would it make your teams put some towers online or add capacity sooner in some markets rather than others depending on what, the opportunity to gain share in that fixed wireless market its. Thanks.
Charlie Ergen
Yes. I’m going to ask the question, start with the real broad answer, which is the government is allocated north of $60 billion for broadband. It is a necessity in this, in the United States to bridge a digital divide. Every family, every child deserves access to education, healthcare, and broadband, right? That’s $60 billion, if properly spent, I’m very confident to get 99.8% of the customers broadband, the United States. And it’ll become as long as it is, as long as you take the best technology for the particular situation. So in very, very rural areas, satellite would be the right answer, in very dense areas I think it’s a combination of kind of some of the things that T-Mobile and Verizon and the cable companies are doing.
And then you’ve got some kind of areas, that are kind of in the middle where maybe things like fixed wireless, fixed wireless is not mobile but fixed and also maybe some mobile and also maybe some cable fiber, those kind of things could all make sense. And it’s a little, it’s a bit it and so forth. What I worry about is the first; the first step is you have to know where you don’t have coverage. And so the current Chairman of the FCC is very focused on making sure we know accurately, where people don’t have broadband. And we didn’t do a good job of that last time, in the last option RDOF. So that’s the first place you start. And then, I believe you had to be technology neutral. So NTIA and the FCC need to be technology neutral, right? The third thing you got to do as you got to make sure, that you’re using all the resources, 12 gigs, as an example, is a resource that use terrestrially can far, actually you see the number of customers, that you could do via satellite.
We believe both technologies can exist together, but if you had to pick one for capacity and for the American consumer, you would pick terrestrial because when you need more, more customers, you put up another tower. Satellites are by their very nature of satellites limited and the capacity that they can do. So that’s kind of where you start though not, the way I look at it is where there’s a government subsidy. It is unlikely and we’re not the person receiving the government subsidy, regardless of the technology that they’re subsidizing. We’re not likely to be competitive, so we’re not going to go there, where there’s no subsidy.
And it’s a fair, it’s a, the best man wins. We feel pretty confident and we’re, perhaps we are getting this subsidy, then obviously we would have an advantage over everybody else. So the government’s going to be very involved in it. They will pick winners and losers which we prefer they didn’t do, but in this case, they’re going to do, but I do think the current FCC both on – both Republican and Democratic sides, pretty focused on it. And I think they understand the issues in a way that maybe they, maybe they have it in the past. And so and I think NTIA will be very, and I saw today that they hit now, for the first time, they actually having an agreement to work together.
That’s critical, that’s really positive. And so I think that fortunately or unfortunately, I think the government’s going to decide where we go with fixed wireless and how we play there. But, our goals as a company, regardless of whether we’re the right company is how can we help bring broadband to every customer home, just like every customer home has electricity. That should be our goal as a country. That’s where we’d like to help. And if we can help, we want to do it. If we can help, then we’ll do something else.
Tim Messner
Well, thank you all for joining. We’ll talk to you again, next quarter.
Operator
This concludes today’s call. Thank you for your participation. You may now disconnect.
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