DISH Network Corp (DISH) 2013 Q1 法說會逐字稿

Good afternoon. My name is Beth, and I will be your conference

At this time, I would like to welcome everyone to the DISH Network Corporation first-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be two question-and-answer sessions, questions from the analyst community, followed by media questions.

(Operator Instructions)

Thank you. Jason Kiser, Vice President and Treasurer, you may begin your conference.

Thanks, Beth. Thanks for the enthusiasm on that.

Appreciate everybody joining us. I'm Jason Kiser, Treasurer, DISH Network. I'm joined today by Charlie Ergen, our Chairman, Joe Clayton, our CEO, Tom Cullen, Executive Vice President, Bernie Han, COO, Robert Olson, our CFO, Paul Orban, our Controller and Stanton Dodge, our General Counsel. Before we go into opening remarks by Joe and Robert, we do need to do our Safe Harbor disclosure, so for that, we'll turn it over to Stanton.

Thanks, Jason. Good afternoon, everyone, and thank you for joining us.

We ask that media representatives not identify participants or their firms in your reports. We also ask that we do not allow audio taping, and ask that you respect that.

All statements we make during this call that are not statements of historical fact constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results, and from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q.

All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements we make, wherever they appear. You should carefully consider the risks described in our reports, and should not place undue reliance on any forward-looking statements, which we assume no responsibility for updating.

With that out of the way, I'll turn it over to Joe Clayton.

Thanks, Stanton, and good afternoon to those of you on the East Coast, and good morning to our West Coast participants. Today, I'm going to focus my remarks on our pay-TV and our broadband businesses. I know that there's a lot of industry buzz regarding our wireless plans, so Charlie and Tom Cullen are also on the line to take you all's questions on mobile a little later.

In the first quarter, this marked another important milestone for the DISH pay-TV business. Knowing that customers want their video content to be affordable, easy to use, and available anywhere, we rolled out our all new Hopper with Sling in February. This award-winning second generation Hopper includes consumer-friendly features that customers can use to take the at-home DISH TV experience anywhere, using both the built-in Sling capabilities and the DISH Anywhere app. With these features, customers can watch their live and recorded home television content on Internet-connected tablets, smartphones, and PCs.

What's more, with the Hopper Transfer app, customers can download DVR content directly to their own mobile device. This app enables viewers to move recorded television to an iPad for viewing, even without an Internet connection. And the DISH Explore, now this is the app that turns your iPad into both a remote control and an information resource, as a second screen. As you all know, this is an exploding trend for tablet owners, and it's changing the way that customers discover and watch content.

And of course, the consumer still receives all of the great features of the previous Hopper, like AutoHop, PrimeTime Anytime, and up to 2,000 hours of storage capability, which by the way, is an industry best. With all of these capabilities, it's no wonder that the Hopper has won multiple awards, including the 2013 CES Best of Show.

In addition to industry awards, our customers have also voted. For example, at the end of the quarter, all three of our iPad apps were rated four stars or higher in the Apple App Store. This indicates that these mobile apps are meeting our customer needs, as well.

At DISH, we're fanatics when it comes to giving customers their video content, not only what they want, but when, where, and how they want it. No other provider can match this experience that is now available for our Hopper customers.

As you all saw in our first-quarter SAC results, we invested heavily in our DISH brand. This upfront investment is necessary, if we're to substantially improve our sales mix going forward. In February, as part of our Only the Hopper campaign, we launched a series of cable television, radio, print, digital, and outdoor advertisements. These ads highlighted the Boston guys, as they demonstrated Hopper with Sling consumer-friendly features.

In addition to the Hopper, our dishNET service launch has been a big success. To recap, back in October we introduced a new broadband satellite service, which makes available, faster speeds, greater capacity, and lower cost to the more than 15 million unserved or underserved American homes. Now, following the launch of dishNET, we've experienced solid broadband satellite growth. In understanding the importance of owning the bundle, dishNET moves us a giant step closer to delivering a complete entertainment package to our customers.

So in the first quarter, we grew total pay-TV and dishNET broadband customers by over 100,000. 36,000 for pay-TV and 66,000 for broadband. And almost all of our broadband satellite customers are bundled with pay-TV. Of course, this leverages our operational scale, and it also provides us with a stickier customer.

Now, while our pay-TV customer additions were down from last year, we did successfully implement our February price increase. Our customer service and retention teams did an excellent job which is evident in our 1.47% churn rate for the quarter.

Now, to provide you all with additional details on our financial performance, here's our CFO, Robert Olson.

Thank you. As Joe noted, we continue to make solid progress in growing our core businesses. Our pay-TV base increased by 36,000 subscribers in the quarter. While this was less growth than we saw in first-quarter 2012, it was not unexpected, due to the price increase this year. Pay-TV churn in the quarter was up 12 basis points year-over-year, but roughly equal to first-quarter 2011, the last time we took a price increase.

Our broadband business continues to experience solid growth. Gross activations of 83,000 in the quarter were significantly higher than the 14,000 activations we achieved in first quarter last year, as well as the 57,000 activations we recorded in the fourth quarter. We ended the quarter with 249,000 broadband subscribers. Subscriber-related revenue was up $128 million or 4% in the first quarter, compared to last year. This growth was largely driven by pay-TV ARPU, which was up $2.30 or 3% year-over-year. We saw about half of the benefit of our price increase in the first quarter, and we expect to see the full year-over-year benefit in the second quarter.

Our broadband business accounted for $20 million of the revenue increase. Subscriber-related expenses increased by 8.5% in the first quarter versus last year. This increase was largely due to higher pay-TV programming expense, but we also saw additional retention upgrade expenses in the quarter, and also higher broadband subscriber-related expenses.

The higher programming costs were primarily driven by increases in our contractual rates. Retention expense increase was partly due to existing customer upgrades to the Hopper receiver system. The increased broadband expenses were driven by higher average subscriber levels.

Blockbuster was roughly breakeven in the quarter. As we note in the 10-Q, we ended the quarter with approximately 650 domestic stores. Blockbuster UK revenue and income was included only through January 16, the date of the UK administration.

Our SAC for the quarter was $882, which was up considerably, versus our recent run rate. While we had mentioned that we would see an increase in SAC on our last earnings call, several of the drivers of the first-quarter increase were short-term impacts.

Just stepping through the major variances, advertising was up $44 per activation year-over-year, associated with the introduction of the Hopper with Sling set-top box. We expect advertising to remain at these higher levels in the second quarter, and then return to more normal run rates in the third quarter. Other non-capitalized costs were up $25 per activation, primarily due to an increase in inventory subsidies provided to third-party sales channels, which was largely a one-time impact in the first quarter.

Finally, capitalized equipment was up $66 year-over-year, due to three reasons. First, we had higher Hopper take rates. Second, the unit cost of the Hopper with Sling set-top box is currently higher than the original Hopper receiver. And third, we disproportionately used new rather than remanufactured non-Hopper set-top boxes in the quarter.

Of these drivers, we expect the higher Hopper take rates to continue. On the other hand, the unit cost of new Hopper with Sling receivers will decline steadily through 2013 as we gain scale. We expect SAC to return to a more normal run rate by third quarter.

Administrative expenses were down $106 million year-over-year in the quarter. This reduction was a result of fewer Blockbuster domestic stores and the deconsolidation of Blockbuster UK business. G&A expenses for the DISH pay-TV business were slightly better year-over-year.

Interest income was up $30 million year-over-year, driven by higher balances of cash and marketable securities, and by the mix of marketable securities. Interest expense was up $23 million due to increased debt levels.

Other income decreased year-over-year due to the $99 million gain we recorded on DBSD bonds in first quarter 2012. Despite the one-time items driving up SAC, we generated $375 million of free cash flow in the first quarter. We still expect free cash flow to be slightly higher than net income for the full year 2013. Let me now turn it back to Joe before we start Q&A.

Thanks, Robert. Given our first-quarter performance, DISH is on the right path. Growing high volume customers and high value customers, re-energizing the brand, and increasing revenue as we move forward. We are also making the strategic investments necessary for our long-term growth.

Thanks for joining us today for our first-quarter earnings call. Now, we'll open it up to your questions.

And we'll start with questions from the financial analysts. When we're finished with those, we'll open the line up for questions from the media. Okay, Beth.

Our first question from our analyst community is Doug Mitchelson, Deutsche Bank. Your line is open.

Thanks so much. A question for Charlie and Tom and then one for Joe. We'll start with Charlie and Tom. Is there anything you've learned subsequent to your Sprint bid announcement, whether it's on your charm offensive with investors and regulators, or from discussions with Sprint or your bankers that's been favorable or unfavorable, relative to your initial view of the value of a DISH/Sprint tie-up.

This is Charlie. I think that we haven't been allowed to go and do due diligence. We haven't started due diligence on Sprint itself. Most of the information we have is obviously peripheral to that. Everything we've seen only makes us more confident.

I think the biggest thing is Softbank now has come in with more details about their synergies and build plans and so forth and so on. There's a lot of good ideas in what they're presenting, and a lot of synergies that are -- most of the synergies, the vast majority of the synergies they're talking about would also be available to us. Obviously they've had the benefit of a more active diligence process. So I think that to Softbank's credit and to some degree our credit, there is a real value in Sprint that, in a proper strategic fashion, whether that be with Softbank or with DISH, that value creation can be achieved, and obviously that's good for Sprint shareholders.

And are you still comfortable with how your bid is positioned relative to theirs?

Yes, very comfortable, because I think our bid today is a little over $7, based on cash and their bid is $6.38, based on the fact that he's getting 45% of the Company for $5.25 and then $7 for the other piece of it. I think the interesting part of that is that, ultimately, I think the way it really boils down, there's a lot of sideshow stuff going on, obviously, in a big merger like this. But we believe in our synergies, and we bid $7 because we believe in those synergies. We bid a little more than $7 now, depending on our stock price.

And they've now come up with more synergies. They actually come up with synergies that they are starting to articulate now, but they haven't increased their bid based on those synergies. So I would expect that if you -- since we believe in our synergies, we bid a higher price. If they believe in their synergies, I would expect obviously they may top our bid. If they don't believe in those synergies, obviously they wouldn't.

Thanks, Charlie. Question for Joe. You've taken a more aggressive marketing posture than the Company has historically. I think said you're very happy with how the Hopper is doing. Is there anything in the numbers that you see underneath the surface for subs brought in on these promotions over the past year that you could share, that could help us understand how the Hopper investment is going to ultimately pay off? For example, is the average ARPU higher versus previous promotions? Is the average churn better versus previous promotions? Average credit scores better? Is there something underneath the surface regarding the promotional subs brought in the last year that you could share with us?

I'll have Robert answer the first part. Then I want to comment on that as well, Doug.

This is Robert. I think Hopper's performing exactly as we expected. As you know, the average monthly revenue we receive from a Hopper customer is about $10 per month. You haven't really seen that in the ARPU yet, because the base is still growing. Over time, that's going to be a significant contributor to our ARPU. We've seen, through the first year, churn about where we expected. It's really kind of early to tell the long-term benefits of the Hopper until you've had customers for a couple years. So right now, everything is right on track.

Yes, and Doug, this is Joe. Obviously, we want to sell a better mix here with Hopper, and Hopper with Sling. And the credit scores are better. They buy more of our services, and additional packages. I firmly believe churn will be lower as we move forward.

And to some degree, it's like at a conundrum, given this particular point in time. We're a little bit being a victim of our own success. We're selling Hoppers, probably at a faster take rate than we might have thought originally, and it's becoming a greater part of our sales mix. As Robert said earlier, the product cost reductions, which come with longer time and greater volume, have not really kicked in yet, but they will as we move into the second half of the year, as the volume grows even greater. So we see this as a very positive sign to our business, but it does necessitate upfront spending and cost to generate this positive momentum.

This is Bernie. The reason -- Robert mentioned it will take a little while for us to see the churn benefit. The product being so new, most of the customers who have the Hopper, whether they're new or whether they were upgraded, they're still in a commitment period, and typically our churn is relatively low in the commitment period. In that period, what we've seen so far is that the Hopper churn has been a bit lower than our traditional equipment. But like I said, it's in a period where churn is naturally pretty low already. When we look at things like surveys of customer satisfaction, customers that do get the Hopper, it does skew quite a bit better than customers on our prior equipment.

Thank you very much.

Your next question comes from the line of Ben Swinburne, Morgan Stanley. Your line is open.

I wanted to ask, maybe Robert, about the sub-related expenses on broadband, I think they were $28 million in the quarter. I was curious if those were all wholesale payments to Echostar or if there were other expenses in there?

Ben, as you obviously saw, we acquired a lot of new subs in the first quarter. The bulk of our sub-related expenses for broadband are indeed wholesale payments, either to Echostar, ViaSat, or CenturyLink. However, we also have some variable cost associated with those broadband subscribers, and so if you're trying to do the math on the broadband business, those variable cost in the first few months of a subscriber's life are typically higher. They tend to call in more.

We tend to solve more problems in the first few months than we do the longer tenure. So if you're doing the math on the gross margins of the broadband business, it's very difficult to do that in a business that's growing so quickly. As we get towards the end of the year, you'll be at more of a steady state run rate on the gross margin. I think we've talked about this before, that we see the broadband business in the long term having roughly the same gross margins as the pay-TV business.

Great.

Ben, let me add to that. Just like we need upfront investments in our Hopper and Hopper with Sling products, dishNET, our broadband satellite business, will require upfront investment for this new product introduction as well.

Makes sense. If I could ask just a couple follow-ups quickly. Charlie, one of the numbers in the presentation from Softbank that I felt I would love to hear your thoughts on is the $6 billion spectrum cost build-out over three years I think for your spectrum was in their slide deck, which was obviously a big number and part of their argument. Wonder if you have any thoughts on that piece?

Joe, we heard from DirecTV. They're happy with Genie. It sounds like Genie and Hopper are doing very well. How do you compare those two products in your mind? Do you think you are moving ahead of cable, perhaps?

Charlie, let me take the last one first, then we'll turn it back to you. The comparison of Hopper and Genie is probably a lot of smoke and mirrors, at least from their standpoint, because they do not have PrimeTime Anytime, they do not have Auto Hop, they have a one terabyte hard drive, Hopper has two terabyte hard drive, so it's double the storage capacity. They do not have DISH anywhere. They do not have Hopper Transfers. They do not have the Hopper Second Screen app. If you're taking count here, I would say just by the numbers standpoint, we are far superior in terms of features and customer experience. Charlie, you can take the second part of the question.

I'd just add to the Hopper, I think every review that's been done, particularly the Hopper's, gotten almost the highest rating you could get, five stars or 4.5 stars in every review I've seen, I've seen a dozen of them. When compared to the Genie, it's always come out ahead of the Genie. Having said that, I think DirecTV does perhaps a better job from the marketing front. Obviously they're able to run network commercials. We're not able to do that, because networks won't run our commercials due to AutoHop.

I think their marketing is quite good, and they've traditional done a really good job of marketing. We start with fundamental, what you want, you have a great product and the satisfaction scores are not only better, they're pretty much off the chart versus our traditional product. But we've got to do a better job of making sure people understand the product and experience the product from a marketing perspective, and we've got a good team that's committed to doing that.

And on the Softbank proposal, that's an interesting thing that -- I didn't totally understand, myself, to be honest with you. Because we're bringing $10 billion of spectrum, and we got no credit for that in their presentation. In fact, we got a negative synergy of $6 billion to build it out. If that was the case, obviously what we would do is just sell the spectrum. We would look exactly like the Softbank offer, except we would come in with $10 billion of cash versus the a $5 billion incremental cash they're coming in. As a baseline if you didn't think the spectrum had any value, or you thought that the build-out cost was going to be expensive, you just sell the spectrum. Now you've got $10 billion of cash, or more probably.

So having said that, I do think that they bring up a good point, which is, ultimately the synergy and the value to Sprint is going to be a big, big, big portion, maybe the most important portion is, who would be able to build out the network more efficiently. We think DISH wins on all counts there, because we bring both low band spectrum, our 700 megahertz spectrum, and we bring mid-band spectrum which is adjacent to Sprint's spectrum. So it fits, its propagation characteristics are almost identical to the propagation characteristics of Sprint's current -- and we do fit on the towers, and we propagate the same amount. From a network system design, if the analysis is done in total, I think you'll find out that ultimately the build-out for Sprint, for DISH Sprint would be that we can add a lot of capacity on the same towers and propagate the same amount, without having to use as much of the 2.5 Clearwire spectrum, which means we need less towers or we have more coverage.

Secondarily, one of the big problems Sprint has is, in fact, national coverage, and we think that our low band spectrum in conjunction with their spectrum gives them additional capacity to make the build-out for coverage much more inexpensive. That ultimately will end up with our spectrum, you're going to end up with much, much more than $10 billion of value, because you're going to get the value of capacity and throughput and so forth and so on, and then you're going to get additional CapEx savings of billions of dollars, and then you're going to get ongoing OpEx savings, and net-net that's going to be a pretty big number. I did think that was a little bit of sleight of hand to try to show that our spectrum was actually a negative synergy of $6 billion.

Worst case is, it would be as positive of $10 billion. That's if you sold it. Now, you wasn't want to sell it, because it would be in the hands of your competitor. It would make them stronger. And the fact that they would pay $10 billion for it only means it must have some value to them and makes them stronger. So you wouldn't want to do that, you would want to have that asset in the Company.

Thanks.

Your next question comes from the line of Marci Ryvicker, Wells Fargo. Your line is open.

Thanks. I have one for Charlie and one for Joe. So first for Charlie, what's your degree of confidence at this point that your acquisition of Sprint can get done, and if it doesn't, does positioning with T-Mo give you the same thing you could get with Sprint?

Well, I think from a regulatory point of view, I don't have any doubt that DISH, Sprint can get done, and I have no doubt that we have a higher offer on the table. We're not going to have a regulatory problem. We don't have a CFIUS review. We're not in the business today. We don't make any of the indexes, that's Jeff's department, and the FCC desperately wants more competition to the big guys in the business. I'm not worried about that.

Obviously, I think we have a better offer in front of Sprint today. I believe that, based on what I've seen in the last few days from Softbank presentations and the synergies that they believe are there, obviously, I would expect that based on that alone, they would probably look at paying quite a bit more for Sprint than we've offered so far. I think that's just realistic. If you've got that kind of synergy, and you believe in that kind of synergy, shareholders are going to demand a piece of that up front. They're not going to give you 70% of that synergy at $5.25 a share or whatever.

I think realistically, the curtain is now up on Sprint, both DISH and Softbank see tremendous value there. Shareholders are going to be the winners, and who knows where this goes? You had a question for Joe?

Yes. So Joe, I think people are under-appreciating the dishNET business and how fast it's expanding. You mentioned a 15 million target market. What's your goal in terms of penetration here, and how long does it take you to get there?

Well, quite honestly, we're pleased with the take rate so far, and we believe the market is pretty vast. That's one of the reasons that we're getting the capability of the satellite service, both from ViaSat and from HughesNet, our sister Company. We believe that the additional capacity will allow us to attract more customers, and the market of course is -- at least we believe, given the capacity that's currently available, between 1 and 2 million customers. Given the two satellites that are currently available. I think there's also been comments about, they're going to launch additional satellites going forward.

I don't have the particulars on that, but I believe via sat has announced that. I won't speak for Hughes, but obviously, all of the participating parties see bigger upside in the broadband business, mostly for rural America going forward. That's the reason we've taken such an aggressive stance on it. And remember, broadband satellite, the majority of all of our customers are bundled with our pay-TV service which gives us a stickier customer and a higher average ARPU.

Thank you.

Your next question comes from the line of Philip Cusick, JPMorgan. Your line is open.

Two questions if I can. First for Charlie, what's holding up the due diligence with Sprint? Is it the guaranteed financing, or is there something else? And then for Joe, if I may, as we look at programming costs ramping, are you adding in mobile rights for eventual cloud-based streaming to mobile devices in your negotiations, or do you plan on relying on Hopper and Sling for mobility over time? Thanks.

This is Charlie. I'll probably take both of those, just because it's easier, and we're in different places. We're not all together. The due diligence, I guess what I'd say is we're having conversations with Sprint, and so people are engaged, and at this point we have no reason to think that they're doing anything but going through the right things that the special committee and Sprint should be doing to analyze offers. It's obviously, as you know, primarily a one-way conversation where we are providing the information to them, so they're doing due diligence on us. Obviously, at some point our -- we have a highly competent lever, we'll turn that into a commitment, a firm commitment.

The problem is, it's a little bit of chicken-egg. The firm commitment does have a cost to us to do that. We want to make sure that we get in a position where they could tell us that based on their due diligence that we in fact do have a -- that they believe we are a superior or lead to a superior offer, and the only thing standing in the way of them coming to that conclusion is in fact the commitment, at which point we'll present the commitment to them, and then we'll incur those costs to do that. We don't want to incur those costs and then have them say well, we don't -- everything's great, but we're worried about this or this, or we need more information on that. So it's kind of a chicken and egg thing.

Obviously for us, our bid is contingent on the fact that we get to do due diligence, right? And so we know a lot about Sprint. We obviously had meetings with them in the past. We know a lot about Clearwire. But there are things like the network architecture that are key components and key value drivers and key CapEx, OpEx things that you want to make sure you're going through with their team, and getting their input into how -- and they agree with our analysis or if they have other ideas beyond the ones that we have.

Okay.

On the programming rights, our programming rights are varied today, but in some cases, we have mobile rights today. In some cases, our contracts are silent. In some cases we would get those upon renewal. And in all cases, we could use, without any change to our contracts, we can use obviously the Hopper Sling product to do that. So it's a very valuable asset that we have in the Sprint DISH merger that we really haven't put in our synergy number. You wouldn't be able to duplicate our contracts very easily, you certainly wouldn't get the pricing that we have, and those numbers alone would probably be well in excess of maybe the handset synergy that Softbank might have.

Got it. Thank you.

Your next question comes from the line of Jeff Wlodarczak, Pivotal Research.

Two for Charlie and one other one. Charlie, I want to get your thoughts about potentially bringing in a partner for your Sprint bid, like a Docomo? And then let's say your Sprint deal falls through, hopefully it doesn't, and you sell the spectrum, and you're sitting on $18 billion in cash. Do you see interesting places to deploy that capital outside of wireless?

I think the way it will play out, to the extent that -- obviously there's a certain -- as a shareholder, right, and I'm kind of in last place behind everybody else, from an equity perspective. With only so much debt that we'd be willing to take on at DISH through the Sprint deal. So there's a limit to how much we can bid. But whether we're -- obviously to the extent that the bidding war got higher, obviously, we'd have to look at taking on a partner to be able to continue in a big way to do that. There would be many options potentially to do that. Whether that made sense for us to do or not, we'd have to cross that bridge if we ever get to it.

If we're unsuccessful with Sprint, obviously we have a lot of options. It could include selling spectrum. It could include selling the whole Company. It could include partnering with somebody else in the wireless business. In the event that we fail, and sometimes we do fail, in the acquisition effort, not because we don't see value there, but we just might get in a situation where somebody could spend more money, then we have other options.

As the Chairman and a shareholder, it's exactly the place you want to be, which is, our preference, we see huge value in Sprint and Clearwire. We've told you what we think our synergies are. We obviously put our money where our mouth is in bidding or increasing our bid over where Softbank is today. That's our preference. That's what we're totally focused on. But we understand that Softbank sees value there too and they've now showed that they see even increased value there, and we realize they're a formidable competitor, and we have to be prepared to win, and we have to be prepared to lose.

Fair enough. Just I was going to say the second part was on corporate CapEx. A lot higher than last year at $67 million. Charlie, did you need a new G6 or what was sort of behind that big year-over-year increase?

This is Robert. I'll take that, Charlie.

You know better than that.

Nobody laughed. I was like oh. But of course not. Just wondering about that.

So Jeff, let me kind of break that down for you. There were a number of factors that impacted CapEx on a year-over-year basis. Earlier in my remarks, I talked about the Hopper with Sling. Currently, it's a little bit higher unit cost than our original Hopper. By year end, unit costs will be down roughly 10%, relative to beginning of year. So we'll get some benefit there.

As Joe has mentioned, the take rate on the Hopper has been quite good, so that's driving more new receivers. One of the subtleties that we had in our 10-Q, our non-Hopper receivers, which we called VIP receivers which are MPEG4 receivers, we basically have stopped ordering those, because we can just rely on remanufactured receivers. But to gain a little bit of operating efficiencies, we pretty much cleared out most of the new receivers of that type in the first quarter. That drove up CapEx a little bit.

Another driver is the broadband business which we had very little CapEx associated with that. Last year we had, I think, around $15 million, $16 million of CapEx in first quarter this year. And then the final item is that as you know, we are capitalizing the interest associated with the spectrum purchases. That's about a little bit north of $30 million a quarter. That was not in first quarter last year.

Okay. So that's mainly what it was. Thank you very much.

Your next question comes from the line of Mike McCormack, Nomura Securities. Your line is open.

Maybe just a quick comment regarding industry competitiveness. Looks like satellite as a category is going to be down somewhere around 70% on net adds on a year-over-year basis. Is this the single product issue really coming to a head? Secondly, thinking about the credit quality issue that you brought up with respect to churn, ares those customers -- I'm assuming value seekers. Are they go to move to OTT if they're not able to afford your services? Thanks.

This is Charlie. I'll just give you a big picture thing. Obviously I think we recognized several years ago that pay-TV, as a business, in terms of the big linear packages that you see, where customers are spending $1,000 a year, that's probably a relatively mature business, and you have kind of seen that the last couple of years. That's a relatively mature business.

I think satellite's perform better within that mature business. There are opportunities there, DirecTV with the Genie us with the Hopper, where we give people a different experience, an experience they can't get anywhere else. I think there's opportunities to grow the business. It obviously gets tougher. You have to be a bit more creative in how you do it.

Having said that, obviously we've seen opportunity in satellite broadband which is very much an equivalent of a video customer that we think has continued growth. Obviously DirecTV has found growth in Latin America. We think that as OTT happens, that's a place we can participate. We've done a lot of things there to be able to participate in that business if it becomes a reality. And then, obviously, from a transformational point of view, with spectrum, we believe that we can be involved in both the wireless side that's the transformational stuff, which reinvigorates your potential growth, and certainly, with that kind of product you can gain market share.

Even if the business was mature, you probably can gain market share and it's probably not mature, because now you can offer different products for video that aren't offered today, like mobile video, or tying into your home system, or video on the go on tablets and things like that. So it's a whole other industry that maybe doesn't exist really today. There's tremendous opportunity there.

I think we're well positioned for -- nothing's happened that we didn't think was going to happen. Quite frankly, the linear video business, big package has performed better than we thought it would. We thought the recession would knock its legs out from under it. Didn't really happen.

The programmers primarily haven't moved to OTT. We thought they might. It appears that they're not doing that, that they're staying with kind of authentication model as opposed to an OTT model. So it looks like the industry for the foreseeable future is going to continue down a path, a mature path, with maybe some companies will only spend a little bit more money for acquisition than others, and maybe small shifts in the marketplace. The fundamental change will come as you maybe move to OTT in years out and maybe our strategy of combining wireless, those could be fundamental changes.

The wireless, I think will happen. I think we'll be the leader in making that happen. But the OTT looks like it's on a slower growth path than I would have anticipated.

Can you just give us any color or thoughts regarding the Sprint derivative investment in the quarter, too, Charlie?

I think it shows our seriousness in going after Sprint. I think some people maybe initially didn't think we were serious. We have, I don't know what the total dollar amount there is, $600 million or $700 million. $600 million I think in total Sprint derivative acquisitions. Just shows we're serious, and obviously we're in the Clearwire capital structure as well. We see real value there. We're happy to be a Sprint shareholder.

Any chance you can size up the non-pay disconnect or the credit quality issue?

Maybe Joe, maybe somebody in Joe's team here wants to take that. Bernie?

Which issue are you alluding to, can you repeat the question?

You talked about -- churn's a little elevated based on credit quality of previous acquired customers, just trying to get a sense for how big that is and how long it may last?

There's a little bit of that all the time, but nothing that happened in this quarter that was different than we always have. This quarter, as Robert talked about, was mostly influenced by doing our price increase which we hadn't done in two years. And the numbers we had for the quarter were very much in line with what we expected, basically in line with the last time we had done a price increase, back in 2011. And so there was nothing on the non-paid front that was noteworthy.

Great. Thanks. Appreciate it.

Your next question comes from the line of Jason Blair, Telsey. Your line is open.

Thanks for taking my call. Our understanding is that the Softbank strategy for Sprint is to offer big buckets of low priced data in densely populated areas. You have suggested that one of the opportunities for Sprint is that DISH comes with many in its sub base that are outside the big metro markets. If you win Sprint would you -- are those mutually exclusive strategies for you?

This is Charlie. Those are non-mutually exclusive strategies. Obviously, I don't disagree that a potential strategy is big buckets of data in densely populated areas. You certainly can do that with our spectrum. You certainly can do that better with our spectrum, in addition to the Clearwire spectrum.

But I do think that Sprint has a fundamental problem, that I haven't seen addressed in some of the Softbank presentations, which is Sprint still has a coverage problem. And so for example, I'm not a Sprint customer today, even though I've tested some of their phones, not because it doesn't work well in Denver, it's just when I travel and go to smaller communities and so forth, it doesn't work. There's no price I would pay that could -- even if I was given Sprint for free, I wouldn't use it, because it doesn't work everywhere I go. So obviously Verizon, and to a lesser degree, AT&T, work just about anywhere you go. So I think that you fundamentally ultimately, once you have the spectrum, which we obviously would have, and we bring more of it than Softbank, you still ultimately have to have a great network. You can't focus just on the Metro areas, or high density areas. You've got to get your coverage better. You don't want to pay big roaming fees, because then it's not economical.

I think that we're positioned to do that with our low band spectrum, in combination with their spectrum. I think those are the kind of things that, when we go through due diligence, particularly as we get input from Sprint themselves and their network people, I think that ultimately we'll find that as opposed to the $6 billion supposedly to build our network out, we're going to find we're spending $6 billion less than the other guys, and we're getting more coverage for it. So I don't know an exact number because I haven't done the due diligence. I think fundamentally, good network engineers understand that our low band spectrum does propagate farther than 2.5. And when it does, it means you can extend coverage for the same price. We've got to attack -- our vision would be to attack both Sprint issues, one is add more capacity, and the other would be to add more coverage.

And Charlie, if you don't win, can you talk about other alternatives for your spectrum portfolio? Could you contribute it to an operating partner? Is there potential for you to do some sort of wholesale hosting deal where you could sell capacity to the industry?

There is potential for that. That's really what LightSquared was going to do. I think that is a possibility, but not maybe first on your list of what you'd do with your spectrum, but you certainly could go out and build spectrum and have every vendor be able to use it. I think that gets to be difficult for a lot of reasons, but not impossible.

This is Tom. I'd just say that we know we have options with our spectrum, but right now the focus is on Sprint. And to the earlier question, you want to put the spectrum to the highest and best use in each geographic area. In a top urban market, that best use for that depth of spectrum is probably mobile data capacity. Where in other areas of the country, where you may not have as much of a spectrum crunch, you have that depth of spectrum and as we presented in our presentation, we see areas of the country where we can be a viable fixed broadband provider which will help serve the communities in the country that are unserved or underserved for broadband today. And again, in that area, you're not going to have as much mobile data capacity requirement, and therefore, you have the luxury of using more of your spectrum depth.

Great. If I could just pivot to a different topic. There are reports that John McCain is going to introduce, into the broadcast spectrum auction legislation, provisions aimed at breaking up programming bundles by offering channels in smaller groups or on an individual basis. Could you handicap the odds of something happening, and the puts and takes of a la carte for your business?

This is Charlie. I think only us -- only DISH and Cablevision have been the two companies that have traditionally been for a la carte or smaller bundles. We haven't changed that position. We just think it's more consumer-friendly. And we know that our customers pay for 200 channels and watch 15. But having said that, there are six big or five big groups that probably have enough clout in Congress to, at least in my opinion, would be to stop that kind of legislation today. We'll see. Because we do have a Satellite Home Viewer Act, must-pass legislation. Maybe Stanton, you want to give a bit on that?

Which is up for reauthorization end of next year. There's a moving vehicle to take a whack at achieving some of that.

Look, the marketplace is going to determine it, right? At the end of the day, if the price of bundled programming gets too high, consumers will start finding other ways to get it. They'll get the smaller, they're get the antennas, they'll go to OTT online, even though it's a limited amount. They'll steal programming.

Ultimately, there's got to be creative ways to make sure you satisfy the customer needs, and there's an awful lot of people who the cheapest -- the best way and best way to get them is to give them 200 channels at the price they get it. If it was a la carte it actually might cost them more. There's an awful lot of people that don't consume anywhere close to that number of channels. In this economy, they're looking to save money anywhere they can. As an industry, we have to be able to accommodate them. Most of us would like to look for creative solutions to do that. The programmers themselves will figure that out as well.

Great. Thanks so much.

Your next question comes from the line of Bryan Kraft, Evercore Partners. Your line is open.

Just had two questions, one wanted to see if you could update us on where you are on connected receivers, how many subscribers are connected to the Internet now? A question for Charlie. Maybe a hypothetical question. From your perspective, if they were to present themselves concurrently, what would be more attractive, a merger with DirecTV, because of the synergies there and the repositioning of the Company, or the acquisition of Sprint moving ahead on the wireless side? Thanks.

Well, I'll take both those real quick. We don't disclose our connected receivers, but obviously the Hopper Sling needs be connected for the customer to get the benefits. The vast majority of our high-end receivers are being connected. We see that as a strategic place we want to go, is to connect receivers. Both us and DirecTV have focused on that the last several years. The experience is really good when you have the Hopper and you're connected, and it's a much better experience and does a lot more, so the vast majority of those are connected.

Our preference is Sprint. That's our focus. That just makes the most sense for us. We would transform DISH, and we'd transform Sprint. Both companies get transformed in that process. It becomes a unique Company, it's something that nobody else can do, both inside and outside the home.

You're right, there would be tremendous synergies with DirecTV, it still would be -- while there would be a lot of synergy and it would be bigger, it would be the same Company. And you still would have to ultimately figure out how to transform that Company long-term in my opinion, because the video business is mature, and ultimately will go into decline phase, the current business. When something goes into the decline business, you want to make sure that you reinvigorated that. That we can do with DISH Sprint. In other words, we don't think, in the video business, we're not going to go into the decline business. We're going to go up. We think Sprint doesn't ever decline. It goes up.

Okay. Thank you.

Your next question comes from the line of Amy Yong, Macquarie Capital. Your line is open.

Thanks. Charlie, historically you haven't really lucked out, so what gives you the comfort that you could lower the leverage on a combined Sprint DISH entity, and can you talk about the longer-term free cash flow characteristics of the combo? Thanks.

I don't -- as an equity holder I don't normally like debt. I like debt more now based on where interest rates and capital markets are. The marketplace is certainly incentivizing you to take on debt, and to the extent that you have a place to put that you can get good return, it does make some sense. I think you have to be disciplined in it, and I think that our approach with Sprint is to be disciplined. I'm not concerned about the debt leverage that we would have going in, for several reasons.

First and foremost, the net debt leverage, day one is less than 5 times, in three years it's less than 2.5 times. So the model itself with our current cash flow, with the synergy that we bring, which we now think, having seen the Softbank presentations and having seen some of the synergies that we think may be realistic there, probably additional synergies that they were able to identify in due diligence that we haven't had a chance to do. The second thing is that it's a very asset-rich Company so we've got 230 megahertz, we've got 15 or 20 satellites, you've got a lot of different assets.

If you wanted to get leverage down even quicker, you could obviously sell assets, non-essential assets and get leveraged down quicker. I think finally, I think there's a lot of different potential partnerships and things that we could do that would reduce CapEx, and perhaps we'd be in more the wholesale side of it in certain markets, particularly rural markets, with customers who already deal with us, who are very interested in what we're doing that would reduce some of the CapEx, OpEx needs and get us into the marketplace faster. I think there's a number of levers that -- from a leverage point of view, is not a concern at the levels we'd be today.

Got it. Can you just clarify what assets you're talking about, in terms of selling?

I'm not talking about selling any assets. I don't believe that it would be necessary, right? But you always want to -- look, I'm conservative, so you always plan for a financial crisis or something to happen. The major asset you have is you have 230 megahertz of spectrum. That spectrum alone, if you just put $0.50 a megahertz pop on it, you're talking about over $50 billion of spectrum. So that, obviously you've seen Verizon very interested in the Clearwire spectrum. You saw DISH very interested in the Clearwire spectrum. So you have the ability to do that, right?

Obviously DISH has satellites, sometimes -- normally we would lease -- if we had our druthers, sometimes we'd lease those satellites. We wouldn't construct them ourselves, certainly from a product point of view, there are people who would be interested in buying and a leaseback kind of thing. We have real estate. So forth and so on. Sprint have assets. They have a long distance business and so forth, so there's things you could sell. I don't want to leave with the impression that's what our plan would be. As an equity holder, it gives me some degree of comfort to know you're a very asset-rich Company.

Thank you.

Your next question comes from the line of Tuna Amobi, S&P Capital IQ. Your line is open.

So I guess my first question, Charlie, is on why do you think the broadcasters are a little bit still hesitant to kind of embrace this DVR? Clearly you guys are getting a lot of traction, just based on your prepared remarks. This is something the consumer really wants and seems like you're doing that despite the constraints of getting the word out there, et cetera. I'm trying to understand. Have you articulated the advertising model that can support a model like this, and what pushback are you getting? And within that context, how do you feel, the whole news about Aereo could actually help to shape that debate? Any kind of larger picture thoughts on that would be helpful.

Well, again, I think as Joe mentioned earlier, I think as a Company, we focus on the consumer and once the consumer makes a decision, kind of en masse, there's not really anything that the broadcasters or we can do to change that, regardless of what we do. I think that's happened with the DVR, and people's ability to push a button and fast forward or skip through a commercial. Every Company in the pay-TV business has a DVR that does that. We made that simpler to do it, so that you can do it with one push of a button instead of multiple pushes of a button, but it essentially does the same thing.

I think that the broadcasters obviously are -- the advertising community of course has recognized that, and so now the model changes somewhat, right. And we ultimately believe in a two pay-TV model. We actually believe in the broadcasting model and having a subscription model and an advertising model, because otherwise we'd have to charge more to the customer. It makes sense to do it, but it does with new technology, make a lot more sense, that if you're going to do advertising, that you make it more efficient. By that I mean that we have the technology to serve up an ad to a particular individual or particular geographic area so everybody doesn't watch the same commercial.

We have the ability now to offer local ads when we've only had the ability in the past to do national ads. As you know, the local ads that cable sells are three or four times more valuable than a national ad sometimes. We have the ability to serve up an interactive ad. So we're presenting that technology to broadcasters. I think that they understand that the model is changing. They wish that it didn't change as fast as it is changing.

I don't think they're happy with us for bringing it to everyone's attention the way we did it, maybe, and our timing wasn't as good as it could have been. But I think they recognize that in fact the model is changing, and I think that they recognize that we agree with them on the two income stream model, and I think they're very interested in the technology that we're talking about. It gets even better when you get into the mobile side of it, and also our second screen applications, because now you have another place to put an advertisement. Of course, that's an interactive ad. When you get to the mobile space, since your phone is smart and knows where you are, then you can do a whole different set of things, so you do something different in your home, you do something different on your tablet, something different on your phone, and the total revenue for the advertiser is materially higher, materially higher than it is today. So I think we're bringing those technologies together, and I think as we present those to the more forward-thinking broadcasters and there are some out there, they're pretty excited about it.

We have to execute. We have to show them how to do it. We have to show them how to make more money. I've never met a programmer or a broadcaster who was against making more money. One more question?

why don't we take one more question.

A quick follow-up.

Final analyst question.

Go ahead.

Sorry. Quick follow-up, Charlie. Do you think that there's a way to kind of leverage what Aereo doing to achieve all of the growth that you just described, or is this kind of mutually exclusive? I guess what I'm getting at, do you foresee a way that you might be able to work with an entity like Aereo to meet all of these objectives? Thank you so much.

With Aereo, we admire what they're doing, technically. It's super innovative. Obviously, we indirectly get a benefit, because it's going to put some downward pressure on retransmission consent fees. But all things being equal, we would prefer to work with the broadcasters to be able to offer service that we would never be required. Aereo does charge money too. Their product's not free. Broadcasters are equipped to do something similar themselves. I think that we're more likely to work with our existing partners.

Today before we go out looking for a new partner. Obviously if our current broadcasting partners didn't want to work with us, which I don't think is the case, but if that were the case we maybe wouldn't have any options but Aereo. But we admire what they're doing. We think the current broadcasters today are the way -- they know they need to change. I think they will change. I guess is how I'd say it.

With that, thanks for the analyst calls. I think we're going to stay on and do a few press calls. Analysts are certainly welcome to listen to that. We'll take some press calls that I guess are for the record now, right?

(Operator Instructions)

I first question comes from the line of Liana Baker, Thomson Reuters. Your line is open.

Charlie, I was wondering if your meeting with Masa San this week, we heard he's in the US, and have you had any talks with potential partners? You mentioned that Sprint might be more expensive with debt levels. What kind of partners would you consider? There was some research that Carlos Slim could be a possibility. Have you threatened to sell the entire Company before, if this doesn't work out? Thanks.

Boy, you're going to be three for three with no comment, I think. Look, on the last point again, I think we said in an earlier call, I think I like where we are strategically. I hope that -- we're going to work our darnedest to get Sprint. We see value. We see a tremendous amount of value there in the Company, and we're going to bid as much as we have to, that we -- we're going to bid as much as we can to get it. That's all I can say, right?

If we lose and we know we have a formidable competitor in Softbank, and that's if nobody else comes into the marketplace to bid. We know they're a formidable competitor. We're highly respective of what they've achieved, and we're realistic that at the end of the day, they could have more fire power than us, and if we lose, then we're strategically positioned to do a number things, right? If they're aggro, we could sell the Company, right? We could have sold the Company before we went after Sprint. We could have sold the Company for the last 30 years.

So it's always an option. It wouldn't be my personal number one option, but it's an option, and I think we're prudent business people. We run the Company for our shareholders. We take that -- we run the Company for the benefit of our employees and our customers, and we take those responsibilities seriously. We will always try to make the best long-term decision for those constituencies.

Got it. Could you talk about this US advantage that you've been mentioning in recent weeks of DISH owning Sprint?

Yes. I mean, I think that -- look, I think that as a US Company, and dealing in the US, you just have -- you always have an advantage. Obviously, culturally, there's not a difference, right? We certainly, because we're in the subscription business, similar to Sprint, we do similar things today. Geographically, we would have an advantage.

And obviously, I mean, I think even within -- even with Softbank you can see that Vodafone, who was a European company, ultimately failed in Japan, given that they were culturally different, as one of the reasons. Might not have been the only reason. Softbank who at that point did not have experience in the wireless business was able to take that over and build a tremendous business. Right? And in the US, they could run into the Vodafone experience, or they could duplicate their experience. But anybody who has run a business in the same country knows it's just materially easier. There's a lot of obstacles when you go into a foreign country.

Does not mean they can't be successful, but I think it's harder, and I think we'd have the advantage there. It's the home field advantage. It's worth about 3 points in Vegas. I think it's worth 3 points here.

Got it. Thanks so much.

Your next question comes from the line of Alex Sherman, Bloomberg. Your line is open.

Two questions, Charlie, first. What role would you want to play at the new DISH Sprint? Would you stay as Chairman? Would you want to be CEO?

I haven't thought about that, and we'd certainly work with the Sprint -- new DISH Sprint Board would make those determinations. I think I would play whatever role people need me in. If that's washing the dishes or getting pizza, I'm willing to do it. I just want to make the Company successful and transform both our companies. Obviously, there's a role for anybody who wants to make Sprint DISH successful.

Anybody who wants to win, and wants to do what it takes to win there's going to be a role for them. Most people are going to be excited about that. Some people may not be, and they'll exit. But most people will want to do that. Sprint, I guarantee you that Sprint employees want to be number one, and I guarantee that DISH employees want to be number one. Together, you've got a shot at doing that.

The second question, I think it's sort of been hinted at a couple times. If Softbank does raise its bid and Sprint falls through, is going after T-Mobile in a similar fashion option A?

I wouldn't term it that way. Again, option A, 1A, 2A, 3A is Sprint. If we fail and I think -- practical business people, I think -- it sounds like from the tone of everybody's questions today, everybody just assumes we're going to fail, which is -- we sometimes have proven people wrong. Then there's a lot of different options for them. Obviously another provider in the wireless business would be an option for us to partner with, acquire, merge, sell to, all of the above, right?

I mean, our -- I'd say it this way. Our spectrum is going to be used in the United States. It's going to go somewhere. And if you -- it's very difficult for Softbank to outbid us. It's very difficult for long-term shareholders. Long-term shareholders would be very difficult, because we bring 14 million homes and cash flow and 45 megahertz mid band and low band spectrum and we bring so much, and an installation network and programming contracts, we bring so much to the party that they don't bring, it would be very difficult.

One thing that Sprint would have to consider is they have a chance to put our spectrum in their column. If they don't, that spectrum's going to compete against them. That spectrum is going to compete in some form or fashion with Sprint. The only thing I can say is when a football team has two great quarterbacks, they'll never trade the quarterback to somebody in their same division, because they'd have to play them. We have great spectrum. Sprint has to think long and hard strategically whether they want that spectrum to go somewhere else.

Softbank, on the other hand, only has cash. And if they bring cash to the United States they don't really enhance anybody because ultimately spectrum's what you need. AT&T with more cash doesn't mean anything. AT&T with more spectrum is formidable. More formidable.

Thanks, Charlie.

Your next question comes from the line of Shalini Ramachandrin, Wall Street Journal. Your line is open.

Just wondering a clarification on a question earlier asked. Are you willing to go to Sprint with committed financing, and get the committed financing, pay the fees, even before Sprint gives you access to due diligence and the potentially superior go-ahead, or are you waiting for that before you get the committed financing?

I'm willing to go with committed financing when they say that is the last remaining obstacle to us gaining access to due diligence, and potentially being a superior bid.

Okay.

Then I'm willing to pay the money.

And one more thing, if I can. Also following up on --

By the way, I'm not asking them for them, you look at what happened with Dell and the Special Committee actually paid Blackstone's diligence fees. I'm not asking for that. I'm saying I will pay it. I'll go the extra mile. But I've got to know that they want to engage with us.

One more if I can, also following up on a previous one. Looks like pay-TV providers as a whole are focusing on higher value customers and you are doing that with the Hopper too. Folks who want advanced services. Does that mean those single-play customers of cable operators and perhaps lower-end video guys who subscribe to DISH, are they going over the top, or do you have a sense on where they're going?

Well, as you know, because we've talked a lot about this, I think that there are people who are cutting the cord from cable or satellite. It's not huge. But it probably -- it probably will grow over time, but there are new household formations again, which we haven't had for many years. That's kind of a balancing act. That's why I say we're in a mature business, and you're looking at, give or take, a little bit no growth in the big linear subscription packages. There is growth in things like Netflix or Amazon or Hulu or so forth. So there is growth in the video business.

Our challenge and opportunity then is to be prepared technically for anything in the OTT business, and we're starting to do stuff now, for example on the -- we just started on the international side of the business, where we have number of international channels through OTT, that I think will be a good growing business for us. If any other thing becomes available on OTT, we'll look at it. And we have to come out with innovative products.

The Hopper does gain market share vis-a-vis our competitors. I think DirecTV would say the same thing about the Genie, because it gives you fundamentally a better experience as a video provider. When you can watch your TV everywhere and you automatically record your primetime shows, that's just a better experience, and people who experience that are extremely pleased. They tell their friends about it. We gain market share.

We probably lose a little market share to cord cutters for somebody who can't afford $80 a month anymore. They put up an offer antenna and go to Netflix and pay $7.99 and they get enough TV for their budget. I think we have to be cognizant of that. It's not the first time you heard me say it.

Thank you, Charlie.

Your next question comes from the line of Paul Taylor, Financial Times. Your line is open.

Brief question. The stakes you've taken, the derivative stakes you've taken in Clearwire and Sprint, I understand Sprint, what's your thinking behind the stake you've taken in Clearwire.

Well, the Clearwire stake, of course we looked at -- we would have liked to acquire Clearwire in its entirety, obviously, but unbeknownst to us, they sold control to Sprint, so we weren't able to did that. We thought it made sense to be in the capital structure. It's a bond that's paying about -- I think it's paying about 12% or something. I can't remember. We bought it at a discount.

We thought it made sense. We thought it made sense as an investment point of view. It had the added benefit, not only was it a good investment, it was a Company that we would like to acquire. So far we haven't been able to acquire it. Obviously, Sprint has majority control of that Company today. So there's really no way to acquire it without acquiring Sprint.

I think both us and Softbank see clear value in Clearwire. I mean, the ironic thing is, if you look at the synergies that we're talking about and look at the synergies that Softbank talks about, a lot of those synergies are in Clearwire. And yet the Clearwire shareholders -- so we bid $3.30 a share for Clearwire, because we're willing to give some of those synergies to Clearwire shareholders. Obviously at the current $2.97, the Clearwire shareholder gets virtually nothing of that synergy, or gets very little of it.

That's why you never really want to put all your synergy out there, because shareholders then says oh, I see what the value is, and then they can -- they go to their calculator, they run the math, and say you're not paying me enough for my -- what you'd like to do and I think what Softbank would have liked to have done would come in the -- would put a bid out there and never have to tell anybody why it was a bid and just -- right? And I think that now that there's a bidding war kind of indirectly for Clearwire and certainly directly for Sprint, now everybody's going to have to go to shareholders and present their synergy, present their business plan, present their vision of the future and let the highest bid win. And that's the way it ought to work.

Okay. If I could just follow up quickly. Is there any path that you can see that you could appeal directly to Sprint shareholders?

Well, this wouldn't be my preference, but certainly there's a path. I'm not that sophisticated in merger battles, and perhaps you could help me, but I certainly have seen from time to time there's proxy fights and presentations directly to shareholders, even when management doesn't side with you. I've certainly seen that in the past. I've certainly read about it, in The Financial Times.

Yes.

I mean, I think the general answer is we're not ruling anything out. I guess that's the general answer.

Okay. Fair enough. Thank you.

Your next question comes from Andy Vuong, Denver Post, your line is open.

Just a couple follow-ups to earlier questions. On the committed financing, the cost to take committed financing to Sprint, what does that cost? And does the fact that you're not willing to do that until that's like sort of the very end, does that show that you perhaps feel that the deal that you've offered won't get a fair shake from the Sprint Board? And not to hammer away at T-Mobile again, but can you speak about why Sprint makes a better merger partner for DISH than T-Mobile, since T-Mobile appears to be perhaps a more willing acquisition target? Thanks.

Well, second part of it, certainly today Sprint is a much more willing acquisition target than T-Mobile. T-Mobile has talked maybe about selling their Company, but Sprint is for sale. They have the for sale sign out, and in fact have entered into a preliminary agreement to sell the Company, sell control of the Company. There's no question, Sprint's a more willing seller today.

Sprint, when you look at the kind of assets we have and you look at the assets that Sprint has, Sprint has a bit more scale. Sprint has a bigger spectrum position, particularly with their control of Clearwire, and so we think that's a better fit. That doesn't mean that T-Mobile's not a good fit. Just means that the price we're offering today, we think that Sprint's a better fit.

And then on the committed financing, the only thing I can say is it's prudent business, which is, before we go -- I think it would be prudent on the Special Committee to make sure you have committed financing before they would declare you a superior offer. They would want that. We're prepared to do it. On the other hand, doesn't make sense for us to spend a lot of money, only to be told that there's other -- that once we solve all their issues, there's other issues that come up.

To some degree, I'm a little bit -- the Clearwire experience was not a great experience for us in terms of our ability to pursue that at the level that we thought we should have been able to do that, based on many things that were told to us, and the rules of the game changed. It was kind of like whack-a-mole. Every time we answered a question, something else popped up. We just don't want to get in that situation.

Maybe we're unrealistically concerned about that, and we shouldn't be, but that's been our experience. So we just think it's prudent. And we see no reason why the special committee who's going to want to get the best price for Sprint shareholders to -- I don't think they are going to have a problem with that, right, and if we can't -- we can't answer all their questions on a lot of issues then we'll never get to that point.

Just a follow-up, if I could. There was a report out yesterday that they didn't want to give access to their books to DISH even though you guys brought the financing in. So there's some indication there.

I think the way it should play out is -- I don't want to belabor this point, but when they look us in the eye and say we'll give you access to the books because we believe you potentially will lead to a superior offer, and that's the only thing left, and the only thing that's left is your committed financing, then we'll give them the committed financing. Right. But we don't want to do is give them committed financing, and them still have other questions beyond the committed financing. That's the situation we're in today which is they -- it's a one way conversation, as you know.

They're asking us -- they're doing due diligence on DISH. We're providing the information to them. As far as we know, that's the way the process should work, and the special committee is doing a good job of doing their fiduciary responsibility. We have nothing to indicate otherwise.

Those conversations are ongoing. Right. And we believe that we are answering their questions and that we're putting our self in a position for the committed financing to be the last issue, at which case we'll provide it. I don't think they're going to have a problem with that. But we've got -- those are the steps, and I would expect that obviously time is of the essence, and I think that both the special committee and DISH are interested in us -- we want to start our due diligence as soon as we can.

Okay. Thanks.

Your next question comes from the line of Jeff Williams, Satellite. Your line is open.

Quick question for you on the, if Sprint and Clearwire don't pan out, does DISH have enough of its own wireless spectrum to make a go of the service on its own, or do you have to have a partner at some level?

Jeff, I think it would be -- I wouldn't say it's impossible. But I've said this, I think it's -- given the time frame that we got our spectrum, and the delays, I think it would be very difficult for us to enter a markets where there's four established players as a fifth player. I think that would be difficult. That would sort of be very far down the list. It's an option. We never say never, but that is very far down the list.

Thank you.

Your next question comes from the line of Mike Farrell, Multichannel. Your line is open.

I have a question, as far as your thoughts on Liberty Media's investment in Charter, and speculation that they may use charter as a consolidation vehicle, and what impact that might have on DISH, since Charter basically operates primarily in the markets that you operate in? Would having John Malone as a stronger competitor in your market change the way you approach your customers, and would it make a Sprint deal that much more important to you, to have that extra product in your quiver?

Hey, Mike, this is Tom Cullen. Frankly, I'm not surprised that we -- first of all, we don't know the motivations behind Liberty in their investment in Charter, but given the relative strength of the programmers in negotiation, it wouldn't surprise me to see further consolidation in the multichannel pay-TV business. As you know, being around the business a long time, there's direct synergy, especially in the systems that are geographically adjacent, and there's many opportunities within the remaining cable MSO space to achieve greater efficiencies. So if that's their motivation it wouldn't surprise me but again, we don't have any insight to that.

In terms of competition, I'm not sure it changes things dramatically. We compete vigorously in each of our local markets, as well as nationally. We're already up against very large players and MSOs that are of near size or larger than we are. But to your last point, and reinforcing what Charlie said earlier, is by pursuing Sprint, we are seeing the opportunity to create a long-term competitive advantage, and bring new and innovative services to customers that redefine the playing field, and so we think it's incumbent upon us to pursue a growth strategy that anticipates where consumer needs are going, and that's not in yesterday's pay-TV model.

I think we have time for one more question. So who gets the last question?

Your last question comes from the line of Greg Avery, Denver Business Journal. Your line is open.

I guess I was curious whether the third-party bid, presumably Verizon for Clearwire, has changed the elements of this whole deal making for you guys in any way, and if so, how? And a second question was just on the core business, when do you expect to start to see housing -- the recovery in housing float the pay-TV business again, the way it once did, or is that ever going to happen?

Okay. Obviously I think the Verizon bid just validates the value that Softbank and DISH saw in Clearwire. Clearwire faced more of a timing balance sheet issue than anything else, and now that people are starting to realize the value of the 2.5 TDD, LTE technology, which Clearwire really is the leader in today, I think people are just seeing more value there. It was -- it's now -- it was considered swampland spectrum and now it's kind of beach front property. So that value continues to go up, in my opinion. That's just my opinion.

And I think that Verizon saw that. I think Softbank saw that. I think Clearwire management saw that. They just have been in an interesting position. And then the housing, pick-up in housing helps all providers, particularly satellite, from a video perspective. So we haven't seen a lot of growth until recently, so that's a positive in the economy. But you also have headwinds of programming costs still going up and some people cutting the cord. That's a balancing act that's going on right now. That's why I say the market's relatively mature.

Okay. All right. Thanks, everybody.

Thanks for your participation.

This concludes today's conference call. You may now disconnect. Thank you.