DISH Network Corp (DISH) 2013 Q2 法說會逐字稿

Good morning, my name is Michelle and I will be your conference operator today. At this time I would like to welcome everyone to the DISH Network Corporation Q2 2013 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session.

(Operator Instructions)

I would now like to turn the call over to Mr. Jason Kiser, VP, Treasurer. Please go ahead.

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

Thanks, Jason. Good morning everyone and thank you for joining us. We ask that media representatives not identify participants or their firm in your report. We also 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 to cause our actual results to materially differ from historical results and future results expressed or implied by such forward-looking statements.

For a list of those factors please refer to end 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 report that you 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.

Thanks, Stanton. Good afternoon to those of you on the east coast and good morning to our west coast participants. I know that there continues to be a lot of interest in our spectrum plans so Charlie and Tom Cullen are also here to take your questions on wireless a little later. Today I'm going to focus the majority of my remarks on our core pay-TV and broadband businesses. As you all know, we rolled out our all new Hopper with Sling product in January with great fanfare. This second generation Hopper, winner of the 2013 CES Best of Show Award, and more recently recognized with PC Magazine's 5-star rating and Editor's Choice Award, was engineered with today's customer in mind. With such consumer friendly and DISH exclusive features as primetime any time, AutoHop, a two-terabyte hard drive for storing up to 2,000 hours of storage, a remote control finder, Sirius XM commercial free music and DISH Anywhere, Hopper transfers and DISH Explorer.

It is DISH's goal to provide the consumer with the best possible video experience and with the Hopper with Sling, he or she can upgrade their viewing experience in home and out of home plus save money. At last count, Hopper had received 17 national awards. Hopper is simply the best as voted by the consumer electronics industry pundits. And other companies are starting to understand that no other provider can match the experience that is now available for our Hopper customers. Apple clearly believes that the combination of the Hopper with Sling and the iPad creates a superior customer experience and as you all know, Apple chooses its partners very carefully and extends its brand name only to the best of the best in its marketing efforts. In May, we launched an exciting promotion with the Apple iPad.

When qualifying DISH customers purchase a Hopper with Sling, they have the option of receiving an Apple iPad instead of traditional programming discounts. It is without a question the ultimate consumer bundle. The Hopper gives customers the ability to transform their tablets into second TVs. These features, communicated through targeted marketing and our innovative bundled product promotion, have resonated with our high value customers. In fact, the success of the Hopper with Sling has been confirmed by the increased Hopper attachment rate in the quarter which drove higher SAC investment. So in some ways we're a victim of our own success, but we'll make that bet every single time in order to attract high value customers that generate better ARPU and MPV. And also as a by-product we're also seeing a higher referral rate from our Hopper subscribers.

Now Robert will give you all additional SAC details in a few minutes but thinking long term, we believe Hopper subscribers, especially those with tablets, are the right high value customer targets for DISH. Now as you all know, certain broadcasters will not run our Hopper television commercials given our position of standing with the American consumer in regards to their right to skip commercials. Obviously we've already won this battle in the court of public opinion. We've now also won in the court of law. Three weeks ago, the ninth Circuit Court of Appeals affirmed the California Federal Court's denial of Fox's motion for a preliminary injunction against DISH's AutoHop and PrimeTime Anytime features. So the battle over consumers' rights for choice and control wages on. Stay tuned, as they say in the TV broadcasting business.

So we refocused our marketing efforts on cable TV, print, billboards, radio, online and social media. Also to further expand our Hopper message of a superior consumer experience, we partnered with another American iconic brand that epitomizes excellent customer service, Southwest Airlines. Southwest also provides us with a direct traveler linkage to our Hopper with Sling product. Again, these are ideal, high value, potential consumers; affluent, frequent travelers and a great likelihood to own a mobile device. Now when you fly Southwest, DISH will provide Wi-Fi-enabled video service absolutely free. Normally it's a $5 charge. The Southwest customer will view our national TV spots featuring the iPad offer and instructions on how he or she can purchase DISH's Hopper.

They also receive Southwest frequent flyer points when they sign up for DISH. Our DISH message appears on the flyer's confirmation document, boarding pass and monthly frequent flyer statement. We also have high brand visibility in airports and in Southwest's own in-flight magazine. And of course the energetic Southwest flight attendants deliver the DISH offer announcement on the plane. The promotion started July 1. Now in addition to the Hopper, our dishNET launch continues to be a success. Quick recap, in October of last year we introduced a new broadband satellite service which makes faster speeds, greater capacity and lower cost available to a market of more than 15 million unserved or underserved American homes.

In the second quarter we continued to experience solid broadband satellite growth and because most of our broadband satellite customers are bundled with pay-TV, DISH's strategy, to leverage its operational scale, is succeeding. Now let's move on to the second quarter numbers. We faced fierce competitive pricing pressures, aggressive promotions, a weak economy and new video providers in the second quarter. Of course this is traditionally a soft sales period for the industry. In pay-TV we lost 78,000 customers, which was partially offset by adding 61,000 dishNET broadband subscribers. We stayed the course of growing our base of high value customers and we continued to increase the percentage of customer activations with HD, DVR and IP connections. And given our first quarter price increase, our first hike in two years, we were pleased with our churn results at 1.67%. Now to provide you all with additional details on our financial performance, here is our CFO, Robert Olson.

Thank you, Joe. Clearly, there were a number of one-time items impacting second quarter. The largest of which was the $438 million impairment charge we took on two of our AWS-4 satellites, T2 and D1. Based on the FCC's recently issued rules on our AWS-4 authorizations and our analysis this quarter of likely potential commercial uses, we concluded that these satellites represented excess capacity. We evaluated potential market values for selling these satellites or components of these satellites and as a result have written down the net book value. While we have no requirement to use a satellite component, we are currently planning to use our remaining AWS-4 satellite, T1 in the commercialization of our spectrum. If you pull out these impairment charges, our second quarter operating income was roughly flat year-over-year.

As Joe noted, subscriber growth is typically challenging in second quarter for most pay-TV providers and we were no exception. Our pay-TV business was down 78,000 subscribers which was weaker than last year but better than second quarter 2011. The shortfall was largely driven by weaker gross activations as our churn of 1.67%, up seven basis points year-over-year, was about where we expected given the impact of the price increase this year. Our broadband business continues to experience solid growth. Gross activations of 79,000 in the quarter were significantly higher than the 21,000 activations we achieved in second quarter last year and roughly on par with the 83,000 activations we recorded in first quarter. We ended the quarter with 310,000 broadband subscribers. Subscriber-related revenue was up $161 million, or 4.9%, in the second quarter compared to last year.

This growth was largely driven by pay-TV ARPU, which is up $3.31 or 4.3% year-over-year. We saw the entire benefit of our price increase in this quarter, but this impact was partially offset by weaker pay-per-view revenue year-over-year. We expect pay-per-view revenue to rebound to more normal levels in the third quarter. In addition to the pay-TV ARPU growth, subscriber-related revenue was up $25 million due to year-over-year growth in our broadband business. Subscriber-related expenses increased by 5.5% in the second quarter versus last year. This increase was largely due to higher programming expense. The year-over-year increase was less than recent trends largely driven by the lower pay-per-view activity.

Our SAC for the quarter was $882 which was flat with first quarter but up $82 year-over-year. Increased brand advertising associated with the launch of the Hopper with Sling accounted for $12 of the increase. Increased capital expenditures drove $49 of the increase, the majority of which was due to higher offer take rate. Our Hopper take rate was up sequentially and year-over-year. Of course increasing our Hopper take rate is a positive, as we will have more of our customers with the best technology in the industry. Also as the Hopper mix in our base gradually increases, ARPU will also gradually increase given the price differential versus our older HD technology.

Our Blockbuster business had an operating loss of $5 million in the quarter. Second and third quarter typically have weaker results due to lower product sales revenue. We ended the second quarter with approximately 450 domestic stores. We are currently planning to close roughly 100 underperforming stores by the end of October. Administrative expenses were down $51 million year-over-year in the second quarter. This reduction was the result of fewer Blockbuster domestic stores and the deconsolidation of the Blockbuster UK business. The reduction in Blockbuster expense was partially offset by $18 million of legal and financial advisory fees in the quarter related to the proposed Sprint merger.

While depreciation expenses were relatively flat year-over-year, we incurred elevated depreciation both this year and second quarter last year. The accelerated depreciation this year was associated with $53 million of certain ground facilities supporting the TerreStar MSS business. This business had less than 2,000 customers and we decided to cease operations in the second quarter. Interest income was up $24 million year-over-year driven by the higher balances of cash and marketable securities. Interest expense was up $106 million year-over-year largely due to the issuance of new debt during 2012 and 2013. We incurred $30 million of one-time interest expense in the quarter due to premiums, interest and financing cost associated with the $2.6 billion in debt we raised and then redeemed within the quarter tied specifically to the Sprint deal. Other income increased year-over-year largely due to the $76 million of unrealized gains on the Sprint derivatives which we mark-to-market.

We generated $263 million of free cash flow in the quarter and $638 million through the first six months despite the increase in Hopper demand. There were a few major changes in the balance sheet compared to first quarter. We issued $2.3 billion of debt on April 5. That debt, coupled with the cash flow we generated in the quarter, helped to drive up cash by $1.2 billion and marketable securities by $1.3 billion. Let me now turn it back to Joe before we start Q&A.

Thanks, Robert. Our plan, our direction remains the same, to grow high value customers and to increase revenue while making the strategic investments for our future. Thank you everybody for joining us today for our second quarter earnings call. Now we're going to open it up to your all's questions. We'll start with questions from the financial analysts and when we're finished with those we'll open the line up for questions from the media.

(Operator Instructions)

Phil Cusick, JP Morgan.

Thanks. I guess Charlie and Tom, if we could start out on the LightSquared effort. Can you talk about how that would fit in to the existing spectrum that you have? And then second for Charlie does the excess cash on the balance sheet create any urgency for you to do something in addition to LightSquared or is that sort of -- do you look at that as a cost of your optionality? Thanks.

This is Charlie. Second part, I mean obviously we have a lot of cash and we're not doing something just to do something, so we have some negative arbitrage there. But it's good to be in that position and it does -- so I think that if there's opportunities out there we'll take advantage of them. And as far as LightSquared, it's a kind of a unique property, a lot of problems that have been well documented over the years. The reason we think it's interesting to us is because the spectrum potentially could fit with the existing spectrum that we have in long term and realize that the LightSquared -- realize that LightSquared is very similar to what DBST and TerreStar were like and essentially -- were essentially satellite companies MSS spectrum but the real value was terrestrial.

And all of them kind of failed as satellite operators only. So putting all that spectrum together at the same time maintaining the ability to use the satellite for voice and data, you know, makes a lot of sense. So we're because we're -- of our history as a satellite company we understand that part of it a little bit better and we think that fits together pretty well with what we're doing. So that's why we're interested that. It's obviously a long-term play and it's obviously something that has a lot of hoops to jump through in terms of from a regulatory point of view and in terms of a technical point of view on the spectrum. So it's challenged and you can take a longview of that particular spectrum in my opinion.

Thanks, Charlie.

Bryan Kraft, Evercore.

Hi, thanks. Charlie, I just wanted to ask you, since you've abandoned the Sprint pursuit, how do you view the attractiveness of the mobile wireless business today, given the increase in competitive intensity? How would you compare now the attractiveness of network sharing versus acquiring an operator? And if you think about the inherent attractiveness of Sprint versus T-Mobile, how would you contrast those two potential opportunities? Thanks.

Well, I mean I don't think anything has really changed. I think that obviously in the pursuit of Sprint and Clearwire, obviously we learned a lot and we continue to learn more about the industry. We certainly learned a lot about those two companies. Strategically we still think everything that we really talked about in the last few months and the last few years is still just as important today as it was then, which is how do you kind of put communications inside the home and outside? How do you put those together in one national company? And wireless is a big part of that so we're still very bullish on the wireless side of the business.

It is going to become, it is becoming a more cost competitive industry. Certainly I think the recent transactions have leaped to AT&T and SoftBank's success with Sprint and Clearwire will make both those companies more formidable in terms of going forward and so forth. Obviously when you put networks together to the extent that you can do that with an existing operator or do that in a network sharing way, that's probably a preferred way to do it. And so I think there's going to be some opportunities for us when we look at that and we're just going to make good rational decisions. And again I think you can make good, rational decisions when you have full knowledge and we've spent the last five years gaining an awful lot of knowledge and I think that ultimately that will pay us dividends as we decide strategically how we move forward.

Thanks, Charlie.

Marci Ryvicker, Wells Fargo.

Just a follow-up to one of the earlier questions, you have but $9.5 billion of cash and securities on hand, I think another $500 million-plus coming in the third quarter post the sale of Sprint derivatives. So at what point would you consider buying in some of your float maybe via a share buyback? That's the first question, and then the second question is the latest retrans fight between CBS and Time Warner Cable seems to highlight a change in the definition of television or pay-TV to now include digital. So do you agree with this statement? And then secondly, if you do, do you think the change to the definition of pay-TV is material enough whereby it could help ease the regulatory environment should DISH and DTV look at some opportunity to merge?

I'll take the first part of that. It's Charlie. Nothing's really changed with -- we look at our cash balances, we look at share buybacks and it's an option. Obviously the options are to first and foremost is manage that we hope we can go out there and invest that capital in other businesses and grow our business and do something strategically that would ultimately return a greater value to our shareholders over time. Having said that, that's not always possible in the marketplace and share buybacks certainly can be considered. I think we have a plan that's been approved by our board to do that to some degree and obviously you could look at dividends.

Obviously we looked at dividends when the tax rates were changing. That is less attractive to us today, but I think I guess the way I'd summit up is first and foremost we still think the strategic things we can do with our capital that's where we prefer to do it. But absent that we would consider share buybacks. And less likely to do dividends based on tax implications of that today. You know, Tom did you want to take the --

Well Marci, on the definitional, clearly the lines are blurring between traditional delivery methods and digital. But you know in this particular dispute, and I think you saw some chatter about this yesterday, the fact that a DISH subscriber could also be a Time Warner Cable broadband subscriber bothers us that our customers would be brought into the fray on a dispute between Time Warner and CBS.

And then I guess the last part of the regulatory process. Certainly the marketplace is materially different than last time we tried to merge with DirecTV in the sense that you've got the two growing, the two actual growing people in the pay-TV business are phone companies. They didn't really exist in the business last time we tried it. And then of course you have almost an unlimited number of people now on digital internet getting into the business, whether it be from Netflix to Hulu to Amazon to everything else that you can do on the internet and that's only going to grow. So clearly it's a different environment from a regulatory point of view. One doesn't always know the way the regulators think, but my experience with regulators has been they understand the market pretty darn well and they see the same things that we see. So I think it's a different environment today.

Thank you.

Doug Mitchelson, Deutsche Bank.

One for Charlie and one for Joe. I'll just ask Joe first. You've highlighted the Hopper for a few quarters now as a pure product and SAC costs are higher as they -- as high as they've ever been. Why is that not translating into flatter growing gross additions year-over-year if you have a better product to sell and market? And as part of that how should we think about the iPad promotion versus return on investment levels for new subscribers? And then I'll have one for Charlie.

I'll try to take that. Robert, you'll help me with the iPad investment piece. Yes, we've lost some subscribers but that does not mean we haven't sold a better mix of product. We're replacing some low end subscribers, customers with better higher value Hopper customers, if you will. Now we will get some relief in terms of the SAC from a product cost basis as we ramp up the volume with the Hopper with Sling product and that will start kicking in really late this quarter but more appropriately in the fourth quarter, As you wrap up your volume, you get economies of scale and the product cost will come down. That's just basic function of consumer electronics.

Doug, this is Robert. I think we've made it fairly clear that in order to qualify for the iPad promotion the customer needs to have a higher credit score. So we start off with customers that are taking this product being better customers to start with. An additional part of the economic equation is that we expect referrals from customers who have Hopper with Sling and have the iPad. It's a great product. They will be taking it with them everywhere they go. So when we look at the economics we think of them pretty positively.

Great, thank you. And then Charlie, I was just hoping to get you to expand a little bit more on your wireless commentary so let me try it this way. I think you've noted in the past the wireless sector is likely to consolidate down to three or four operators and there's an investor perception that the only wireless partner that you really have left that makes sense to work with is T-Mobile. And I know you just mentioned network sharing with others as an option, but can you comment at all about the viability of competing with these larger wireless operators without being a part of one?

Yes, I think you -- I don't think you can compete if you just did the same thing they were doing. That's why I think video is such a big part of what potentially can be done from a wireless perspective and I think where we would have an advantage and why we would be a very good partner for one of the wireless providers in the sense that we can give them something that differentiates. One of the things that always struck us is as difficult on the Sprint acquisition for SoftBank was at the end of the day it was still going to be Sprint and they didn't bring any spectrum, they didn't bring anything that was different. What they do bring obviously is capital and tremendous expertise and creativity and so I assume that they will find ways to compete very well. But they are not going to compete on geography and so they're going to have to compete on price. And so I think there's still a lot of opportunity for us and I think that opportunity certainly T-Mobile from a -- this is a company you could put that together with DISH in any number of ways including acquisition or merger and that probably is not possible with the other wireless providers.

But having said that, I think the other wireless providers do provide us some pretty good options and I think in an ironic sort of way Sprint becomes a really kind of interesting potential partner for us as well. And I think people just assume maybe that that is not the case, but the fact is we actually understand Sprint and Clearwire probably better than we do any of the other wireless providers. Certainly I think Sprint and Clearwire understand us pretty well and certainly understood the synergy and strategic reason why we're an attractive option. I think we were just too late to the party. We got hung up in regulatory and there just wasn't an opportunity to convince the [spesh] committee that they could wait another six months to a year to take a chance on us when they had essentially somebody at the table that was willing to step up and pay today. So I think that there's a lot of optionality for us in the wireless business. I don't think that has changed any, unless you just looked at a full blown acquisition, our merger, and really that's probably only T-Mobile at this point in time.

All right, thank you. That's helpful.

Ben Swinburne, Morgan Stanley.

Thank you. Good morning. Charlie, just sticking down the Seinfeld strategy route of line of questioning. I was wondering, given all the time you spent in DC over the last several years, a couple of things they have to decide over the next few years. One is on the incentive options and the other is on spectrum caps. I'm wondering if you have a view on how either of those shake out and particularly how the spectrum cap might impact AT&T, which a lot of people think is a natural buyer of your spectrum? And then on the incentive options whether you'd be interested in acquiring any of that spectrum since you've generally been a buyer over the last several years on the spectrum side? And I guess I'll leave it there.

Well, I don't know where the -- obviously we have a new SEC Chairman coming on board this fall so I think he will take a fresh look at spectrum caps. And generally the Democratic side has been more in favor of competition and new entrants. Typically on the Republican side it has been a bit more laissez-faire, let the marketplace decide it. So I assume that the new commissioner will still continue some of the policies of the past, but I do think that all wireless providers will be able to get more spectrum as more spectrum becomes available that they will be able to increase the spectrum that they have. And that's going to come in, obviously in the form of auctions and so forth. We've participated in most auctions, we'll continue to participate in auctions. We don't see anything for -- the H-block unfortunately is not as attractive to us if it's auctioned by itself today, as things stand today, because it doesn't really provide, it really doesn't provide us much because it would be uplink spectrum for us that -- we need more downlink spectrum.

So, but that doesn't mean we wouldn't participate. Obviously we want to make sure a fair price is paid in the marketplace. So you never know what people are going to pay so it always makes sense to show up. So I would expect that we would show up in most auctions, although the H-block is not particularly attractive as things stand today. The incentive options for the broadcaster spectrum of course has a lot of hoops that the commission and the broadcasters will have to jump through to make that available. If it's made available and we've made a lot of comments on the public notice and it comes in a format that's generally along the lines that we've suggested and we generally agree with what the FCC is on that, then I think you would see us participating in that.

And then just to follow-up on your comments before about DirecTV, DISH and how things are different today than 10-plus years ago. How would your wireless vision be impacted by a combination? Would the combined cash flow and sort of borrowing capacity fire power of the two companies mean you wouldn't even need network sharing, you could enter the market on your own? Or is it still something you think that you'd need to partner even if you were a bigger business?

It's an interesting question. I think there's a couple things. One is that I think you heard Mike White's comments, John Malone's comments. I think you have a general kind of momentum, gravity towards consolidation in part because the programming partners have gotten so powerful that their rates are going up at four or five times the rate of inflation. And we got into the video business because cable companies as monopolies were raising the rates three times the rate of inflation year after year after year, that the government worked with -- to open up new competition we were able to enter the marketplace.

We've got almost that going on plus even a little bit more, in my opinion, where the programmers themselves are really in a way monopolies. There's five big programming groups, they are essentially monopolies, they're raising their rates at double digit rates, inflation is 1% or 2% and so I think that just really Congress really hasn't done anything to level the playing field. So you see it in retransmission disputes, you see it in other disputes. So I think that that forces people towards consolidation to level the playing field. So I think that from a regulatory point of view that's more achievable today than it ever has been because it's just too one sided today and the consumer's losing out on that.

And then of course secondarily, there's new competition coming, whether it be from the phone companies themselves or from the internet, that didn't exist before. So I think the marketplace is probably fairly attractive for consolidation in the video business. Might happen in cable first and that may force the satellite guys to look at different things. And then I think the other thing that's interesting is, having said that, is our strategy has been a little bit different than DirecTV's in the sense that we've thought wireless or outside the home is part of what we would like to do and what would make us successful and transform us. They may not necessarily be in agreement with that and so you might not ever be able to put the companies together because you just have a different strategy. Or it's possible we don't have the right strategy, that we have to look -- we're not married to any particular strategy.

If events change and it's possible if we couldn't be successful in the wireless business that we would just sell our spectrum and so that then our strategy would be aligned with maybe where DirecTV is today. So if we couldn't convince DirecTV that wireless made sense, and they convinced us or the marketplace or the regulators we just couldn't get in the wireless business, then as I've said many times we're not suicidal about it. We'd exit the wireless business and sell our spectrum and then we would be a video play. So all those options are available for us. I like where we are strategically. I think we still have the same optionality that we've had for the past year with the exception of possibly Sprint Clearwire being maybe a different kind of option for us than it was before. My experience has been that there's going to be events that transfold that are going to force us in a certain direction that make sense for our shareholders and we will continue to look at whatever we do strategically to be the right long term decision for our shareholders and for our employees.

Thanks a lot.

Vijay Jayant, International Stager.

Hi. Charlie, the LightSquared transaction, I'm just trying to get some clarification. Is that you personally buying the spectrum and then eventually selling it to DISH in some [arms end] agreement? And then for Robert, obviously the broadband businesses, the growth aspect of the Company right now, can you sort of give us some more clarity? You've mentioned its got some more economics to pay-TV, but any color on what the ARPU, SAC and gross margins are on the business, we'd really appreciate it. Thanks.

Robert, do you want to start?

Yes, I'll start with the broadband. I think we've perhaps talked about this before, but we think long term the broadband business will have similar subscriber acquisition economics so the net present value of acquiring a subscriber as the pay-TV business. We're not there yet. We've still got a lot of work to do to improve our customer service or operations, real blocking and tackling work, but we're moving forward, pretty much every quarter we're getting a little bit better. Churn is a big thing that we're working in the broadband business, it's not quite down to the pay-TV level but we expect it will be. I think we've mentioned before that generally, SAC is a little bit lower in broadband and ARPU is a little bit lower right now in broadband. So SAC in the $600 range and ARPU in the $60 range.

And the nice thing about -- this is Charlie -- in broadband the content cost is down like zero so (laughter) and stays down. So that's the attractive part, the broadband side. As it relates to LightSquared, obviously this is all public information, but I did -- my understanding was that there really wasn't a corporate opportunity for DISH, but I did buy debt personally in July. The court has indicated that they will take the exclusivity period for the Company management to make bids in bankruptcy is gone so that any company can make a bid in bankruptcy. DISH when they're in special committee and an independent board of directors and the board of directors decided that they wanted to make a bid in bankruptcy of about $2.2 billion. And so that's the path that DISH is pursuing.

So whether -- ultimately how that shakes out -- and they got the support of the basically the ad hoc committee of lenders' support to support the DISH bid. The judge has kind of rejected that in the sense that they want DISH to come in with the management of LightSquared. Certainly DISH will work with LightSquared management to see if they come to conclusion on preparing something with management's support. I'd say the timing is an issue there and at some point DISH might not be interested, from a timing perspective. But LightSquared, I think it's an asset that has so many difficulties that it's one that there becomes a point in time when maybe it's not as attractive to where DISH wants to go.

So I'm in a awkward position, obviously, so there's a lot of the stuff is done external to me. But right now, strategically it seems to be the right thing -- a good fit for where DISH wants to go. So we'll see how it plays out. But bankruptcy is difficult and judges make a lot of decisions and there's lots of people that have a stake in a bankruptcy and you can't always herd everybody to the same conclusion. So it's not a must-have for DISH. It's certainly something that seems attractive to DISH versus other potential investments, but it's certainly not a must-have. It's not certainly something that -- as you know, we would be disciplined in our approach and we'll remain disciplined with LightSquared.

Thank you.

Jason Bazinet, Citi.

I just had one more question on the LightSquared stocking horse bid. It seems like there's a fair degree of uncertainty on a couple different dimensions, how much spectrum whoever buys the asset ultimately gets, what the end [Marsat] payment is. And so in the context of your $2.2 billion bid, would you just mind taking a second and just in broad brush strokes laying out sort of the bull, base and bear case in terms of what you would hope to achieve if you ultimately succeed in buying that asset? Thanks.

This is Charlie. I don't know that I can do that that well but I think there's different elements. Certainly there would be with LightSquared at a minimum uplink and downlink to satellite spectrum. It would have some value in the sense of an existing business of machine-to-machine or handsets to a satellite that is irrespective of probably the kind of conflict they've had with the GPS industry and MRSAT per se. The second thing is there's -- the second piece of it they do own some spectrum out right, I think it's 18 megahertz of spectrum out right. Some of its conflicted that has some kind of value. Certainly long term you would work with the GPS industry to try to clear some of that spectrum and some of that takes a long time to do.

And then thirdly there's the potential lease of additional spectrum from MRSAT and MRSAT clearing that spectrum and the payments that go to MRSAT to clear that spectrum. And so you look at -- you kind of look at the value of LightSquared and say, you know, what are the odds that you're going get -- some of those pieces are going to come to fruition and some of them aren't. And that's kind of how we looked at it and that's kind of how we came up with $2.2 billion as kind of a price between the satellite assets and the spectrum assets. Assuming that perhaps MRSAT is not something that continues the way people or the way LightSquared thought was going -- initially entered it in contract and also looking at some of the -- and also making the calculation that some of the spectrum will be impaired for a considerable period of time. So again, as a result of that it's not quite as cut and dried as some of the other things that we've done. When we look at thing I think there's a lot more betting on the come on LightSquared than perhaps some of the things that we've done before. And you have to -- but having said that we know the government wants to free up more spectrum.

We know that we're in a spectrum shortage. We know the government wants to see spectrum put to use, but I think this administration has generally been and this FCC has generally been supportive of entrepreneurship and creativity and our feeling is that there's a desire on the government's part to just free up the spectrum. I mean all the hoops that the government's jumping through to free up spectrum for auction, there does exist spectrum at LightSquared that can be freed up with the desire for people to compromise and look at technical solutions and we think we're a perfect company to go out and do that kind of thing because we have a long term view of it. So that's how we look at it. The bear case would be that you just have some satellites and some long term spectrum and the bull case would be that you'd -- the real bull case would be to free up 40 megahertz of spectrum. I'm not that bullish, (laughter) but that would be the bull case.

Thank you very much.

Tom Seitz, Jefferies.

Yes thanks for taking the question. Charlie, knowing disputes that wireless data traffic is growing through the roof, but what I think has some people surprised is how much of the traffic growth is shifting to Wi-Fi. Certainly in the home, but increasingly out of the home as well. So two questions if I could. Do the business models you contemplated when making the spectrum investments anticipate that phenomenon?

Do you think it even matters? And then second, do you worry at all that when Washington starts to dig in on this that there's the risk that they begin to allocate materially more spectrum to unlicensed uses, potentially devaluing to extent purchases of spectrum? I guess I noticed at the June Senate hearing on the state of the wireless industry that the only service company called testify was Comcast. There wasn't even a mobile operator at the table.

You bring up good points, I think those are interesting things that have to be considered. Certainly Wi-Fi is both is an opportunity and also a threat. It's an opportunity in the sense that if we were building out a network, there's a lot of areas we wouldn't have to buildout because Wi-Fi would exist. So as long as you can combine with Wi-Fi it makes the buildout a lot less and you just have to cover outside geographic areas. On the other hand, Wi-Fi takes customers away from your network and puts them on some public spectrum. There has been some, and there is some more spectrum coming online that's going to be available for Wi-Fi. So Wi-Fi is going to become an improved product with 802.n and the additional spectrum you're going to get.

But they still have the long term fundamental problem that it's unlicensed spectrum so you can't have a consistency of service and consumers are going to want a consistency of service. You're going to want to know when you're using your wireless device that it's got -- it's going to maintain a pretty consistent speed no matter where you are. And you're not going to really -- and so I find myself and I see a lot of people when I'm an LTE area or 4G area, I'm actually turning Wi-Fi off and I'm getting a better experience in LTE. And I think that's where you want to get to as a wireless operator, where you want your customers to know that the best service they are going to get is not going to be on Wi-Fi, it's going to be on your network. Then the challenge is to get the cost of your network down so where your cost of your data is low enough such that people will accept that consistency to -- will pay for that consistency. That was part of the attractiveness to Sprint for us which was they had the -- Sprint Clearwire has the kind of capacity to do what I just said. They have the ability to go out and create a network that will be fast enough consistently that -- at least where they have coverage, where they have geographic coverage you're going to prefer that network to the Wi-Fi.

So we'll have to wait and see kind of how it develops. On the other hand there's probably going to be people who never build a network at all and just have devices that work on Wi-Fi and never build a network and some customers are going to be happy with that experience. And that experience probably is going to get a little better than it is today. So they don't have any CapEx and they'll just have a network off the public network. So we'll have to see how it all goes about. I think the government's going to look at it because I think options are such a big part of where the government's going that you're probably not going to see a lot more public spectrum coming online because then there's nobody to pay for it. So at least for the foreseeable future the new spectrum coming online appears to be private spectrum that will be auctioned.

Thanks very much for the color.

Tuna Amobi, S&P Capital.

Thank you so much. So with regard to your upcoming negotiations, can you remind us what made your negotiations, I know you have a few coming this year on the retransmission side. And given all the noise, the back drop of the retransmission environment, all of the dispute and also given the traction that you're getting with your Hopper, Charlie, do you feel like your approach to these negotiations is dramatically -- would be dramatically different today than it was, say, in a couple years ago? So clearly you're still in litigation on the Hopper even though it's very obvious that it's been very well received, both from a technical and consumer standpoint. So I'm just trying to tie it together in the context of your retransmission deals that are still ahead, how your philosophy has evolved.

I'll take a stab at just a little bit of it and maybe Joe or Robert want to chime in there. But, as far as -- I don't think the Hopper has material effect on retransmission consent. The train's left the station, customers skip commercials. We kind of -- maybe we shined a light on a little brighter than other people have done it, but people skip commercials, advertisers know people skip commercials. TV as we know it is going to change and I think where we have tried to move the industry is to go to commercials that are meaningful to customers.

So we think those are more valuable to the customer, we think they are more valuable to the broadcaster. So part of what the Hopper does is give you the ability to target a commercial and play different commercials for different customers. We think those are more valuable and we think people are going to skip those less. But the train has left the station for the consumer to have the right to skip a commercial, I think that's just going to -- I don't think that's going to go away. And I think there might have been a lot of hype about from the broadcasters' perspective when the Hopper first came out, but I don't think that that's material in any retransmission consent talks at this point in time. And then you guys may want to --

So Tuna, this is Robert. We have retrans negotiations going on all the time. So it's going on today, they'll go on tomorrow. With regard to major programming networks, national networks, we usually don't disclose the specifics of that.

Okay. Do you get a sense of a lot of pushback, or -- let me rephrase the question. Are you at risk perhaps of a major signal disruption of the type that we saw a couple years ago? Or do you feel that -- do you have enough kind of fallback position to be able to continue to operate? And I'm talking about the broadcast networks, not necessarily the cable networks.

This is Charlie. I don't think there's probably a major risk from a broadcast network perspective, I don't think there's a major risk -- a real major risk. I mean the broadcasters themselves don't own that many stations anymore so you're pretty fragmented in terms of -- it's good news bad news, you've always got retrans negotiations going on, I think we have somebody down today, right?

Raycom.

Raycom's down today. So they're in a lot of smaller communities but we add them all up, it still -- it adds up to maybe half the size of a major broadcast network. So that's an ongoing thing for everybody. Obviously I think -- I don't know if CBS is still off Time-Warner? It is, so that's -- we end up, from a positive point-of-view for us short-term, Raycom's a negative for us short-term. That will all kind of come out in the wash. I think the overriding thing is that obviously the broadcasters as an industry have gotten more aggressive in terms of retrans discussions and there's going to be more outages, which is ultimately going to lead to one of three things.

It's going to lead to industry consolidation or it's going to lead to Congressional action or it's getting into new technology alternatives, whether it be the guys like Aereo who do it a different way or whether it be the people that just quit watching broadcast networks. I will guarantee you that they will be customers on Time Warner Cable when they come back, whenever CBS comes back on Time Warner they won't watch CBS as much. They will watch some other shows because they will realize they don't miss it or they've discovered new programming that they didn't know existed before or they went to the internet and cut the cord and never came back. So all those things are going to happen, it's nothing new to us. It doesn't surprise us and content owners are going to go where they get paid. And so they've got a product, it's got a limited shelf life. They are going to go do all of the pass where they think they maximize their revenue.

And I think what's going to happen is there's going to be mistakes made from a content owner's perspective in the sense that the linear programming as we know it today with a big package that averages over $1,000 a year to the content owners as they start putting that out in different forms and becomes more convenient for customers to go on the internet and get it, their actual revenue has a risk of actually going down because obviously, the linear providers and the bigger packages will go down. So that's -- how that all shakes out is going to be very, very interesting and some people are going to navigate that, some companies will navigate that better than others and thread the needle a little bit better. But I think all the content revenue in the industry is probably at risk for a variety of reasons too long to go into and for a variety of reasons where I don't think the industry quite understands how the internet works and how consumers use it. And so you just end up with decisions that will be interesting and hopefully at the end of the day the consumer wins because if the consumer wins we're going to try to be on that side.

That's very helpful. Just quick clarification for Robert on interest and taxes. Seems like a lot of one-time items in this quarter, so if you can help us kind of recap on what would be a good run rate going forward for modeling purposes? Thanks a lot.

Sure, Tuna. I think in our 10-Q, we disclosed that we had roughly $30 million of one-time interest expense related to debt specifically raised and then redeemed within the quarter, specific to the Sprint deal. So that should not continue into future quarters. With regard to taxes, we had the favorable benefit of a settlement with the IRS with regards to years prior to 2009. That was roughly $15 million of favorable impact that was one time in nature.

Okay, so what's your ETR now? Is it pretty much stable as it were going forward?

We've said before that it's in the 37% to 38% rate and if you make the corrections I spoke to you'd get there roughly.

Great, thanks a lot.

Devon Xu, Wells Fargo.

Thanks for taking my question. I just had -- was a little bit more curious on when you think the, I guess fill or kill on moving into a wireless space is, given timeline of the auction, Sprint's deployment and some of the FCC terms on your spectrum?

I'm not sure I understood the question. Tom did you get that?

No, I'm sorry. Would you repeat it?

Yes, so when do you think the deadline is for making a decision on how you approach the wireless space, if you do at all?

Yes, this is Tom. Yes, we're mindful of course of the buildout requirements that came with the AWS-4 spectrum, but keep in mind there's two different intervals there. One is three an a half years out and the second is five and a half years out. I think given the pace of change in the industry over the last 12 months, the concentration of spectrum will probably continue well before those deadlines. What we're doing in the meantime, and as Charlie mentioned there's a new Chairman coming in to the FCC and some other changes there that we'll see develop over the next couple months, but in the meantime we continue to work with the vendor community in the infrastructure development around AWS-4 radios, which is shrinking one of the key intervals associated with any deployment of that spectrum. As mentioned earlier, the question came up around spectrum caps and I don't know how the commission's going to deal with that eventually, but the reality is there's been a wave of consolidation in the industry this year with Sprint and Clearwire, with Metro and T-Mo, with Leap and AT&T so the number of holders of spectrum has naturally shrunk and yet the needs of 315 million Americans and growing is not going to shrink. It's going to continue to expand as they bring on multiple devices and a younger generation, there's 70 million people in this country under 15 years old, that generation is the one that's going to be more voraciously consuming videos. So however the commission deals with it in time, the needs of the American consumers aren't going away.

Okay. All right, thanks.

Andy Hargreaves, Pacific Crest Securities.

Thanks, just actually sort of a follow-up on that. Do you have any sense for how close to, I don't know, their spectrum caps the wireless guys are at peak usage right now? And how desperate are they for more?

Well I think it's dependent on the individual holder and the number of customers that they have. So you can't look at just across-the-board somebody has 105 megahertz versus somebody who has 75 because one might have twice as many customers using it, first of all. Secondly, in terms of the strict definition of caps as you know, there's a growing view that different frequencies should be viewed differently in the eyes of the commission relative to spectrum depth. But again, those are the types of things that will be determined through rule making and process. But I think generally there's a sense of urgency that those questions have to be answered definitively and I'm sure that will be one of the agenda items for the new chairman.

This is Charlie. There's one more variable to get a look at which is you can't just turn off your spectrum. And everybody wants to go to LTE because it's 300%, 400%, 500% more efficient than 3G or whatever the number is, right? Or whatever number you want to use. But you can't just turn off your 2G and 3G and snap your fingers and have LTE or 4G so that's why news spectrum is so important, because you can take new spectrum and of course deploy it as 4G or LTE and then wean your customer base over a number of years, which may be 10 years or more, and continue with your 2G and 3G.

So it's a little bit -- there's one more variable that all the carriers have to go through in terms of how they deploy and how they can modernize their network. So that's obviously Sprint, in their network vision, that's a difficult thing that they were somewhat spectrum limited. For them to deploy LTE is very difficult which is why Clearwire was so important to them because that was virgin spectrum for them to be able to convert to LTE. So lots of variables that you got to consider beyond just the spectrum cap.

Okay and then can you just explain a little bit more about why the video you consider to be a strategic advantage as you look to get into wireless? Because it seems like on one hand you're saying look at video as kind of, I don't know, the profit opportunity is declining and that as we move to the next generation the core competencies of running a network and video programming seem more like they did diverge than anything.

Again I don't know if the video opportunity, profit opportunity is declining in video. I think it is a very mature business as we do it today at DISH, which is a linear package of hundreds of channels that customers pay on average over $1,000 a year. That's a mature business, right? And the profit opportunities there are more limited. Having said that, there is tremendous opportunity for our content partners and for DISH to do video outside the home on a wireless basis, right? So what people refer to as TV Everywhere, there's great profit opportunity for content owners and us in that particular situation, particularly as you get into more targeted advertising and things you can do. So that's why a lot of the technology we work on all kind of comes together in that form.

To do it outside the home the only way I can think of to do it is in a wireless manner. You certainly can't haul a cable around while you're driving a car down the road, at least not that I know of. So if you're doing wireless methodology, then you've got to have spectrum to do it. Second thing is that video consumes a lot of spectrum. So if you look at all of the zeros and ones and bits you're using the vast majority of them are going to be video.

I think it's over 50 -- the majority of bits today are video. It's probably going to be 80% or 90% of your bits in the future are going to be video bits. So that would be a tremendous advantage for somebody who understood video and had relationships with content owners and technically knew how to make those content owners get more money and be more profitable. That all works, right? And that's why we think that's a differentiating item.

Got you. Thanks.

Craig Moffett, Moffett Research.

Yes, hi. I wonder if I could return to Tuna's question from a short time ago. You have a Disney renewal coming up in September. Can you talk about what your objectives are in renegotiating the Disney contract and how smoothly you think that negotiation will go?

This is Charlie. I think obviously Disney's been a good partner for us for a long period of time and obviously our motivation would be to get a fair price, be treated fairly as the third largest video provider and our customers to be treated fairly and to get increase, and I think Disney's perspective is increase the amount of money we pay them. So there's a way to thread the needle there, there's rights that we don't have today that we'd like to have. Those are valuable to us. They like to charge us more money for them and if in both sides, neither side has to have the other side. Disney is not going to go out of business without DISH Network and vice versa.

If you took a really long term view of it because the sports are so expensive, took a really long term view of it and because there's so many different -- because most of the linear providers today are doing exactly the same thing, for example, ESPN is exactly the same on DISH as is DirecTV or on Comcast. If you take a really long term view of it somebody some time may decide that sports isn't something they have to have and therefore they can have a materially lower price for customers and while they'll lose customers initially they will gain customers long term, they'll be back in a growth pattern for gaining customers. So there could be a day when, strategically, companies just can't get together, where they go opposite directions and they both have strategies that work for them and we're prepared to go either way. I think that's where you have to get yourself in position. So, obviously, we'll work first and foremost to find a deal with Disney that makes sense for our customers.

If we get that deal we'll do it. If we don't get that deal we'll part ways. Simple as that. So I'm optimistic that we will get that deal done with Disney, we've had lots of discussions about it already. But you never know until you sign the final agreement.

Thank you.

Joe, are you going to add something to that, because you've been more involved than I have.

We are engaged -- I was in New York last week, they were here this week. We're moving, I think, to a favorable solution for both parties. That's the objective.

Thank you.

Jason Armstrong, Goldman Sachs.

Hey, thanks. Maybe just two quick ones on rate hike slash ARPU. I guess it sounds like the second quarter had a tough compare as it related to some of the events. But going forward should we expect the video ARPU left to be closer to the $5 rate hike that you put in as sort of an acceleration as we move into 3Q and 4Q? And then maybe looking at 2014 sort of along the same lines, you're probably far enough into this to know whether large rate hikes every two years is a better strategy than smaller rate hikes every year. I'm just wondering if you think about the forward, which strategy makes more sense based on what you have observed so far? Thanks.

Jason, this is Robert. With regard to your first question, we will have probably less headwind in the third quarter than we did in the second quarter. As I mentioned in my opening remarks, we had some pay-per-view headwind year-over-year that should go away. With regard to your question of whether we'll hit the $5 price increase, we'll get closer. That $5 price increase was not applied to every customer. We had talked about this before.

Customers that had joined us within the last 12 months did not see that price increase until their 12-month anniversary. Also some of our international packages were raised by different amounts. So it will be closer but it won't be the $5. With regard to your second question on the once a year pricing versus every two year pricing --

I think, this is Bernie, I think 2012 was really an anomaly. I think our past had been to do a price increase every year. For a number of reasons, largely a big billing conversion that we did in 2012 we skipped that year and I think as we've alluded to in past discussions on this call that's probably something we'd lean against doing again.

So another rate increase at the beginning of 2014 to get back to sort of an annual schedule would be the concept?

That's correct.

Okay, thank you.

Michelle, I think we got time for one more question before we open it up to media questions.

Walter Piecyk, BTIG.

Thank you. Just want to go back to your comments on using the satellite. If you are able to get LightSquared and use their satellite does that reduce the need to use a satellite you have from your existing spectrum? And then also on the H-block, you had mentioned, I guess there was a filing last week from your meeting at the commission talking about not wanting to bid on it. Are there specific reasons or are there things that the SEC could do that would increase your interest in bidding in that spectrum?

Well, I mean -- this is Charlie. I mean obviously we kind of fought and lost for some of the things that we think the FCC could have done to make that spectrum more valuable to us. Doesn't mean we can't revisit some of those things with them. But you know, I don't think we wouldn't bid on H-block. I think that it's less interesting to us than had they done some of the things that we put in our filings before.

It's probably more interesting to Sprint. It's probably really only interesting -- I mean if you look from a big picture perspective, the way H-block is configured today and based on the rules Sprint pretty much got the rules that they wanted for H-block so I think it's very interesting to Sprint and they are probably the one that's most likely to prevail there. With the first part of the question -- oh, the LightSquared, I think that satellites are an important part of what you would do from a communications link and from handsets. I think an important part, I think we realize that we have today a very good asset in T1 in terms of the ability to cover the spectrum that we have in S-band today, that's why I wrote down the other satellites because they are not really needed to do that. LightSquared obviously has some satellite assets that do something similar, although we don't really know those satellites very well at this point and whether and how -- but we do think that you could use those satellites in conjunction with existing satellite assets that we have and do some interesting things.

But could you get rid of the existing ones, Charlie, and just use the LightSquared ones? Meaning if you wanted to do something else with the spectrum would you need both?

Technically, I would say you probably -- technically you probably, depending on what you were doing you wouldn't necessarily have to have both, technically. From a regulatory point of view that's a different question. And number two, you might come up with ways to do more things in which case you might need more satellite assets. But if you just kind of did the world as we see it today, you wouldn't need all the satellite assets, which is again why we wrote down two of the satellites this quarter.

Got it, thank you. And Rich Greenfield wanted to hop on with a follow-up question. He's going to take my second question. Thanks.

Charlie, I was just curious. You've spent a lot of time before talking about doing something over the top. Intel has been discussing a launch some time before the end of the year with a non-facilities based MVPD-like service, wondering where you stand on that? What's your appetite for doing something like that, whether with sports or without sports? Thanks.

Yes, we certainly talked to all our content provider, major content providers about over-the-top services, just as probably everybody has and we just haven't found a lot of support for that kind of service. And it's not necessarily our first choice of things that we want to see happen, obviously over the top would be available probably to multiple people, probably will be over time available to multiple people and that's going to bring some challenges to our current existing models. So we certainly understand over the top. We certainly are technically prepared for over the top if that becomes something that content owners want to do, but it's not something where we're trying to be the leading advocate to go change the world over the top. I think Intel -- I think people who aren't in the business today are more inclined to do that, such as Intel. To the extent that they are successful, you know I would hope that our content providers would give us the same rights and we'll go compete. But we haven't seen a great critical mass of content owners willing to do that at this point.

Thank you.

At this time --

Okay that concludes our Q&A with the financial analysts and we thank you all for joining us today. Now we've got a little more time for members of the media to ask questions.

(Operator Instructions)

Alex Sherman, Bloomberg.

Charlie, I have two questions for you. The first one is you mentioned doing a partnership with Sprint again and you also mentioned potentially doing an acquisition with T-Mobile sort of being the only one left. And I'm wondering if you can just explain a little bit about what makes more sense for DISH or maybe which one of these options is more likely? Just any sort of detail that you can give on why you might do one instead of the other would be helpful.

You know, I don't have preconceived notions about it. I would say a couple things. One is obviously T-Mobile is a company who if you want to go into the wireless business they come kind of ready made to go do that, right? And their network upgrade is much, much simpler than Sprint's. And so if you wanted into the marketplace you'd be in fourth position, you have to look at that and see whether you strategically can get there. T-Mobile's got a lot of momentum now because of Leap's inability to do things and with Sprint being tied up in the merger, their inability to kind of move forward, that's all going to change right? So what does T-Mobile look like when Leap is now AT&T and Sprint is now -- and Clearwire now under SoftBank's management.

That may be a tougher challenge and may be a challenge that we wouldn't feel comfortable taking on. On the Sprint side, Clearwire side we just know those companies really well and we know their networks really well, realizing we went through full due diligence on them. So we know we fit pretty well with where they might want to go. And I don't really know the SoftBank executives at this point, but they seem very innovative and they seem very creative and they certainly seem to be more aggressive maybe than some of the other people in the wireless business. So I think there's a lot of similarities between the way we think and perhaps the way they think. We certainly gained a lot of respect for them. They basically won an asset that we would liked to have.

We gave it our best shot to get it and sometimes your best isn't good enough. But their best was better than ours. Well, I like those kind of people. I like people that are better than us. I want to hire people that are better than us and I like to work with people that are better than us. So that's why I say indirectly that might be an interesting fit for where we want to go. Not our only option --

Second one I had for you, I just want to give you a chance to defend yourself here because I know Harbinger is basically accusing you of fraud by skirting the rules a little bit by buying their debt yourself and then potentially combining it with DISH and I wanted to give you a chance to respond to that accusation.

Well, I mean I think that all I can tell you is that I personally followed all of the rules. I think DISH has followed all the rules. We'll responded in the appropriate way and we will certainly put -- I will certainly personally put my track record and what I've done and I will put the light on that, I'll put the light on DISH and we will put the light on Harbinger and Mr. Falcone and we'll let the courts and the public opinion decide who is fraudulent and who is not.

Thanks, Charlie.

Liana Baker, Reuters.

Hi, thanks again for giving the press time to ask questions. We really appreciate it. Charlie, you suggested in your comments that a network partner would be preferable and that T-Mobile would be your only option for M A on the wireless side. Should we read from that that you've given up on M&A or had talks with T-Mobile that didn't go well? I'm also wondering if you have a deadline that you've set on yourself on your wireless strategy.

We don't have a deadline. I think that you -- there may be events that put an obstacle that we just can't overcome and that is more likely what happened from a regulatory point of view, from a government point of view than it would be from the marketplace. But we don't have any deadline and we're going to continue to -- we continue see that as a potential strategy, but I disagree with all the other comments you made before that. We still think our options are all open. We're not discouraged by what's happened in the wireless business.

There hasn't really been anything totally unexpected there. We got dealt a bad hand with regulatory delay, but life doesn't always go in straight lines and it doesn't always go exactly the way you want it and sometimes you have obstacles and what separates companies and people are those people that overcome those obstacles. And so we'll try to continue to overcome those obstacles and unless the obstacles are so great we can't or we come to the conclusion that we can't. And we haven't come to that conclusion yet.

Is there any indication that T-Mobile would be interested working with you or any color on that?

Well I think you'd have to ask T-Mobile. What I've seen from their public comments is that they like their US business, but they would exit it. For the proper consideration they would exit the US business. Clearly they were willing to do that with AT&T. Clearly they had discussions with Sprint from public documents. But where they stand on where they are today, I think they've got a lot of momentum and the wind behind their back for at least a short period of time and you'd have to ask them.

Thanks for that. And then you also spoke highly of Sprint and you said that you could still work with them in some way. Is that a network sharing deal or some other kind of option?

Look, I think there's a lot of options to working with Sprint. I think they are pretty innovative. But look, we did due diligence. We liked their management team, we thought they had tremendous spectrum portfolio with Clearwire, they just had a balance sheet problem. They were capital constrained and that's been alleviated by the acquisition of SoftBank. So it's a great asset and I'm jealous that SoftBank got them. But on the other hand, we know that asset pretty well and we know we fit pretty well with it.

Got it. Thanks so much.

Shalini Ramachandran, Wall Street Journal.

Hi Charlie, Hi Joe, how's it going? I just wanted to clarify, from your comments on this call it seemed clear that perhaps you're more focused on figuring out wireless partnerships or network sharing deals more so than looking to a merger with Direct at this point. Is that a correct reading of what your thinking is right now?

Look, I think we look at everything and we think of everything, right? And look, there's not any question that putting DISH and DirecTV together makes a lot of sense. I think that you have really -- but you have a couple issues there. One is we're slightly different strategic directions and we're not sure which ones right. And secondly, you'd have to be pretty comfortable from a regulatory point of view that ultimately regulators would say that that's an achievable thing to do. I think the events will happen if there may be consolidation in the cable industry that might drive you together, there could be things in the wireless industry that might drive us together. Or we might go our separate ways, right?

But I think that there's no question that certainly -- let me put it this way. All I can do is speak for DISH. At DISH we would certainly look at DirecTV and putting DISH and DirecTV together because we think that's obviously something that makes a lot of sense strategically, right? So we're obviously going to look at that. We obviously would look at that.

That doesn't mean you -- we look at a lot of deals that don't get done. Sometimes it's personality, sometimes you can't agree on the economics, sometimes it's regulatory and sometimes it's all of the above. But we don't rule anything out. I think that's prudent management. And, look, if you just looked at -- if you just wanted to create short-term value that would be probably your number one option.

Okay, fair enough, thank you.

Andy Vuong, Denver Post.

Hi guys, just two quick questions. How far away is DISH from perhaps just shutting down the Blockbuster brand, or if that's even a consideration right now? And then was wondering if you guys might be able to provide more detail on the Hopper and just how many of your subscribers have the Hopper and the Hopper with Sling, or if you could offer a percentage of how many are still on the legacy systems and how many have switched over to the new box?

Hi Andy. Joe Clayton here. In terms of Blockbuster, Robert went through the store count numbers. We ended the second quarter 450. We're going to close another 100 stores between now and October and we'll continue to look at the business on a store-by-store basis. Obviously the lower the number we're getting close to being profitable on the remaining store so we'll continue as we've stated in the past to look at the business on a store-by-store basis.

And Andy, this is Robert. With regard to your question on the Hopper, we haven't disclosed the Hopper percentages either for our base or for our new connects. However it has been growing steadily for the last year and we're quite happy with the level of Hopper take rate.

In fact --

I think last time you guys mentioned, I think in January you mentioned there were maybe like 2 million homes with the Hopper and Joeys. You guys can't update that at this point since the Hopper's at a low point?

Andy, this is Robert again. That number included Hoppers and Joeys so that was the total number of receivers. That was not a number which was -- that was not the number of customers that had the Hopper.

Okay. And just to follow-up on the Blockbuster, I mean it continues to bleed a little bit of cash. Do you guys have sort of like a time frame for when? Because when you first bought Blockbuster part of the plan was to maybe sell cell phones in these stores and now DISH really is still probably a couple years out from doing that. Do you have sort of like a deadline for when you hope the business would turn around and longer term, I guess, to keep it in the portfolio?

Andy, this is Robert again. I think I mentioned on the call is that Blockbuster is a seasonal business. It does better in the first and fourth quarter. The fact that the second quarter was lower just indicates that some of that seasonality. We largely think of this as a break even business at this point.

Okay, thanks.

Jeff Williams, Satellite Business News.

Hi, Charlie. Thanks for taking the call. As Congress looks at the expiration on some of the satellite TV laws, provisions next year, what are your preferences for what you'd like to see happen with that? Are you in favor of a straight reauthorization or are there -- is there sort of a wish list you'd like to see come through?

Sure, and this is Stanton. Top of the list hands down, which is consistent with a lot of the questions and responses on this call, is meaningful retransmission consent reform. And we put forth a plan that we think will level the playing field somewhat because as you know today it's an unfair fight. Back in the days when it was one cable company versus one broadcaster there was somewhat of mutual assured destruction. Today you've got one broadcaster playing three, sometimes four MVPDs off against each other and demanding several hundred percent rate increases every time the negotiations come up.

So we put a plan on the table, backed with Time Warner Cable and other folks in the industry that would allow us to import distant signals during takedowns. Which admittedly is not a perfect solution because you don't have local advertisements, local news, et cetera, but at least it would allow consumers to keep access to their network programming during a take down so the consumers are less in the cross hairs and it also levels the playing field a bit. But hands down that's our number one hope, is it's a meaningful retransmission consent reform will get passed, we think there's some traction for that. Just by way of example, to get back in 2010, there were 10 takedowns, 2011 there were 50, last year there were 100. As everyone knows CBS is down on Time Warner right now. It's a problem and it's an escalating problem and someone needs to do something about it.

Are all these hard file disputes giving you any sort of additional leverage in convincing lawmakers that you guys are on the right side of this issue?

No, but it's causing folks to take notice. It's a real problem.

Great, thanks a lot.

We've never had leverage on anything in Congress. (laughter) So I'm happy somebody asked the question, but we've never had any leverage. We just try to make common sense arguments, right --

Trying to give you the benefit of the doubt.

We try to make common sense arguments and, look, we started with retransmission ideas for level playing field back in the very first authorization, the very first home satellite when we first did local local. We were the champions of local local, we worked on it single-handedly for a couple of years before the people joined the party and we saw the risk of retransmission consent at the time. And our position hasn't changed over the last 10 years. Its only gotten -- obviously many of the things we predicted have happened. The consumer's the one that gets hurt and if Congress hears from the consumers, they're there to serve their consumers, they will take it seriously. They don't hear from consumers they won't take it seriously. And I think they are hearing -- I imagine they are hearing from consumers right now because there's a couple takedowns now. Both us, DirecTV and Time Warner all have takedowns. And that's pretty unusual and that's probably going to become the norm. Okay, operator we have time for one more.

Eric [Grimwendel], [Quest].

Thanks for taking my call. I had a question back to Blockbuster. Wasn't Blockbuster @Home, wasn't that sort of patterned after an over top service? And Charlie, you made comments that you think the OTT business is not really in the best interest of DISH. But wasn't Blockbuster @Home going down that path?

I don't know that Blockbuster was going down the path. Blockbuster @Home is really a library of movies. So its tens of thousands of movies on video-on-demand that people can get. So I think it's a little bit of a different animal. Joe, you want to maybe --

It's 15 linear digital channels so it's really a movie service. But we like the Blockbuster brand and the name and we've had a great deal of success with the package.

I kind of view OTT as live TV on the internet, right? And if you look at OTT as library product, whether it be shows or movies, I mean I think that's already happened. I think all the major providers are doing that from a catalog perspective. But the real dynamic that would change is when live TV becomes live TV on a non-authenticated basis became available, that would be a game changer for the industry and for content providers. I think content providers generally have looked at it and believe they would make less money in that particular model than they do today, but that might change. That might change for some of them.

Obviously make sure you understand authentication. Our customers can watch live TV outside their homes for much of our product as long as they are in fact subscribers to that product. Then they get authenticated for outside the home. But they have to be a subscriber to the product. I think OTT might be a situation where you could view it inside or outside the home without having to buy a package of programming, more a la carte kind of stuff.

Look, the consumer's ultimately going to drive that and long term I think they will get more choice. And so we have to be prepared for that and we have to be prepared technically and everything else to do that. And that's why we looked at it, but we didn't get as much -- we didn't get much, we got very little enthusiasm from the content owners when we looked at it last year. They may have changed their mind. We haven't revisited that, but we got very little enthusiasm.

Thank you.

Thank you all.

Thanks everybody.

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