DISH Network Corp (DISH) 2014 Q4 法說會逐字稿

Good afternoon. My name is Kyle, and I will be your conference operator today. At this time, I'd like to welcome everyone to the DISH Network Corporation Q4 and year end 2014 earnings conference call.

(Operator Instructions)

Thank you. Mr. Kiser, you may begin your conference.

Thanks, Kyle. Thanks for joining us. My name is Jason Kiser. I'm the Treasurer here at DISH Network. I'm joined today by Charlie Ergen, our Chairman; Joe Clayton, our CEO; Tom Cullen, EVP of Corporate Development. We also have Roger Lynch, the CEO of Sling, joining us for the first time; Bernie Han, our COO; Steve Swain, our CFO; Paul Orban, our Controller; and Stanton Dodge, our General Counsel. I think Joe probably has prepared remarks that he'd like to go through. But before we do that, we will turn it over to Stanton for our Safe Harbor disclosures.

Thanks, Jason, and good morning everyone, and thank you for joining us. We ask that media representatives not identify participants or their firms in your reports. 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 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-K. All cautionary statements we make during this call should be understood as being applicable to any forward-looking statements that 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. And with that out of the way, I'll turn it over to Joe.

Thanks, Stanton. Good afternoon to our East Coast participants, and good morning to those of you on the West Coast. Charlie, I had to say that one more time. Since most of you all have undoubtedly read our 2014 financial results press release, we will immediately open up the phone for your questions. We have about a half an hour for the Wall Street analysts, and then time permitting, about 15 minutes for the press. With that, let's get started. Operator?

(Operator Instructions)

Marci Ryvicker, Wells Fargo.

We're going to miss you at CES. I just want to let you know that. Charlie, two questions for you. Now that the AWS-3 auction is over, and it feels like you have all the building blocks that you need, we're all curious about not only how you plan to monetize the spectrum assets, but about the timing. And given the buildout requirements, do you feel any pressure to do something sooner rather than later?

Okay, thanks, Marci. First of all, I'd just make a -- just thank Joe for his service over almost the last four years. It's been a pleasure to work with Joe. He's been a lot of fun, and I've learned a lot.

And I think our team has learned a lot, and he's also really helped build our team. And we're in good hands with the next generation of Management here at DISH.

And we're going to miss Joe, and we wish him well in his hunting and fishing, and whatever he's going to be doing and -- but he's left -- I think the mark of a really good CEO is what you leave behind. And maybe we'll take a little bit of a step backward, but we're going to -- our best days are going to be ahead of us, in part because Joe has left us in good shape.

As far as the auction, obviously, the auction was a big piece of strategic piece of where we needed to go. I'd start with, really, there were two things that we needed to accomplish in the auction. Both of which I think we were able to do with our partners -- our DE partners.

One was, we obviously need uplink spectrum to go -- we needed the ability to go all down length with our spectrum, if we could. So we realized we had the option to do that over the next year, to go all downlink, if we so choose.

We now have the ability to do that, because of the uplink spectrum that our partner acquired in the auction. We think we may have the option to do that, let's put it that way. And obviously, we believe there's a lot more value in downlink than uplink.

The second thing was that the FCC has made clear that, if there is large players in this auction, that they will fight for interoperability between the AWS-1, AWS-3 and AWS-4 bands. Interoperability is super important for all the constituents in this auction, but certainly, DISH, as well.

And I think that there is momentum now, to see. And certainly, the FCC has made a promise on interoperability. And I think that that's a real positive, in terms of where we go forward.

So that leaves us with the fact that we haven't been able to talk to anybody for six months in this industry. And now, I think the lines of communications are open between the players in the industry, and potentially players that aren't in the industry today. And we'll spend the -- our first focus will be to make sure that the DE's that we work with file the long forms, and get the licenses issued to them, and then we'll have strategic meetings, after that, to decide what the best path forward is. That's A.

And then the second part of your question, we have a rule here that we do it right the first time, and we don't feel pressure to have to do something tomorrow. Many analysts have misreported our buildout requirements, so let's just set the record straight of that. On our AWS-4 spectrum, we have until 2017 for our first milestone, and 2021 for our second milestone.

If you miss the first milestone, which is to build out, I think, Tom, 40%? 40% of the population. Then you lose one year -- the penalty is that you lose one year on your second milestone. So that if you were to look at it from that longest term scenario, then you have until 2020 to meet your milestone of building, I think, it's 70% of the country.

So a lot of that will depend on, strategically, how we move forward, and some of it will depend on the technology. But probably most important that the speed of which we can move forward will be what the big guys will try to do, and something called 3GPP.

So what happens in this industry is, as soon as you become a competitor, the big guys take you on and try to stop you. They try to stop you in Congress, they try to pass laws, they try to file against you in auctions, they try to do -- and they try to go against you in 3GPP. And they try to go to the handset manufacturers. And they cause all kinds of mischief.

But one of the things they do in 3GPP is, they try not to get your band approved. And so you have to do that before any handset manufacturers will manufacture product.

So we'll have a lot of battles ahead of us. And the same guys that are going to be filing against buildout schedules are going to be doing their darndest to stop us in other ways. And the FCC is not naive about these things.

And we'll -- but once we get approved in our bands, 3GPP -- first, we have to get the spectrum. Second, we have got to get approved in the bands. And then we're in a -- have an ability to build out.

So those are all the things that we have to get done. And we'll certainly have more information for the Street, and for every analyst, as we move forward. But obviously, we're in a good position, strategically, at this point.

Got it. Thank you.

John Hodulik, UBS.

Thanks. Charlie, how do you feel about potentially selling maybe a portion of your spectrum holdings, like the 700 block you have, as opposed to selling all the spectrum together? And then could you talk a little bit about the advantages of a longer-term leasing arrangement that -- to some of the other players in the space, that may need to access some of your spectrum, as their capacity needs grow? Is that something that you would entertain? Thanks.

The short answer is yes, we'd entertain that. There's -- those are two options out of probably a dozen options that we have.

Look, we're going to entertain those things that will provide competition to this marketplace. We'll entertain those things that are good for our shareholders.

But we're not walking in with -- this isn't something where we had predetermined things that we're going to do, before we have a conversation with people. There's people, both in the industry and outside the industry, that are interested in this industry, and particularly the spectrum. And I think there will be a lot of conversations over the next few months.

And just a quick follow-up. Why not move ahead with a structure that would allow you to efficiently sell that spectrum, pending tax [issue way], now? Is there a reason why you wouldn't create a separate subsidiary, or do what you need to do, to make that happen now?

Again, I -- we don't have preconceived notions of what we're going to do, other than, ideally, as we said on virtually every call we've had the last five years, our dream would be to enter the marketplace and provide meaningful competition. But structurally, we will look at every structure that makes sense for the Company.

If you ultimately made a decision that you were going to sell the spectrum, or that you thought there was a likelihood that you might -- high likelihood you might to, you have a different structure. You might structure your company differently. But we haven't -- again, that is not a decision we have made yet.

Got you. Okay, thanks

Brett Feldman, Goldman Sachs.

Thanks for taking the question. You said earlier that you may have the ability to use the uplink that you purchase in the auction to take advantage of all of the downlink in your other bands. I'm just curious whether the word, may, carries a nuance that we don't fully understand.

And then just beyond that, you've obviously tapped into your balance sheet pretty significantly, in order to fund AW-3 purchases. Do you have a different philosophy now, going forward, in terms of the amount of leverage you are comfortable with? Are you going to run the DBS business differently?

And do you think you'd have the ability to buy more spectrum, if that was an option, going forward?

That's a lot of questions, probably least on amount. The uplink -- realize that in this auction, we ultimately were unsuccessful, as DISH, to acquire spectrum. The price just got too high for us to look at that economically, and think that that made any sense.

But we were fortunate to work with two DE's that are set up by the FCC to participate with a discount. But we don't control those companies. And they get to run their own ship.

And so while we think we are, maybe, one of the few, if not the only, person that could use the unpaired uplink spectrum, there is no guarantee that they will want to work with us to do that. They may have other things that they want to do. So that's why I use the word, may.

The -- what was the other parts of the question? In terms of how we run the business differently, I think we'll run -- we think there is a lot of -- DISH is a mature business. We have talked about that. It's core business, Roger is starting the business that probably has the new wave of -- for some people to get new people into the business. That probably has some upside.

But the core business is a mature business. And we'll run that as a mature business, and we'll run it -- but both our eye out to look for opportunities, where we think there are some, to grow that business.

As far as -- we used a lot, or most of the cash that's available on our balance sheet, in this auction. Currently, we've been obviously saving up for a long time. It was the best investment that we felt we could make with our cash.

We obviously think that, to the extent that there become future opportunities, that we will have to address those and see whether a capital structure make sense to participate in other things. But this was the thing that has made the most sense in the last five years to us, and we were patient until we found the best place to spend our capital.

Great, thank you for that color.

Jason Bazinet, Citi.

Thanks. I just had a quick question on liquidity. I may be doing the math wrong. But it seems like, when I look at the cash on the balance sheet, and some of the payments you've made to the FCC, it seems sort of tight. Do you mind just walking us through how you are thinking about liquidity, through March 3?

I would say it's tight, compared to a company used to -- that had $10 billion on their balance sheet, but it's not tight for a company that generates approximately $1 billion a year in cash flow. So we feel comfortable. I don't know, Steve, you may want to jump in here with him. But we feel comfortable, in terms of where we are from a liquidity point of view, including the fact that we have a bond payment due in May, as well. But we feel comfortable that liquidity is not an issue.

That's exactly right. Because the underlying pay-TV business is pretty cash flow positive, we are satisfied with our current cash balance. But as such, we will access the capital markets opportunistically, going forward.

Okay, all right. Thank you.

Phil Cusick, JPMorgan.

Thanks. I wonder if you can talk about the broadcast auction? As we look out a year, does this have anywhere near as much importance as the [AWS] auction did? Thanks.

The broadcast incentive auction, I think, is very important. And I think the importance, really, is maybe a little bit attuned to what T-Mobile has been saying, and what their CEO said in the last week or so. Which is that the low band spectrum is -- to be successful in wireless, you have to have a combination of low band and mid to high band spectrum.

The mid to high band is obviously for capacity, and the low band is for coverage. And probably the strongest asset that AT&T and Verizon have is, they have virtually all of the low band spectrum. So that their networks, when they brag about their networks, in part, it's because their coverage is better, because of the low band spectrum.

So the FCC wisely is trying to set up the incentive auction, the broadcast incentive auction, so that there can be some set aside for the two major non-incumbents, so they can actually get some low band spectrum to compete. And that's very, very important.

So I'd say A, it's an important auction, because it's spectrum. And second, it's an important one to level the playing field, from a competitive point of view. And I would agree with what T-Mobile is saying, in the sense that I would hope that the -- that about at least half of the incentive auction spectrum would be set aside for essentially new entrants who don't have critical mass of low band spectrum.

So I expect it will be a -- depending on how they set the rules up, will depend on how competitive an auction it is. To the FCC's credits, on this last auction, they set the rules up to make for a very competitive auction. And as a result, they had the largest auction in the history of the world, I think, in terms of communication auction for spectrum, even though it wasn't that much spectrum.

And even though some of the spectrum is impaired, that they -- the uplink spectrum was impaired, they -- the value of the downlink spectrum was such it was a record auction. So they set the rules up correctly, and they provided competition where competition has been lacking in some of the previous auctions that we participated in.

So given your comments about liquidity a minute ago, should we be ready for you to rebuild the war chest here, as you look out into that auction?

I think that a lot will probably happen between now and the next incentive auction. I think the timing of the next incentive auction is -- still questions about that. Certainly, the big guys are going to want to delay it, probably, and the little guys are going to want it as soon as possible. But you've still got to bring a third party, which is the broadcasters, to the table, in a way that is fair to them, and that they want to participate.

And so there's a lot of jockeying for position, but to -- we're hopeful that the FCC can have the auction. If the auction comes about this time next year, we hope to participate.

We have a skill set for auctions, so we have a skillful team for auctions. We're knowledgeable about spectrum in a way that we feel confident.

So we'll just have to see what the rules are, and the timing of it, and where we are as a company, at that point of the time, as to -- and whether we can afford to participate or not. Those are all questions that will have to be answered.

Sure.

Walter Piecyk, BTIG

Thanks. I want to go back to a follow-up on the comments that you would access the capital markets opportunistically. Is equity one of the things that you would consider using opportunistically?

This is Charlie. I think that answer, we could give on every conference call. Which is, we always look at the capital markets and say, are there opportunities to -- that make sense? And do you have something to use with the money?

We actually had negative arbitrage for a number of years, which probably wasn't to the benefit of our shareholders. And so we prefer not to do that. But you also raise money when you don't need it, sometimes, because we're pretty conservative.

So -- and when it comes to capital structure, I think that today, we don't have any plans today. But if there was something that made sense, and it could be any combination in the marketplace, as a receptive to something. And it could be debt, equity, converged, whatever else.

I don't what else you can do. Can you sell your kids? (laughter) We look at -- the market, sometimes, some financial instruments just end up being the right time and the right place, because of the market, or because of the position we're in. And we certainly look at that. We have got some bankers who are smarter than us, at that kind of thing.

You answered Phil's question on the incentive auction. But if I want to ask about two other chunks of spectrum that are out there, if you would have comments on whether you have interest in them?

First is the 2.5 spectrum. I think Marcelo and your friend [Massa] have talked about potentially selling some 2.5. Would you have any interest in buying that?

And then similarly, there's a chunk of that 2.5 spectrum in New York that NextWave debt holders own a piece of. So to the extent that they are selling 2.5, does it make sense strategically to buy the 2.5, either from these NextWave ex-creditors, or if Sprint was going to sell some of the stuff?

Obviously, to the extent that there is spectrum available, we take a look at it. 2.5 is, given the success in the last -- in this auction with mid-band spectrum, it's probably not as attractive, but it depends on price. It's -- but the interoperability of the current -- of the last auction made it more attractive.

The propagation characteristics made the last auction more attractive. But obviously, there's an ecosystem that will develop for 2.5. And to the extent some becomes available, and we think that being in that ecosystem makes sense to us, and the price was right, we'd certainly take a look of it. And if we could afford it, certainly.

There's really no option -- I think in management, we try to stay away from preconceived notions. So it's -- we're happy to negotiate with people before the ground rules are set.

This isn't a Middle East peace treaty, where it starts off with, if you don't trade us this land, we're not going to have a conversation. We don't put preconditions on negotiations.

Rather, you try to talk to people about how you can improve their business, and improve your business. And both shareholders come out in a win-win situation. That's a much more productive way to talk about things.

And Charlie, you have been vocal on the risks posed by that Comcast/Time Warner Cable combination. Just curious if you think the government will seek to block the deal? And what would be the risks posed to your recently launched Sling TV, if the government allows the deal to proceed?

I will let Stanton start with that one.

I'd say, I think we will stay out of the handicapping game, as to what we think the government is thinking. But I will say this.

We did an analysis that showed, if we were foreclosed by Comcast or Time Warner, our Sling TV business would still be viable. But if you put those two together, and they exercise their monopoly power in over 50% of the homes' access to broadband in this country, that Sling TV wouldn't make it.

Yes, and I would just add that Comcast and AT&T, if you -- in over-the-top services, if you believe that services are moving that direction, which they are, obviously, around the world, and starting to have in the United States, with things like Amazon Prime and Netflix and Hulu, then Comcast and Time Warner aren't -- would be competitors. This regional propaganda that they put out is not accurate. They actually become national players, in an OTT side, and they'd use each other's networks, right?

And they are not likely to cause a lot of problems to each other, and they would be natural competitors. That goes away in a merger. And I think that's a real risk to the competitive nature in the industry. So Roger, you want to -- you deal with this. Do you want to add to that?

Yes, to the point Stanton made about them controlling more than 50% equally. Or even more important is, they'll control 19 of the top 20 markets, which is where we think the main (technical difficulty) opportunity tends to skew, with younger people living in urban markets.

Thanks for clarifying. I appreciate the time.

Amy Young, Macquarie.

Thanks. Two questions. Charlie, should we expect that you will stay on permanently as CEO, and running the day-to-day operations?

And my second question is just on programming. Can you quantify the impact of Fox in the quarter? And also, any impact for 1Q? And what term might look like?

And I guess you have a pretty high profile deal coming up with Viacom. How do you view the importance of that programming at this point in time? Thanks.

First answer is, I certainly will stay on as CEO until I can find somebody better, and I'm sure there are people better than me out there. So -- but on the other hand, I think that there is talent within DISH today that may come along, with a little bit of nurturing.

And certainly, as somebody gets better than me, I am obviously capable of firing myself. So you can be confident that when somebody is better, they will be running this place.

The -- obviously, not just Fox -- but obviously, we had CBS down for a short period of time. We had Fox, we had Turner Broadcasting. Those are all negative impacts to your company, short-term. And you have to balance the short-term negative with the long-term risk that you are paying too much for programming.

And so we know, for us, it's pretty easy, in part because we have a good finance team. And we know generally what our customers watch, and how many hours they watch, of particular networks. And we analyze what the value of a network is by how much our customers use it, and how much they value it, and how many hours they watch.

The network themselves only have one play book, which is, you are paying us X, and we want X plus 10% next year, even though our viewership might have gone down by 10%. That math doesn't add up. And the industry can survive in a situation where content providers want double-digit increases, but they've got double-digit decreases in viewership.

And it gets compounded by the fact that the content providers also have diluted their programming, to some extent, by selling the same content to other providers, particularly some of the other OTT providers, where that content is now available, then that dilutes the value of the product. And of course, over the next few years, that will decrease the viewership from the MVPD platform, at least -- so that -- so we have to balance all those factors together. And you end up in a situation where -- I said this before -- the programmers will self-select.

They will ask for a price increase that is so high that we, or others, will just say, based on our viewership, we make more money, long-term, by taking you down, and not providing your programming. And so we're fortunate, we value our relationship with Turner and CBS and Fox. And while it was painful for us, and probably for them, and we certainly will lose some subscribers out of it, and certainly it impacted the fourth quarter, it will impact negatively the first quarter.

We have long-term deals that make sense for us, and make sense for them. And we're really happy that those relationships can continue on, because we think highly of those companies, and think that they are going to be long-term players in the content business.

So as far as Viacom, we've -- it's one of our better relationships. We just renewed a new deal with them, with Epix. And so they are a valued content provider.

And I think that eventually -- we don't talk about our negotiations per se -- but as we get -- and timing of those things. But as we get into those things, as long as we are treated fair -- our customers are treated fairly, and we're treated fairly, we would be very hopeful that we will continue with a long time with Viacom, as we have for 20 years.

Got it. Thank you.

Vijay Jayant, Evercore ISI.

Charlie, just want to -- any color on Sling TV so far? It's been early. But any color on the breakeven points? And Disney keeps mentioning it's an experiment, and there is some set of caps on it. Can you give us any detail on the real scope of this opportunity? Thanks.

I will let Roger address that.

Sure. First of all, we only just completed the commercial launch two weeks ago. So we were in invite-only data before then, and really completed the full commercial launch on February 9.

So on the early results are encouraging, but they are obviously just early results. We are seeing, really, what we expected. So our strategy really has been to go after people for whom traditional pay-TV doesn't meet their needs. So these are people who don't have traditional pay-TV largely.

So we are skewing younger, we're skewing more male, as we expected. We started with a [pretrial]. So lots of people came in with a free trial. And it's a little early to tell, long-term, what this means. But we're encouraged by it. And as I said, we're really focused on the segment of the market that [within] traditional pay-TV is not.

And I wouldn't -- I think it's a bit more than an experiment today. I think we know that there is demand from people who -- particularly for something like ESPN, for people who read the blogs, and you read -- and so forth, what they say. Now, I can get my sports, and I was having to go to my parents' house, or I was having to go to a bar, or I just wasn't watching the game.

And so there's a lot of people happy about that. But I think the more interesting thing will be when Sony launches their product, which is, in fact, as we understand it, a much more comprehensive OTT product.

And really, I think, will be a direct replacement to cable and satellite and phone video subscriptions. And I think that will be more interesting, because I think that will actually have an impact on MVPD market.

And I think we're interested in incremental business. But I think Sony, because they are not in the current environment, and don't have a live investment in infrastructure, like cable and phone and satellite companies do. I think that they are more apt to be more disruptive. And I think that will be -- look, it's competition. We're okay with competition, but that will be more disruptive.

Great, thank you.

Ben Swinburne, Morgan Stanley.

Thank you. Sticking was sling, and then I had a quick question for Steve. I guess Charlie and Roger, do you think the programmers' mindsets have changed over the last 6 to 9 months?

It seems like, externally, anyway, that they are looking for over-the-top to be a new revenue stream in a way -- not over the top, but going outside the bundle, in a way that wasn't true a year ago. If you agree with that, do you think that has implications for your business on the Sling or DISH front.

And then Charlie, just going all the way back to your Sprint plans. A couple years ago, you talked about mobile and pay-TV, and bringing those together as an interesting way to attack the market.

Is Sling a foundation for what you might do in wireless? Is there anything -- any relationship between those two? Or do you view them as totally separate?

This is Roger. Let me start on the programming side. So I think it was four years ago, Charlie and I went around and started meeting with [some] of the programmers to talk to them about the ideas we had around over-the-top. And it was clear it was very early for them, in their thinking.

And there was a lot of, I'd say, concern and trepidation, at the time, about, am I upsetting the apple cart? And what does it mean for the overall industry? There was interest, but there was some trepidation.

After we announced the Disney deal -- and through those negotiations, we found that Disney was concerned about the same things we were. Which was, how do we grow the pay-TV market? How do we get people who -- from traditional pay-TV bundles, are not meeting their needs?

Then, that deal was, really, I think, a watershed event in the industry. And we've obviously announced other programmers since then. I'd say today, if I can contrast it to four years ago, there are more programmers who are concerned about not being on the platform, than they are about joining the platform.

So I think there has been a significant mind shift amongst the programmers -- the vast majority of the programmers. Because they've seeing the trends that we've been seeing in the industry, too, and they realize that there needs to be a response.

Yes, and this is -- I would -- our hope is that as we work with the programming partners that are working with us with OTT, that when they add it all up a year from now, or two years from now, or five years from now, they did better than -- better, they made more money, than they otherwise would have, with perhaps other ways they could distribute their product. And obviously, getting people who aren't paying for TV today are people who have cut the cord, or will never buy it, or will buy this product and ultimately move into a house, and buy a bigger package later. That's an important thing.

And then the advertising, where we can do advertising on a one to one relationship, and do a much more meaningful, interactive type of advertising. And the data that can come out of all of this to make their businesses better.

We think that's the first time that we are able to have a win-win conversation with the content provider, as opposed to, they just want -- normally, the conversation is, they want more money. They want a 10% increase in their product, and they have 10% lower viewership. That's a zero sum game conversation.

But when you start talking about, how do we go get people who aren't watching you today, and we get more money for advertising on a per-ad basis. And we make it more appeal-able to a customer, and can watch it on every device, both inside and outside the home.

That's a win-win conversation. And obviously, Roger and his team have spent a lot of -- have spent the last five years developing the technology to do it.

As far as your second part of the question, it is part of a strategy. Sling is part of a strategy to take content to a more mobile basis, to a more wireless basis. Because that's the way the next generation is going to watch television.

They are going to watch as much or more television on a phone or a tablet, or a computer, than they are on a big screen TV. And if that's going to happen, then how do we -- we have to have the infrastructure to do that. And so part of the foundation for any wireless project that we would do, that we can envision that we would do, or in partnership with somebody, would involve a heavy deal of -- a heavy dose of video and content. And we believe we've developed a platform that's a precursor to do that on a wireless network.

And then if I could quickly ask Steve a question on the financials. Given the free cash flow comments earlier, what can you tell us about the tax outlook? Because you guys have had de minimus cash taxes last -- certainly, in 2014, but you don't have any NOLs.

Any guidance you can give us on cash taxes for 2015? Or what might impact it, in terms of accelerated depreciation, or anything?

You can take the book taxes, and then you can make assumptions on some of our accelerated depreciation will continue into 2015. There is a book to tax accelerated depreciation help that Congress has given us for the past couple of years, that is called bonus depreciation. And that should continue into 2015.

Great, thank you.

Kannan Venkateshwar, Barclays.

Thank you. Just a couple of questions. The first one is on all the content deals. Now that you also have Sling in the picture, how do -- how is the nature of the negotiations, whether it is with Turner or Fox, or any of these other entities, changed? And are you negotiating this on a combined basis?

I know some of these deals are not on a combined basis. But how are you going forward in all your content deals?

And secondly, just from the funding perspective. When we look at the total amount of cash that has been put into the designated entities, it's obviously much higher than the amount that is required as a proportion of the 85%. And there is likely some equity funding for how these businesses grow in the future, and so on. S

o if you could just help us with, how we can think about the funding of the designated entities, going forward, beyond the spectrum leads, that would be very helpful?

You want to take the second part, Tom? Tom Cullen will take the DE, how they might find.

I'd just comment that in the short-term, there are several hurdles, if you will, that are in front of us, with the DEs moving forward. First, we'll go through the approval process of the FCC.

Secondly, there will be a lot of work with NTIA, and the various federal agencies that are currently incumbents on the uplink of the paired bands. So that work will take some time to clear. And then as Charlie said earlier, dovetailing that with the 3GPP effort, you are probably looking, a year, year and a half out, as those things take time to get completed.

In that timeframe, then you will have better visibility as to when those federal incumbents will be vacating the spectrum. And therefore, that impacts the timing associated with any build in the operating expense.

I would note --

By the way, you might mention the buildout schedule on this auction.

There is a distinction, obviously, with the earlier buildout discussion. This auction, the AWS-3 spectrum, has a 12 year build requirement from the date the licenses are issued.

So we anticipate that's sometime midyear, after the DE long forms have been approved. And then that's a 12 year build schedule, with an interim milestone. If the interim milestone on that is not met, the build schedule is reduced to 10 years.

So you have got to keep in mind, these are two different planning horizons. But as Charlie said previously, we like to do it right the first time. And so we are trying to take a holistic view of all of our spectrum holdings, to say, how can we anticipate band plans developing that would take into account H block, AWS-3, AWS-4, and even E block.

One encouraging move in that direction was during the December 3GPP meeting. The RAN plenary group, which is Radio Access Network, did adopt a 70 by 90 band plan that incorporates AWS-3, and also included 20 MHz of the AWS-4. So that's a first step in moving towards AWS-4 interoperability and ecosystem development.

So long story short, the -- other than the information that was disclosed in the AK, that's all we are preparing -- prepared to share, in regards to the DE structure today. But as you can see from that, there are opportunities for us to continue to fund the organizations, as they need it, as those business plans evolve.

And they're obviously free to go (technical difficulty) capital, too. There's not that -- they may -- they could choose to do something different with their own capital structure. And so they would probably be better the guys to ask that particular question.

And then on the negotiations, each programming negotiation is different. We -- the -- in our business, Roger's organization with Sling TV and the core DISH business are separate entities, separate P&L's.

So the -- we don't necessarily tie negotiations together. And in some cases, we've had content providers who preferred not to participate in OTT and Sling TV today. And that is certainly okay with us

And then we've had other program content providers who would like to participate in both ways. And in some cases, they have almost -- they've seen the upside and the Sling TV side of it. So they -- part of those negotiations are with Roger's team and, in part, now will be with Bernie's team.

But we're not -- again, we'd like to have -- our conversation is, how do we make more money together? And let's go from there. And every time somebody convinces us we can make more money, we have a really good outcome.

One more follow-up on the balance sheet. What's the minimum amount of cash you guys require to run the core business?

We need to have all the checks cleared, so we need $1. Because we're positive cash flow. So I think we've always felt comfortable.

I think we've always looked at it and said, we would like to have $1 billion of cash or liquid investment on the balance sheet. And we've just been -- you guys have gotten a little bit spoiled, with $10 billion on the balance sheet. But when you take $10 billion and put it to work, we that's good for shareholders, when you can get value for it. That's what we've done. But you feel pretty comfortable, as long as you are cash flow positive, of having de minimus amounts of money. Because you've get money coming in every month.

Operator, we have time for one more question from the analysts, before going to the press.

Tom Eagan, Telsey Advisors.

Great, thank you. I have a follow-up on a previous question. Hoping you could provide color online on the language of the Sling TV contracts with the programmers.

For example, are there any subscriber minimums that have to be reached? And are there any material differences between the deal with Disney and with the other ones? Thank you.

You want to comment, Roger?

Yes, we don't comment on the (inaudible) programming agreements with our partners.

Yes, they are confidential agreements, so we will protect that kind of confidentiality.

Okay. Thank you.

All right. I think we're going to let the -- so thanks. We will be back in May, and the press is going to be on. Thanks, everybody.

We'll now take questions from members of the media.

(Operator Instructions)

Jimmy Schaeffler, Carmel Group.

Hey, good morning, Charlie. A couple of future-oriented questions. One is, have you changed your mind, in light of marketplace developments, on marketing and owning content?

And then second question is, you talked about last quarter, and I wrote about, your comments on the Internet of things. And carrying Ben's question a little bit further out, could you add a layer to what John Chambers and CNN said yesterday about the Internet of things? And how DISH's and EchoStar's future fits into those?

We will start with the content question. But strategically, we haven't been too excited about owning content for a couple reasons.

One is, we're not very good at it. It takes special skills. And then with the -- dealing with our content partners, we realize just how difficult that is. So it's just not a core competency for us.

And the second thing is, I've never felt like it was that productive for us to have a mindset here that we could actually compete with our content partners. So we -- since we started this Company, we have been open to all kinds of content. We are Switzerland of content.

So we're not competing with the people that are on our platform, and we try to give all of our content providers a fair shake, from a marketing and channel placement, et cetera, pricing point of view. And then let the marketplace decide what they want to watch.

And we carry the most liberal of news to the most conservative of news, and everything in between. And we're proud of that fact. And so I don't -- it's not to say that there couldn't be a content deal that made sense for us as a Company, but it's just not something we focused on much.

I don't even know what the Internet of things means, but I guess I would -- Jimmy, I would say it this way. That strategically, I think it's always nice to keep things simple. And if you can conceptually have a concept, and you can build around it.

And for us, the strategic concept with the Internet of Things is really that -- is everybody, particularly the next generation, is always going to want to be connected to the cloud. And they're going to want to be connected to the cloud, because every piece of information known to mankind is going to be in the cloud, right? And that information is also going to include video and entertainment, as well as education, news, healthcare information et cetera, right? So -- and you want to be connected.

There's only -- you can be connected two ways that I know of. One is the cable, or a piece of fiber, and the other is in a wireless manner. And the only way you can be connected in your car, or when you are outside walking, and so forth is in a wireless manner.

So that's what we have focused on, is to say, how do we have a business that helps people always connect to the information that they want? And that is about as complex of a strategy as we have. It is pretty simple in nature.

And so that's why we have focused on spectrum. And obviously, we'll focus on how we can build a network, or partner with a network, or work with people who have a network that allows people to be connected to the cloud.

And it is just going to take a different form than -- there isn't anybody born today that isn't probably, in every waking minute, going to be connected to the cloud of their life. There's not many people that are -- there's not anybody who is less than five years old who -- that they think that when you have a phone call, that you look at the person you are talking to. And you see them on the screen.

So -- and there is not a person born today who doesn't -- isn't going to watch TV on a tablet or a phone. So how do you make all that work? And so that's really what we're building at DISH.

And hopefully, we're entrepreneurial enough to help other people get involved in that system, grow their businesses. We know what it's like to be a small business. We know what it's like to be a start-up.

The creativity in this industry is going to come from small business. It's going to come from start-ups. We were really happy to work with the DEs on the auction. They were creative, they were tenacious, they were disciplined. They were better than we were, as a big business. And so they added a lot to that. We had to drop out, and they did better than we did. And that is the beauty of small business.

Scott Moritz, Bloomberg.

Joe, congrats. Charlie, a question in light of that -- when you look ahead, like maybe two to five years, do you see DISH as being more of an acquirer, or more of a seller of assets?

Scott, it's hard to say. I think that -- what we hope is that our best days are ahead of us And we think that our best days are ahead of us. And we think we have the management team to get there. We think we have the assets. We don't have everything we need, in terms of assets. But we are certainly closer than we were several years ago. And if there's assets that we need, we might be an acquirer.

If we fail, or if somebody has a better idea, or somebody has more scale than we do, that would allow us to do the kind of things that we think we want to do for competitive products out there, and for the next generation, then we could be a seller. And everything in between.

But our main focus is to build a good product and compete. And usually, if you can do something -- Joe has always pounded this into our heads for the last four years -- is put the consumer first, and give them a great product. And then if you do that, probably going to be really good for your shareholders, and for your employees.

Great. There was some discussion. I think we reported that there was interest in T-Mobile that you took to the DT management. Would that be something we should think about, going forward? Or is that less of an interest to you now?

I think T-Mobile is a company we think highly of. I think it's hard not to be impressed with what they have been able to accomplish in the last couple of years. But there is equally impressive companies, other companies, in the business. And there is equally impressive companies, outside the business, that may want to be connected to the cloud.

So we'll take a look at -- what normally happens is that ultimately, companies get strategically aligned. And there becomes a will to do something better than what they can do individually. And when that happens, you have a chance to move things quickly.

Now whether T-Mobile and DISH ever got strategically aligned is unclear, or whether we get strategically aligned with somebody else is unclear. Or whether nobody wants to do business with us at all. All those things could happen.

But when you can get people motivated in the same direction, whether it be employees are businesses, or partners, then good things happen, as long as those motivations are to the same end. And we want to build -- I only tell you, we want to build a great product. We want to make a great -- we want to compete. We want to have a great product for consumers.

And at its core, it's going to have video. That's what we would like to do. Whether we can find somebody else who wants to do that, whether we have to go it alone, or whether we're -- it's just a stupid idea, and we have to fold our tent, I can't tell you.

Phil Goldstein, FierceWireless

Hey, everybody. Joe, congratulations, as Scott said.

Charlie, two questions, if I may. I know you said that you're not predisposed to anything, and it's all going to depend upon what conversations you have, and how that all comes together. But building on your response to Scott's question, what factors would you guys need to have in place, or consider, in order to become strategically aligned with a partner in the wireless industry?

And then you mentioned video as a core component of any wireless offering that you guys would want to have in the market. Can you just talk about how it would be differentiated from existing offerings? Or other things that carriers are working on, in terms of LTE broadcast?

I think that, look, we built the Company on video for 35 years. So if we think -- and we think that video and -- I would say it this way, that wireless systems now are going to be, in the future, data-centric, and video is going to be the biggest portion of that data. So we think those two things go together.

It's possible that other people have different ideas. But we think there's more -- I'd say this. We think there's more value in what we do at DISH Network, even though it's a mature business, than maybe we are getting credit for. Obviously, AT&T saw that value in DirecTV, to some extent.

And it's how do you -- and then, it's really, how do you build a better product? And how do you -- look, I hope that the wireless industry, five years from now, is materially different than it is today.

I hope the cost per bit goes down, the fact that you can go between devices, and not have to pay a fee for this and a fee for that. And all the data caps, and the things such as that have to be determined, in terms of net neutrality, and how your system operates, and all those things. I just hope it's consumer friendly.

It's not surprising to me that -- I would say, at least from my personal perspective, that the Company that is focused the most on the consumer has been T-Mobile. And it's not surprising that they have gotten the majority of the net adds in the industry, in the last two years. And I think it's, in part, because of their strategy. Because I don't think they necessarily have the best network in the industry today. So they have --

Just (multiple speakers) for the first part of the question. What would you have to consider, in order to become strategically aligned with another company in wireless, whether they are an existing carrier or not?

I think it would have to -- I think it would ultimately have to be good for our employees and our shareholders, right? You have to -- it has to make sense, right? But it would have to be -- from my personal perspective, it would also include the fact that you can build a better product.

That what you would do strategically, as a result of it, the strategic relationship, would be better than you could do by yourself. Or better than they could do by themselves. And then it has -- and that's a good starting port. And then it has to be good for your shareholders and your employees, right?

Got it. Okay. Thank you.

David Crow, Financial Times.

Hi, there. There's been quite a lot of criticism, at the end of last week, as to how much spectrum you control, following the recent auction. I think the letter said you could sit on it for 10 years, technically. And so I just want to know how you would respond to that?

And two, if you could give a sense of any timeframe you have for making your intentions clear? If not 10 years, then when?

I think obviously, we'll -- as we -- as a public company, we will make our intent -- we will make sure people are -- understand our strategic stuff, going forward, when there's something to talk about. As far as the criticism of our auction participation, I would say a few things, first and foremost.

One, there was some criticism that we cost -- first we went, went by the rules. So we -- the rules were all set out, they were approved by one of -- unanimous approval by all the FCC commissioners. And everybody had a public notice to comment on the rules. And so we went by the rules.

The second thing is that we didn't do anything that -- I think there was an AT&T blog that talked about that we created artificial demands, and things like that.

First of all, anybody who has been in auction would know that's impossible to do. We bid economically, and every license that we bid on, we wanted to win. We -- there was nothing artificial about it. We wanted to win the license. We were disappointed that we didn't win all the licenses, right?

But we also were economical. And when -- it's impossible to stop somebody from winning a license. All they have to do is bid $1 more. So if you want to win New York City, you have got to bid $1 more to win it. And you win it, and there's nothing that anybody can do to stop you.

There's nothing complicated about an auction. It's the guy that wants to pay the most money wins. End of sentence. And so what happened -- I think the criticism is unfounded.

Because what is different about this auction was that the world -- it's the first auction since the advent of data, and the advent of broadband. And so the world of auctions -- before, we were talking about spectrum for voice and texting -- didn't make a lot of sense. And we always thought the auction would go -- as a result, would go for more money than people thought it would.

And as a result, you had the first auction where people started thinking about data, and there was more demand for the product, because of the demand on spectrum needs. And so we -- obviously, all you can do -- the only thing I can say is that where other the people might call it artificial, or loopholes in laws, or whatever the people had to say, I would just say it's competition. It's just competition. And not everybody wants competition. And this was the first competitive auction. And we were proud to be a part of it, and we were really proud to work with the DEs.

And we provided competition to an auction that, on the one hand, people say cost the US Treasury $3 billion. And on the other hand, people say, was $20 billion higher than it otherwise would be, because we participated.

You can't have it both ways. And I'm sure that, in a competitive auction, the taxpayer was well rewarded. And I think we hopefully played a positive role in that aspect. And everything else is, if you want to compete, you have got to compete. And that's all you can do.

And in terms of buildout, every wireless carrier today has spectrum that they haven't built out yet. The wireless carriers that complain about buildout are usually the guys fighting you, at 3GPP, and fighting you in Congress, and fighting to keep you out of the business. And I hope that they support us in our buildout, and all of the things we need to do, and all the regulatory stuff. I hope they support us. And then they have clean hands. Otherwise, they are hypocritical.

Thanks.

Malathi Nayak, Reuters.

Hi, this is Malathi from Reuters. Thank you so much for taking questions from the media. Charlie, I was wondering why you've decided to be CEO again? And another question I have for you is, do you think the spectrum is worth more if you keep it or sell it?

I became CEO because A, of the things I was working on, on the strategic side, are now in great hands with Tom, with the wireless side, and all the things we're doing, and Roger on the OTT side. And with Joe leaving, I thought it was a good chance to get back into the days of the operations and see -- and I haven't really spent, really, much time in the last four years.

And there's a lot of good people in management there. And I want to get to know them. And I think we -- hopefully, we can make some improvements.

And much of the stuff we do in our core business is going to be relevant to what Tom is working on, and what Roger are working on. So it was just good timing to do that. And I'm very appreciative that Joe allowed me to go do some things, over the last four years, that I think, in small part, helped us be in a strategic position.

And then obviously, with spectrum, whether we buy it or sell it, whatever, I think we've answered that. Hopefully, we're going to use it in a way that provides value to our Company, but also provides competition and good product.

How that manifests itself, I guess you don't hear it much from CEOs, but we don't have all the answers today. But I think when you grow a business from scratch, and I think when you have the kind of team that we have, we're very confident that we can build value, and build great products here. And we've done it for a long time, and we think we can continue to do it. And we think we can do in the wireless industry.

(multiple speakers) Could I just ask one follow-up question. Yes, thanks so much. So in terms of the scenario where you keep the spectrum, would you consider, perhaps, some sort of business model, where you could use the spectrum in partnership with other carriers? For instance, a T-Mobile or a Sprint?

I think that's an option.

Do you see any value in that?

I think that's an option. I think virtually everything that somebody has suggested on this call are potentially options. But it boils down to management. That's what we do.

When we come to work here, and when we think about it, and when we meet as a team, we are thinking about all the things you guys are asking about. And then, it -- we have to ultimately make decisions on how we move our business forward. And so look, it's a little bit early, because nobody in this industry has been able to talk to each other for six months.

And the -- as the dust clears here, and everybody goes back and looks at what happened, and sees how they -- if they got what they wanted, or didn't get what they wanted, then I'm sure the conversations will happen. Not only between DISH and other people, but I'm sure that other companies -- I think somebody mentioned Sprint and their spectrum -- other companies will have conversations.

There's big mergers out there. What happens with Comcast and Time Warner, I think that's going to play a major role, as to what the government decides to do there.

There's DirecTV and AT&T. That's going to shift this industry, depending on what the regulators decide. So those all are going to be factors in people's thinking.

The only thing I am pretty sure of is that, if you want to be competitive in this industry, you're going to need spectrum to do it. And I think that DISH will be in a lot -- I think we're relevant, and I think we will be in a lot of conversations. And so that -- for us, that is opportunity, and I think we know how to manage. So we will see. All right. Thanks, everybody. We're back, I guess, in a few months, in May? April?

Thank you.

That concludes today's conference call. You may now disconnect.