DISH Network Corp (DISH) 2020 Q4 法說會逐字稿

Good day, and welcome to the DISH Network Corporation Q4 and Year-end 2020 Earnings Conference Call. Today's conference is being recorded.

And at this time, I'd like to turn the conference over to Tim Messner. Please go ahead, sir.

Thanks, and good morning, everyone. We're joined today by Charlie Ergen, our Chairman; Erik Carlson, our CEO; Paul Orban, our CFO; Tom Cullen, EVP of Corporate Development; Mark Rouanne, our Chief Network Officer; and John Swieringa, EVP and Head of our Retail Wireless business. We have some opening remarks, but first, I'm going to run through our safe harbors.

Statements we make during this call that are not statements of historical fact constitute forward-looking statements that are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and our forecast. We assume no responsibility for updating forward-looking statements. For more information, please refer to the risks and other factors discussed in our SEC filings.

We filed an application to potentially participate as a bidder for spectrum in FCC Auction 107. Due to the FCC's anti-collusion rules, we will not be answering any questions on that auction during today's call. That's it for me.

I'd like to turn it over to our CEO, Erik Carlson.

Hey, thank you, Tim, and welcome, everyone. I hope you're all doing well. We appreciate you being with us today. Paul and I are going to keep our comments brief and leave plenty of time for your questions.

This year has been a trying year for everyone in the face of the pandemic. And I'm proud of how the DISH team has responded and turned obstacles into opportunities. I'm also proud of how we've kept the safety of our team, our customers and our communities we serve top of mind as we execute against our goals throughout the year.

We've accomplished a lot in 2020, and we've entered the retail wireless business with the acquisition of Boost Mobile, and we partnered with Tucows to utilize their mobile services solutions, and we acquired the Ting Mobile subscriber base.

Now over the past 6 months, we've worked to implement the same discipline we have on the pay-TV side of the business to our retail wireless business. We've introduced new plans, offers, shed unprofitable customers and have been making plans to grow the business in 2021. In addition, we made great strides on building the nation's first cloud-native OpenRAN-based 5G broadband network.

In 2020, we signed significant contracts with software partners, fiber providers, equipment manufacturers and tower companies. We've charted a course for a great 2021, and we look forward to sharing updates throughout the year on progress on our network.

We also had a solid year in pay-TV despite the headwinds presented by the pandemic. This was driven by our continued discipline and better execution in both DISH TV and SLING TV. We're focused on providing products and services with the best technology, outstanding customer service and a great value. We strive to offer our customers with a better price-to-value relationship than those available from other pay-TV subscription providers. And through our efforts, we were recognized by our customers for the third year in a row as being #1 in customer satisfaction with J.D. Power in 2020.

We reported strong revenue numbers for the year and brought in more than $3 billion in OIBDA. And we've increased our revenue more than $2.5 billion from 2019, and our net income by nearly $400 million.

With that, I'd like to highlight a few items across several key lines of business for the fourth quarter. In the fourth quarter, we continued to advance our wireless efforts. Retail wireless net subscribers decreased by approximately 363,000 for the fourth quarter, largely due to our ongoing efforts to integrate our retail wireless operations, shed unprofitable customers and make operational changes to enhance profitability. As I mentioned last quarter, our profitability is determined in part by what we pay to access the network as an MVNO. As we roll out our own network, we'll begin to benefit from owner economics. That's going to drive profitability that allow us to be more disruptive and drive better competition in the retail wireless space. In addition, we made great strides in Q4 with our wireless network efforts.

Since our last call, we've enlisted fiber providers like Everstream, Zayo, Crown, Segra and Uniti for fronthaul and backhaul network support. We reached an agreement with Crown Castle for wireless towers. And just last month, we signed a similar agreement with Vertical Bridge.

We've announced an agreement with Aviat for 5G microwave transport services and signed a deal with Mavenir for cloud-based messaging and Qualcomm to utilize our 5G RAN platforms.

We've also completed our first 5G validation in December. 2021 is going to be a landmark year for us in wireless, and Charlie, Tom and Mark are here with us today and are available to talk more in-depth about our wireless progress in a few minutes.

With regard to the quarter, DISH TV performed well, given the current environment, with gross activations of nearly 235,000. They're down year-over-year primarily due to COVID and our approach to it. And as stated before, the crisis has impacted our customers' willingness to respond to some marketing tactics like opening direct mail or event-based sales, and in some cases, allowing technicians to perform services in their home. As a result, we reduced our marketing expenditures and our gross new TV subscribers have decreased. However, our DISH TV strategy has been anchored in acquiring and retaining long-term profitable customers. We've been focused on a more rural and higher credit quality customer base, and we remain committed to that path.

In the quarter, we saw DISH TV net subscriber loss of 149,000. Our losses are primarily the result of a lower gross new DISH TV subscriber activations, partially offset by lower DISH TV churn rate. Paul is going to have a few -- a bit more detail on that in a moment.

Turning to SLING TV. In the quarter, we gained approximately 16,000 subscribers. And while we still have considerable room to grow, we're encouraged that we added subs in the back half of the year compared to the first half of the year. This is primarily due to the return of sports, and it was also helped by the improvements we made to the platform. We launched Sling Watch Party to enhance the collaborative viewing experience, added new programming like the Big 10 and increased our on-demand library to over 150,000 titles. And most recently, we added 50 hours of free DVR storage.

With that said, we continue to focus on acquiring and retaining profitable customers and delivering a great experience for both DISH TV and SLING TV.

2021 is going to be an exciting and transformative year for many -- on many fronts, and we've got a lot of work to do, but we've got the focus, the resolve to realize our vision.

With that, I'm going to turn it over to Paul for a little comment -- commentary on the numbers.

Thank you, Erik. I have some brief remarks on the quarter before we open it up for questions. As a reminder, we made changes to our financial reporting in the third quarter. We now disclose operating results for both our pay-TV and wireless segments. In addition, we report results for our 2 wireless business units, retail wireless and 5G network deployment. Since we now report segment operating results, we're disclosing segment OIBDA as a measure of profitability for each segment.

Erik addressed the overall subscriber trends, but I'll add a little color on our commercial subscribers for DISH TV. The COVID pandemic has significantly impacted our commercial subscribers. As discussed in previous quarters, 250,000 of these accounts were put on pause and/or received temporary rate relief. They were removed from our Q1 ending DISH TV subscriber count.

During 2020, 80,000 of those subscribers restored service or had temporary rate relief mend. These subscribers came back with minimal or no cost. They were added to our ending subscriber count without being counted as a gross activation.

Of the remaining commercial accounts, 69,000 of these accounts disconnected during the year. We are hopeful of the remaining 100,000 commercial accounts will restore service in the coming quarters. However, we cannot be certain of this.

Companies in the hospitality and the airline industries continue to evaluate the amenities provided to their customers, and that includes pay-TV.

Turning to the financials. In the fourth quarter, compared to last year, our consolidated revenue and OIBDA are both up significantly. Revenue increased due to the Boost acquisition. The OIBDA increase was driven by pay-TV generating over $1 billion and retail wireless generated $188 million during the quarter.

Let's dig into the details of each segment. Our pay-TV revenue in the fourth quarter increased due to higher ARPU, partially offset by a lower subscriber base. The increase in pay-TV ARPU was mainly driven by price increases for both DISH and SLING.

Our subscriber margins for the quarter were positively impacted by the ARPU increases just discussed, and our cost-cutting initiatives related to COVID. SG&A expenses for the fourth quarter decreased compared to last year as a result of fewer subscriber additions and our cost-cutting initiatives related to COVID.

We settled our telemarketing litigation for $210 million, which was $70 million less than what we had accrued, benefiting SG&A expenses in the quarter. DISH TV SAC per activation decreased slightly from $850 last year to $842, largely due to lower equipment cost per activation.

Now let's turn to our retail wireless business unit. Service revenue was almost $1.1 billion, down slightly from Q3, and OIBDA was $188 million for the quarter. Consistent with DISH and SLING, we're focusing on acquiring long-term profitable retail wireless subscribers. We're currently in the process of making changes to our marketing, sales and operations to further enhance our profitability given our MVNO economics.

And lastly, let's look at our 5G network deployment group. We invested over $50 million in OpEx and CapEx during the fourth quarter. We expect CapEx to increase substantially throughout 2021 as we ramp up our 5G network deployment.

During Q4, we generated $357 million of free cash flow and made the final payment of $730 million to the FCC for our licenses to acquire -- for our licenses acquired in Auction 105.

Finally, in December, we issued $2 billion of our 0% convertible notes due in 2025. We ended the quarter with approximately $3.7 billion of cash and marketable securities.

I'm going to turn it over to Charlie for some comments.

Good morning, everyone. Normally, I don't make comments, and I -- certainly not one to look in the rearview mirror. But I did want to point out something that I think sometimes gets lost. And when you analyze at DISH, and obviously, we don't talk a lot, we don't go to a lot of conferences, and we remain focused on really building our business. But 2020 was a transition year for us. It's a very successful transition year for us. And it's the third time that we've had a transition in my 40 years in business. And I've always felt that the transition year -- the transition time is always the toughest. And if you can get through the transition, then you can really jump-start -- you can really grow your business in a dramatic way.

So in 1980, when we started the business, the transition really was to survive. Most companies go out of business, probably 90% of the companies go out of business because they just don't have a good idea and run out of funds. And for us, it was -- it took us about 3 years to make the transition from a retail company to a distribution company and actually get past the survival stage.

Second transition was when -- it took us over a decade, which is we realized that the technology -- that there was a technology -- experimental technology called DBS. And we were in the big dish business and that, that was going to transform big dishes into little dishes. And so in 1995, with the launch of our first satellite, that year was a transition year for us because we had put all the pieces in place with spectrum, satellite construction launch and digital technology to go compete with the cable industry.

And 2020 was over a decade-long transition of accumulating spectrum and getting critical mass with spectrum to go and compete in the wireless world. And we finalized our long-term executive team, which took years to do. We were able to enter the retail market in wireless in an unexpected way with the acquisition of Boost, and a 7-year MVNO term with T-Mobile who's quietly or not-so-quietly building probably the finest network in the United States. The -- we purchased 14 megahertz of low-band spectrum in 800. We purchased approximately 20 megahertz of CBRS spectrum nationwide, the only nationwide provider, and over -- around 600 megahertz of millimeter wave, all last year. We solidified key vendor relationships who -- and have a number of companies that are helping us on our quest to build the world's best network. And we have over $4 billion of cash in our balance sheet. So that all leads to the fact that as we enter 2021, we have everything that we need to build this one-of-a-kind 5G network. And now it's -- now, for us, it's execution.

So once you get through the transition stage, you have to focus on -- it's all about execution. And there are certainly significant risks for us as we go execute. We have to deploy our network. And then we've got to put it all together to work -- to make it work. And there certainly will be substantial risk. There's certainly going to be lots of problems, but we have the team and the focus to overcome that. And our company, it has always been a company that can execute. So I have a high degree of confidence that we're going to execute in 2021. That means that we're going to build our first major cities by the end of the third quarter and more to come. We're going to round out our team. The really, really great engineers, the wireless engine, where they want to come work for this company, because we're building something special. And we're going to continue with rounding out our vendor partners and making sure that we have -- we still have cloud. We still have transport. We still have orchestration, just to name a few. So we'll continue to do that.

And at the end of the day, we're going to have this really, really special 5G cloud native, OpenRAN virtualized network that really doesn't exist in the world today. So it's not our first rodeo. It's very similar to building the digital video when the world was analog. Wireless networks really haven't been upgraded from an architecture point of view in the last 30 years. And we're confident that with our focus will actually help the United States, actually start leading again in wireless and hopefully continue to bring -- most of our partners are American companies with American ingenuity. And there's no reason that America can't lead as an example, nobody has better cloud companies than the United States. Nobody had a better -- when you virtualize the network, you know what you write, you do it with software, not hardware. Nobody has better software than the United States. And this is a company that has 2 main operating systems in the world today, and Apple's iOS and Google's Android in the handset side. So there's no reason that this country can't lead, and there's no reason that DISH isn't going to be a part of that and probably will be up front in some of those things.

The reason the transition is important, is in 1995, we went to the little dish business, we had 2 other competitors. We had a cable company and we had DIRECTV. Today, we probably have over 20 competitors in that very same business. In fact, we compete with our very own suppliers. So that market is very competitive. You've obviously seen the trends in our industry in the last 4 or 5 years. We expect that those trends will probably continue.

The world is becoming an a la carte world with vendors going directly to their customers.

But in the wireless world, we're 1 of 4 competitors. So there's 3 $200 billion companies that are out there and we're entering their business with a better network to go compete. And it's not just about competition for consumers or handsets. It's about what a 5G network can do, which includes a lot more than just consumers.

So with that, we'll open it up for questions.

(Operator Instructions) We now take our first question from Michael Rollins at Citi.

A couple of questions. First, on the 5G side, I was curious if you could just provide some additional context of how you're seeing the emerging addressable market in dollars for the business side of what you're focused on versus the consumer wholesale side for the wireless business plan?

And secondly, on the Sling business, with the cord-cutting trends in the industry, are you surprised not to see Sling grab more share of that video distribution market? And is there something that's holding it back that could be unleashed over the next 12 months?

Why don't you start, Erik?

Yes. Thanks, Charlie. Michael, this is Erik. I'll start with the Sling question, and then I'll turn it over to the team for the 5G question. Look, cord cutting has accelerated, Charlie mentioned it in his opening comments. I mean, we are now competing with some of our largest partners on the distribution side.

We feel like Sling is well positioned, not only from a value perspective and maintaining kind of that lowest price point. But also from delivering a good customer experience and technology. Now we have work to do on the latter two, which -- we've made good progress on at the end of last year, and we'll continue to make progress on this year.

But Sling is in a unique position based on our packages and services that we provide in order to be a very complementary service to some of your larger SVOD services, whether it be a Disney, Netflix, Peacock, et cetera.

So I think that, obviously, we have work to do on the Sling side. I think customers, as Charlie mentioned, there is a bit of a la carte world happening. I think there'll be some aggregation back. But we're well positioned to fulfill the unique proposition, providing a kind of a bundle of cable nets with quality SVOD services from some of the competitors out there.

I think the other thing that we do very well is we're giving customers choice, right? And choice and how they acquire the content, that is important to them, most uniquely on the local front, right?

And if you look at expenses, retrans is obviously one of the expenses that's going up at the highest rate, those local channels. And Sling is well positioned to provide services, whether it be an off-air antenna that's integrated to one of our set-top boxes. Or a service like low cast or a service like CVSL access, which will now become Paramount. So our strategy there is to really partner and become complementary and with that, I think we can continue to make progress on the acquisition front.

Yes. This is Charlie. I'll answer the second part of your question. I have just 1 comment on Sling. I actually agree a little bit with the premise. We should have more market share there. We really were first to market. We stumbled a little bit with our -- with just the quality of the user experience. And technically, as we -- our network was the best at first, but we got -- maybe got a little complacent. It's taken a while to upgrade it, but that's all being done the first half of this year. So we'll see how it goes.

But it -- we have room to improve that. That's for sure. And we should have gotten more market share.

On the business side, we don't have a dollar amount to give you today on where the business. But our network is designed. Let's talk about the 3 things that we do different from current networks. First of all, our network will be an ORAN network. So it means that we separate the baseband and the radio. So it gives a lot more flexibility in terms of mix and matching off-the-shelf parts and radios and lower cost and more flexibility, more American content and vendors and not 1 company that controls us end-to-end like current networks have.

We're virtual -- we're more virtual. We do a lot more with software than hardware. So it means a lot of big boxes that use a lot of power, those things become software. And we're cloud native, which means our network runs in the cloud. Now why is that important? That's important because we can use modern techniques like machine learning and artificial intelligence, so we can actually analyze our network real time, we can make our network better, but we can also -- we also -- it opens up our ability on an automated basis to what we call slicer networks, so we can open up our network to private networks and companies and what we call enterprise business, so that they can have what looks like their own network. And they control their own network and they get access to the data in the cloud where they can actually use that data to make a better product, a less expensive product and a safer product. And it also marries obviously with private cloud should they so choose to do that.

So we're changing -- so I think a lot of analysts they're going to have any -- how many handsets you're going to have, what your market share are going to be in handsets and so forth and so on. But your question is well taken in the sense that a part of our business will be -- the enterprise business that is a fairly nascent business today. And we'll be on the leading edge of that as it grows.

We'll now take our next question from John Hodulik at UBS.

Great. Again, maybe for Charlie, just any milestones or metrics that investors should look at this year to -- as evidence that the strategy is on plan? And maybe along with that, how many cities are you targeting at this point for year-end? And then lastly, just one follow-up. You guys executed the transaction in the fourth quarter for about $300 million. It looks like to buy in the designated entity, is just that the thought process and the driver behind that transaction would be great.

You want to take the second part on the...

Yes. John, this is Tom. Yes, we did a transaction in the fourth quarter with one of the DEs, where we just bought down their position, and it was a transaction that both parties were interested in executing, so there's not much more to it than that.

They had a put right to do that. So that's a bit out of our control. And then the second, yes. Yes. What was the first part of the question was...(inaudible)

I think obviously, we have lots of metrics and milestones internally, and we're not going to go through each and every one of those, because it's just a bit complicated. And then obviously, our focus is on actually doing that. But the big milestone for people is probably going to be our first major city that's up and operational. That's where we'll find out -- my experience has been, as we open up our first city, we'll have problems. We'll drop a call. Something's going to go wrong that we didn't expect. And then that's where we find that our team and our vendors work together to solve those problems.

So by the end of the third quarter, you'll see that, you'll see the first major city. We'll have other cities. I don't have a number for you year in, but what we'll be doing every month after the third quarter, we'll be doing multiple cities. And focused on a June of 2022 metric of 20% of the population in the United States to meet our first FCC milestone.

So -- but by the end of the third quarter, you'll be able to take a phone and see whether we work or not and see all the problems, and we'll have them, for sure, and then see if we can fix them.

And then you'll have a feel for how good we are at execution and how good our architecture is and how good our network is going to be. But realize, we're not going to be running in the first city, we'll be crawling. And then hopefully, we'll get up and be walking by the end of the year.

John, as Dave mentioned on the last call, he has built out a distributed deployment team in many markets around the country. The RF planning is completed, and we now have permitting and zoning activity underway in dozens of markets around the country. So the activity level is very, very high. We just -- we're not at a position right now to forecast the final number of markets by the end of this year. But we clearly, as Charlie said, we're focused not only on the June '22, 20% milestone, but we're really vectoring towards the 70% milestone in June of '23.

And John, our long-form forte is radios, right. But we could have done like everybody else has done and we could have built a network that was never going to compete with the Chinese, was never going to be up to the standards of Huawei. We chose to strategically -- we said, what's the next generation? What's the next-generation of networks? And that's where you go to OpenRAN. And when we went to OpenRAN, there just weren't any non-Chinese current providers that were ready to go, and it took us an extra year to get Fujitsu and MTI and now some others to help us with O-RAN radios and architecture. That's a long pole to tent. And those radios start coming in, in the second quarter. And then we'll -- as soon as we get them in, we'll start deploying.

We'll now take our next question from Craig Moffett at MoffetNathanson.

Charlie, 2 questions, if I could. First, you've talked a lot about adding a strategic partner. Can you just first update us on that? And then -- and perhaps tell us your thinking of when is the ideal time to add that partner? Is it before you've done any of your test markets? Would you rather have a test market in advance?

And then related to that, you did a convertible security in the -- December, it wasn't a huge number relative to the overall financing. But I wonder if you could just talk about your thought process of why you decided to go with a convertible rather than debt? And whether we should read anything into that for future financing decisions?

Yes. So I think on strategic partners, Craig, we look at it maybe a little bit different than the Street does, but for our strategic partners or our strategic relationships, we already have the major strategic -- whether it be VMware or [indiscernible or Altiostar or Crown, an SBA, Vertical Bridge and other tower companies and more to come.

So what we do there is -- and we're a pretty big R&D project, and all those companies are helping us. They're spending capital, but they're not getting the immediate return on in terms of that. And like in the cloud, we've got several companies have been helping us with cloud. And wireless is the next big growth. Telco's the next big growth for cloud. In fact, it's probably the biggest growth of the next decade. That's probably going to be their biggest growth. And yet, it's a little bit different than the normal data that they've been doing today. So there's some things that we have to invent together and change in what they're doing.

So the way we look at strategic partnerships, there's -- money aside is, how do we make their company better? And how do they make our company better? And everybody we're working with, that's our goal, is we're their champions to go help make those -- their companies better, whether it be providing resources or test beds or our testing on our network, and they're spending a lot of resources to help make us better.

From a financing point of view, the converged security, we just felt like putting capital on the balance sheet to get us to 2023, where I think, there's always a chance more than 0, Craig, that we're out of business. We don't know what the heck we're doing, and we fail. But I think that the rational bet is that we know what we're doing and that we have a team and partners to help us. And we're going to get there. And then obviously, the world looks at this a little bit differently. And you're probably one of our biggest skeptics and it's our job to -- your stuff is well taken. I read your stuff. I think you're a great writer, and I think you make great points.

But not one of your points, not one ever, has been something that we haven't thought about here. And that we don't at least believe we have a strategic solution to it. And therefore, I think that our job is to go out and produce this, is to go out and execute and build this network. And then obviously, internally, we talk about -- we just prove our skeptics wrong. And so we don't really talk -- so we don't do a bunch -- we don't spend a lot of time talking external about what we're doing, we just stay focused on what we're doing. And good teams and good companies that do things, they focus. And we focus probably to our detriment. We don't explain what we're doing to everybody every day. But we're going to show you. And that's why I think John's question, I think, earlier, when we can see something, the third quarter, I think, will be important.

And then -- so there's -- so the ideal time is when you can show people what you're doing, if you believe in what you're doing.

So I take that -- that means that ideally, you want to -- before you would think about a major strategic partner in the sense that you've talked about them in the past rather than vendors, you would wait until after you have a sort of showcase set of test markets? Is that the way I should read that?

Well, I don't think you should read -- I think that -- I think we always thought we might name a strategic partner where we didn't have any capital. We had a lot of debt maturities. But I think what -- same thing happened to us in DBS. We always wanted a partner in DBS. We wanted somebody to help us build satellites. And what happened was, ultimately, we just got good enough. We just got confident enough and good enough in what we're doing, that it just made sense to keep the equity. And it didn't make sense to give up the equity.

And so I think we're probably in a similar situation today in the sense that we do have enough capital to build on our balance sheet today, to build our network to the point where people can see whether OpenRAN cloud-native networks work. And I know not everybody in this call sees it, but we see it every day. The number of resumes and the quality of people that are applying to come work with us is exponentially higher than it was last year.

The number of vendors that are putting resources towards us is vastly different than it was last year. The -- I think the whisper confidence level for people in the know is vastly higher.

We're leading though. Nobody's built a 5G OpenRAN cloud-native network before. We're fortunate that GEO took a first step and Rakuten took a second step, but we're going to be the first network that does it and completely. And I don't think -- there's certainly always will be skepticism. But that -- every time we hit a milestone internally with our partners, it -- that goes down. And you saw -- you see it -- you saw with Qualcomm and they put one of our frequencies in their chips. They don't do that for -- that cost them money. That cost them R&D, it cost them space. It costs them antennas, it cost them that radio. They don't do that for companies who aren't going to make it.

Great. We'll now take our next question from Philip Cusick at JPMorgan.

Charlie, maybe following up on the O-RAN side. How has it gone in terms of integrating those network vendors? Where are you versus what you expected a year ago with those sort of vendor integrations?

And then second, Paul, regarding the fourth quarter financials, can you talk about any one-timers here? Last quarter, I remember you had some programming credits, many repeated this time. And is it right that the $70 million benefit versus the accrual on the telemarketing front hit the G&A line?

I'll take that -- the last part of the question. So as it relates to onetimers, the only onetimer that we had hit in the P&L was the $70 million coming back from the FTC case, and it did hit SG&A.

This is Marc, and I'll take the one on O-RAN. I would say that we are now moving into the second phase of our O-RAN journey, that is -- we're starting to build. We have tested a lot of vendors. We have brought radios, compute software together. And now what we're doing is that we are transferring this knowledge to our teams in the field in order to build it across the U.S. So that's really where we are.

In terms of testing integration, we -- for me, this has been a normal journey, like I've seen in the past for other technologies. This is -- we're coming at a time when there is maturity in the O-RAN industry for us. So we're just deploying it now.

We will now take our next question from Walter Piecyk at LightShed.

Charlie, the first market that's getting launched in the third quarter, can you just give us a little bit more color in terms of -- is this like -- are you going to sell to consumer wireless? Is this kind of a profile of what you can do with network sharing for potential strategic partners, investors whoever to look at? Just a little bit more color on that first market.

Yes. Well, first of all, it will just -- it will be an NFL city. It will -- so it will be a large market. It will -- well, we certainly hope to have handsets for consumers, although it's going to be a beta test, for lack of a better word, even GEO in India, they had to -- took them 6 months to let people try it. So -- and I just don't know what kind of problems we're going to have. I just know we're going to have problems and certain things aren't going to work. And it's also -- it's also our integration with T-Mobile and our core and getting the hand-offs right. And so it's a big test bed that I think is going to work kind of, day 1. And I'm hoping by -- that's why I say we'll be crawling.

And then I think that as you work those bugs and kinks out in a major market, it's cookie-cutter after that.

But what do you hope to highlight the most? How the network works into the core? Or how the RF works in terms of, hey, we can build a network where phone will work if you drive around?

Well, I think the first part is blocking and tackling. So the foundation is we -- is what can we do compared to what other people do, although we won't have as much -- I mean, we'll be -- it'd be a 100% 5G network, so that will be completely different than other people.

We certainly want -- certainly, speeds are important. But certainly, that is -- you don't -- everybody doesn't need a car that -- got a Lamborghini that goes 280 miles an hour, and I think as long as we make something that goes 100 miles an hour, we'll be in pretty good shape.

So I think we'll look at consistency. And then we look at where all the problems are, where are our dead spots, where do we go along in our RF plan? Where did we -- where does our open rent have issues and how are we ever to analyze that and how are we able to sell fuel and self-correct. And it's just all those issues. My experience in DBS was, I remember when we launched, our pay-per-view didn't work. And -- and then as we started getting customers and getting more successful than we thought initially, suddenly, we couldn't actually provision people fast enough. We didn't have enough compute power to do it. And as we learned all those things, and it took us 3 or 4 months to kind of get the right things in place. And then it was clear sailing. But we still had problems, but they were kind of one-offs, one at a time.

So my expectation is that we'll -- I think everybody on this call will have a pretty good idea where this stands by the end of the year. And some people are going to say, we bit off more than we can chew, and some people are going to say, well, we always knew they could do it. And we're good at execution. Transition's tough. Execution is hard work, but there is no law of physics. Walt, this is important. There are no law of physics to stop us from what we're doing. There is nothing that has to be invented to stop us from what we're doing. People know how to climb towers. We'll be getting radios in. People know had to build radios. People now know how to build broadband DUs. Cloud exists. We don't have to invent the cloud. Handsets exist. We just have to execute. And right now, we're -- it's right to be skeptical about our execution because we got to prove it.

And -- but this team, we have a team that can do it. And it's just -- for me, it's a pleasure to get from the transition stage to the execution stage because it's just hard work. And we never knew tenured I'm looking at Tom here, but 10 years ago, we knew we had to get 100 megahertz of spectrum. We've got 40 megahertz of spectrum. And we said, how are we going to -- we just never knew if we'd get there or not.

Now we've got well over that. And the -- well, I can't talk about the C-band auction, I think that -- that's a whole another dynamic and a whole another strategy, counter strategy kind of thing that you guys will be writing on in the next -- the rest of the year.

And think all the analyst days you get to go to and hear everybody's story. And we're going to show you -- show your story. We're going to show you our story.

Charlie, can you talk a little bit about Boost as well? I mean you took this thing on, the margins, I think, in the quarter were 15%, which is higher than a typical margin. Is that sustainable? Is it balanced with just continual sub losses? But you also brought on Steve Stokols to run. I think historically, he's been very good at developing e-commerce channels. And I'm curious, like is there a plan to try and broaden the distribution and maybe reverse some of the sub losses there while maintaining margins with some type of e-commerce type strategy?

Well, the first answer to that, maybe, John, on -- the first is bad news for Boost, because we have some -- I think we -- and Craig, to his credit pointed this out in his -- today, you might talk about the biggest negative kind of risk factor there is just a...

Yes. Of course. Hi, it's John. We're 2 quarters in. We're -- I think we've talked about on the last call that we've had a lot of operational improvements to make, converting to the MVNO economics. We're certainly working with our distribution. We are focused on building new, more profitable acquisition channels. So you'll see us look to make changes there as we move forward.

We are working through some very big technology and operational projects with the Boost business. I want to point out, which is new news this quarter, is that we have received notice from T-Mobile. The voice CDMA network will be discontinued on or around January 1, 2022.

So the majority of our retail wireless subscribers receiving services from that network were part of work on planning a big migration. So we can't be certain that the network will actually shut down on that time line. But we have to plan and act as if it will, which will be costly for us. And as Charlie mentioned earlier, we're focused heavily on building devices with our partners that will work on our future network. And so we've got some timing and other considerations there that we've got to work through.

Yes. No, I was going to say. So Boost is probable -- so I don't think anything -- I don't think that this quarter, that those kind of margins are probably sustainable to the extent that, in fact, it might not be very good at all in the sense that we look at it from a profit and loss, the Boost customers are some of the most economically challenged customers out there, that Boost pays attention to them and they're good customers for Boost. But they're economically challenged.

And so if they -- it's hard to upgrade, to go from a phone that works great and works in their territory, works great and then go to another phone that won't even work on our network because we're 5G. So then we have to upgrade them again. So you run the numbers on that, and there would be significant fallout from that, in my opinion.

The second thing is, I don't even think we could get the supply of the phones that we would need. So we just don't -- it's -- you can't order phones and not know that you can move the phones and the supply is somewhat limited for the kind of phones we might need for that. So that's a material risk that's out there on Boost.

And -- but I think the positive side is the team, the Boost team, John, lead and the team, show them they can execute. They showed that they, in a very short period of time, could turn around some past practices from Boost that weren't economical. And maybe were to show Wall Street some numbers. We're not into that game here. We're into actually managing your capital and our capital in an efficient manner.

And so they've shown that they can turn that around in very short order. I set a goal for them to be profitable by the end of the year. They were profitable the first quarter, and they became more profitable in the second quarter. So we've got a management team that can execute, and they're on pins and needles and the edge of their seat to get our first market on our network where we can control our own destiny.

We'll take our next question from Jonathan Chaplin at New Street.

Charlie, it seems like the last big vendor, sort of category of vendors to slot in for the network is a cloud partner. And I'm wondering if you can sort of talk through the merits of 1 cloud partner versus another? And whether it would be a single cloud provider that you would partner with? Or whether it could be nonexclusive, you could partner with multiple?

And then I'm wondering if that's a relationship that you'll be able to leverage, to sell into enterprises, given that so much of the opportunity in 5G seems to be in the private network, enterprise private network space. Whether you'll be able to leverage the relationships with a power partner who already have strong relationships in enterprises to get into that business.

I'll let Marc -- I'll make just an opening comment, and I'll turn that over -- this question over to Marc. But the challenge I've given with every vendor to our team and to Marc is, that our cloud provider has to, first and foremost, be best-in-class technically. And we're fortunate that there are several vendors that actually can live up to that. And there's just great cloud technology in the United States. And it's a whole new way of running the network. And maybe I'll let you talk about how that affects enterprise, and...

Yes. So first of all, we've seen very strong progress from our cloud choices. I mean, several different choices in the U.S. and Charlie was saying that telco is a bit different in the cloud. And now we have the confidence that the cloud partners in the U.S. have the telco technology that we need. And that's a big thing for us. So we feel very good about that.

When it comes to our software, you remember that we -- the first choice we made was to set at VMware. And the reason was that we wanted to control the software that we use. And VMware has given us, over the last 15 months, has given us this capability to move our software a bit with cloud, but also from the top of the cloud to the edge. And no other network or no other architecture has that capability in the world yet for us. That was very important because when you discuss private networks, different customers want different setups. Some want, do you have a certain type of cloud, some want, you have the private cloud, some want to put the software on their premise, on their factory or on their campus.

And for us, it has to be automated. And so we spend a lot of time with our cloud partners to be able to do that seamlessly. And I -- like I said, for the O-RAN, we are now in the deployment mode where we have the capability with VMware and with some cloud partners to move the software east, west, north, south.

Jonathan, this is Tom. Most of the focus has been with Marc's team working on the technical architecture, but we clearly expect a cloud partner to bring a go-to-market component to the relationship.

We'll now take our next question from Kutgun Maral at RBC.

Charlie, you've talked about transitions, and I know the focus is on wireless, but maybe thinking through the transition across pay-TV, effectively, all your content partners have launched their own direct-to-consumer services. Obviously, this isn't new, but I'm curious if the tenor of your discussions during the slate negotiations is changing? And if so, is it more about fine-tuning pricing and packaging terms with programmers? Or do you expect to take an even harder line with ultimately, I guess, who you're distributing? And if I could have a brief follow-up.

Yes. I don't know that it's a harder line. I think that what -- we value programming, is to have -- how many people watch it. So for lack of a better word, cost per viewing hour. And what are the alternatives to get it.

So obviously, to the extent that we had football exclusively, we had NFL season ticket, that was an exclusive. That has value, to the extent that you can watch it in 10 different places, it has 1/10 the value, right? So when our -- we have a content negotiation and our content, that content is available through other means, it's just less valuable to us. And then the content providers are strategically, I think, in their strategic rooms. They're saying, how do we keep these linear guys paying as much money as possible for as long as possible, while we go direct to the consumer and cut them out?

And oh, by the way, we're making these guys bundle every channel, and we'll go to the consumer and give them a lot more flexibility and be a la carte. So obviously, that's a, that's going to be a tough business model going forward. We're unique in that, Erik, maybe speak to this, we've made our viewing -- we looked at viewing as an experience, and we've done a lot of different things to make the experience on DISH network better than the experience might be. And on one of these vendors, and we go after people that are more rural and so forth and so on.

But look, it's why the -- all I can say is, I'm sleeping at night now because we -- I've been through this before. We knew the big dish business was going to be a business that would be challenged 40 years before anybody ever wrote the first word about it. We knew that this model would be challenged in video. I think we talked about it on a conference call probably, you go back and look on your records, probably 7 or 8 years ago, when everybody kind of laughed at us and said, why aren't you spending more money to get these customers?

And we've made that transition that it's a mature, declining business, and it's a solid business. The cash flows are good. It's not going away, but it's going to decline. And I would expect our cost of programming would go down or would -- or wouldn't go up as much, based on customers going direct. And we probably will lose some of our customers -- some of our programming partners we may lose as a result of that.

But Erik and his team are running it as a business. We have great relationships with our consumers. We found that out with HBO. HBO didn't renew, they wanted minimum guarantees from us and the high prices that we -- that made no sense for us to pay. And obviously, we're a competitor. So they had no -- and they had Game of Thrones coming up, final season to Game of Thrones. We didn't lose -- we didn't lose many customers, let me put it that way, because our relationship was strong. And they felt -- they bought Showtime and STARZ and other things, Netflix, and so -- and HBO lost the revenue stream. So do you want to jump in on that? No. Fine.

Yes. I've got the follow-up question from Kutgun. It's Jon Atkin with RBC. On the 5G, I wanted to basically drill down a little bit on the tower MLA that you referenced, all the fiber partnerships. And what type of run rates are you targeting per month or per quarter in terms of getting the equipment deployed? Is the gating factor, the delivery of the radios or similar to that, the permitting and the entitlement? What kind of pace can we start to look forward through for the end of the year?

Yes. I think the gating item is going to be radios. So it's right to say it's a supply chain. It's supply change management.

And in terms of the number of markets that you're going after besides the NFL cities and to get to that 20% target and beyond, you do obviously need to redeploy the hardware, predeploy the hardware of the network. So what kind of cadence are we looking at, given that you already have a lot of the MLAs in place and the fiber agreements in place?

Well, the cadence will be -- to get us to 20% in June. So that's 60 -- I don't know the exact number of pops that is, but it's probably 60 million, 65 million pops.

Well, we mentioned it earlier on the call that the activity is underway in dozens of markets. The target is really focused on the 70% buildout by June of '23. The requirement is for 15,000 towers, minimum. And as I said on the last quarterly call, I think it will be north of 15,000 by that time frame.

Yes. Mayo, in our daily staff meetings, Mayo is always saying, I'm ready whenever you're ready. And he's looking at Marc and Stephen and Tom and that means that I'm ready whenever you guys are, when are you going to have radios. And we have a schedule for radios. And so are hesitant to give you that cadence, because with COVID and supply chain and everything else, we've already had some delays in that, and we're pretty confident. But until the factory production is spitting it out and we get to see with our own eyes, we'll see.

But okay, it looks pretty -- the cadence looks pretty good.

So operator, we have time for 1 more from the analyst community, and then we'll have time for a couple from the media.

All right. We'll now take our final -- yes, we'll now take our final question from the analyst community. (Operator Instructions) Our final analyst comes from Doug Mitchelson at Crédit Suisse.

Just a couple. You guys have already covered a lot. Tom, when you say a cloud provider should bring go-to-market component to the relationship, just interested in what you mean by go-to-market component.

I think a jump ball, are -- you guys wanted to give us a sense -- I understand, Charlie, your comments that you can fully fund the network build-out at this point, based on cash flow and cash on hand. But just curious if you're willing to say what the 2021 spending on deploying the network would be?

And then lastly, sort of just, not sure if there's much more fishing I can do here, Charlie, but just adding on to Craig's question. I think I was pretty surprised by you using equity. You certainly have a pretty long history of avoiding equity. I assume you expect a lot of value creation if you execute here. The last couple of years, you mentioned there was a lot of interest in financing and helping you with funding the network and shifting over to equity from that seems like a change in sort of balancing how you might financing. So was the demand by others willing to give you money just sort of too expensive in terms of share of capacity? Or in terms of the rate they wanted to charge you versus equity? Any more that you could help us with understanding, issuing a convert rather an issuing debt or taking an investment in would be helpful.

Yes, this is Charlie. Obviously, there's a balance between how much debt and equity you have. And for the most part, we're -- we believe, given where we think we're going to go, that we're relatively debt-free on the wireless side. And we thought we'd get better execution. The market kind of threw up on it for whatever reason, and we thought we'd get a little bit better execution, so we're disappointed.

But on the other hand, it's not going to be material in the scheme of things, where we're going. So that was 0% interest for 5 years was attractive. And again, I think we didn't quite hit our metric of where we thought we would come in, pricing-wise. And had we, in hindsight, maybe knowing if it was going to be conversion in the 40 -- low $40 range, I think maybe we'd have thought about it differently. But you win some, you lose some and our best guess there wasn't quite as good as it should have been, I guess. And so I go back, file that one away and now we're a little smarter. Tom, do you want to take your estimate?

Yes, Doug, nice job getting in 4 questions there. As far as the go-to-market, obviously, the conversations with -- they range, depending on which cloud service provider we're talking to. But they clearly all have enterprise sales channels, and they all see a movement towards distributed cloud, mobile edge computing, which brings 5G into the conversation naturally with their customer base. So beyond that, I don't want to go into more detail.

That's helpful. And spending this year?

We don't give guidance on that.

We'll now take our first question from the media from Scott Moritz at Bloomberg.

Great. Hey Charlie, you spoke earlier on the call about the risks of the Boost network shutting down. Have you had a chance to talk to the FCC about this? Do you have any confidence that maybe they will give you a break on the timing of that shutdown?

We have not talked to the -- we have not talked to the -- well, I should say, I haven't talked to the FCC. It's possible that our staff has. But it's a risk that's out there, and we'll -- we -- look, this administration wanted 4 providers. We're 1 of 4 providers. Hope we'll see what the -- we don't know what the regulatory environment. It's one of the risks that we always worry about, is that Washington picks winners and losers, and they make policy that affects people one way or the other. And we've had some good luck, we've had some bad luck with that, as have others. So we'll have to see which way that goes. But I'd probably tell you a little bit. I'll probably tell you a little bit about which way the wind's blowing. But it -- look, we view it as anticompetitive. I mean, as simple as that. Obviously, those customers, if they can't go to our -- we don't have a network up yet, they obviously -- if they only -- a couple of places they can go. And so we view that as anticompetitive.

Great. Do you face the risk of those customers going back to T-Mobile? And would that also be considered anticompetitive?

Well, you can see what -- look, I don't know what -- I can't speak to their motivations, but obviously, one of the beneficiary -- what we can say is, one of the beneficiaries of a premature turnoff of the CDMA network would be T-Mobile.

(Operator Instructions) We'll now take our next question from Amy Maclean at Cablefax.

I just wondered, Discovery said today that its Discovery Plus service has surpassed 11 million paid subscribers. I wondered what you thought of that service? And do you foresee it changing how you deal with them as a partner?

I think Discovery's got great content. And we've had a long-term relationship with them. But obviously, to the extent that you can get it on an a la carte basis, it will affect future negotiations. Because if our customers -- some of our customers don't watch Discovery. A lot of our customers don't watch Discovery, should we burden every customer with Discovery if they can get it somewhere else? I mean, that's the -- so it has to be a relatively -- has to be a fair rate that we can burden customers who don't watch it and you have to run that math. And that's just the economics. It's not rocket science. We know our customers who watch it, how long they watch it in real time. And look, that's why I started out with, I don't think I've done in a long time, that's why I talked about transition to start the call, because that's why it was so important for us to get in 2020 where we are.

Okay, operator, I think we can take 1 more from the media, please.

(Operator Instructions) There appears to be no further questions. I'll turn it back to the speakers. Please go ahead.

All right. Good we'll be seeing you in like, late April or (inaudible)

Thank you, all. Appreciate it.

Thanks, everyone.

This concludes today's call. Thank you for your participation. You may now disconnect.