DISH Network Corp (DISH) 2020 Q3 法說會逐字稿

Good day, and welcome to the DISH Network Corporation Q3 2020 Earnings Conference Call. Today's conference is being recorded.

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

Good morning, everyone. Thanks for joining us.

We are joined on the call today by Charlie Ergen, our Chairman; Erik Carlson, our CEO; Tom Cullen, our EVP of Corporate Development; Paul Orban, our CFO. And on the wireless side, we've got Stephen Bye, our Chief Commercial Officer; and we have John Swieringa, our EVP and Group President of Retail Wireless. Erik and Paul will have prepared remarks, but first, I need to take you through our safe harbor disclosures.

Statements we make during this call that are not statements of historical fact constitute forward-looking statements and are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results and/or from our forecast. We assume no responsibility for updating forward-looking statements.

As part of the process for FCC Auction 107, we filed an application to potentially participate as bidder for those spectrum assets. Because of the FCC's anti-collusion rules, we're not able to discuss that auction, and we will not be taking questions on that during today's call.

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

Thank you, Tim, and welcome, everyone, to the call. I hope you and your families are healthy and well. We appreciate you being with us today. Paul and I will keep our comments brief and leave plenty of time for your questions.

It's been an exciting quarter. We acquired Boost Mobile on July 1 and entered into the retail wireless business. We saw growth in Pay-TV due to our continued discipline with DISH TV and through better execution and customer growth with Sling TV. We reported strong revenue numbers and brought in more than $1 billion in OIBDA, and we continue to make good progress with our wireless network build.

With the acquisition of Boost, we made changes to our segment reporting, which you'll see in the Q as well as in our earnings press release. Paul will talk about those in a little bit more in a minute.

I'd like to highlight a few items across our business units. With regard to the quarter, DISH TV performed well given the current environment with gross new activations of approximately 292,000. Activations are down year-over-year primarily due to COVID and our approach to it. As I stated before, the crisis has impacted customers' willingness to respond to some of our marketing tactics like opening direct mail, and in some cases, allowing technicians to perform services in their homes. As a result, we have reduced our marketing expenditures and our gross new DISH 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 this path.

In the quarter, we saw DISH TV net subscriber loss of 87,000 customers. Our losses are primarily the result of lower gross new subscriber activations, partially offset by a lower DISH TV churn rate. Paul will have more detail on this in a moment. We've also placed a significant commitment to delivering best-in-class customer service, and that work is paying off. We've been recognized for the third straight year by J.D. Power as #1 in customer satisfaction. Look, I want to thank everyone at DISH for keeping our customers top of mind and delivering the exceptional service, technology and value that we provide.

Turning to Sling. In the quarter, we gained approximately 203,000 subscribers. This is encouraging news given the heightened competitive environment. It's a significant increase from the previous quarter when we lost customers. Now the increase is primarily due to return of sports in the third quarter. It was also helped by the enhancements we've made to the platform. We launched a beta version of Sling Watch Party, which has been well received. We've made numerous improvements to the overall user experience, and we've taken a more disciplined approach to attracting the right customers. With that said, we'll continue to focus on acquiring and retaining profitable customers and delivering a great experience for both DISH TV and Sling TV. We all know we still have room to grow.

Now switching gears a bit. As a result of our Boost Mobile acquisition in the third quarter, we officially entered the retail wireless business with more than 9 million customers. We now offer competitive retail wireless service as a mobile virtual network operator or MVNO. And while we build out our 5G broadband network, we'll operate under an MVNO.

Retail wireless net subscribers decreased approximately 212,000 in the third quarter. This is largely due to our efforts to integrate the retail wireless operations to make certain operational changes to enhance profitability. We're just getting started, and we'll likely need another quarter to continue to implement changes that will drive better profitability, improve the customer experience and continue to focus on attracting and retaining the right mix of customers.

As I mentioned last quarter, our approach will be similar to what we did with DISH TV and what we're now doing with Sling TV. We'll implement a more disciplined strategy in acquiring and retaining high-quality, profitable customers. Our profitability is determined in part by what we pay to access the network as an MVNO. And as we roll out our own network, we'll begin to benefit from owner economics. That will drive profitability and allow us to be more disruptive and drive better competition in the retail wireless space.

Now regarding our wireless network, we continue to make progress building the nation's first cloud-native, OpenRAN-compliant 5G network. Since the last call, we named several additional key vendors, including Nokia, Intel, Hansen Technologies, DigitalRoute, Blue Planet and MATRIXX Software, including our announcement with VMware in the third quarter. And both Charlie, Tom and Stephen Bye are here and are available to talk about our progress on wireless efforts.

Look, it's a great time to be part of DISH, and I want to express my gratitude to the entire team. We've still got a lot of work to do, but I'm confident in our focus and our resolve. We definitely have room to grow, and we'll continue to take a disciplined and innovative approach to the opportunities that lie ahead.

In closing, right now as we all observe every day, COVID cases across the country are increasing. COVID has certainly become a part of our daily lives, and a lot of work has gone into taking care of our customers, taking care of each other and taking care of the communities that we serve. I appreciate our team's focus on keeping our team, customers and communities safe, and I hope everyone stays well.

With that, I'll turn it over to Paul for a little commentary on the numbers.

Thank you, Erik.

Before we get into the quarterly results, I want to address the changes we made to our financial reporting. We are now reporting operational results for both Pay-TV and Wireless segments. Our Wireless segment will report results for 2 separate business units: retail wireless and 5G network deployment. Since we are now reporting segment operating results, we are disclosing segment OIBDA as a measure of profitability for each segment.

In addition, we have made changes to the line items in our P&L. First, subscriber-related revenue has been retitled service revenue. Second, subscriber-related expenses has been retitled cost of services. Third, satellite and transmission costs are now included in cost of services. And fourth, subscriber acquisition costs are included in SG&A. We will continue to disclose the DISH TV SAC metric, and that calculation remains unchanged.

In Q3, gross new activations were negatively impacted by COVID-19, and churn was positively impacted. As discussed in previous quarters, many commercial establishments are closed or running at reduced capacity. We put these accounts on pause or provide a temporary rate relief. These accounts represent approximately 250,000 subscribers and were removed from our ending Q1 subscriber count. During the third quarter, 35,000 of those subscribers restored service or had temporary rate relief end. These subscribers came back with minimal or no cost and were added to our ending subscriber count without being counted as a gross activation. In total, 80,000 subscribers had restored service or had temporary rate relief end. Of the remaining commercial accounts that were removed, 5,000 of these accounts disconnected in the quarter. We expect the majority of the remaining 148,000 commercial accounts to restore service in the coming quarters.

On a consolidated basis, our revenue and OIBDA are both up significantly compared to last year. Revenue has increased due to the Boost acquisition and OIBDA is up due to increased profitability in the Pay-TV segment.

Let's dig into the details of each segment. Our Pay-TV revenue increased slightly 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 reduced costs related to channel removals, including regional sports and multiple onetime programming adjustments. In addition, margins benefited from the cost-cutting initiatives related to COVID-19.

DISH TV SAC per activation increased from $827 last year to $864, largely due to an increase in advertising cost per acquisition. SG&A expenses were down compared to last year as a result of reduced subscriber additions and the cost-cutting initiatives related to COVID-19.

Now let's turn to our retail business unit. We closed the Boost Mobile and Ting acquisition on July 1 and August 1, respectively. As a result, we added over 9 million wireless subscribers. Service revenue was almost $1.1 billion and OIBDA was nearly $80 million for the quarter. We lost approximately 212,000 net wireless subscribers. We are currently in the process of integrating these businesses and making operational changes to enhance profitability given our MVNO economics.

And lastly, let's look at our 5G network buildout reporting unit. We invested almost $50 million in OpEx and CapEx during the quarter. In the fourth quarter, we anticipate CapEx to remain at similar levels and increase substantially in the second half of 2021 as we ramp up our 5G network deployment.

Our free cash flow of $651 million for Q3 benefited from improved operational or operating performance and working capital. We ended the quarter with approximately $2.8 billion of cash and marketable securities.

With that, I'll turn it over for questions. Operator?

(Operator Instructions) And we'll take the first question at this time. It comes from Ric Prentiss from Raymond James.

Glad to hear you're making it through the COVID time. Our thoughts are with you. The question is, I appreciate the breakout of detail obviously in 5G. Can you update us a little bit on how many cell sites do you think you're going to need to build out the coverage that you've committed to? And how is it relating to the possibility to use some of the T-Mobile, Sprint decommissioning 20,000 sites that you get to take a look at?

Yes. So this is Stephen Bye. We are on track to achieve the objectives as well as the commitments we made to the FCC and in terms of the 2022 time line, in terms of the 20% as well as the 70% in 2023. And so we're on track in terms of the deployment. We're also looking at the sites that T-Mobile has provided to us to look at how we can reuse those sites as we go forward. So some of those sites have actually been included in the design, but we're on track to the 15,000 that we committed to as a minimum buildout requirement for June 2023.

Okay. And any update in terms of how you're moving towards having postpaid sales? I think that was going to be required within, say, a year?

It's John Swieringa. Obviously, it was a big quarter in Q3, acquiring and integrating 2 businesses. One of the reasons that we entered into a strategic transaction with Tucows for the T-Mobile assets is it gives us some of the tools that we need to enter and compete in postpaid. We'll certainly be focusing on that in the first half of 2021. But when you look at where we are, we've got support to build our team to assess the market. Obviously, there's lots of opportunities in the industry, and we have a lot to learn and to take advantage of. Stephen Stokols is in town. He's going to be partnering with me to address our opportunities in the market as we go forward.

Our next question comes from Doug Mitchelson from Crédit Suisse.

Charlie, Tom and team, I guess, a couple of questions. First, what's your confidence at this point, Charlie? You've made a ton of progress lining up all your vendors. But if you can get them, and again, the supply chain all working together up and running as you planned, when will you have a live market for a proof of concept, do you think?

Yes, Doug, we'll have some preliminary small markets in the first quarter. But we won't have -- it will be the third quarter before we have a major market up and running that probably the world can touch and feel a little bit to see what we're doing. But I think the big picture, Doug, is that we're running pretty fast internally. It's not visible, obviously, to all of our investors and to the Street. There's so much detail and so many things that go into it. We strategically said we're focused on just getting the job done. It's not a great forum for us to communicate in a world of COVID because for us to show you what we're doing, you really got to see it. It's not a PowerPoint presentation. But rest assured that we're really working on 3 things. One is, we continue to build the team. We can't accomplish what we want to accomplish without a great team, and we have to hire people whose best days are ahead of them. We have to have people that have a lot of upside because when we grow, our growth will be dramatic, and you've got to have people that you can look at and put in other positions. So it takes a little longer to find the people whose best days are ahead of them.

We continue to work with our vendors and our partners either in beefing up that team. Obviously, there's a few areas that we still haven't made announcements on. And make sure they're all tracking in the same direction and the same vision that we have. And we're really pleased with the vendor group we're working with today, at all levels of their companies. And they're taking a chance on us, and we recognize that. But we all work hard in there and it's going to pay dividends for them. And we all take the approach that we're going to help make their business better, and they're committed to help make our business better. So we're building a great team of partners and vendors.

And then we're planning our buildout behind the scenes. It's public that we have 1 tower up, but we're planning, and a really good network starts with planning. And while we wish we had supply of radio today because we are ready to deploy in certain markets, we're dependent on those O-RAN radios from Fujitsu. Those don't arrive en masse until the second half of next year. So in the meantime, that allows us to get our planning done, our permitting done. And then it will appear to you second half of next year, they're running pretty fast. But behind the scenes, we're running fast now. And we're putting all those things in place to do that.

I appreciate that. And the second question, Charlie, as you said, I think you probably have a better wireless model than we all do. You've got a much better idea of what your operating cost per megabit is going to be and what it means for your ability to undercut the incumbents and take share and what your coverage and propagation looks like. I guess, just for fun, you want to take a stab at what kind of market share of wireless you can get? Should we be targeting 15%? What should we circle in our models that might help us understand capacity and monetization potential for what you're building?

Doug, big picture, big picture, we look at businesses where we can build something that's less expensive and better, less expensive and better. When you have both of those, you can be successful in the marketplace. So we're building a network that's less expensive both to build and to operate. But it's one more additional thing that we don't always get that we're going to get here. It's going to be a lot more flexible because it's cloud-native, because it's an O-RAN, OpenRAN system, because it's 21st century architecture versus 30 years ago architecture. That network can do things that other networks can't do. So the big mistake, I think -- so we'll get our fair share of the consumer business. With 4 major nationwide players, we're going to get our fair share there. And that's what I know you guys are concentrated on.

But I think the other place that's not as obvious is in the enterprise business, where we can now, what we call, slice our network or give people the option for a private network. That's something that's going to be relatively unique to DISH wireless because the architecture allows us to do that. And in that particular, in the private network side of the business, that's one where, I don't know that we have competition for that. I mean we'll have competition but not the kind of competition for what we really can do. And so for us, as you might imagine, we're going to go for 2 things, where we get the highest price per bit but also where the utilization of our network is the highest.

So the big economic thing if you -- and I haven't seen anybody with this model. But the biggest thing is when you have a network that the incumbents run about 25% of their network capacity. So if you look at a 24-hour a day, 7-day week and you look at how many gigs that network could put out and how many are actually consumed, it's a relatively low number. But if you have a more modern architecture where you can run that capacity more than 25%, maybe it's 30%, maybe it's 31%, the economics are pretty dramatic. Maybe you can run your network at 50%. So that's another place we'd look.

And so that's the gig economy, right? Uber makes money, in theory, would make money because they use the car more, right, because they used the car for lots of people instead of just parking in the garage every night. Our networks can be used by a lot of people, particularly on the enterprise private network business that most networks aren't used for today, and that's the big difference. So that's complicated. And obviously, we want to have customers, and we don't know what all those economics are ourself. We just know that there's a little bit less competition in that. So it will be a factor in the consumer business, but will be even a bigger factor in the private networks.

We'll take the next question. It comes from David Barden from Bank of America.

Maybe just want to follow up, Charlie, on this conviction that you have that there's a plan that you guys have that we don't know that we're all going to be surprised by. If you're going to have one major market in 3Q '21 and you need to get to 50% of the U.S. population by June '23, can you explain to investors how that happens, convince us that it's all going to be okay?

Yes. Okay. Good question. First of all, I know you want details, but we are communicating. We're building a very modern architected wireless network for the 21st century. It does 3 things, right? It's OpenRAN technology. So we break this. We break apart the baseband and the radio. So there's no one company that controls us end to end. We virtualize the network. It's much more virtualized than current networks. So we do a lot with software where people today do hardware, right? A good analyst can look -- we can go to a lot of detail where that is, but it's a lot of software, less hardware. And it's cloud-native, which means mass majority of the network runs in the cloud. So there's lots of details behind that. But if you can get your arms around that, you'll probably be in a pretty good space.

I think the thing you're missing is, as you look at the buildout for us, which is obviously an execution challenge for us. It's not a technical challenge, but it's certainly an execution challenge. The time to build the network is not when you climb the tower, which is what everybody is thinking about. When we look at the network planning, maybe Stephen, who's done this for a living, can pick up where I leave off here. The best time is in the planning and then you got permitting and zoning and structural. But the actual climbing of the tower and then the cloud-native network and provisioning is actually not -- in other words, and so if you have your hardware at the base of the tower, it might take you a year to get through your planning, zoning, permitting to get ready. But when you climb the tower, you can do that in 7 days. So the marketplace is saying, oh, you're looking at something that takes us 7 days to do if we've done everything else correctly. So you want to...

Yes. And David, we're already well into the planning process. So when you look at sort of the activity level, the activity level actually started like months and months ago. So Charlie talked about the market coming on air. We're already in that planning phase and in the preparatory work as we go into the deployment phase. So we're not starting now. We actually started months and months ago in that process. And the pipeline and everything that's moving forward is with that target in mind. And in fact, we're looking to exceed the objectives that we have to make sure that we've got enough buffer in there to make sure we more than exceed the FCC obligation. So we're well aware of that. Dave Mayo and I have been through this a number of different times. And we're in a very, very good position and very comfortable with where we are today.

Yes. The one thing I'd add is that, the one that will become more visible to you will be, obviously, tower contracts. So obviously, there's been a lot of negotiation there. And obviously, that's a place where you at least will see some visibility. I've got contracts on my desk. There's still some issues. Some people want to be more of a partner than other people. So we've got to take a look at that. But I think that's the first visibility you'll have that you at least know that from a tower perspective, that's something.

But the planning process, you're just not going to get visibility to. And that's, again, that's all the planning, zoning, permitting and structural. Those things, you're just not going to get visibility to. And we can't climb the tower until we have radios. And we made the strategic decision to be open with O-RAN architecture. That is not something that some of the incumbent OEM, the radio manufacturers were ready to endorse in the United States today. So that did take us a little bit longer. COVID is not particularly helpful from that perspective. But we've now cleared that hurdle technically. And actually, I thought that was the biggest risk to our whole program. And now I'm sleeping pretty good at night because we have cleared that hurdle. So we know we can be an open network now.

And I'd also add that we're aggressively hiring deployment teams in dozens of local markets around the country.

With regard to time line and what it takes to construct and just climbing the towers is actually one of the faster things, let's put it that way. We were very good on IoT. It used to take us, sometimes take us a month from the time we start until the time we provision because we're cloud-native. And basically when we learn, we'll be materially better than that.

That helps a lot. But I think another piece of the puzzle that people are wondering about is where the money comes from. If you don't really have more than one big market up and running by third quarter next year, then you're going need to prove out the technology or you need to burn the commercial go-to-market strategy. And then maybe money comes in to support this in 2022? Like what's the financial?

Yes. Good question, Dave. So a couple of things. One is we'll have more than one market next year. Again, what you can focus and what we're committed to is that we're going to have 20% of the population by June of 2022. We're going to have 70% by June of 2023. So you have critical mass certainly by 2023.

The capital is still, we're still projecting $10 billion of capital spend, and you're going to get to see every penny of that in our financials and how that's spent. So you can see it.

Having said that, while initially, we thought that $10 billion might be spent over 3 years, with the MVNO deal with T-Mobile, we have a nationwide network today. We have use of a nationwide network today. And now we don't have to monetize, we don't have to wait until we build the whole network to monetize it. So we get to build out market-by-market and monetize, and so the net effect of that is that $10 billion is stretched out over 7 years instead of being stretched out over 3 years. And we'll try to give you more visibility to that in the future.

But you saw, we had $2.8 billion in the balance sheet. We're $600 million of cash flow positive for the quarter. The capital markets are open. And kind of a timing issue, do you go-to-market with the amount of skepticism around what we're doing or do you go-to-market then when there's fewer skeptics, I would say. The rest is what we're doing. We could say it, right? That -- right? But again, we don't spend our time and effort and capital for things where we think are going to fail. And every day, we get better. We build value every day. It's not just -- you're not going to see it outside of our company until, obviously, we deploy in major markets.

We'll take the next question. That comes from Kannan Venkateshwar from Barclays.

Charlie, a couple of questions. So first is when we look at some of the comments you just made, you mentioned enterprise as a big opportunity over time, bigger than retail potentially. And you also mentioned that T-Mobile's network, in effect, gives you a way to scale retail, build up your cash flow stream and then fund your construction over time. But those 2 seem to be in contradiction with each other. If retail is not going to be a big business, when can it really fund the buildout? And then more importantly, I guess, is when you think about the network itself, I mean there has to be, at some point, a cash flow breakeven. Because building up the retail business obviously is going to cost you a lot of money. And while you have the network, you have to spend on SG&A and so on. So when do you expect cash flow breakeven on the business? Even in a breakout, say, 50%, 70% of the network is a few years after that, that would coincide. If you could give a commentary around that, that would be great. And then the second question is on DIRECTV. What's the main hurdle to that deal? If you could just expand on that, that would be great.

Well, that's a lot of great questions. A, I think we're cash flow positive in the wireless business this quarter, so at least on the retail side. So -- and that was -- I said I have challenged our team for the first year with Boost to basically breakeven. We obviously have -- the way we run our business with -- but when we paying for a network versus perhaps the way Sprint ran it, there are differences. Certainly, there are customers that are not economical to us. And obviously, we have to get -- we are now, on a lot of the Sprint systems, we've got to put those systems in ourselves, and John and the team are working on that.

So I think that the retail business -- big picture is the retail business could be a profitable business. Shouldn't be a negative -- it not need to be a negative business. I'm not saying we're going to have some ups and downs to get there, but it should actually be a very profitable business.

And then the cost to build the network, again, every day seems to be a little less, but we're still sticking with the $10 billion. And again, it's stretched over 7 years. You can run the math. You can see -- you can -- I think a rational person can see how we get there. But again, we're confident that we will be able to find the network build. Obviously, after that, the execution risk, do we have a better network? Is it what, is it automated? Is it cloud native? Does it really do what we say we're going to do? We do have an execution risk to prove that and prove that people actually wanted -- people want to analyze their data, either privately or in a public cloud. We think that's what people want to do. They do that in all sorts of markets today that's not done in the wireless business yet. We think that OpenRAN's a better architecture. We think it's 21st century. We think that's where the world will be 3 years from now. Are we wrong, maybe? So do we -- did you build -- could you put a $5,000 sale site route or box at a tower as you could be doing in software for $100? We think software is a better way, but we could be wrong. And maybe, I just think you're going to see -- do we think that it's a national interest in the United States? And would you think it's bipartisan, that we have more connectivity in the United States that's controlled by American companies and less reliant on foreign companies? We think that's the bipartisan. Maybe we're wrong. Maybe people would rather have the foreign influence there. Do we think that's exportable technology to the rest of the world? We do, but we could be wrong.

So it's -- I know it's difficult for investors to not have the visibility internally, but everything that we're doing. We certainly will be -- we're certainly not opposed to being transparent in China and light on it. But we're going to have to get to where people come in and visit us and see it, not a PowerPoint presentation on a virtual -- we're not going to convince anybody in this call. We didn't convince anybody last call. We're not going to convince anybody by the next call. But when the people who really do their homework come see it and visit us and visit our vendors, then I think you'll start to see the tide turn a little bit. There'll be a few less skeptics.

But we lived through this before. In 1992, when we said we're going to go do digital nationwide launch satellites, I don't think there is anybody -- I think there was 0 -- I think it was 100% skeptics, and it was about 90% skeptics when we're in the launch pad. So it wasn't until we demonstrated the product and put numbers on the board that some of that skepticism went away, so.

And then the other question was DIRECTV. I'm sorry, I'm so long-winded today. DIRECTV, obviously, I've said publicly, but I think the combination of those 2 companies is inevitable. The competition is not -- for us, it's not DIRECTV. The competition is the actual programmers themselves that we deal with. They all have their own OTT product. They compete very well with what we do. It is in the consumer's best interest that there be scale as alternatives to that. So -- but that's a regulatory -- that's something where there has to be -- I think, the DIRECTV is, at least what I've read, but don't take me as gospel on this, but that they would like to deconsolidate that business and that they would like to do that before they would take any regulatory risk. Whether that happens or how they do that or whether they do that, of course, remains to be seen. But make no mistake, whether it's a year from now or 10 years from now, I believe it's inevitable those companies go together.

We'll take the next question. It comes from Walter Piecyk from LightShed.

I first have kind of a technical question for Stephen. When these Fujitsu radios are available, whatever, mid next year, is the anticipation that they'll be capable of doing band 66, band 70, CBRS, C-band? Is that flexible and are there going to be alternative radio vendors? And then on a more touchy kind of feely question on the same concept, Charlie. When you think about this network that you're going to launch in the second half of next year, are you -- basically because when we talk to some of the vendors that you've hired thus far, it seems that there's tremendous focus on this network slicing and kind of enterprise and what future 5G applications can mean. Is the focus on the type of network you're building to address that market and consumer will just be an obvious offshoot? Or is it the reverse where you're building a consumer wireless market, which also has the flexibility to do some of this network slicing and some of these enterprise applications that a lot of people seem to think is exciting for 5G?

Let me take your softball question first or softer question first. We can walk and shoot down at the same time with a proper network architecture. We're building Netflix in a Blockbuster world. And obviously, you're one of the guys that saw Netflix. You actually understood Netflix probably years before most people did. But we're building this up. It's not that Blockbuster didn't work. It did. It just seems pretty archaic that you went to a store and had to rewind the thing before we delivered it back, get a late charge. And you're talking to a guy who knows because we owned it and lost $100 million on it. So I'll never do that again.

We learned our lesson and we're always going where the puck is going. So we're building the next-generation of where things go. And so the consumer is going to benefit from our network. It's going to do things in the network that current networks don't do. But the network is also designed architecturally that if somebody wanted a private network, they could have their own private network. And it would look like, it would look like their own network.

And so again, not to hit the politics of this, but when the Department of Defense put their RFI out, our response to that is on our website. A couple of you people have read it. That basically shows you how the Department of Defense could have their own network. And we already do that today. They already have their network when it comes to satellite. We already lease capacity to the Department of Defense. They uplink. They encrypt it. They didn't build the satellite, but they have every benefit of the satellite as if they did. It's called a private network. Same thing can be done in wireless with the same architecture. I don't know politically whether the Department of Defense is going to go anywhere with what they're doing. We don't believe they should build their own network because we don't think they need to. But we do think that the technology allows them to do what they ask. And we're building that network.

And part of the idea and the architecture of our network was from their white paper 2 years ago. So we looked at what they -- we're cognizant of what very sophisticated people the Department of Defense would like to do. We think there's a lot of elements of logic to what they want to do. We think some things there that we don't agree with. Now not surprisingly, the incumbents don't like that idea because they can't easily do what the Department of Defense wants. But forget the Department of Defense, think of Fortune 500 companies who might have that same need and then now use your imagination.

Yes. So Walter, on the question regarding Fujitsu, what Charlie said was that we're going to hit scale in terms of the delivery of those units next year. We're obviously working very closely with them. We're actually going to take delivery of units before then. But they do support all of our bands and anticipated bands that we have in the future as well. So they're very sophisticated radios. I would consider them sort of on the leading edge in terms of the technology capability within the radio, but they're also an open architecture that allows us to support even CBRS as well as the existing bands we have today. So n66, n70, n71, even n29 and all of the spectrum portfolio we have.

So it's a great radio, but they're not the only radio vendor that we're working with. We are working with other radio vendors. We just haven't announced that at this point in time. And that goes a little bit to the architecture that we've talked about in the white paper with the DoD. We can easily integrate other vendor radios into this architecture as well that allows us to provide those services on those other spectrum blocks as we go forward.

And then the other question, just to add a little bit of color to the slicing. The way we look at it is, a retail customer base is essentially a slice or uses a slice on the network. And we can support whether it's Boost or Ting or any other retail brand, we can support that as a slice on our network in conjunction with other MVNOs or other enterprise customers. So each of them can consume those slices, but we can also allow them to manage and set their own policy and manage that infrastructure as if it was their private network, as Charlie said.

I know it's kind of a touchy-feely question, but I mean, reading books about disruptors. And a lot of times, there's companies that focus on a new niche area that end up driving the cost down because they're competing in a different version and then consumer becomes the offshoot. So I guess that was the question, are you building for a network slicing network? Are you building for a consumer network that network slicing happens to be a part of it? But it sounds like it's the former from what you were just saying.

Exactly, Walter. It's the former. We're building it with the slicing essentially as part of the DNA or the fabric of the network, of which consumer is part of that. That's exactly how to think about it. And that the beauty of this architecture, it allows you to have that level of control all the way from the radio through to any application and any customer segment. So that's where it is a very disruptive architecture compared with most traditional networks and the networks that have been deployed today with other carriers.

So if T-Mobile and Verizon decided that they were going to make that change today and they wanted to switch to something to create a flexible network and they had to evolve the network, how many years do you think it would take them to accomplish that?

Having been through multiple network upgrades and technology transitions, it is a multiyear approach. It's not as simple as flipping a switch. As I say, the architecture goes from the radio all the way through to the application. And then the other point to perhaps highlight is, it doesn't stop at the application. It's also at the OSS/BSS layer. And the choice that we've made around the partners that we have in those layers of the network are equally as important as the radio decision. So the architecture of the OSS and the BSS is really, really critical to us being able to monetize the network and being able to support this capability. So oftentimes that's ignored, but the vendors and the partners we have selected in that space also share our vision of what we're doing as well.

Yes. And Walter, this is Charlie. I think from a disruption point of view, I think the market thinks that disruption is a lower price. And most of what we see in the marketplace today, particularly in terms of disruption is, in fact, marketing, right? My 5G is better than your 5G and my...

The functionality, yes.

Whatever. I think it's more functional. We went there with digital. The disruption for digital was we could launch 100 channels of HD at one time. That we could do an on-screen guide that was interactive. That we could do a DVR that skipped commercials. That was real things because we were digital we could do that you couldn't do in an analog world. And so I think there are things that we will focus on from a consumer or an enterprise that will be disruptive from a feature point of view, but maybe not from the way that most people look at it today.

Charlie, just a quick follow-up on sports. You've obviously proven that you can drop the RSNs, and now everyone is following you. But maybe just you're always so good at kind of thinking about the kind of tectonic plates of the industry. What happens to sports? I mean the sports industry can't survive on 45 million or 55 million subscribers sort of levels where the MVPD universe seems like it's heading pretty fast. Like as you look across, you're building out a broadband business on a mobile broadband business, like what should sports look like? I don't think it works on a purely a la carte basis. So like, what would your advice be if you were sitting at the sports leagues? What type of innovation would you like to see in terms of packaging?

That's probably a little too proper. I don't think sports are dead, and I don't think regional sports are dead. It was so unfortunate that Sinclair didn't own the company when we were negotiating a deal. I think that there were things that could have been done that neither company was able to do. So I'm not as pessimistic about it. I think that things have to change. And I think that they change in terms of new technologies and taking advantage of them and change in terms of features for the consumer, the consumer that they see value in. And I think you're not going to be able probably to get people who never watch sports to pay. I think you've got to change that model.

For us, we had real math when it comes to programming content. We know what the value is to our customers. As we said on many conference calls, the value of regional sports to our customers was the most overrated thing. We have some of those, still have some of that content that our customers are paying too much for. So it wasn't a big risk on our part, but we haven't given up on sports. We think it's part of the ecosystem. We think that some changes around the edges and maybe a fundamental change here or there. And it's a business that's going to be around for a long time. It's got the advantage of being live. It's got the advantage of being interactive. It's got the advantage of passion. And it just needs to be restructured.

The next question comes from John Hodulik from UBS.

Okay. Charlie, just a quick follow-up on the DoD RFI. What do you think are the chances that, that goes forward and that contract becomes a sort of a proof point or maybe an anchor tenant for you? And then I guess, obviously, a lot of questions on network slicing and enterprise and wholesale. I mean, are there other discussions or other RFIs besides this one, this sort of highly public one from the DoD that came out and other discussions? And just trying to get a sense of what the demand is for network slicing or how quickly you think that, that will materialize?

Yes. I don't know the odds on it. I would say the DoD RFI was that, a request for information. Let's see where they go. I do know that the issue is bipartisan, that network security in the United States, particularly if we can involve U.S. vendors. We haven't made radios for 30 or 40 years in the United States. That's a shame that all radios come from outside the United States. So it's a national security issue. It's probably some of the best dollars we can invest as a country. I don't know the DoD needs to be involved, but we'll see where that goes.

Demand for slicing, again, private networks is what I really call it. You can use your imagination, but I guess I'd answer it this way. There isn't a Fortune 500 company CEO that I talk to that their Board of Directors haven't said, what's your 5G strategy? And what they really mean by -- they don't really know what 5G means, but they really mean, how do you use connectivity to improve your business, improve your product to make it safer? And you're going to have to have it. If you're a car company, you've got a private network, you've got an advantage. If you're a retailer, if you have a private network, you have an advantage because you know your sales, you know your security of your parking lots, whatever it is. The use cases are endless.

And first of all, any CEO can call me, I'll take the call. Second, I'll meet them anytime, any place, and our team will. And we'll work with their people to make their business better, right? And we'll be tireless in that effort. And we don't have to get 100% of the profit. We actually share. So we'll see what happens. But we are building something special. And we may fail, but we are building something special.

We'll take the next question. It comes from Jonathan Chaplin from New Street.

Charlie, in the early days, you said that you're not going to start building a network until you knew who you were building it for, that you would ultimately partner up with an anchor tenant that would be the sort of the first user of the network. Is that still the case? And if so, I think initially you had said you needed to get a commercial trial up and running before you sort of selected one of those anchor tenants. Is that something you would do after running a couple of small markets in the beginning of 2021 or is it something that has to wait until later in the year?

The answer is, I don't know the answer to those questions. We clearly will start with -- the Chinese philosopher said, a journey of 1,000 miles starts with a first step. So we'll clearly start with a first step. That was last month when we built our first tower. That was the step. We have consumers on the network today. John is adding customers today on the T-Mobile network but through our Boost facility. So that's a step. And we'll have an anchor tenant. That will be a step.

But we'll have many, many private networks on what we're doing. And I don't know the exact timing on that. All I'd say is, the way that we look at business is, our definition of partnership is, we help somebody make their business better and they help us make our business better. And that is a fun way to do business. You can accomplish great things. It's not just about, we send you a check. It's not always about a zero-sum game.

The thing that's always frustrated me about programming agreements and Erik's business, it's almost always a zero-sum game. A programmer comes in. They want a raise. They want more money. Our customers don't want to pay more money, so we fight for our customers. And you never have the discussion about how you can build a better product for the customer where maybe the programmer can make more money and we can give a better product to our customers. I think we're going to be able to do that in the wireless business and it's kind of a breath of fresh air.

The only reason I say that is, the timing gets muddier in terms of -- we know where we have to be. And if we can't get there with somebody, we'll -- at some point, we know that as we get better and better, more and more companies will take a chance on us because if we're successful, they're in the driver's seat. And now the next guy has got to pry him out of the driver's seat. And so they've got to ask themselves, do they bet on DISH or do they stay in the sidelines and hope like hell we fail. I got a funny feeling that the savvy management teams are going to bet on DISH.

Charlie, a more pertinent question. In a year or 2 when that DIRECTV deal ultimately happens, are you a seller in that transaction or a buyer or are you open to both?

Well, I would say this. I think Erik and team are the best in the business at managing that particular type of business. So I don't know how a transaction takes place. But if it was me, I'd be looking for that DISH management team in some form or fashion. Now, don't let that go to your head, Erik, because I'm going to kick your a** tomorrow, as soon as we're off this call and something happens.

I always appreciate the support, Charlie.

No problem.

The next question comes from Phil Cusick from JPMorgan.

You have talked in the past about how it may make sense for your local compute needs rather than having a real base station to be hosted on another company's edge compute node. Does that still make sense for your initial deployment or is it still more of a long-term goal? And the other is, while I have you, the SPAC you just raised, how does that fit into the DISH strategy overall? And any update on the FCC? You've got a designated entity issue outstanding and we're probably coming to the end of this FCC administration anyway. How should we think about that?

The edge, we don't have Marc on the call because he's in some high-level meetings. But obviously, he's the architect of what we're doing. So he would be the right one. In general, on the edge, it's a place where networks are going to go. There's economics that will drive the timing of that, but there's no question that networks are getting closer, will get closer and closer to the edge and will just be a timing issue as to when the economics grow with it. We're in a very good position to put the network in the edge because we're designing the architecture to do that. We don't have to change anything to do that.

The SPAC is, it's a couple of things that is different than DISH. It's shorter term in nature. So taking a much shorter-term focus than we're -- I have to say, we're 13 years into a 15-year project in wireless. The SPAC would certainly look at things materially shorter than that, certainly less than 5 years' time frame in terms of businesses. We have a front-row seat to where the world is going in connectivity. We think there's a lot of companies that can benefit from that. So the SPAC brings not only capital but brings, I think, brings a strategic awareness that gives us back maybe an advantage over some others that just bring capital. It's likely that the SPAC would look at companies that are peripheral to what DISH and EchoStar do. It is possible that there's some benefit to EchoStar and DISH from the SPAC. But the focus really is the profitability and increasing shareholder value in the SPAC regardless of how it might impact any other organization.

But we know a lot about video. We know a lot about satellites. We're getting pretty dang good on the connectivity side and wireless side, particularly within the 5G world, where we don't have a legacy thought process. That's unusual in a company in the world today. So we think there's a lot of opportunity there.

The FCC, look, the DE thing has been on for a long time. It looks likely that we'll have a change of administration. So that always slows things down, but it would be helpful. The DEs, in terms of the conversations I've had with them, they're ready to go out and start deploying and do things they need certainty. They've been in limbo for 5 years now, and it's a little bit unfair. The courts have said that they get a chance to change the agreement, and I think they're anxious to move forward, and they're excited about what's happened in the 5G.

And obviously, in any business, you'd like to have certainty. Whatever that certainty is, you'd like to have certainty. It's just better than uncertainty. And hopeful, whether it could be this administration, the tail end or the next administration, hopefully, they've come to a decision there.

The next question comes from Kutgun Maral from RBC Capital Markets. We're taking this final question from the analyst community. (Operator Instructions) We will begin the media portion of this call following the answer to this final analyst question.

Two, if I could. First on the Pay-TV side, this TV churn was fairly muted again in the quarter. I realize the pandemic is the primary driver. But trying to look beyond that, are you seeing any discernable benefits from some linear competitive pressure easing, whether it's from the cable companies continuing to de-emphasize video a little bit or perhaps even at DIRECTV? Or is that mostly being offset by heightened competition from all the new streaming services now in the market? And does it mean that churn give you conviction in the ARPU opportunity ahead? And then I have a brief follow-up.

Yes, sure. This is Erik. I'll take that. Look, we've been talking for quite some time on these calls about kind of our strategy and how we look at the Pay-TV landscape, especially as it relates to DISH TV. So I think you're right in your statement about pressures related to COVID. In my opening comments, I talked a bit about the idea that switching has been maybe tapped down just a bit because of the pandemic. And obviously, we're managing that on the acquisition side and making sure that potentially, we're not as aggressive and we're keeping our powder dry there. And we're definitely seeing some of the benefits on the retention side.

There's still lots of competition in rural America, which has really been where our focus has been. We positioned DISH several years back now to really kind of refocus our efforts on high-quality customers that were profitable, that were more rural-based. I think some of you have written about the idea that, that is a proxy for less broadband. But we still see good competition from, obviously, DIRECTV and some of our, maybe you call it, smaller cable companies in rural America. But I think you're seeing a benefit of not only our strategy on the churn side, but also a little bit from the pandemic and switching.

Great. And if I could, I'll just hand it off to my colleague, Jonathan Atkin, for a follow-up.

Yes. On the wireless network side, I guess I might have missed it, but you gave coverage targets for 2022, 2023 in terms of population. What does that translate in terms of cell sites needed to achieve that? And the comments that you made about kind of evaluating the Sprint sites, have they presented you with a complete list or is that an ongoing effort where there's more lists that they'll determine they need to discard and potentially offer up to you?

Yes. So I'll start with the coverage requirement. It's 20% of the pops by June 2022, and that's our FCC commitment. We haven't disclosed exactly how many sites that is, but you can pretty well do the math. And our plans are substantially complete for that. The 70% objective is June 2023. And again, we're well on track to achieve that objective. And that is a minimum of 15,000 sites. That's the guidance we've provided. And we're obviously looking to exceed that objective. So we have a very healthy funnel and pipeline of sites that we can deploy to be able to achieve those objectives.

As it relates to the T-Mobile sites that we're getting visibility of, that is a rolling forecast and where T-Mobile is providing that on a rolling basis. As they look at decommissioning those sites, they're giving us visibility of those sites, and we take that into consideration as we evaluate market by market, site by site. We look at search rings. That is not a prerequisite for our design. We actually do our design. We do our plan independent of that, but then we take it into consideration as we look at candidates for those sites to see if they're a better option than what we otherwise have. So that's the approach that we take.

And then lastly, as you begin the entitlement process that Charlie was talking about, permitting and environmental and municipal, et cetera, do you need to have a lease in place with the tower company or rooftop host at the site or can you do that independently, having not finalized the lease agreement at that particular site?

So what we do is we actually take into account all the candidate sites in a market for all the tower companies and all the rooftops that are available, and that's actually part of our design process to determine whether and how we factor the value of those sites into the design. So there is a process that we go through with respect to the permitting and the zoning. And it varies market by market, locality by locality, but that is a consideration as we do the design. And the site selection is weighted based on whether that's an easy site or a hard site.

Yes. This is Charlie. From a practical point of view, we are entering into master lease agreements with the tower providers. And then we know the context of each. We know the economics of each tower site. Should Stephen come back and say that, that particular tower company site is the best one, we would already have. Under our master lease, we would have the economics of that.

Okay. Operator, let's move to the press, please.

Certainly. We will now take questions from members of the media. (Operator Instructions) Our first media question comes from Scott Moritz from Bloomberg.

Great. Charlie, wanted to get your reaction. T-Mobile, your brand enemy, competitor launched a TV service, online TV service this week that looks a lot like Sling TV, especially in the prices and the selection. Just wondered what you thought of that and how much of a rather competitive threat you might think that is.

Well, obviously, T-Mobile is a competitor of ours, obviously. And their video services is aggressive and competitive. And maybe, obviously, it's one more competitor in an already crowded marketplace. And obviously, they're going deep into rural America, 99% of rural America, 99% of the country for their FCC. So we'll have to be on top of our game to compete. They're obviously knocking the ball out of the park in terms of execution, and their change in management is off to a great start.

So look, I'm beside myself that I get to be in the same -- that we as a company, we get to compete against companies that good and because that makes us better, too. So Erik, you're the one that's got to compete against that particular one.

No, I mean, I think you said it quite well, Charlie. Obviously, it's a very competitive product. It's something that they've been working on a while since they acquired Layer3. We're just looking forward to trying to compete against them.

The next question comes from Amy Maclean from Cablefax.

Yes. I'm afraid I have to ask you the retransmission consent question, but I think the company dispute has been going, the blackout has been going on for about 4 months or so now. And I know there's some other -- the former Northwest stations, too, that has been warning for a while. Are there any talks going on at all there or is this something you're looking really for the court to sort out?

Erik will have a different answer to that. But I would say, in general, when somebody has been down for 3 or 4 months, it's not likely they're coming back. Because what happens is you lose the customer. If there's really somebody who wanted to watch that particular network, they're gone, right? They've gone out and found another. They've put another antenna in place. They found another alternative to find it. They're online finding it. They've gone to Hulu. They've gone somewhere else. They've gone to a competitor. We were willing to pay the price that they offered 4 months ago. We're certainly not going to pay a higher price today than what we offered before because we don't need customers who want to watch it.

So it's the same problem we got with regional sports. I mean, I always tell, but the programmers don't listen. If you come down, you got to get a crowbar to get back up at 4 months. It's unusual that you would go back up unless there's some other prevailing reason why. But a lot of those customers, if they really want the network, we found a way for them to get it. And they sure as heck don't want to pay for it twice. So that's my conversation with programming. But Erik, you have a different take on it maybe.

Charlie, maybe I'll give it just a slightly different spin. And Amy, thanks for the question. I mean, look, Charlie is right. I mean, obviously, that's generally our viewpoint. I'll just talk generally because we're not going to really talk specifically about certain agreements or companies that we may be negotiating with. But look, we're always willing to listen. And generally, look, when a programmer comes down, customers leave and they find alternatives. So when that happens, usually the content is worth less to us than it was before they went down.

But look, we're always going to listen. We'll do what's right by the company, by our customers and by our shareholders so.

And we have real metrics. We know the customers have turned as a result of the takedown. We prefer not to have a takedown. We pay retrans, right? We know what the market price is for retrans. So if somebody is materially higher, that doesn't make sense to us. I mean, we're economic animals. We have real data. There's real science behind it.

I mean, Amy, you're just seeing that there's just a lot more, especially if you're a connected customer, there's a lot more places to get the content. And Charlie alluded to it before, whether it's the programmers with direct-to-consumer offerings that have very similar programming or the same programming or slightly delayed. So those things all have to go into our equation.

And I'm empathetic to the local broadcaster because they're getting squeezed from the networks themselves with reverse retrans and declining viewership. And on the other hand, the marketplace is saying we can't pay more for your channel. And that's where partnership really works, where you look at it and say, how do we both get better, but that's not usually the way broadcasting contracts go or programming contracts go, which is a shame. But I'm very empathetic to the situation they're in. I understand why they're asking, what they're asking. It's just not economic reality.

Is local something you all are looking at or promoting in any way?

Their customers look at it. It's an alternative. We don't have visibility into how they're doing, but we know that customers look at it for some customers. It's our understanding that some customers, that's a choice that they make. Just as we have Netflix and Prime, that application is on our set-top box and customers can click on it and watch it for free. So you can understand the economics of the business have changed. And that's just one case.

But we are active with offering antennas. That we control. That we can go in. We can make that available to customers. For some customers, that's a very attractive option. Just as the law has always been, the broadcasters are required to provide it for free to somebody who puts up an antenna. So there's a limit on what they can charge is all I'd say. But sometimes there's an honest disagreement of what that price should be. And with a couple of people, we're in that honest disagreement stage.

It appears there are no further questions at this time, and that ends our question-and-answer session for today. I'd like to turn the conference over to Tim Messner for closing remarks.

That's it. Everybody, have a great afternoon. We'll see you next quarter.

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