DISH Network - Q3 2022

Transcript

Operator (participant)

Please stand by. Good day, and welcome to the DISH Network Corporation Q3 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Timothy Messner. Please go ahead.

Timothy Messner (SVP and General Counsel)

All right, thanks, Justin. Good morning, everyone. Thanks for joining us. We are joined on the call this morning by Charlie Ergen, our Chairman, W. Erik Carlson, our CEO, Paul Orban, our CFO, and on the wireless side, we have Tom Cullen, our EVP of Corporate Development, John Swieringa, the President and COO of Wireless, and Stephen Bye, EVP and Chief Commercial Officer. Before we start, I need to remind you of our safe harbors. During this call, we make forward-looking statements which are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from the historical results or from our forecasts. We assume no responsibility for updating forward-looking statements. For more information on factors that may affect future results, please refer to our SEC filings. That's it.

We do not have any opening remarks this morning, so operator will open it up to questions, starting with the analysts, please.

Operator (participant)

Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. You'll hear a tone indicating when your line is open. At that point, if you would please state your name and company name. Again, that is star one to signal with questions. We'll go ahead and take the first caller.

David Barden (Head of U.S. Communication Services and Partner)

Hey, guys. It's David Barden from Bank of America. Thanks for taking the questions. Lots to go through today, so I'll let other people kind of touch on a lot of stuff. First would be, could we talk about the spectrum secured bond that's in the market right now? I think I'm most interested in understanding kind of how you think about loan-to-value collateralization and what this exercise will tell us about using spectrum as a funding vehicle on a go-forward basis for the business.

I guess the second thing I'd like to talk about, if Jason's on the line or Charlie, with respect to the SPAC, and the process that you were maybe investigating with respect to the prepaid business sale, I guess I understand that the SPAC is likely to unwind for the most part, based on the shareholder vote on the thirty-first. Is the prepaid business still for sale? If you could kinda describe a little bit about the thought process on why it might be or might not be. Thank you so much.

Charlie Ergen (Co-Founder and Chairman of the Board)

David, this is Charlie. Unfortunately, I'm not gonna be able to answer a lot of what you asked. Those are good questions for legal reasons when you have an offering in the Street. Let me just take a chance to maybe reset some things and then try to address what I can say about the questions that you asked. You know, it was another really good quarter for us in terms of us doing a lot of things in a relatively short period of time.

As we said last quarter, you know, one of our goals was to stabilize the retail wireless business, and while from an EBITDA perspective, we didn't do as well as we'd like to, we needed to stabilize that business and we were successful in doing that in going from instead of losing over 100,000 subscribers each quarter to a very small gain, and that doesn't count the 139,000 customers we got from T-Mobile. That was an important for us to get our process in place to do that. We actually did have a bit unexpectedly some growth in linear TV.

It was certainly led by Sling, but one of the few companies in linear TV, maybe the only company that actually had growth. Importantly to a lot of people in this call, we continued our build out success together with over 10,000 towers now constructed, that can reach over 35% of the population. We're still continuing focused on that, the next milestone is 70%. I think one thing that's not quite understood by everybody is we're building 600 MHz out. It includes all our frequencies when we're building these towers out. We're pretty far down the path on 600 MHz towards the final milestone of 75%, which affects the 600 MHz milestone.

I mean, 600 MHz frequency. We continued on, and we continue on that approximately 1,000-tower pace per month, you know. We've launched Boost Infinite internally, and we still have a lot of operational issues to make sure we're buttoned up on and you only get one chance to do it right for the consumer. For our customers that we've launched internally, it is still a pretty good experience. We've got some work to do, so that's gonna launch. We're poised now to launch that in the first quarter, and John maybe talk about this in a minute, but we're launching that on our own OSS/BSS system.

Today we're on T-Mobile's system, and that's a misunderstanding how important it is to get onto your own system there. Finally, we're in the market. To your question, we're in the market for funding today for the network. It's a $2 billion offering and because that is limited to qualified investors, I can't go into details about that, but it obviously is funding for the network going forward. On the SPAC, can't say a lot about that, but the

The SPAC did have high redemptions, but is still intact, and still a public company and still capable of doing. Nothing's really changed strategically there because in the SPAC world today, you're gonna have to have a pipe, and no matter what you do, you're gonna have to have other secured funding. It may be a different set of shareholders, but there's still opportunity. One of those opportunities that's public is that there have been preliminary discussions with DISH. Let me take the SPAC hat off and talk about DISH. Obviously, one of the things we've talked about is we'd like each sector of our business to be as self-funding as it possibly can be.

DBS obviously has been self-funding. We're in the marketplace for network build to move in that direction. We think that retail wireless is in a unique position to do that as well as we enter the more lucrative postpaid business because it doesn't have any debt, it doesn't have any CapEx, and it's got eight million subscribers. It's a pretty interesting business and one that's got a lot of growth ahead of it. I know I didn't answer everything that you wanted, but that maybe gives you kind of a reset, a big picture.

David Barden (Head of U.S. Communication Services and Partner)

Thanks, Charlie, for that. Appreciate it. We'll take the next question.

John Hodulik (Managing Director and Senior Equity Research Analyst)

Great. Thanks. It's John Hodulik from UBS. I guess just some follows to David's question. First, Charlie, anything you'd say about the Boost sale in terms of timing or the process that we have from here? And then, following up on the comments on Boost Infinite, just any additional details on the timing of the launch, maybe anything you'd say about pricing or distribution or what some of those issues are that you guys are trying to get over to launch on your own OSS and BSS? Great. Thanks.

Charlie Ergen (Co-Founder and Chairman of the Board)

Okay. I'm gonna let John answer Boost Infinite. I didn't quite catch the first part. It was about, is Boost something about Boost for sale or Boost?

John Hodulik (Managing Director and Senior Equity Research Analyst)

Yeah, just the prepaid sale and then the SPAC and just, you know, sort of timing or the process you guys got to go through.

Charlie Ergen (Co-Founder and Chairman of the Board)

No, I guess the press kind of got that one wrong. There's some preliminary discussions between a SPAC and DISH Retail Wireless that would potentially be a sale of a very small portion of the retail wireless business. We think at DISH that retail wireless belongs in what we're doing, right? We think it's not impossible that you could sell a company, but today it would be more likely that you would sell a portion of the company. It certainly wouldn't be limited. The board of directors is gonna look at everything.

Then when they look at retail wireless, they've had some preliminary discussions with the SPAC, but they've also looked at a lot of other things that they could do with retail wireless. It's a pretty clean company, doesn't have huge financing needs, but it certainly has a clean balance sheet and a real business. You know, that's kind of... I think everybody's ahead of their skis on maybe the SPAC discussions. With that, I'll turn it over to John.

John Swieringa (President and COO of Wireless)

Yeah. Hi, John. It's John Swieringa. Regarding Boost Infinite, we've been sharing all along that we, you know, plan to move into postpaid. We wanna move our retail wireless business upmarket. We have gone ahead and launched Boost Infinite here internally. It's a full postpaid business with retail credit qualifications, device financing, full assortment of iconic down to mid-tier devices. You'll see us come out sort of after some of the holiday rush with the competition, and be in market in the first quarter. You'll see us largely focus on a transition initially into digital, and then later you'll see us into national retail and pockets of branded distribution. Big focus on that business here.

We believe that's a great path to building enterprise value for the retail segment. Underpinning that, there has been a lot of work to get our own sort of operational and technology shops in order. We're in the process now of transitioning off of the T-Mobile transition services agreements, not only for Boost, but we're launching Boost Infinite at the same time. As everybody sees, there's a little bit of pressure in the quarter. A lot of that can be attributed to steps we're taking to get Boost Infinite ready to roll, and also the transition activities for Boost Mobile, which are fairly significant.

Charlie Ergen (Co-Founder and Chairman of the Board)

You know, just to add to what John. This is Charlie. You know, I've said this on conference call after conference call, but the wireless business as an outsider, you know, coming in looking at it, the postpaid customer is way more profitable than the prepaid customer, and the prepaid customer is actually getting a much better deal. United States is really the only market that I know of where prepaid is cheaper than postpaid. You know, you can be really good in the prepaid business, you know, as an MVNO, and you're talking about, you know, 10% margins and that kind of thing. Obviously we know in the postpaid business, people are north of 50% margins.

You can get a feel for the investment in postpaid customers. You're gonna get a much better return, and we haven't had that luxury to do that. Competitively, the postpaid business is not nearly as competitive as the prepaid business, and it's not even close. There's just a bigger opportunity there. You know, I wish we could have started six months ago, but we're excited to get going and we're gonna have a great product with great network partners on our own network. We're uniquely positioned for coverage in terms of nobody really could match our coverage as we use multiple networks, and we'll be competitive.

You know, as a new entrant, you're gonna have to be a lower price. A lower price with a better service is a good business. We found that out in DBS, right? We had a better product and we had a lower price, and if you can do both those things, you can be successful.

John Hodulik (Managing Director and Senior Equity Research Analyst)

Great. Thanks, Charlie.

Operator (participant)

Moving on to the next question.

Philip Cusick (Managing Director and Senior Analyst)

Hi, guys. Thanks. It's Philip Cusick. Two things here. One, can you talk about, maybe John, the better prepaid churn in wireless that you saw this quarter? I assume that new handsets you'll be launching on Boost Infinite will all roam to AT&T. What's the path of moving existing subs over to AT&T? Second of all, Charlie, maybe talk about the DIRECTV combination. You've sort of talked about this a couple of times in the past. You've talked about it as being inevitable. Do you think that a political environment will let that go through? With the linear market accelerating to the downside, what are the synergies look like of doing something like that going forward? Thanks very much.

John Swieringa (President and COO of Wireless)

Thanks, Phil. It's John. I'll take the first part. With respect to Boost Infinite, you will see us launch that business as an MVNO with AT&T. You will, however, also start to see Band 70 devices in that portfolio, as well as with Boost Mobile. Certainly we'll be in a position as we launch our network commercially in our deployed cities. You'll start to see us activate a mix of the devices onto our own MNO. That will be the same for Boost Mobile as well. Devices that are fielded, I mean, certainly, as you all know, we have some experience now with network transitions. We feel like we have a pretty good playbook to move our customers across as we feel confident in doing so.

As Charlie pointed out, I'll just double-click on it. Once we're on our MNO, we've got access to three networks, our own Dish 5G network, as well as two partner networks. Obviously, we can do some things there to make sure we're providing a great customer experience and it's also a good setup for us to be competitive. On the prepaid churn part that you asked about, we certainly expected that number to go down a little bit, and it has. Still a very competitive marketplace in prepaid, as Charlie mentioned. We're doing what we can there.

Certainly have a lot of focus on continuing to get the right handsets into our customers' hands, and we're now in the business of doing that with Band n70 devices as we start to sort of preload Band n70 VoNR capable devices into our base. That's gonna be a big effort as we head into 2023.

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah. I think this is Charlie, just to add that there's not a necessity to move those prepaid customers to AT&T. Some will, but that's not a big conversion thing like the CDMA shut off was. The more interesting part is when you move Boost customer prepaid to our network, and then obviously you get owner economics. You know, that's a more logical path in terms of your thinking, 'cause T-Mobile network works great, and people that are on the T-Mobile network are happy, and there's not a need to move them except from economic point of view. That's the biggest economics would be when we have our own network. On the question about DIRECTV, you know, a couple of things.

One, I think politically, obviously there's three parties. I can't speak for anybody else. I've always said I thought it was inevitable. I haven't changed my opinion on that. I do think the political environment when an election's going on, you don't really want to be a political football for somebody to complain about big companies or whatever in an election cycle. But that election cycle is over next week. Then you have a window where I think all companies are looking in M&A. You're probably going to see some increased activity in that sense. You're not really in the political arena from an election point of view for another 15 months or so.

If the timing was right, it would be in the near term, not the longer term. There's still some material synergies. There's significant synergies. I won't go into detail of what we believe those are, but we believe that those are still material. They're not what they were five years ago or two years ago, but they're still material. Certainly in a declining industry, taking advantage of synergies is a rational strategy.

On the political side, in terms of a legal objection to a merger, that's been diminished by time and obviously the degradation of the linear TV business and competition from dozens of companies in the OTT business and the proliferation of broadband today. There's not a home in America today that can't get broadband. Not one if you wanna buy SpaceX, you know, SpaceX or Viasat or Hughes, right? There's not anybody that can't get broadband, and the government spending, I think now up to $80 billion to enhance broadband. They're gonna cover every man, woman, and child with broadband in the next several years unless the government wastes the money.

Philip Cusick (Managing Director and Senior Analyst)

Charlie, can I follow up on the wireless side? Just one thing. Are you able to move a Boost customer with a T-Mobile handset to look at your network, for example, in Vegas, where that exists already? Or is that something we have to wait until you sort of swap those handsets out? Thank you.

Charlie Ergen (Co-Founder and Chairman of the Board)

You could, but you wouldn't have Band n70. The more rational approach would be that particular customer would set at some. You would move them and upgrade them, which you'd have a little bit of cost to do that, but you'd also have the benefit of a long. You would do that for the longer term customers, you would do that with customers that were in an upgrade cycle anyway, and you do that with customers that had Band n70, so that you got O-RAN economics, which would more than pay for the cost to do that. There certainly is a portion of your current customers today that you're just not gonna move. You're gonna lose them from churn, and you're gonna lose them 'cause they don't have any handset that's upgradable.

I don't know, John, did I get that right? I hesitate to-

Philip Cusick (Managing Director and Senior Analyst)

Thanks, Charlie.

John Swieringa (President and COO of Wireless)

Yeah, I think you got it right, Charlie. I mean, there's really two components. There's the spectrum bands and the device, and then in some cases, phones aren't able to operate in 5G standalone.

Charlie Ergen (Co-Founder and Chairman of the Board)

The 5G VoNR was the other piece of it. That would be the reason you wouldn't do it. You know, you can look at, like anything else, the Boost transition is probably a two-year or three-year transition.

Operator (participant)

Our next question will come from Ric Prentiss with Raymond James.

Ric Prentiss (Managing Director and Global Head of Telecommunications Services Research)

Appreciate some of the clarity. Yeah, thanks. Ric Prentiss, Raymond James. Appreciate some of the clarity on the Conx transaction, but just wanna clarify, some of the other folks keep calling it a prepaid. Charlie, you keep referring to it as maybe a portion of retail. Should we assume Boost prepaid and Boost Infinite postpaid would be on the table if you wanted to do something with a portion of retail wireless?

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah, I think you should assume that retail wireless at Boost includes both prepaid and postpaid.

Ric Prentiss (Managing Director and Global Head of Telecommunications Services Research)

Makes sense.

Charlie Ergen (Co-Founder and Chairman of the Board)

Because there's not really that much difference between prepaid and postpaid. One customer has credit, and they get billed post-activation, and a prepaid customer gets billed, usually doesn't pass a qualifying credit, maybe doesn't have a bank account, maybe doesn't have a credit card, and they pay at time of activation. That's the difference. In the marketplace, there's a difference because typically a prepaid customer can get a subsidized phone, doesn't have a contract, doesn't necessarily have a monthly fee on their phone, and really the churn is higher. You know, you guys are smart running net present values on that. That's a lower return on investment customer. It's still a positive return, but a lower return on investment.

You know, incumbents, you see incumbents doing a couple of things. They have extra bandwidth, so they would enter the prepaid business for that group of customers because not every customer has credit, so there's no reason to not play in that field. Now they're doing some stuff with fixed wireless where they actually take excess capacity and compete against cable on the fixed wireless side, right? Both of those are relatively good uses of the network because they've got excess capacity, so if they don't use it, they lose it, but they're not huge returns on investment, I don't believe. I'm not privy to all their fixed wireless stuff, but they're not as big a returns as the postpaid business.

Ric Prentiss (Managing Director and Global Head of Telecommunications Services Research)

Right. That kind of begs the question, retail wireless, will you someday expect to report enterprise wholesale as a business segment? How is that going with what Stephen Bye is working on?

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah. We'll let Stephen answer that. I mean, I think when the segment gets big enough, Paul, you report them as a segment.

Ric Prentiss (Managing Director and Global Head of Telecommunications Services Research)

Yeah.

Charlie Ergen (Co-Founder and Chairman of the Board)

Is that fair?

Ric Prentiss (Managing Director and Global Head of Telecommunications Services Research)

That's fair.

Charlie Ergen (Co-Founder and Chairman of the Board)

I expect it'll get big enough that will happen, but perhaps that's a good opening for Stephen to bring us up to date on enterprise.

Stephen Bye (EVP and Chief Commercial Officer)

Yeah. Thanks, Charlie, and thanks, Rick, for the question. You know, as we talked about in the Analyst Day, you know, we started out with sort of private 5G, and we're sort of evolving that product into a private 5G as a service solution. You know, we talked about the early success we had with DoD. We continue to win more projects and take on more opportunity with the Department of Defense, which are very exciting projects. Unfortunately, I can't go into a lot of detail specifically about those projects, but we're also very active in several other verticals and industry sectors, not the least of which includes hospitality. Given the DISH business from a video side of the business, we are actively engaged with different hotel groups for private networks.

Also industrial manufacturing, we're responding to more and more RFPs in that space. As companies are looking at how do they invest in more sophisticated solutions to take cost out of the, you know, the manufacturing facility and the plant. We're actively engaged in responding to a number of RFPs there, and we're seeing more and more RFP flow coming to us, which is very encouraging. Then we're also active with utilities, and you've seen different stuff being published recently about utilities and their activity in sort of the private space. We see movement there in a very positive direction, and we're actively engaged in those conversations. I think, you know, the point that I would leave you with is we've got some really strong proof points in 2022. We're seeing growing momentum as we step into 2023.

We expect that deal flow to continue to grow, and we're excited about that opportunity. I think on the projects we have won, we're very focused on the execution against those projects. It's very important for us to deliver against those commitments. Execution is key. As we've done on the macro network, we're shifting that focus onto the enterprise side. As it relates to differentiation, you know, this is really not as competitive as other spaces. The point that I wanna get across here is, in order to build these networks, it is absolutely vital to have access to licensed spectrum. You know, we're running into different players in the space who are offering, you know, CBRS solutions using GAA or Wi-Fi.

What we're hearing more and more from customers is that just doesn't cut the grade. They need to access the licensed spectrum, and it's not sufficient to have one band. It's actually very important to have access to a combination of three, five, using PALs, but also low-band spectrum is a vital ingredient with these networks. We're obviously in a very good position with the spectrum portfolio we have today. We talked a little bit about that on Analyst Day, but that also limits sort of the competitive playing field to those who have access to that kind of spectrum. We continue to work with our partners. We have very good partners that are working with us on the technology side, both on the network side, but also in the private 5G space. We talked about Dell and Cisco, JMA.

We work very closely with Hughes as a sister company as we work with the Department of Defense. You know, we continue to work, you know, on those RFPs. It's a good business to be in, and we expect that momentum to pick up as we go into 2023.

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah. It's Charlie, and I know it's a bit frustrating 'cause it's a kind of a new concept for private networks, and it's really. Everybody has a different definition about it, but. Obviously, the sales cycle is a little bit longer, but it's a long-term customer. You're gonna have virtually no churn in it, and it's big contracts, or a lot of them will be big contracts when you win them. It's gonna be a big part of our business.

Our business was designed to be an open wholesale network, where if you're in the private enterprise business and you can think of a need that you have, because we're software-based and we're in the cloud, you can write an API, you can write code that can do that for you, and it's a big differentiator between legacy networks. Having said that, you can argue whether the business is a $30 billion business or a $100 billion business, whatever it is. It's unquestionable that there's really only four companies that can participate in a large degree in the private network business that have spectrum, private spectrum, licensed spectrum portfolios. We think everybody's at the same starting line.

We think the incumbents are gonna get a lot of business there. They're gonna get their fair share of that business. It would be realistic that with a better network and something that's architected, that we have an ability to get 25% of that business. That's gonna be a very profitable business. We get it two ways, right? We get it one way, that where we're the integrator, and that's where we're gonna go to places in rural America where we're strong. We're gonna go to places like in hospitality, where we're strong and already have relationships. Working with our partners, integrator partners, where they may go in and do the integration.

We just may be a network supplier of spectrum, or some connectivity, and that's just a lease of spectrum, so to speak. While the revenue not as high, it's not a lot of work on our part. It monetizes our spectrum in a way that's not visible today, and it's obviously very profitable.

Ric Prentiss (Managing Director and Global Head of Telecommunications Services Research)

Great. Thanks, guys.

Operator (participant)

Our next question will come from Kannan Venkateshwar with Barclays.

Kannan Venkateshwar (Managing Director and Senior Equity Analyst)

Thank you. Charlie, I mean, I think you implied that a part of the wireless business, if you contemplate that transaction, would move to Conx. I want to understand, I mean, is there any constraint under the DOJ consent decree for you to have wireless move completely away in theory outside of DISH and run an independent wholesale business? If that is possible, then why not go down that path and keep a capital light model at DISH versus, you know, a more retail model at another entity?

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah, the DOJ question. I don't know the answer if you could do what you're saying. That really hasn't been contemplated, so I don't know the answer to that. But obviously, the DOJ, there's a consent decree, but everything is everything you would go to everything as whether it was competitive or not competitive in. And a well-financed retail business would be more competitive, people would probably look at that. But the retail business is relatively capital light, so I'm not sure you gain anything by that. But that's, you know, our board looks at that. We got a talented board. We got people that have a lot of experience in this.

All I can say is that strategically, we'd like DBS to fund DBS, we'd like network to fund network, and we'd like retail to fund retail. We think that that's doable. Kannan, just to clarify, in the scenarios that we're looking at, DISH would always retain control of the entity. It would just be looking at vehicles that would attract growth capital into the retail wireless segment.

Kannan Venkateshwar (Managing Director and Senior Equity Analyst)

Got it. I guess.

Charlie Ergen (Co-Founder and Chairman of the Board)

I'm unaware of anybody in the retail wireless segment that's got a debt-free balance sheet like Boost does today. There might be, but I'm unaware.

Kannan Venkateshwar (Managing Director and Senior Equity Analyst)

Yeah. If I could just follow up on the capital question. I guess, you know, you do have the debt issue in the market right now. As the wireless retail business scales, there's probably going to be some working capital needs as well. The degree to which you can scale the wireless business in some ways becomes a function of that working capital, you know, management process. If you could just help us think through, you know, beyond this debt issue, how you're thinking about capital raise cadence, because that in some ways would inform how fast you plan to scale the business as well. Thanks.

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah. I think that's a valid question point, that we went through this with DBS, where we had this great product and a great competitive price, but we had to scale the business. It did take some working capital, not as much as people would have thought, because we were pretty good stewards of capital, and we were able to do some things to lessen those needs. Obviously, in postpaid, the customers are so profitable that you probably wanna grow as fast as you could without just trying to gain market share for the sake of market share. That might take some working capital, but I think a debt-free retail wireless business today is probably capable of raising that capital. Obviously the board of DISH is looking at multiple areas.

The only one that's public is that they had some preliminary discussions with the bank. You can assume that that's not all they would look at.

Kannan Venkateshwar (Managing Director and Senior Equity Analyst)

Good. Thanks, Charlie.

Operator (participant)

Our next question will come from Michael Rollins with Citi.

Michael Rollins (Managing Director)

Thanks, good morning. Two questions if I could. First, you know, back on the network, the 10-Q referenced $2 billion needed to hit the 70% target mid of next year for population coverage. Is that premised on this ongoing 1,000 sites per month ramp, so you'd be ahead of the 15,000 that has also been discussed? Are there some other things in that $2 billion that we should be mindful of? Then just separately, on the video performance, can you talk a little bit about the strength of Sling net adds and if there's a more deliberate effort to try to migrate the satellite subscriptions to streaming over time? Thanks.

Charlie Ergen (Co-Founder and Chairman of the Board)

Eric, you will take Sling. You take Sling, then I'll come back to the network.

W. Erik Carlson (President and CEO)

Gotcha. Yeah, Michael, this is Eric. A couple things there, and we've talked a little bit about it in the past. I mean, obviously, pay TV had a strong quarter driven by some of the seasonality in Sling with you know, college football and NFL. You've seen that kind of year-over-year. I think that we showed up in the right place to take advantage in a disciplined manner of customers that we think not only will be profitable there, but also longer term, right? I mean, it's as you see the OTT landscape, obviously, churn can be spiky and engagement can be spiky.

You know, we have to have a product that meets the customer's needs and keep customers and not invest too much in customers that want kind of a seasonal type product, which, you know, by the way, Sling is very good for to complement other SVOD type services. As we've talked about, you know, over the past many years, on the DISH side, we've really been focused on a more rural profile, a whole home type solution and an older demographic.

Now, where customers have a need, you know, for SVOD or OTT type products, we meet them halfway or all the way there with our Hopper platform in having, you know, apps like Netflix, Amazon and YouTube right in the interface and along with, you know, launching our Android TV product. Your question is a good one, and it's one that we look at, where customers that have a need to transition kind of away from a more traditional linear service into an OTT service. We're obviously opportunistic, you know, with that customer relationship that we have with DISH and how else we can monetize or keep that customer within the overall DISH ecosystem. That could be a Sling product. That could obviously be a Boost Infinite or Boost product.

Obviously, Boost and DISH don't go as well together. You know, you'll see us start to monetize our customer relationships and retain them in a strategic way, hence your question about, you know, a roll off from DISH to Sling.

Charlie Ergen (Co-Founder and Chairman of the Board)

I mean, I think the short answer is there is not a lot of role from Dish to Sling other than adding apps to our platform, which they can do, and then they get it in the guide, and they can search for it and so forth and so on. It becomes a whole home experience for people that wanna add Netflix or Prime to Dish.

W. Erik Carlson (President and CEO)

I think the big difference there, Charlie and Michael, is obviously Sling is very light on broadcast locals. That is, you know, as the viewership on broadcast continues to decline, Sling's a really good choice to match up with, you know, a Peacock or a Paramount, and a Netflix, you know, depending when you need that, if you just need it for a free trial or if you need it for a couple months. I mean, the ins and outs of SVOD and the pay TV ecosystem with OTT are changing. You know, our Dish customers, you know, definitely like broadcast TV. It's one of the reasons they choose Dish, along with kind of, you know, all the additional features and functions that the Hopper platform brings.

Charlie Ergen (Co-Founder and Chairman of the Board)

On the network side, the $2 billion would bring DISH to 70% coverage from a capital expenditure perspective. From a deployment perspective, it would bring us over 70% of deployment to meet our milestone, the next FCC milestone. In addition to that, which we haven't articulated very well, so I'll take an opportunity to do that. Because we're building 600 MHz at the same time, it also gets you. Because we are more urban based, and we actually go into the 80s and 90% coverage in urban areas to meet the 70% population. In fact, as part of that, we go a long way, not all the way, but we go a long way to the 75% 2025 milestone for 600 MHz.

Where we'll be within spitting distance of that milestone, and in many cases way early, maybe even a couple years early on some of those milestones as well. That's a huge positive that we really haven't articulated very well, but that's a huge positive in terms of the build-out schedule. What happens, and you didn't ask this question, but I'll reiterate this one. What happens is you start building, you do what I call success-based capital deployment. Because you have roaming arrangements with two of the big providers, you look at every tower, and when you pay more for roaming than you could have for the owner economics, you would build that tower. To the extent that roaming is less expensive, you wouldn't have to build that tower.

Of course, a great example might be that I think Dave, who's traveling today, gave is a stadium where you might have, you know, 100 customers in the stands that are using it 6x a year or 8x a year. It doesn't make sense to spend tens of millions of dollars to deploy capital in that stadium when the customers can roam. It's just a math exercise. It's a unique position for us, where I think people are gonna get more confident in our total build out of $10 billion, which includes a lot of success-based capital, by the way. The latter half of that is success-based capital.

I think people start to get their arms around that that's a realistic number, where I think people didn't think that was a realistic number early on. We have a lot of advantages in what we're doing. We have to go out and prove it. We have to go out and show it. It'll start showing up in the numbers. It'll start showing up in the margins. You'll start to see those kind of things.

Michael Rollins (Managing Director)

Thanks for all those details.

Operator (participant)

Our next question will come from Craig Moffett with MoffettNathanson.

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah.

Craig Moffett (Partner and Senior Analyst)

Hi. Thank you. Maybe I'd stay with that same line of discussion, Charlie. You know, it sounds like you really are describing a more of a hybrid MVNO/MNO network than a pure MNO network, which is maybe a little different than the way you've described it in the past. How do you think about the amount of traffic with the number of cell sites that you'll have, sort of 10 going to, call it 20, versus, say, a Verizon or the peers that would have 80,000 or so towers? How do you think about the percentage of traffic you think you can send over your own network versus over the MVNO agreement?

How does that sort of shape the product that you're offering, where you talked about some of the advantages of a native O-RAN 5G network that obviously won't be ubiquitous in the hybrid network that you're describing?

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah. We look at it from a financial point of view, right? Just to frame it maybe, 70% of our network gets built, and the last 30% costs as much as the first 70%. It might even be more than that, so it might even be more than double that. A lot of towers are non-profitable for the current incumbents. In other words, that tower never ever even generates enough revenue to pay for the investment in the tower. We don't have to make that investment. While we may roam on their 5G versus our 5G, you're not gonna lose some of the benefits 'cause you're coming back to our core.

Steve, I'm gonna look at Stephen here 'cause he knows this a lot better than I do. You're coming back to our standalone core, and once you're into our core, we kinda control that customer, and we can kinda control that service. For the most part, and there's probably some corner cases where there might be something we wanna do that we can't do when we're roaming. As opposed to our own network, for the most part, we can offer that ubiquitous experience. It, you know, we deal with this every day, and this would take me the rest of the month to explain in detail because we've been looking for years. The economic advantage that DISH has is immense.

Of course, that shows up in ability to pass along some of those savings to the customers, which gets you more competitive. Which, when you look around the world and you see people who have not been in as good a position as we have, they typically get low double-digit kind of market share, which is why we've publicly stated that our goal is to hit 30 million subscribers in retail wireless, which would obviously be well above break even on our CapEx and then our OpEx and everything else that we do in our network. But it's just math. I guess I'd turn the question around. Why would you build 80,000 towers if you didn't have to, why and lose money on 40,000 of them? It doesn't make any sense.

That's why the CapEx is so incredibly expensive for the incumbents. It's not all bad news for the incumbents because obviously, when we ride on their network, they're getting free money for an investment they've already made. It's actually, ironically, in some ways is a good thing. This is just, you know, I personally see when you look at the marketplace, T-Mobile is running away with the market. They're just going 90 mi an hour, and they're running away with things. You know, somebody's correctly pointed out they have a higher market cap than Verizon and AT&T now. They started out, I think they were number four when we first started talking with T-Mobile years ago.

They're now number one, and they're not even close. I mean, they continue to gain momentum in the marketplace. You got two choices in management. You can let them run away with the market, or you got to figure out another way to compete with them. One of the ways that people around the world compete is you start sharing resources, you start sharing CapEx, and you start sharing spectrum. The technology is getting better and better and better to do that. So there's gonna be opportunities for all the players in this market, but there's gonna be good opportunities for us. I mean, you know, that's big, high-level stuff. You know, we run that math there every day.

You're not privy to our agreement, so it's difficult for you to run that math, but you'll see it in the results over time.

John Swieringa (President and COO of Wireless)

Operator, we'll take one more question from the analyst community.

Operator (participant)

Thank you. We will now take our final question from the analyst community. Members of the media on the call, please press star one now to enter the queue to ask a question. We will begin the media portion of this call following the answer to this final analyst question. We'll go to Jonathan Chaplin with New Street.

Jonathan Chaplin (Managing Partner and Lead US Communications Services Analyst)

Thanks. Thanks for taking my question, guys. Since it's the last one, I'll make it an easy one. Do you still need to do funding at DBS to meet the March 2023 maturity? Or will you have enough cash flow between now and then at DBS to meet that maturity? Or is there the potential for some of the funding that you're doing at network to go down to DBS to pay off some of the intercompany loan there? Then just a quick one for John. I'm wondering if you can help us size the EBITDA impact at Boost that you'd sort of characterize as one time associated with the transitioning to the new BSS off of the TSA. Thanks.

Charlie Ergen (Co-Founder and Chairman of the Board)

You want to take that one first, John?

John Swieringa (President and COO of Wireless)

Yeah, I'll take that one first. We've had our share of, sort of large, headwinds since buying Boost. The big one in front of us now is migrating off of all the legacy T-Mobile and Sprint systems. There's a few hundred people working on that. You know, I think each month it's, you know, somewhere between $5 million-$10 million a month of incremental drag right now, just based upon funding that program, which will take us through middle of next year. We'll have sort of our own singular platform from which we can operate all of our retail wireless businesses. In a funny way, it really kind of pays for itself, because we'll be able to jettison more higher-priced transition services.

It's a good use of our dollars to do it, but there is a bit of a short-term impact.

Charlie Ergen (Co-Founder and Chairman of the Board)

The bottom line, Jonathan, is we're paying twice for services today. Obviously, one is for our own that we're building and one for somebody that we're using. We get speed and flexibility and ability to wholesale to anybody on our network through our OSS, BSS, which we just don't have through T-Mobile or AT&T. On your other question, we don't, with the funding in the marketplace today, we would not need to raise additional capital at DBS. Right? You never know what the marketplace will offer. You never know if there's opportunistic, but we wouldn't necessarily need to do that.

Jonathan Chaplin (Managing Partner and Lead US Communications Services Analyst)

Charlie, is that because there's enough cash flow at DBS?

Charlie Ergen (Co-Founder and Chairman of the Board)

I'll point out that's a little bit different. When you read the 10-Q, it's a little bit different 'cause we wrote the 10-Q as of, you know, as of the end of the quarter, which we didn't have an offering in the marketplace. That's a little bit confusing, so your question's well taken.

Jonathan Chaplin (Managing Partner and Lead US Communications Services Analyst)

Charlie, is it because you'll have enough cash flow at DBS to pay off the $1.5, or because you'd use some of this and push it down to DBS?

Charlie Ergen (Co-Founder and Chairman of the Board)

We have enough cash at DBS.

Jonathan Chaplin (Managing Partner and Lead US Communications Services Analyst)

Yeah.

Charlie Ergen (Co-Founder and Chairman of the Board)

Assuming we're not funding.

Jonathan Chaplin (Managing Partner and Lead US Communications Services Analyst)

Got it.

Charlie Ergen (Co-Founder and Chairman of the Board)

the network out of it, which is what, you know, obviously we've told the street would be our preference.

Jonathan Chaplin (Managing Partner and Lead US Communications Services Analyst)

Got it. That's great. Yes. Thanks, Charlie. I really appreciate it.

Operator (participant)

Thank you. We will now take questions from members of the media. Again, if you are a member of the media and would like to ask a question, please press star one now to enter the queue to ask a question. We'll go to Scott Moritz with Bloomberg.

Scott Moritz (News Reporter)

Great. Charlie, question. I wanted to just check in with you on the network build-out. When you first announced the opportunity, it was, you know, this first mover advantage. You'd have a cloud-based, low latency, kind of 5G network. Since then, we've seen the incumbents come in with kind of their plan, cloud-based, virtual RAN, all those things. I'm just curious, does this still have an edge that it used to have? Has the opportunity changed since then?

Stephen Bye (EVP and Chief Commercial Officer)

Yes. Scott, this is Stephen. I'll respond first. I think, you know, they may put some say, paint on the outside of the house, but it's still fundamentally not a cloud native 5G network. You know, we don't have any of the legacy infrastructure that they have. I like to sort of draw an analogy. It's like adding an extension to the house and calling it sort of a 5G network, but it's really, you're still stuck with the rest of the house. What we have is unique. It is the only cloud native 5G open network that has been deployed at this scale anywhere in the world. There are a lot of capabilities that we have with that infrastructure.

The other thing which I would add is, as it relates to sort of the OSS/BSS, while we don't talk a lot about that, what we have is a next generation OSS/BSS system. We're not bringing the legacy of those systems along with us. We had the opportunity to rebuild that. In fact, that's the platform that we're moving our retail business to. As Charlie alluded to, in his earlier remarks, it also allows us to be able to bring enterprise and wholesale customers through that stack onto the network. We're already exposing APIs within that platform, through the cloud, that allow enterprises to be able to build applications into that space.

Yeah, you know, while the other guys who we're competing with are talking about it, we actually have built it and it's actually operational, and now we're sort of optimizing that and scaling it up. We still have what we believe is a significant advantage from an architecture perspective, and I think it'll be some time that we maintain that advantage.

Operator (participant)

Our next question will come from John Celentano with Inside Towers.

John Celentano (Analyst)

Thanks for taking the question. I saw an entry on the 10-Q referring to a cost item called third-party integration. Can you elaborate on that a little bit? What is that, and who are the third-party integrators that are involved?

Charlie Ergen (Co-Founder and Chairman of the Board)

I'm looking at it. We gotta be more specific about that. Where in the queue are you seeing that?

John Celentano (Analyst)

It was listed as a cost item.

Charlie Ergen (Co-Founder and Chairman of the Board)

Cost side, third-party integrators? Both on the revenue side and the cost side, obviously. But you'd have to read that paragraph to us. I don't know the answer to that off the top of my head.

John Celentano (Analyst)

I think the reference was to the 5G build.

Stephen Bye (EVP and Chief Commercial Officer)

Maybe I'll just add some color. I mean, we work with a number of different partners as we put this infrastructure together, but, you know, we've often been asked, like, who is the systems integrator? It's DISH. We are considered as the uber integrator of this infrastructure, but we do work with a lot of different third parties that essentially subcontract us to us, that are each responsible for their domain expertise. Overall, we're the systems integrator. There is an-

Charlie Ergen (Co-Founder and Chairman of the Board)

I don't know that we answered your question, so.

Stephen Bye (EVP and Chief Commercial Officer)

Yeah, we'll get back to you.

Charlie Ergen (Co-Founder and Chairman of the Board)

We'll get back to you 'cause I don't think we answered your question right. That's the first time I've been stumped.

John Celentano (Analyst)

Exactly.

Charlie Ergen (Co-Founder and Chairman of the Board)

on a question.

John Celentano (Analyst)

I'm honored. Well, thanks. I look forward to your response.

Charlie Ergen (Co-Founder and Chairman of the Board)

Yeah. All right. Operator, I think that's the last one in queue. Thank you everyone for joining us, and we'll talk to you again next quarter.

Operator (participant)

Well, thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.