EchoStar - Q2 2023

Transcript

Operator (participant)

Good day. Thank you for standing by. Welcome to the EchoStar Transaction Announcement webcast presentation. At this time, all participants are on a listen-only mode. This conference will also have a user-driven web slide presentation. Feel free to navigate through the slides by clicking on the Next button. After the speakers' presentations, there will be a question-and-answer session. To ask a question during that session, you will need to press star one one on your phone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Tim Messner. Sir, please go ahead.

Tim Messner (EVP and General Counsel)

All right. Thanks, Chris. Thanks, Chris. Good morning, everyone, and thanks for joining us. In light of today's joint transaction announcement, in lieu of the EchoStar earnings call that was originally scheduled during this time slot, we're instead going to focus on discussing the transaction, and we will generally not be taking questions on either EchoStar's or DISH's quarterly results. To that end, we're joined on the call today by Hamid Akhavan, the President and CEO of EchoStar, Charlie Ergen, the Executive Chairman of both DISH Network and EchoStar, John Swieringa, the President and Chief Operating Officer of DISH, Paul Gaski, the Chief Operating Officer of EchoStar, Tom Cullen, the EVP of Corporate Development at DISH, Paul Orban, EVP and CFO at DISH, Dean Manson, Chief Legal Officer of EchoStar, and Jeff Boggs, the SVP of Finance at EchoStar.

Before we start, I need to remind you of the company's safe harbors. During this call, DISH and EchoStar may make forward-looking statements which are subject to risks, uncertainties, and other factors that could cause their actual results to differ materially from historical results or from their forecasts. DISH and EchoStar assume no responsibility for updating forward-looking statements. For more information on factors that may affect future results, please refer to the company's respective SEC filings. Just to let you know, you can replay today's call as well as the prepared remarks and supplementary slide deck on the EchoStar and DISH Investor Relations websites following the call. As a reminder, the presentation is self-driven, so click Next on your own to advance through the slides.

At the conclusion of the prepared remarks, we expect to take calls, first questions from the analysts, followed by questions from the media. That's it. With that, I think I'll turn it over to Charlie Ergen to take over the presentation. Go ahead, Charlie.

Charlie Ergen (Chairman of the Board)

Thank you, Tim, and good morning. Thanks for joining us. It's an exciting day for both EchoStar and DISH. This morning, we announced DISH and EchoStar have entered into a definitive agreement to combine in an all-stock merger. You know, the combined company will be well-positioned to deliver a broad set of communication and content distribution capabilities. We're bringing together two trailblazers with complementary portfolios to create a scaled operator with a premier portfolio of wireless, satellite, and video distribution assets. At its core, this transaction is about growth and building long-term, sustainable business. This is a logical next step for both companies to realize the potential of the combined portfolio.

Today, I'll provide a bit of an overview of the transaction and the reasons we're excited about the merger, and then I'll hand it over to Hamid Akhavan, who will provide more detail on the strategic fit, operational synergies, and financials. Let's turn to page three, which is Slide One, but it's on page three. Let me start by outlining why this is strategically compelling and financially attractive combination. First, this transaction creates a scaled operator with premier capabilities across wireless, satellite, and video distribution, including global reach. We'll enhance our scale by combining customer bases, and together we have a diversified portfolio for approximately 18 million subscribers. They're all in a little bit different buckets in our companies, and we combine those all together.

With, with obviously, with, with more modern technology and databases, we have an ability to, to be more efficient at, at, at serving those customers and growing those customers. Additionally, by integrating DISH Spectrum with EchoStar's technology capabilities, technological capabilities, we'll have the ability to amplify the 5G private network. In other words, what we're really what we're able to do is combine satellite communication and terrestrial communications all within a 5G cloud-native platform. Beyond the strategic benefits, there's also it's also attractive it's also an attractive financial combination. The slide's, it's a little bit clear, but we expect to generate to ramp to $150 million of clear, achievable EBITDA annually, right?

The slide's a little bit unclear, but that's annual, based on a ramp of synergies that will create a more robust capital structure and provide financial flexibility to position the company for growth and value creation. Let's, let's move to page four. Let me take you through some of the elements of this trend, of this slide. The transaction, transaction structure is an all-stock merger at a fixed exchange ratio. The combination was negotiated and recommended by special committees and independent directors of both companies and unanimously approved by both boards of directors. At close, as outlined in the slide, EchoStar shareholders will receive 2.85 shares of DISH Class A common stock for each Class A, Class C, or Class D common stock, and 2.85 shares of Class B common stock for each share of each EchoStar Class B common stock.

The exchange ratio represents a premium of 12.9% to EchoStar shareholders, as implied by the unaffected 30-day volume-weighted average closing price of the two companies on July 5th, 2023, the last full trading day prior to media speculation about a potential transaction. The majority shareholder group, which is approximately 90% and 93% of the combined voting powers of DISH and EchoStar, respectively, has approved adoption of the merger agreement and the issuance of DISH Network common stock required for the transaction via written consent. No further action by DISH or EchoStar shareholders is required to approve this transaction. Post-close, existing DISH shareholders will own approximately 69%, and existing EchoStar shareholders will own approximately 31% of the combined company. Let's look at what the leadership will look like.

I will continue to serve as Executive Chairman. Hamid Akhavan will be President and CEO of the combined company. To say a little bit about Hamid, he's got 25 years in telco experience, of which 10 of those years was running Deutsche Telekom European operations as the CEO. He's also a unique individual in that he not only understands technology as an engineer, but he also has a lot of experience in the private equity world, with seven years in private equity. Of course, most recently has been CEO and President CEO of EchoStar. He brings a rare combination of financial ability and engineering and technical ability, as well as management.

I couldn't be more pleased to work with, with Hamid, and I've enjoyed working with him and, with EchoStar, but even more excited to, to work with him on the, on the total combination. John Swieringa, President and COO of DISH Wireless, will be President of Technology Group and also Chief Operating Officer of the combined company. John is, is uniquely qualified, really, as, as a former COO of, of DISH, to bring those assets together and make them function in a bit more, synergistic way, for the benefit of all of our customer base. Erik Carlson will continue to serve as President and Chief Executive Officer of DISH until closing of the transaction, at which time he will depart the business. Certainly, Eric has been a valuable part of our company for the last 28 years.

He's part of what everything that is good is about DISH. He started at the lowest level of the company and grew to the top of the company over his career. He's gonna make a great CEO for somebody out there, and we'll be rooting for him. We're sorry to lose him, but we also want our people to. Our alumni to be successful, and Eric's certainly going to be. We'll have more announcements about the broader management team in the coming weeks. Hamid and I will serve on an 11-member board, along with three EchoStar directors and six other DISH directors. The combined company will be headquartered in Englewood, Colorado, while maintaining its presence in Maryland, primarily with our Hughes Corporation assets.

We expect the transition to close in the fourth quarter, and of course, it is, of course, subject to regulatory approvals and customary closing conditions. With that, I'd like to now turn the call over to Hamid, and he'll share some more about why we think this is such an exciting time for both DISH and EchoStar.

Hamid Akhavan (President and CEO)

Thanks, Charlie. We are thrilled about this combination and believe this is a win-win for the shareholders and other stakeholders of both companies. Moving to Slide Five, this clearly highlights what we, what the combined company will look like. We'll be a truly scaled operator with a wide and diverse set of connectivity capabilities. We'll go to market worldwide with a portfolio of leading brands and consumers know and trust at a scale of capabilities that is premier in the industry. From cable, to internet, to mobile and cellular service, our consumer connectivity business will serve roughly 18 million total subscribers across our combined offerings. For enterprise and government customers, our complementary market-leading services and systems will support 570,000 sites in 43 countries around the world.

DISH's O-RAN 5G broadband network, America's first, leverages more than 16,000 sites to cover 246 million Americans. DISH has also invested more than $30 billion in its strategic spectrum assets in the U.S. and abroad. By leveraging EchoStar's technical and engineering capabilities together, we will be able to unlock significant value from this established foundation to effectively capitalize on the 5G private network opportunity. On Slide Six, we show how this transaction will result in a combined company with a diversified and a strengthened portfolio of connectivity businesses. Not only will our scale be enhanced, but our portfolio of assets will be more diverse and even stronger together. This will put us in a best position to effectively capture significant growth opportunities ahead, as you can see by looking at the combined chart on the right.

Turning to Slide Seven, we believe this transaction will create a scaled consumer connectivity leader focused on the value we'll bring to consumers. One of the reasons this transaction makes sense is to ensure we are better positioned to meet the needs of consumers in a connectivity landscape that is rapidly changing. From unconnected individuals in the most rural and remote regions of the world, to the constantly evolving networks of private enterprises and government institutions, things are shifting quickly. DISH's pay TV service has a high-quality customer base of 8.9 million subscribers that benefit from our optimized content cost and innovative technology and equipment, which have earned us the number one rating in customer satisfaction across the country. For retail wireless, DISH's a smart 5G network, offers nationwide coverage with value and price leadership and leading online retail relationships.

These are complemented by EchoStar's satellite broadband service. The number one satellite ISP, EchoStar's offering, is bolstered by Jupiter-3 capacity and low latency technology to provide customers with a high-speed, seamless online experience. Together, these assets are the basis of consumer connectivity business that delivers the highest quality service at accessible price points to all of our subscribers. On Slide Eight, I would like to discuss the greater 5G private network opportunity. This is a significant component of the revenue synergies that we expect to extract from the combination of these two companies. By bringing together DISH's enormously valuable portfolio of nationwide spectrum built for private networks and EchoStar's decades of network experience and deep history of SD-WAN site management, we will be able to provide a more attractive, higher quality offering to capitalize on the significant 5G private network opportunity.

This is a big area of opportunity for us. Turning to Slide Nine, if we think about what we have done to get here, it's important to recognize that both DISH and EchoStar have already made significant investments that will position the combined company for future growth. DISH has deployed its 5G network to cover more than 70% of the United States market, with the rest covered through long-term roaming relationships. Full commercializing and subscriber leading of the DISH Network is also currently underway. On the EchoStar front, we have now successfully launched the Jupiter-3 satellite, a key milestone for us, and there is significant available capacity for service to converge. Importantly, DISH's substantial past investments in its spectrum and its wireless build-out, combined with EchoStar's recent launch of Jupiter-3, will significantly reduce near-term CapEx requirements, which in turn will increase free cash flow generation.

Indeed, we believe we can accomplish our goals, our growth plans, with approximately $2 billion of cumulative CapEx in 2024, 2025, which is well below current Street estimates. Moving to Slide 10, one of the attractive elements of this combination is the synergies we can generate. The cost and revenue synergies from this transaction are clear and achievable and will drive significant shareholder value. Through rationalization and optimization of expenses, we'll be able to realize $75 million in run rate, OpEx and CapEx synergies, 75% of which we expect to achieve within the next two years. We're also targeting $275 million in revenue synergies that would result in incremental $80 million in EBITDA by 2027, driven by executing opportunities in our combined 5G satellite broadband private network, expanded government services, and additional sales opportunities from EchoStar enterprise relationships.

We also see a potential significant opportunity to license or build, build out EchoStar's S-band globally. That was not modeled in our estimate of potential synergies. Altogether, we expect approximately $150 million of EBITDA synergies that will accelerate growth, enhance free cash flow generation, and create value for our shareholders. Next, on Slide 11, this transaction will result in a combined company with a stronger balance sheet and enhanced liquidity, and we have a clear plan in place to fund our growth objectively. With the efficiencies in CapEx spend that we discussed earlier, coupled with the significant cost synergies, we expect our free cash flow generation capability to strengthen meaningfully. The combined company also benefits from significant funding capacity. Most notably, DISH's unencumbered spectrum has a market value of more than $35 billion, as estimated by an array of Wall Street research analysts.

This spectrum portfolio can support an additional $10 billion or more in financing capacity. In conjunction with additional potential sources of liquidity, combining will strengthen our capital structure to position the company for sustainable growth moving forward. Lastly, on Slide 12, in summary, this is an incredibly exciting milestone for both DISH and EchoStar. This benefits not only our investors, but also our stakeholders, from employees to customers to partners. As a combined company, we'll offer a broad suite of robust connectivity services using a superior portfolio of technology, spectrum, engineering, manufacturing, and network management expertise. This is all about growth and building a long-term sustainable business. We are enthusiastic about what we will be able to achieve as a combined company in the near future. With that, we'll now open the call for Q&A.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star one, one on your phone and wait for your name to be announced. To withdraw your question, please press star one, one again. Once again, we will be taking questions from analysts first, and later we will be taking questions from the media. Stand by as we compile the Q&A roster. One moment, please, for our first question. Our first question will come from Ric Prentiss of Raymond James Financial. Your line is open.

Ric Prentiss (Managing Director)

Thanks. Good morning, everybody. You've been busy. We.

Hamid Akhavan (President and CEO)

Just, just, just a normal day for us.

Ric Prentiss (Managing Director)

I think we've lived a year this last week. The recombination stock deal makes sense to us, yin and yang combination. I want to focus on a couple of areas. Hamid, you mentioned on Slide Nine that cumulative CapEx in 2024-2025 of $2 billion, that's definitely well below the Street. Help us understand. I assume that excludes capitalized interest. Does that include CDE equipment for, like, success-based stuff? How does that reflect the June 2025 75% build-out coverage requirement from the merger?

Hamid Akhavan (President and CEO)

Start with it, man. Yeah, that does not include the CP. Obviously, the growth CapEx is not included in there in the sense that any CapEx that you spend for acquiring new customers obviously is, is a success-based CapEx that we appreciate, but that's not included. It does not include the capitalized interest, but it does include the plan build-out. I think there, maybe I'll refer to Charlie here in terms of the plans for the DISH's wireless capital. I can say that Jupiter-3. We have paid for the satellite in full. There is really isn't anything else we need to pay. We will pay, incur some CapEx for, you know, a subscriber equipment, you know, but the scale of that CapEx relative to the $2 billion is a very small number.

Charlie, perhaps you can comment on the, the DISH Wireless side.

Charlie Ergen (Chairman of the Board)

Yeah, on the DISH Wireless side, it, it, it, we have a number of opportunities and, and, and potential on all of our buildouts, but it does include what we expect at the lowest level of what it would take for us to, to reach our milestones, continuing milestones with the FCC.

Ric Prentiss (Managing Director)

Okay, second question, Slide 11, you talk about unencumbered spectrum. Can you update us a little bit on the T-Mobile spectrum option? I think T-Mobile mentioned that's been extended by the DOJ, maybe to a decision by August 11th. Is that reflected in here, or what should we think about the current status of that option?

Charlie Ergen (Chairman of the Board)

Yeah, this is Charlie. The option is still in place, we still. As, as Mike at T-Mobile, we're in negotiations about the transaction there. We wouldn't in any way leverage DISH's balance sheet for a transaction of that magnitude, given our. We do think that the spectrum's important. We don't think there's a hard date at this point of, I forget the date you said. You know, I think both sides are hopefully negotiating in good faith, and we'll see where that goes. From an investor point of view, it would, it would if we're able to construct a transaction, it'd be positive, and it won't, it won't affect Echo's, I mean, DISH's balance sheet.

Ric Prentiss (Managing Director)

Makes sense. One more quick one for me. You talk about 5G private networks being stronger with the combined company. I'm surprised you haven't done more with fixed wireless. That product's doing very well for T-Mobile and Verizon. It works great when you have spare capacity. Update us maybe on your thoughts about where fixed wireless fits in the stacking of using the DISH spectrum and wireless network, because it sure seems like some easy revenues to pick up, particularly selling into the pay TV base that you have at DISH.

Charlie Ergen (Chairman of the Board)

It's Charlie, it's a fair point. I might have John talk about fixed wireless and, and, and that potential since he's been working on that. I'd say in general, we're a connectivity company. We think fixed wireless is, is, is part of what we do, whether it be from satellite, whether that be from terrestrial. We, one of the potentials out there is the 12 GHz spectrum that we own, which is, which we own about, I think, the vast majority of the top markets in the United States, and that's 500 MHz of 12 GHz. That's another way to approach it. The FCC is analyzing that.

They've decided that it, that it's not, at this point, it's not, available because of interference, for mobile, but they've indicated that they're reviewing it for fixed wireless. That would, that would be a, a, a big benefit to consumers and, and certainly a very robust spectrum that in, in many ways is more efficient than, than the mobility side of it. John, maybe you talk about, because I know you've looked at that.

John Swieringa (President and COO)

Yeah. Hi, it's John. Good morning, everybody. On the fixed wireless side, obviously, we're keeping an eye on what the competition's doing. It's about sequencing for us. You know, we've got our macro network deployment now with our low band and mid-band spectrum. Our, our uplink position's a little different than some of the incumbents. We'd like to see new technology like carrier aggregation on the uplink come to market. We expect to see that soon, we'll be in the field doing trials and different things. Obviously, we, we have a lot on our plate with getting the retail business rolling, fixed wireless is on the development roadmap with no

Ric Prentiss (Managing Director)

Great.

John Swieringa (President and COO)

No firm plan on launch.

Charlie Ergen (Chairman of the Board)

Yeah. I mean, I would say I would say, John, today, the network today is capable of doing fixed wireless, similar to way, to way some, some of our competition does it. It will be it'll obviously, for us, be an economic model, and as you said, if you got available bandwidth, you can, you can make a case for that.

Ric Prentiss (Managing Director)

Great. Thanks a lot. Thanks for having the call today.

Operator (participant)

Thank you. One moment, please, for our next question. Our next question will come from David Barden of Bank of America. Your line is open.

David Barden (Managing Director)

Hey, guys. Thank you so much for taking the questions. I guess, Charlie, I have to ask you the first one. Obviously, I'm sure you've been busy, but U.S. Cellular looking at strategic options, could you elaborate a little bit on your thoughts about pros and cons of what U.S. Cellular would, you know, represent as a legacy mobile player, but maybe as an opportunity to get, you know, further down the path on your 75% coverage buildout? Then the second question, I guess, John, the Amazon relationship. You know, this is something we've been talking about for years and years and years. Can you elaborate a little bit on what's special about this relationship between Amazon, DISH, if, if anything, or that'd be really helpful. Thank you.

Charlie Ergen (Chairman of the Board)

Tom, do you want to take U.S. Cellular?

Tom Cullen (EVP of Corporate Development)

Well, you know, the, the notion that they're pursuing strategic alternatives just surfaced on Friday, so there, there's not a lot of information in the market yet as to the process. Clearly, you know, they have towers, they have spectrum, and, and they operate in geographies that we haven't fully built out. It'd be something that we'd be interested in looking at.

Hamid Akhavan (President and CEO)

Yeah, Charlie, I would just say that certainly, the extent that U.S. Cellular were to sell some of their assets, that's, that's a positive. Almost under, you know, most scenarios, that's an opportunity and a positive for where we're trying to go. Obviously, you never know. Yeah, there's a lot of regulatory issues and so forth. There's probably not those issues for us, but even might even be issues for us. John, you want to take Amazon?

John Swieringa (President and COO)

Yeah, sure. Look, on the Amazon front, we've made some progress. You know, we certainly hope that they're viewing it as some increased confidence in us and our route to market with postpaid as well as our prepaid offerings. It's a bit different than a normal retail relationship. Certainly, we run our core network on AWS, so as we load customers, there's benefits for Amazon, sort of as we enter a growth cycle. It's early days. We hope to be able to expand the relationship, but we know we're going to have to show success and momentum to make that happen. Probably nothing else to say on that right now, other than we are in market with Infinite.

Charlie Ergen (Chairman of the Board)

Yeah, I would say one thing, big picture, and not specific to your question, but when you, when you think about where the world's going, data becomes more and more important, and particularly with the advent of artificial intelligence. Artificial intelligence is not any good if you don't have data, and data is no good if you can't analyze the data. That leads you to. I have to give Marc Rouanne a lot of credit because he's been talking a bit about this for three years when he architected our network, in the sense that he knew that we had to be cloud native, we had to run the network in the cloud. There was a lot of skepticism about, you know, our ability to do that.

To Amazon's credit, they've spent an inordinate amount of resources to, to, to make that happen. One of the dividends, and there's many, but one of the dividends is that our, our data is going to be in the cloud, where you can now automate, analyze, and, and do things that perhaps others can't. With the advent of our, our satellite network coming together, a lot of our satellite data will follow that same path. We're where the puck is going, and from an architecture point of view, obviously, we have to, to execute. Artificial intelligence is, is starting to take off in a, in a, in a path that's faster than we thought.

People probably overestimate the short-term benefits there, but that, and probably underestimate the long-term benefits, as people say. We're well positioned to take advantage of the growth in data usage and, and, and, the, the need for, for that data so that you can automate and make artificial intelligence do things that it otherwise wouldn't do. I'm talking, I'm talking about stuff well beyond things like ChatGPT.

David Barden (Managing Director)

Thank you so much, Charlie. Really appreciate it. If I could just do one quick follow-up, and I apologize. You know, Mike Sievert at T-Mobile said that your relationship would end, I think as Ric said, on August 11th, which is in a couple of days. In your regulatory filings, you said August 30th, and then in your remarks just a little bit ago, you kind of said there might not really be an end date. We all remember how the DOJ kind of got all up in your grill about the MVNO change with T-Mobile and slowed things down there. Could you kind of just be crystal clear about what the timeline and, and how, how this plan could, could look on the 800 MHz auction? Thank you so much.

Charlie Ergen (Chairman of the Board)

I would say it this way: I think as long as the parties are negotiating, I think, I think things will remain open. If, if there's a, if there's a path, if, if it becomes clear to one, one, one or both of the parties that there's not, then I think. You know, I think that, that, that those negotiations would cease. You know, so I think August 11th, I know, is not a date. All I can tell you is, I know August 11th is not a date. I can't tell you whether August 12th will become a date or August 30th. I, I just don't know. I can only say that the negotiations, there are negotiations going on at the highest levels between the companies, and, and, and neither company has come to a resolution on that.

David Barden (Managing Director)

Right. Thanks, Charlie.

Operator (participant)

Thank you. One moment, please, for our next question. Our next question will come from Walter Piecyk of Lightshed. Your line is open.

Walter Piecyk (General Partner)

Thanks. Can we go back to the CapEx? I think, historically, you said it's going to take $10 billion. It might have even been in the 10-Q. I mean, assuming you don't really jack the CapEx in, in the second half of 2023, you'll probably end, like, at $6 billion in aggregate. With that outlook for $2 billion in 2024, 2025, that gets you to $8 billion. Are you just, is it, is it lower to build than the $10 billion that you initially expected, or is there something else we need to think about there?

Charlie Ergen (Chairman of the Board)

Yeah, Walt, it, you know, based on our projections, I would say that we, that we think we can do it. Again, some of that will be I guess there's two ways I look at it. One is, there's the FCC commitments, and one is, how do you have the robust network to compete against your compete against the incumbents? There's the bare bone. You know, obviously, we've, it's not the network we have today that we built out for 73% of the population is certainly a robust network. We have a cost for more rural areas. Then, there you have kind of two thoughts.

One is, given our capital constraints, right, which is what we're showing you in the model, to meet our FCC obligations, that's, that's in that $8 billion kind of range, I guess. In reality, with success, obviously, we go beyond that. So I, I still internally still work with that $10 billion number. Internally because, but we're not gonna, you know, you only can do what you can do, and we're not gonna stretch the balance sheet to do that if, if that's not the right business plan. You know, but internally, I would say that, that, you know, and I think people are very skeptical of that $10 billion number when we, when we put that out there three years ago.

People just didn't understand with the, with the greenfield, with an O-RAN network, just how much, how much less expensive that is to, to build and operate.

Walter Piecyk (General Partner)

At a minimum, you can hit that, the, the next deadline with, what is now an eight number, in your mind?

Charlie Ergen (Chairman of the Board)

Well, I mean, I'd say it this way: We, we have worked with the FCC to, to, to hit our milestones. I would have preferred to be able to build our network out a little differently without the kind of 70% milestone. We did have to we spent, as you know, close to $1 billion in IoT that, that we had to throw away based on FCC requirements. We probably would have built our network at a more regional basis, and but it would have been a little bit more robust, and it would have been on in market sooner, had we been able to do it on a regional basis versus a national population basis.

But these are things that, that, you know, were negotiated with the FCC and, and there's, there's the practical business world, and there's the, the regulatory world, and sometimes those aren't, aren't as practical as we would like as business people. Look, we don't get credit for it. Maybe we made it look a little easier than it was, but to, in 1,000 days, to build a network to 73% of the population, from scratch, credit to Dave Mayo and his team. We had, we had, we had zero deployment employees 1,000 days ago, and it was hard enough, but then you throw in COVID, where, where, where people couldn't even come into work, and then you the supply chain problems that that created.

We, we spent a little bit more money to, you know, quite a bit more money to make sure we had supply and, and, and paid extra money to get things done. Our team had to work extraordinarily hard and come to work every day in a world that that, that was, was not the norm. It's quite the accomplishment. It should give investors a lot of confidence that this company can execute at a high level because very few companies could have probably done what, what this team did.

Walter Piecyk (General Partner)

If you're at 73 again, then this incremental lower number isn't implying that there's some change in what your expectations of the FCC, that you'll get that incremental 200 basis points or whatever it is, with this number?

Charlie Ergen (Chairman of the Board)

Well, I look, I can only say that I've I would say it this way: I think that in general, the FCC has an obligation for things in the public interest, right? I think you.

Walter Piecyk (General Partner)

Yep.

Charlie Ergen (Chairman of the Board)

I think it's pretty clear that, that this administration would love to see four nationwide competitors. We're certainly going to bring innovation to it. We're going to bring innovation and competition. I think the background of all that's good, right? Hopefully, we want to just build the best network we possibly can that serves the public interest, and we have whatever requirements we have. We think we, we, we've, we've put out there where we think how we get there, and I think we can build on that and, and do it a little bit better. That might take some conversations on how we might do it better. If they don't, if, if the public interest is just to do what we said we're gonna do, then we're gonna do that.

I would hope the public interest is to go beyond that and bring a little bit more innovation to the marketplace. That, that's normal, right? Every company does that. All telcos do that. The FCC uses their judgment as to what's in the public interest and makes changes accordingly.

Walter Piecyk (General Partner)

On the Slide 11, you talk about in terms of sources of cash, you know, you reference levering up DBS more. I don't, I don't see anything here about levering up effectively what is at SAT. I mean, SAT has free cash flow, but can you lever that effective subsidiary up as well for cash for the wireless business, or no?

Charlie Ergen (Chairman of the Board)

Yeah, I, I think it'd be a mistake, Walt, to try to get into all the details of our capital structure and where. The fact, the overwhelming thing is, I think the only thing that give investors confidence is that as we looked at putting these companies together, the special committees and financial advisors, they did stress test the companies, and they did stress and they looked at all those details, right? They came, my understanding, they came to the conclusion that this company passes that stress test. That should give investors a bit more confidence than we probably see in the street today.

There were, in that analysis, there are any number of options for the combined companies to continue to operate, to generate cash flow, and if need be, generate investment capital.

Walter Piecyk (General Partner)

All right, let me just give you one last one, because, you know, you mentioned to Faber about this S-band on a global basis, and LEOs was, I think, your next sentence. You know, maybe you could either describe the cost of SAT to launch a LEO constellation to take advantage of the S-band, or maybe comment on, does that have strategic value to Kuiper? Just to ask it directly, are other people out there that are that are, you know, in the process or maybe changing or altering their, their LEO constellations? How, how do you, how do you view that S-band getting deployed? Strategically as a partnership, or through an incremental funding via SAT?

Hamid Akhavan (President and CEO)

This is Hamid Akhavan. I'll take this question. First, I want to say that one of the key reasons we brought these companies together was to bring all of that spectrum and spectrum rights in one hand. One of the, in fact, the only assets in this picture of having direct to device is, that is lacking, that is strategic, is a spectrum ownership. Because without that, nothing else can be done. We are very happy that this is now in one hand, under one capital roof. Now as to what we're designing, we're in the stage of designing right now, and there's a number of options, you know, based on we're tweaking this and designing this as we work with the market. This is an ecosystem development.

This is not just build the satellites. Building the satellites is probably the, the simpler, candidly, a part of the equation. The harder part of the equation is how do you bring how, how do you bring telco into it? you know, marrying this satellite network to over 500 networks around the world, carriers around the world, how do you, you know, create roaming relationships with them? how, how do you meet the regulatory requirement, the landing rights? all of that requires partnerships. I, one piece of answer to your question is we're working in partnerships, and we are in the process of, you know, developing and enhancing those partnerships. Those partnerships also help us, you know, finalize the design.

We are in that stage, and clearly, one part of one aspect of that is the funding, which, I think there's a significant amount of demand for a system, given, you know, all the projections out there. You know, funding will ultimately be the, you know, the final stage of this when we, we have the partnerships put together. Our contribution at, at a minimum, includes a vast amount of value through the spectrum assets and engineering and resources that we bring to the table. In time, we'll disclose more information on that. Just for now, we, we're very happy that we are on that journey, and we're not far enough yet to be able to disclose any financials to the market.

Charlie Ergen (Chairman of the Board)

Yeah, while you, just to give you more color, let me kind of backtrack, take one step back. When you look at putting the companies together, my thought process in that, obviously, there are other thought processes, but mine was when you put the companies together, are there opportunities that we couldn't do separately, that we could do together, you know? Are there operating synergies between the companies? Will our stakeholders benefit? That's our consumers, our shareholders, and our employees. The final part is there just a big idea out there that keeps your company going for the next 50 years, you know, that you wouldn't otherwise do?

Part of that big idea part really is combining the spectrum assets in, in one band, S-band, combining those together, which we couldn't do separately, and then taking advantage of the 5G standards, which now have a satellite-to-handset standard, right? A satellite-to-device standard with Red Cap and other things, is put yourself in a position to do that. With DISH having North American spectrum and EchoStar having the rest of the world, that, to me, is a much easier path than trying to do different frequencies in every country from satellite. We know enough about satellites to know that's a difficult project, and it adds a lot of cost and interference that you have to then mitigate. It's a much tougher problem.

When you have the same frequency around the world, it's much easier for your modem manufacturers, handset manufacturers, and your, and your operators, who don't have to give their spectrum up. And then in the backdrop of that is, obviously, from a financial point of view, we have spectrum and technology and network management. Still gonna be needing a lot of capital, and as you know, having seen you at our last Jupiter satellite launch, it, you know, you're four, you're three, four years away from any kind of project like this in terms of operations, so you need capital. On the revert, and Hamid, you need, having worked in that, in the industry with the operators around the world, all operators are looking for extra revenue.

They're looking for how they can get to make their product unique to their customers. In theory, that there's no subscriber acquisition cost for satellite to handset because customers already paid. There's no additional cost for that. You combine all that together, and you can certainly formulate a strategy where you'd say, DISH, with this combination, will be in a unique position to take advantage of potentially that. That doesn't mean that, that we're funding this thing. It just means it enhances the value of what we have, what we have. If there's a desire on the parts of operators and handset manufacturers and chip manufacturers and government entities and so forth, then we have it all together in a unique way that nobody else in the world does.

While we think there's a lot of different ways, and you see a lot of different things in the marketplace of doing it, based on what we know, and Hamid said it right, it is, it is, it is difficult to combine satellite and telco together. Our open architecture that we, that we designed, was designed for, to put a satellite component into it. We, we've thought about this a long time. I just think we're well positioned. It, we're better off today together than we were before in terms of pursuing any opportunities there. It's, you know, it's a long way off, and it is not in our model. If you're an investor looking out at five years, you might be interested, you know.

If you're here today for quarter-to-quarter, it, you know, it's just not in our model.

Walter Piecyk (General Partner)

Got it. Thank you.

Operator (participant)

Thank you. Again, one moment please, for our next question. Our next question will come from Kannan Venkateshwar of Barclays. Your line is open.

Kannan Venkateshwar (Managing Director of U.S. Media, Cable, and Telecom Equity Research)

Thank you. Charlie, from a capital perspective, you know, obviously, this enhances liquidity, which you should take care of maturities as they come up over the course of the next year or so. I think earlier in the year, you had mentioned potentially tapping the hybrid markets to deal with the maturities of the converts next year. Is that still part of the part of the alternatives you're considering? Is there any other equity issuance we should expect? Then beyond that, looking longer term, you know, when we look at the quarter, the wireless business was not great, just from a quarterly performance perspective.

Is there any capital needs that you foresee for the wireless business beyond just CapEx, to maybe accelerate the growth in this business or, you know, increase your spend on marketing or handsets, going forward? Any color on that would be very helpful as well. Thanks.

Charlie Ergen (Chairman of the Board)

So, so good questions. The, the, the, the one on, on, on, the first question, I think, again, we have a lot of opportunities and options. I think all I can say is we're, we're better off financially today than we were yesterday in a as a joint company, but, but we still have wood to chop, right? And, and we're cognizant of that. And I think you will see us as we, as we, as we move along this journey, you'll see us, continue to, to, to show you how we're going to fund this company and its development. On the retail wireless side, again, the, the paradigm shift for us is, is, is our ability now to move into, to, post-pay and put people on our own network. That's a big, that's a big paradigm shift from a financial point of view.

To the extent that that's going well, we will need success-based capital to grow that business for sure, but that'll be success-based capital, and that's a little bit different than having to, to build out whether you, you know, that's, that's a little different than building out a network where you're not sure whether you're going to be successful or not. I, I could take a follow-up or something if that wasn't clear.

Kannan Venkateshwar (Managing Director of U.S. Media, Cable, and Telecom Equity Research)

Yeah, I, I guess just as a follow-up, I mean, is there any, any sense of scale you could give us in terms of how much capital you plan to put behind scaling the business beyond just CapEx?

Charlie Ergen (Chairman of the Board)

Again, the way I look at it, the way we look at it, I think, is that, that if we're, if we're being successful and we're putting $1 out and we're getting a $2 return, we're going to go as fast as we can, and we think there's a plenty of appetite for companies that can turn $1 into $2. If we're putting $1 out and get $0.90 back, you know, we're going to go pretty slow. I mean, I think, I think that we're economic animals. I think we've been good stewards of capital, and I think we've, you know, we've, we've. All I can say, we've, we've invested in the future, and we invest in the future in a big way.

You, you can't not pay attention to the future. I think we'll be rewarded if we execute, which I think we will, then we're going to be rewarded for that because that investment is gonna pay dividends. We didn't invest in Spectrum because we thought it was a bad investment. We invested because we think it's a good investment. It's a limited resource, and it does something special. It connects people and things. Therefore, we think that's a great investment, and we just have to go execute and get a return on that investment. We haven't done that yet because it's taken longer than we thought to do that.

Contrast that with a company that might just, you might just, you know, take your cash flow and bleed it out and, take, take the fixed, fixed telephone line business, right? That's great that you can, that you can pay a dividend and, and do that, but, but you're not ready for the future. Investors, they have to make their choices to which company they want to invest in. I've chosen personally to invest in this company and invest in the future.

Kannan Venkateshwar (Managing Director of U.S. Media, Cable, and Telecom Equity Research)

All right. Thank you, Charlie.

Operator (participant)

Thank you. One moment, please, for our next question. Our next question will come from Brett Feldman of Goldman Sachs. Your line is open.

Brett Feldman (Managing Director)

Thanks for taking the question. You know, Charlie, as you're aware, over the last several weeks, there's been a lot of speculation in the media about conversations you were having with potential financial partners and potential strategic partners. Obviously, this story ended up being true. What can you share about the process that actually led, the DISH process that ultimately led to this combination? You know, what, what else may have been out there? You know, why do you believe that this i- is the best next step for DISH to take as you execute your business plan? And then, is that process still ongoing?

You know, should we anticipate that you are actively looking to maybe bring in another financial partner, another strategic partner, or is this going to be the focus over the, the near to medium term, getting this, this deal right? Thank you.

Charlie Ergen (Chairman of the Board)

Yeah, Brett, I, I, I think I tried to answer that when I really went through my thought process. Again, obviously, other people of our, of our board and other thing had other, other thought process and other reasons, and, and maybe Hamid could speak from his process. It really was, can we, you know, it's really, can we do things together that we couldn't do? When, when Hamid and I were at a satellite show, you know, and, and we, and we're talking with a lot of people who, who were very interested in satellite to, to ground communications, and, and we, we, we started exploring how, how we might do that separately. We just couldn't get, between the companies, we just couldn't get the economics.

We couldn't make that work, and then, so then we started looking at if we put the companies together, we knew we could do something that- between satellite and ground terrestrial, and it started getting bigger and bigger and bigger. I'll give you an example. May- maybe I'll turn it to Hamid on that one, but talk about enterprise business and how those go together.

Hamid Akhavan (President and CEO)

Yeah. We did from EchoStar for the past year and a half, for the past, at least, first year of my work at EchoStar, M&A was a key topic. I wanted to diversify the business through M&A, had a good balance sheet, had the ability to execute. Had a deep scan of the market, you know, again, with a view to, to, to, you know, acquire a scaled business that was synergistic with what we had. Candidly, there was nothing in the market that excited me that would give me either a good value, good value creation possibility, or a diversification that I was looking for. You know, you know, we give you a bunch of examples of how these two companies now have achieved that.

I think ultimately our special committee of the board looked at all those opportunities and then decided that this opportunity was the most value-enhancing, given all the strategic angles. Charlie already expanded on the direct-to-satellite. I won't beat that one to death, but it's it is a, the next holy grail of communication, which, you know, essentially allows every person on Earth to always be connected, whether on the top of Mount Everest, in the middle of the oceans, or middle of New York City with the same quality. I think that that that's a game changer that we we we we activate with this merger. Also on the enterprise business. We have a $400 million enterprise business at EchoStar Hughes. It's highly, highly prized with respect to the quality of the customers we have.

In combination, with DISH's resources, we actually demonstrated a private 5G for the government in Whidbey Island. This is, you know, a Navy base that we, we were handed to, to make the most modern 5G Open RAN environment and fully turnkey service manage it. Spectrum from DISH, resources for core from DISH and managed services, SD-WAN, satellite connectivity, and a bunch of other capabilities from EchoStar. This was a showcase for the government that we are hoping, and we already have. Well, we already received a second base to work on. You know, we are hoping that this is a, you know, foundation for many enterprise 5G and government 5G deployments. Long way of saying, I think we have our hands full with what we have already in terms of M&A.

I think we have enough assets that just in-house material can give us, you know, feed us growth for a long time to come. If there's anything, you know, strategic out there that would even take us further, we certainly would look at it. I mean, there's no reason why not, why not to look at that.

Brett Feldman (Managing Director)

Thank you for that color.

Operator (participant)

Thank you. One moment, please, for our next question. Our next question will come from the line of John Hodulik of UBS. Your line is open.

John Hodulik (Telecom and Cable Analyst)

Great. Thanks, guys. Just, I guess, coming back to this, this spectrum question, you guys have about, by our math, about 150 MHz of mobile wireless spectrum, sort of on average per market, and then all the higher, higher frequency stuff. I mean, Charlie, I mean, obviously, a lot of focus on the 800 MHz option. I mean, obviously, the wireless business is nascent, and you've got, you know, you're building a tremendous amount of capacity. Why so much focus on adding to that pile of spectrum? And if so, sort of, you know, where does it fit within your portfolio? Just trying to get a sense for. Again, you guys are, to a certain extent, some financially constrained.

It just sort of stands out to me that it seems strange that you would look to add to that pile given how much capacity and spectrum you have at this point. Thanks.

Charlie Ergen (Chairman of the Board)

Yeah, I mean, I think you have to look at the total ecosystem. Our competitors obviously have almost twice as much spectrum as we do. There's applications in the front of the FCC today, where, where, where perhaps they want to add to that, that kind of spectrum. Then you have to understand the characteristics of spectrum with 800 MHz, and obviously, low-band spectrum, at least from a coverage perspective, is important, right? That certainly keeps your cost of build-out down in a big way, right? If you when you, when you look at, at spectrum and build-out cost, you have to put those together and analyze those together. 800 MHz is a, is a unique low-band frequency that, that, that we have already built out in our network.

In other words, it's in all our radios that we have in the marketplace, so there's not an incremental build-out cost for it. To the extent that we could negotiate something with T-Mobile for the purchase that doesn't stretch our balance, that doesn't affect our balance sheet, that would make some sense. Whether that could be a deal consummated, that's another story. There's a lot of logic behind why we think it's important for us to compete.

John Hodulik (Telecom and Cable Analyst)

Got it. That makes sense. Is there any part of the-

Charlie Ergen (Chairman of the Board)

The other part of it, strategically, we just wouldn't go to it on a call in terms of, you know, all the other reasons we think it's important.

John Hodulik (Telecom and Cable Analyst)

Got it. Is there any portion of your portfolio that you would consider non-core? Like, frankly, it's small, but the 700 MHz sort of stands out. Any other sort of pieces that you would consider sort of selling?

Charlie Ergen (Chairman of the Board)

Yeah, I think you're on the edge of a very good question, right? That there are in spectrum, there are trade-offs. To the extent that you might get a piece of spectrum that might make some other piece of spectrum less important. So I think it's for all operators, it's always a continual game of how do you, get your spectrum into the, you know, to adjacent spectrum where you can carry aggregate, where look, match low band with high band, mid band. So you see a lot of transactions where people are doing that, and they should do that. So, that's why you can't look at any transaction in isolation.

There's usually a, a method to somebody's madness and why they do it because it affects other things. Ultimately, people do that because their network's more efficient to save some capital and get some better competitive position. I'd go a step farther. I think, I think what you're seeing around the world and other things, I think a rational thing is, is with all the CapEx that we, that we see in, in telco and the tremendous amount of money that was paid for C-band Spectrum, as an example, you've got to start looking at, at network sharing. The technology has advanced so far that network sharing is another way for incumbents and new entrants to reduce costs.

That's a whole other thing we could spend 1 hour on as to why that you might see some of those things, things happen in the future. I guess for us, for us, we're, we're in the, we're in the arena every day with this, and so it's, it's, it's. I've always found it frustrating to have a 30-second soundbite to explain what we're doing. Because it, most, most every conversation is, is an, is an, is a one-hour-long conversation to explain it. Right? You know, we will do a better job of it, boy, but it's just really hard to spend 15 years studying telco, and me, it's 25 years in it, and try to explain that on an hourly conference call.

John Hodulik (Telecom and Cable Analyst)

Makes sense. Thanks, Charlie.

Operator (participant)

Thank you. One moment, please, for our next question. Our next question will come from the line of Michael Rollins of Citi. Your line is open.

Michael Rollins (Managing Director)

Thanks, and good morning. Maybe going back to the, to the 5G network build, you know, with all the, the spectrum bands that you were just describing, what's the experience that customers should expect today on the DISH Network? How that might change by the time you get through your goals for 2025? Within that context, is there an expectation for the amount of traffic that's on net for DISH versus off net for DISH?

John Swieringa (President and COO)

It's, John. How's it going, Michael? Thanks for the question. We've, we've talked in previous DISH quarterly calls about where we are with our commercial VoNR deployment. The team is really on a roll with this. You know, we're, we're past 75 million pops now covered with commercial VoNR. In those markets, majority of the traffic is carried by our network. We do have some constraints around compatible handsets. We've spoken before about going to market with, Samsung, and Motorola devices, that carry our unique spectrum bands, that are able to operate in 5G standalone with VoNR. We've also talked about the expansion of that handset portfolio going into next year. We, we, we have the right handset and chipset partners to really have a full portfolio of, competitive devices, for retail.

So far, it's going pretty well with respect to the performance of the handsets on the network. Obviously, we're working at those metrics every single day, and we're really bullish about being able to load customers on the network as we go forward and expand to sort of full pop coverage, within our 70%+ footprint, going into early next year.

Charlie Ergen (Chairman of the Board)

This is Charlie. I'll expand on that. The short answer is that the customers should expect our network to work as good as any, the other, the three main national carriers today, their networks all work very well, right? It's, I'm amazed at how well they work, given how complex they are. It's a great achievement for them, and our network needs to work as well as those, so that they wouldn't notice the difference. On the margin, voice over new radio or VoNR, the 5G voice, it's on the margin, a little better. So maybe on the voice side, there's, there's, there's an opportunity for more efficiency and a slightly better quality.

Having said that, I think the long term, and the way we look at it, is what can you do with a modern O-RAN cloud native network? What are we gonna be able to do in the future that, that perhaps other operators won't be able to do? That's where you'll see the differentiation. There's not any question that as a fourth player with a, a, a fraction of the customer base that, that our competitors have, we have to ultimately differentiate, and in our network and have to be unique in some ways. The architecture and the way we're structured, you know, we think there's gonna be ways to do that. You know, that's a 2024, 2025, 2026 kind of thing where you'll see that. It's no different, and we've been through this.

It's, it's deja vu for me, but when we did satellite television, how did we have to differentiate from cable? We had to differentiate from that experience, right? We did simple things like interactive guide. Automatically, you know, the 30-second skip ahead for commercials. Parental lockout that was, that was robust, so customers could control what their kids watched, right? We did very simple things, but it was a better experience. And so, and so customers preferred the experience with, with, with DISH over, over cable. That's what we have to do here again, and we think there's ways to do that.

Michael Rollins (Managing Director)

In the slide deck, you referred to, you know, some of the synergies through 2027. As you're looking at the merged company through that year, can you give us an update on, on how investors should expect financial contributions between going after that retail consumer market? that you started to target, including in postpaid. The business and private market, where you provided some thoughts on the opportunity and the wholesale market, where you might sell to other providers that use your network for their own purposes, whatever it is.

Charlie Ergen (Chairman of the Board)

Well, I think we're designed to have our cake and eat it, too. We're designed primarily as a wholesale network. We have our own OSS/BSS. It's available for other people to ride on our network. It certainly is helpful for a network where we're not utilizing all the capacity we have, so it's designed for wholesale. Whether we have wholesale customers or not, you know, you'll have to stay tuned, but it's designed for wholesale. As part of that wholesale network, Boost, our own brand, is a customer of that wholesale network, and John is responsible for that network. For a private network or an enterprise customer, they also would utilize that network. They may have some other SD-RAN and other things that maybe Ameen could talk about in conjunction, and they may have a satellite overlay.

It's one of the things we're finding out, that as we talk to customers on the satellite side, they're asking for terrestrial coverage, right? You can imagine an airline that says, I want connectivity to my airplane, but my biggest problem is when I get, when I get around the major airport, I have congestion 'cause I got 300 planes that are circling and no satellite coverage can, can take care of that. Well, we can solve that problem terrestrially for, for the airlines so they can, so that they can uniquely cover their customers while they're in the air, but they also can cover their customers when they're on the ground and when they're circling, circling. There's a lot of things that go together. You, you want to add something to that, Hamid?

Hamid Akhavan (President and CEO)

No, I think that's. The synergies you talked about is primarily in the enterprise side, the growth. The revenue synergies come from. I gave an example. A key example was the Whidbey Island, which has been good, you know, foundation for us, bringing in, you know, the terrestrial, the satellite, and also beyond that, just the managed services of a company use. We have, you know, dozens and dozens of leading global brands as our customers, and very satisfied customers, names that are very notable. Just recently won a 10,000 location for, you know, U.S. post offices. Many of these, many of these customers are able and interested to have their own private network.

Some of the, you know, energy, gas and oil companies, you know, that we are currently providing satellite connectivity, they're looking to move to 5G. They're like, moving to terrestrial and maybe even satellite 5G. We have a foot in the door. We have a long-standing relationship with those customers, and I think that the next path of evolution in their connectivity and our offering is to, you know, bring dishes, 5G, terrestrial 5G to them on a private way. That's primarily where the synergies are, and I think obviously, we try to be conservative.

We know that market is nascent and developing, but nobody's in a better position than DISH and EchoStar, given what DISH has created so far with their completely cloud-based 5G network, which can be sliced and delivered to enterprises without any legacy encumbrances.

Michael Rollins (Managing Director)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question will come from Craig Moffett of MoffettNathanson. Your line is open.

Craig Moffett (Partner and Senior Analyst)

Hi, thank you. Charlie, I think you can tell a lot of us are very focused and interested in this $2 billion CapEx guidance for between now and 2025. Can you just remind us, what is the measurement standard for successfully meeting the FCC's requirement for coverage of each of the individual licenses? I believe it's a drive test. What does the CapEx between now and then look like? Is it primarily small cells? Can you just sort of put some meat on the bones for us as to what you think needs to be done in order to satisfy the next tier of FCC requirements for coverage?

Charlie Ergen (Chairman of the Board)

Yeah. Thank you, Craig. First of all, I think the CapEx are 2024 and 2025. We still have CapEx, and again, I think we've talked about redu you know, our CapEx will, now that we've got 73%, there is a bit of a tail into the, into the next quarter, but obviously, that, that CapEx will, for the rest of the year, will be at, at a much lower run rate. Having said that, I would, I would look at it, the specific drive test that we have with the FCC is to show that we have, I believe it's, and I'm looking at Tommy, 35 Mb downlink to our customers on an average basis, right?

The current network build that we have will then be the, the an independent third party will go verify that. We're highly confident that we go well beyond that, and we've learned a lot. The, the, the thing I think maybe the streets got a little bit wrong is that, that in the 600 MHz, where we have which is only the big remaining part of what we have to do and to get to 75% of some smaller markets that we haven't built out yet, that, that spectrum propagates very far. If you're not burdened, our network today is designed to not really take advantage of all the propagation of 600 MHz because we also have 2 GHz spectrum, so we have to balance those two together.

If you're just doing 600 MHz, obviously, you can expand much farther. You have a base build that says, here's the FCC qualifications. It's probably not as robust as you would like for consumers, but it meets your FCC qualifications. That's kind of one end of the goalpost. The other end of the goalpost is, I'm gonna build this thing so robust that it's as good or better than my competition. That's another end of the goalpost. What you're seeing in our model is the left-hand side of the goalpost, is this is what we need to do to make sure that we meet our requirements, right? If when you think about the $10 billion, you know, we're gonna be much more robust and go farther.

And there's a number of ways of, of doing things and a number of way of doing things in between that. I, I think, I think that the takeaway, Craig, is that, that, the, that we can modulate our capital. We have some degree of flexibility to modulate our capital expenditures based on how well we're doing in execution.

Craig Moffett (Partner and Senior Analyst)

Complemented by the MVNOs.

Charlie Ergen (Chairman of the Board)

You know, we're fortunate we have good partners in AT&T Mobile as well, but that's a cost to us, of course. Obviously, when you can build it yourself and operate it yourself cheaper than you pay somebody else, that makes a lot of sense. If, if, if you don't have enough customers where that makes sense, you're better off sharing your network with them in an MVNO agreement. We've kind of got a lot of, of levers to pull, and I think that's. We haven't done a good again, it's so hard to communicate this, and I know for you to build a model, we've made it difficult for you, but I think that we just have more flexibility than people think. I think with this transaction, we've added more, we've added more flexibility.

By no means are we done, or by no means have we solved all our capital constraints. We've shown one more thing to the market, that we're moving in that direction, and we're also saying that we have other opportunities to, to increase our financial flexibility. One thing's for sure, the marketplace opportunity is, is, is now bigger than it was before, and, you know, I think, you know, it's up to us to take advantage of that and to, you know, not, and to execute, and we've proven in the past 42 years we can execute. Maybe one more question?

Hamid Akhavan (President and CEO)

Operator, yeah, one more question.

Operator (participant)

Thank you. All right. We will now take our final question from the analyst community. Members of the media on the call, please press star one one 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. One moment. Our final analyst question will come from the line of Chris Quilty of Quilty Space. Your line is open.

Chris Quilty (Co-CEO and President)

Thanks. A question for Hamid. kind of repeating a question that Walt asked earlier. Last quarter, you announced you were gonna build a several hundred satellite, 5G-capable constellation using the C-band. Is that project still on, or is it a victim of, sorry, EchoStar- Dish's needs, in terms of cutting CapEx costs?

Hamid Akhavan (President and CEO)

Chris, we have always announced. I want to make sure that this is not misstated. We have always announced that a wide-band satellite system would have, you know, satellites in the number that, that's north of 100, in the hundreds. We never said that we are yet in the process of actually building that. We are in the design and engineering phase of that. That is still is the case. That is still the case. We're not changing that plan.

Even as a standalone company, we had to, and we would, we need to develop the ecosystem and including the finance ecosystem, because building a satellite system like that, it's it's an undertaking that requires participation from all aspects of the industry, from device manufacturers, carriers, and chipset manufacturers. You know, there's a it's a, it's a, it's a very large undertaking, and clearly, the funding and capital structure of that requires participation from outside of the company, and that hasn't changed. We will continue to look at that, and we'll, when we get to the phase of funding, we'll, we'll talk about the financial aspect of it further. Yes, we as Charlie, you know, mentioned at the beginning, you know, this is one of the reasons we brought the companies together.

We're not, we're not abandoning by any means, the, the S-band opportunity.

Chris Quilty (Co-CEO and President)

Okay. I, I guess the question is, I mean, I'm, I'm thinking of this from the EchoStar side. I mean, that was kind of the real juice to the story in terms of actually putting, you know, some of your spectrum and capabilities to use. You've got competitors that are moving quick in direct-to-device. Short of building that capability, I'm, I mean, at least from the EchoStar side, I, I'm at a loss to understand, you know, where the operating synergies are between the two companies. Can you maybe explain that?

Hamid Akhavan (President and CEO)

Yeah. Remember, Chris, that one of the biggest holes we had in building at EchoStar was that we did not have North American spectrum. The North American spectrum, it's the without North American spectrum, you really the business case doesn't work. I mean, everybody has looked at it. We have looked at it. It does not work. Much of the value comes from the coverage of North America, and also, you know, ties to, you know, having the ability to serve large enterprises and military and others that, you know, North America is very important to. This gets us, this solves that problem in a space. I would say, by no means, our ability to execute and get to what we had been planning at EchoStar gets reduced here.

I would, as I said, there's a still, as we had planned and continue to plan here, a need for additional external funding, and we will bring that. There's so much to, to do here and so much value to be created that I think that, that is still will take care of itself when we get closer to it.

Chris Quilty (Co-CEO and President)

Yeah, but I, I mean, at the end of the day, there's plenty of examples of spectrum sharing or, or purchasing spectrum. I mean, you've got a pristine balance sheet, and had you wanted to acquire a spectrum or, or, you know, enter an arrangement so that you could, you know, go globally, I mean, theoretically, EchoStar could act on that now with your balance sheet instead of waiting, I don't know, five years for the combined company to get their balance sheet together.

Hamid Akhavan (President and CEO)

No, Chris, that is not accurate. I want to make sure that that's, I've said that correctly. There is only two pieces of the spectrum that is authorized for MSS over U.S. and Canada. There's one piece of S-band that belongs to DISH, and one piece of L-band that belongs to Ligado. Those are the only two pieces of the spectrum that can talk to the satellite and are authorized for MSS, and actually, the standards 5G-3GPP standards support. There is no other spectrum. None of the carrier spectrum today can do that.

By the way, if you get the carrier spectrum, let's assume you got the, you know, regulation behind you and the NPRM that the FCC has put out there, and, you know, you went through all of that, you end up with a spectrum hodgepodge around the world in every geography. Let's say, you know, you have a piece of the spectrum, over Germany, and then you have a piece of the spectrum, over Austria, as they're different. You know, a satellite cannot, you know, deal with the boundary of Germany and Austria, switching a spectrum from Germany to Austria. I mean, the countries are not designed for satellite boundaries.

Contiguous MSS spectrum is the must requirement, and here there's only, you know, one, one company now that has that in the world, and I think that was one of the synergies that brought the companies together. Thanks for the question, though. I think that's, that's, that's a relevant, piece of information I think the market needs to know.

Chris Quilty (Co-CEO and President)

If I can just follow up on one other question. You know, obviously, you've just launched the Jupiter-3. You've got a competitor, your number one competitor, that had a satellite failure. It, it seems like, you know, in terms of timing of this transaction, you know, I'd scratch my head from the EchoStar side. You know, you've just got major things rolling out with OneWeb and new services, and you've got a consumer broadband that's rolling. Is there still an intent? Because in the past, you had a distribution agreement with DISH, and they walked away from it on the consumer side. Is that still an area of interest?

Hamid Akhavan (President and CEO)

The distribution agreement with DISH, are you suggesting?

Chris Quilty (Co-CEO and President)

It was, but 10 years ago, you know.

Hamid Akhavan (President and CEO)

Yeah.

Chris Quilty (Co-CEO and President)

When, both DISH or sorry, both EchoStar and Viasat had reseller agreements through DirecTV and DISH, and both of those, went away.

Charlie Ergen (Chairman of the Board)

Yeah, this is Charlie. Just to set the record straight. Dish is get distribution agreements with both EchoStar and Viasat in a consumer broadband market. Obviously, with the advent of Jupiter-3 and the combination of the companies, there is synergy in the fact that you don't need two customer service centers, you don't need two installation networks, you don't need two dispatch units, and there is synergy with the customer who has a satellite dish, who may want broadband or a broadband customer who may want satellite, or they may want telco services. Those are all separate databases, they're all separate systems.

When you put all those things together, there's some synergy in the fact that Jupiter-3 now is a much more robust competitor for consumers compared to Jupiter-2, as an example. You can see how you might, you might If you're in DISH and EchoStar's position, you would relook at that, which we have. Okay, operator.

Chris Quilty (Co-CEO and President)

Okay, thank you.

Hamid Akhavan (President and CEO)

Thank you.

Charlie Ergen (Chairman of the Board)

We'll move to the media.

Operator (participant)

Thanks. 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 one to enter the queue to ask a question. One moment for our first media question. Our first media question will come from the line of S. Moritz of Bloomberg. Your line is open.

Scott Moritz (Reporter)

Great. On the build-out requirement, Charlie, you spoke about the challenges, especially meeting some of the rural area requirements. You spoke about the need to have the FCC cooperate with your plans, and you, you seem to be wanting to sell them on this, this superior, superior, robust network, that's always been your vision. What confidence do you have that the FCC will work with you on this?

Charlie Ergen (Chairman of the Board)

Well, I, I, I think you misstate, but maybe I didn't articulate it. We, there, there's a requirement. There's a, there's a requirement on paper, right? That, that's kind of one thing, and that's, that's what the FCC is requiring. That may not be the most robust service for consumers, right? So my experience with the FCC is that they're, that they, at the end of the day, they want the- they want competition, and they want, they want the cus- the cus- the consumer interest to be at the, the heart of what they do, in Connecticut. When you, if you just look at a piece of paper and say, this is what you want to do, that.

We're happy to do that, but we, we think that there's other ways to do that in a more robust faction, fashion, that's better for the con- for consumers and better for competition. They're always open to discussion. You can see a perfect example where they, where SpaceX said, we think we can do satellite broadband to customers, and they, the fairly quickly, by FCC standards, in fact, very, you know, they were given the authorization to do it. When it came to the public interest in deciding whether the particular frequency would be used for mobile or for, for, for satellite, they chose satellite because they felt that was in the best public interest. Even though, even though terrestrial, we paid at auction, we paid for terrestrial rights, and Starlink didn't pay for it, didn't pay.

But they made the choice based on engineering and based on the public interest. That's what you want your regulatory agency to do. We always have a point of view, but, you know, they, they're the expert agency. I found, I found through all the administrations, for the most part, the FCC has been willing to listen, and for the FCC has tried to make a rational decision. Some we agree with, some we don't agree with, but they've always, at the, at the heart of their decisions, looked at, at the public interest.

I think, I think there's not any question that, that what we've done to bring telco leadership back to the United States is gonna be important, given that, that for the first time, the United States now has something more robust than maybe what other countries can do. I think that there's no guarantee on those things. If we're gonna be on the left-hand side of the goalpost of what we're gonna do. I think there's better ways to do things, and those conversations will continue. You know, from an investor point of view, you should feel secure that we're gonna go out and do what we need to do to secure our spectrum. Operator, we'll take one more question.

Operator (participant)

Thank you. One moment. All right. Our last question will come from the line of Drew Fitzgerald of WSJ. Your line is open.

Drew FitzGerald (Reporter)

Yeah, thanks. Two questions, if I may. First, if you pursue this opportunity for direct to, to smartphone communications, like long term, for the combined company, and, and need partners to do that, what's the extent of the options that you have to with regard to your 2 GHz MSS spectrum? If you had partners, could, could those assets be shared, at least, put into some sort of joint ownership? Could it be levered, or is, is that an asset that, that you need to fully own, unencumbered? Second, on the wireless side, there, there's an attractive deal now with Amazon for wireless service, but there's no subsidies to buying a smartphone.

Big incumbents, as you know, they spend a lot of money to acquire new customers, often with a big upfront discount on smartphones. Is that a strategy that you think works and you’d like to pursue? If so, how would you pay for it, or are you looking to go a different direction?

Hamid Akhavan (President and CEO)

I'll take that first part of the question. Hamid Akhavan here. On the, so you can imagine the network, that, you know, satellite network built on S-band, is similar to, you know, a terrestrial network built on S-band. You, you still have the rights within your own company, but certainly, you, you can bring other members of the ecosystem to take part. Equity participation, you could raise, you know, any sort of leverage and, you know, convert notes. There, there is, you know, revenue share, you know, all, all sorts of models that are possible and we have looked at. There is really no restrictions on structuring a deal to, you know, bring in additional investment and capital into it.

That's, that's the part that actually is somewhat exciting because, you know, this is one of those networks that we believe there's only one good one that can be built. There's not room for many. Yes, there can be many companies offering a basic messaging, perhaps. You know, that's something that we will see in the market. To have the same exact experience as you have on your regular smartphone, coming from a satellite, there really isn't room for more than one. Therefore, you know, we expect to have some very significant partnerships to emerge in the, in the next, course of the next few years as we put this system up, up in place. As for the Amazon, I'll pass that to, to, to John for, for comment.

John Swieringa (President and COO)

Yeah. Hi, Drew. It's John Swieringa. Look, on the postpaid front, look, we're not confused. It's obviously a very competitive market with respect to the handsets. You see us operating today with Boost Infinite, where we offer an everyday low price. We also have device financing opportunities. As you see us start to convert to owners' economics, nobody's gonna be more motivated than us to load compatible devices onto our network. I think you'll see us being very competitive in the market as it relates to sort of the best devices that consumers want, right? We'll be there to compete and provide a really attractive pricing.

Drew FitzGerald (Reporter)

Got it. Thanks.

Hamid Akhavan (President and CEO)

All right. Thank you all. Appreciate it.

Charlie Ergen (Chairman of the Board)

Thanks, everybody.

Hamid Akhavan (President and CEO)

Thank you.

Operator (participant)

This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.

Hamid Akhavan (President and CEO)

All right.