EchoStar - Q2 2024
August 9, 2024
Transcript
Operator (participant)
Greetings, and welcome to the EchoStar Corporation's Q2 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dean Manson, Chief Legal Officer. Thank you, Dean. You may begin.
Dean Manson (CEO and Secretary)
Thank you, and welcome to EchoStar's Q2 2024 Earnings Call. We will begin with opening remarks from Hamid Akhavan, President and CEO, followed by Paul Orban, EVP and Principal Financial Officer, Gary Schanman, EVP and Group President of Video Services, Paul Gaske, COO of Hughes, and John Swieringa, President of Technology and COO. We request that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recording, which we ask that you respect. All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statement. For a list of those factors and risks, please refer to our quarterly report on Form 10-Q for the quarter ended June 30, 2024, filed today, and our subsequent filings made with the SEC. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. We refer to OIBDA and free cash flow during this call.
The comparable GAAP measure and a reconciliation for OIBDA is presented in our earnings release, and in the case of free cash flow, in our 10-Q. With that, I'll turn it over to Hamid.
Hamid Akhavan (President and CEO)
Thank you, Dean. Welcome, everyone. Thank you for joining us today. Through the first six months of the year, EchoStar has been performing as planned. We are focused on integrating operations, advancing our 2024 plans, driving better alignment within our business units, realizing synergies, and managing costs. Our prepared remarks for today's earnings call will focus on our operating business units in the pay TV, wireless, and broadband, and satellite services segments. Many of you may also be interested in hearing about our efforts to refinance our maturing debt obligation due in November and to improve our liquidity, including addressing the going concern disclosure. On that front, we continue to make progress and are in constructive discussions with counterparties, which we feel best support our objectives. The nature of these discussions requires confidentiality.
While I cannot provide more detail today, we will have more to share when it's appropriate. Our operating business continued to meet or exceed our budget targets in key metrics in the Q2. We will elaborate upon this later on the call. As we have stated on the last earnings call, our operating plan achieves positive operating free cash flow for the year as we continue to drive efficiencies, optimization, and synergies that increase our profitability. After the first six months, we remain on track for meeting this key objective for the year. In addition to our operational improvements, particularly in pay TV and broadband and satellite service business units, we continually refine and enhance our offerings for both consumer and enterprise customers.
We remain committed to innovation with our state-of-the-art Open RAN wireless network that now serves double the number of Boost Mobile customers since last quarter at over 500,000. Our network, coupled with Boost Mobile's pivot to a unified digital experience, gives us the runway to increase our share of the wireless market. In our broadband and satellite business, we continue to march forward with our enterprise offerings and expect enterprise revenues to surpass that of our consumer revenues this year. On another positive front, this morning, we received approval on Liberty Puerto Rico transaction, so that, that transaction will close within the next 30 days or so. While there is still a lot of work ahead for the team, we are pleased with the performance from the first half of the year, and we'll use this positive momentum throughout the second half of 2024.
With that, I will turn it over to Paul Orban for additional commentary on our Q2 numbers.
Dean Manson (CEO and Secretary)
Thank you, Hamid. I will briefly touch on the going concern disclosure as a reminder, but please read the financial statements contained in our 10-Q to see the precise disclosure. This evaluation is a technical accounting determination that requires us to consider our current cash position and project our cash position one year from today and does not allow us to consider any new funding sources unless that financing is committed as of today. At the end of the Q2, our cash and cash equivalents in marketable investment securities totaled $521 million. Roughly $2 billion of debt will be maturing this November, and currently, we do not have the necessary cash on hand and projected future cash flows to fund Q4 operations or the November 2024 debt maturity.
As Hamid mentioned, we are currently working to address this with our refinancing activities, in discussions with funding sources at all levels in our capital structure.
As previously highlighted, our teams are focused on maintaining positive operating free cash flow as we have defined on our prior calls. We're on track to meet this goal this year, in part, by continuing to execute on our plan to remove $1 billion of operating expenses from the business, which includes merger synergies. We continue to manage all of our brands with a focus on financial discipline and a goal to onboard the highest quality subscribers. We continue to see the results of these efforts in our DISH and Boost Mobile churn rates this quarter. Now, let's review our financial performance for the Q2. Revenue was over $3.95 billion in the Q2, down 9% year over year, primarily due to subscriber declines across all lines of business.
OIBDA was $442 million, down $181 million year-over-year, driven by the ramp in operating costs per network as we have more sites on air, as well as decreased margins from having fewer subscribers across all brands. Free cash flow was a negative $191 million, primarily driven by cash interest of $450 million. Year-over-year, free cash flow was better by $360 million, driven by a decrease in capital spend per network of $565 million, which was in line with our prior guidance. This decrease in capital spend was largely offset by the $181 million decrease in OIBDA. As a reminder, we continue to expect CapEx for the year to be roughly half of what it was in 2023.
With that, I'd like to turn it to Gary to discuss video services.
Gary Schanman (EVP and Group President of Video Services)
Thanks, Paul. On the pay TV side, we finished Q2 with approximately 8.1 million customers. Across the business, we continued to see operational efficiency gains, and our focus on engagement, customer loyalty, and subscriber quality drove substantial quarter-over-quarter and year-over-year churn improvements across both DISH and Sling, while growing ARPU by over 4%. Improved churn, combined with lower variable and fixed costs achieved by our savings for growth efforts, resulted in higher per sub profitability. In particular, DISH TV SAC was significantly less versus Q2 2023, and this improvement was primarily attributable to an increase in marketing efficiency per subscriber. Similar to Q1, our media sales revenue per subscriber continues to grow year-over-year. Our DISH Connected product, which delivers programmatic advertising to our connected, linear set-top box subscribers, continue to roll out and scale in Q2, underpinning ARPU gains.
On both platforms, significant addressable and programmatic market demand also helped fuel this growth. DISH Business, our bulk sales division, has continued to experience year-over-year growth through our concerted efforts in the hospitality and senior living spaces. In the hospitality space, in particular, we increased our units by 30% compared to the same period last year, ending the quarter with a total of 1.35 million hotel rooms. In addition to our wins in hospitality, DISH Business ended Q2 with over 300,000 total active units in nursing care and assisted living facilities, with over 21,000 units in Q2 alone. In regards to DISH TV specifically, we finished the quarter with approximately 6.1 million subscribers, with Q2 churn 12 points lower than in Q2 2023.
Our Q2 subscriber numbers for DISH TV were positively impacted by consistency in programming and improved product quality. We also continue to offer high-value added services to our DISH subscribers, including cross-sell offers of HughesNet and Boost Mobile. Our objective moving forward into the second half of 2024 is to more closely integrate these products, improving the customer experience and lowering collective churn. Also noteworthy is the launch of a Netflix bundle for our existing DISH subscribers, which provides those subs the ability to add Netflix to their existing DISH subscription at no additional out-of-pocket cost with a DISH commitment and watch Netflix through our Hopper platform. Regarding our Sling business, one of the industry's only profitable streaming services, we finished the quarter with approximately 2 million subscribers, a gain of 78,000 in Q2.
This increase is due to our purposeful focus on acquiring high-quality, profitable subscribers despite competitive headwinds and an improved customer experience. Improvements to product performance and the continued adoption of features and services on Sling, including Rewards, Arcade, free DVR and Sports Replay, which launched in Q1, have led to an increase in viewership and engagement, and we expect that increase in adoption to continue into the second half of 2024. I'd like to turn it over to Paul Gaske now, who will cover broadband and satellite services.
Paul Orban (EVP and Principal Financial Officer)
Thank you, Gary. Our broadband and satellite services segment operates in both the consumer and enterprise markets. Our consumer business, under the HughesNet brand, expanded subscriber acquisition on Jupiter 3. With the support of this new satellite, we've been able to increase our gross additions by roughly 14% year-over-year. Jupiter 3's additional capacity allows us to offer new, high-speed, unlimited data service plans, and at the same time, upgrade existing subscribers to similar plans on Jupiter 1 and 2, thus enabling them to benefit from faster speeds and increased data allowance. We also launched the HughesNet DISH TV bundle during the quarter, allowing customers opting for both services to benefit from a bundle discount and a two-year price lock.
We continue to focus on acquiring high-value customers and driving customer loyalty, and our efforts so far have reduced subscriber losses by more than 50% from Q2 of 2023. We finished this past Q2 with approximately 955,000 broadband subscribers. As Hamid mentioned in the opening, our HughesNet enterprise business continues to grow as we drive to acquire the majority of our revenues from the enterprise market.
In our Hughes Managed LEO business, we have shipped over 5,000 of our Hughes-manufactured user terminals based on our unique flat panel, electronically steered antenna, also known as ESA technology. Feedback has been very positive, and demand increased in Q2. We anticipate launching new versions of this terminal starting early, as early as the Q3, and that will boost our Managed LEO Services business. We received significant orders across the entirety of our enterprise business during the quarter, both domestically and internationally, and continue to make progress in the in-flight communications business. In Q2, we announced a deal in partnership with TCI and Turksat to supply AJet advanced in-flight connectivity for their passengers. In addition, we continued to execute on our previously announced programs with Delta Air Lines and Gogo Business Aviation. With that, I will turn it back to Hamid for an update on our wireless business.
Hamid Akhavan (President and CEO)
Thank you, Paul. We had a number of positive developments for Q2, but before I jump into those, I want to comment on a few significant changes we made to the business last month. Our mid-July announcement regarding the new Boost Mobile was a result of much of the hard work completed in Q2. More than just a brand refresh, we unveiled a unified and unique prepaid and postpaid experience across the Boost Mobile website and app, new and easy-to-understand rate plans, a new marketing campaign, and a 30-day money-back guarantee so customers can test our state-of-the-art network risk-free. As alluded to in previous calls, and as part of this overall effort to put forth a new Boost Mobile, we sunset the Boost Infinite brand and brought postpaid and prepaid together.
This continuum of experiences and offerings allows us to bridge the gap between pre- and postpaid service and remove the binary nature of the mobile industry, giving customers access to more choices. Through these changes, our single brand will be a driver of profitable growth and help maximize operational efficiencies across the retail wireless business. In regard to the Q2, we finished with approximately 7.3 million subscribers. Excluding the loss of net ACP subscribers, we added approximately 32,000 net retail wireless subscribers in the Q2. With the loss of the government-funded ACP program in the Q2, many providers experienced ACP subscriber losses. While we believe that ensuring Americans have access to high-speed internet and mobile services is essential in today's world, these subscribers were not very profitable under our brands, and we have worked to transition them to cost-effective solutions where available.
ACP losses account for a total decrease in our wireless subscriber business base of only 16,000, compared to the decrease of 188,000 in the same period last year, a positive sign and momentum for us to build upon. Additionally, we have seen further reductions in our churn numbers, 2.93% in Q2, compared to 4.54% during the same period last year, a reduction of 35.5%. ARPU continues to increase as we focus on higher-quality subscribers, improving the customer experience, and optimizing our network. Boost Mobile's customer satisfaction and the overall brand sentiment is rapidly improving, and in some studies already exceeding some incumbents. We are encouraged by the results this quarter and overall positive trends since the beginning of the year.
We strive to profitably increase our share of the postpaid market with the power of having owners' economics. While there is still work to be done in this area, as previously mentioned, we made great strides under operational and marketing efficiencies with the efforts in Q2, and look forward to seeing those efficiencies continue as our new Boost Mobile brand ramps up through the end of the year. Let me now hand the call to John to cover our network deployment progress.
John Swieringa (President of Technology and COO)
Thank you, Hamid. The team has been hard at work expanding and optimizing the Boost Mobile network, which is now capable of reaching over 200 million Americans with 5G voice and over 250 million Americans with 5G mobile broadband. As Hamid referenced earlier, we continue to add on-net customers at a high success rate when activating network-compatible devices in our 5G Voice markets. Our on-net customers experience pure 5G on the Boost Mobile network, as well as nationwide 5G and 4G coverage via our partner networks. The acceleration of on-net traffic allows us to further optimize and improve the world's first Open RAN cloud-native network, including speeds and coverage. In certain key markets, our third-party benchmarking shows that we have already moved ahead of some incumbents across key network stats and customer satisfaction, which allows us to confidently highlight our new network in the market.
We are seeing a competitive network experience with room to run in the back half of the year, further accelerating our transition to owners' economics. Additionally, we were the first network operator to commercially launch simultaneous 2x uplink and 4x downlink carrier aggregation for compatible devices this past quarter. This accomplishment is a further testament of our efforts to provide our customers with the most advanced wireless experience and technology available. These are all positive developments, and we are pleased with the network's progress and performance as we further position ourselves to compete with the incumbents. We have met all of our FCC milestones to date.
In the next year, we have some additional milestones, specifically June 14th, 2025. Our fully constructed facilities, along with our construction in process, will be sufficient to meet many of our build-out requirements over the next year, including our June 14th, 2025 milestones. These facilities are for licenses comprising approximately 90% of the aggregate carrying value, including capitalized interest for our 600 MHz, 700 MHz, H Block, and AWS-4 licenses. However, for the remaining licenses that we have not yet constructed facilities sufficient to meet our build-out requirements, we will need to raise additional capital to continue our 5G network deployment. In Q2, we invested $237 million in our network deployment, which is comparable to $802 million in Q2 of 2023.
Our focus continues to be on capital investments and optimizations required to have a competitive network for Boost Mobile customers within our existing and future 5G voice footprint. As we discussed last quarter, this is a logical progression for us as we transition from an accelerated build to running and optimizing our markets with a P&L mindset. Now I'll turn it back over to Hamid.
Hamid Akhavan (President and CEO)
Thank you, John. In summary, liquidity is a key factor for our long-term success. Significant attention is focused on this critical area, and as I already mentioned, we are in constructive discussions with counterparties at this time. In parallel, we are continuing to expertly and diligently operate our business, develop long-term opportunities, and create value. Pay TV and Hughes, to date, are generating operating free cash flow ahead of our expectation, and Boost Mobile has made good strides to find its footing this year. We have improved ARPU and reduced churn across both the Pay TV and wireless business units, and will keep our focus on attracting and retaining high-quality subscribers. The operational momentum we have established over the first half of the year is promising, and we will work to maintain and accelerate it in back half of the 2024.
With that, we will open it for Q&A from the analyst community.
Operator (participant)
Thank you. We'll now be conducting a Q&A session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Ric Prentiss with Raymond James. Please proceed with your question.
Ric Prentiss (Analyst)
Thanks. Hi, everybody.
Hamid Akhavan (President and CEO)
Hi, Rick.
Ric Prentiss (Analyst)
A couple quick questions for me. First, area, obviously, you're in constructive discussions, but I think factually you can help us. When do you need or want to have the cash on hand? And related to that, can you remind us how much unencumbered spectrum you have, and is that securitization market open?
Hamid Akhavan (President and CEO)
Ric, good to hear from you. I will pass on the question regarding cash to Paul, and then we'll comment on the unencumbered spectrum.
Paul Orban (EVP and Principal Financial Officer)
Thanks, Rick, for the question. We're gonna have sufficient cash on hand to pay all of our bills as they become due through the day before we actually have the $2 billion due. So, we'd love to raise the money as soon as possible, but we have latitude to wait to basically the day beforehand, if we had to.
Ric Prentiss (Analyst)
The unencumbered spectrum and securitization market?
Hamid Akhavan (President and CEO)
So there are, you know, in terms of spectrum, we certainly have an ample amount of a spectrum that we have not reevaluated in terms of incumbency. But go ahead, Paul, maybe you-
Paul Orban (EVP and Principal Financial Officer)
So right now, the, the only spectrum that is encumbered is the 600 MHz today. There is an internal, note on the 3.45 GHz, but there is no third-party debt on that. So everything else is unencumbered, and we can use that to, securitize to raise capital.
Ric Prentiss (Analyst)
Okay. And then operationally, on the wireless side, help us understand what's the path to positive net adds? Obviously, you had some ex-ACP, but more importantly, what's the path and timing to getting the retail wireless business to producing positive EBITDA?
Paul Orban (EVP and Principal Financial Officer)
That's not something that, Rick, we have announced. You know, obviously, in due time, we will be more specific about guidance in the market. That's not something we have published today. But I wanna say that what we have seen, what I have seen on the first half of the year, what we have been managed to achieve, it's exceeded my own expectation, candidly. Don't mean to be too bullish here about just a, you know, couple of quarters in a row, but we have made some fundamental changes in the business. You know, this business was hugely declining in terms of number of subscribers. The first thing about growth is to arrest the fall, and we have managed to do that, and has not been an accident, and I don't see that as a one-time thing.
But now let us have till the end of the year. I mean, I wanted to get through this year just to see, first of all, how our progress is in terms of getting our team focused, getting our, you know, strategy sharpened, getting our execution honed, before I put projections in the market. I certainly do not want to put projections in the market that I cannot stand behind. In addition, you know, this is a very exceptional year for us. I mentioned it, other than the fact that we have a merger, other than the fact that we have brands that we are bringing together.
We also have these financing activities that are taking significant amount of our energy and attention, and also, I would say to some degree, limit our ability to participate in the market. In some regards, we just targeting, you know, the most profitable customers and some of the other, segments that, at the time, we can afford to be in the market for. So all of that makes this a very special year. It would not be prudent for me to put a, you know, hard projection out there, but, you know, certainly, I am very encouraged by what we have done so far under the circumstances, and hopefully starting next year, we could be more specific about, you know, how our business is going to develop.
Ric Prentiss (Analyst)
Makes sense. Last one for me is, any update on 5G private networks? That was obviously a big part of the best use of the spectrum and the network you're building. Any update on how that market is starting to gel?
Hamid Akhavan (President and CEO)
That's a nascent market. Again, we have enormous hope and expectation for that market. Nothing in the immediate future, though. I mean, as you know, in enterprise sales, and particularly in a brand-new category where you know, the customers and, you know, have no strong precedence in the market. You know, there's a bunch of business and development activities that have to go on before significant sales can be made. We already have a couple of things. You know, we saw. We have now been able to participate in the Spiral 4, DoD, and I think that came through Navy. Contract is about a $2.7 billion over 10 years. Multiple operators are there.
We are there. So, so we see that coming in. We do have a couple of deployments that we have talked about in the past. I don't want to repeat those. You know, Whidbey Island, Hawaii, a few other places. You know, those are early signs, and we have been seeing success on all of those, but I'm not at the point yet that I can put a, you know, big forecast out there for it. I just want to say that with all of this AI news that is in the market, much of it may be hype, but certainly there is some truth to it, and we, we believe we have the network that is absolutely optimized to take advantage of that, and we have plenty of great spectrum also for that. So we like it.
We, we like that, and we are very excited about making a business that is very significant out of that. But I wanna, you know, preach a bit of patience there, not because we are not moving fast enough or able to move fast enough. It's just that the market has to develop, and that takes a bit of time.
Ric Prentiss (Analyst)
Makes sense. Thanks, guys.
Operator (participant)
Thank you. Our next question comes from the line of David Barden with Bank of America. Please proceed with your question.
Speaker 12
Great. Thanks for taking the question. This is Shipra. Just calling in for David right now. Just two questions, if I could. Looking at the company holistically and collateral buckets that you have left and spectrum licenses that you just touched on, what is left within the company that can still be levered? What LTV can they be levered at? And how are the current fraudulent conveyance lawsuits and other legal liabilities impacting your collateral pool and ongoing refinancing talks that you're in right now? And my next question: The company this year reshuffled some of its assets to create new pockets of collateral, to borrow against, to extend the life of the equity that wasn't welcomed by existing creditors.
We asked this last quarter, but with the business cash performance where it is and the maturity wall where it is right now, what are the circumstances where management's obligation shifts from trying to extend the life of the equity market cap to maximizing the recovery for the $20 billion of debt outstanding? Thank you.
Hamid Akhavan (President and CEO)
Thank you. Several, several questions. I don't know if I'm gonna be able to answer all of them, but if I don't, please repeat some of it. So I wanna make sure I hit all the points. First of all, I sense that you believe our spectrum assets are not monetizable or not able to use as collateral, and then we need to refer to other. And I wanna say vehemently and strongly that that is absolutely not the case. Zero. Our spectrum assets unencumbered. We can and we will use those as collateral. And the fact that we haven't done it yet is because we have not arrived. As I mentioned, we are in constructive discussions. We have not reached a point that we believe that the right deals can be made.
This is a matter of negotiations, and progress is being made. No guarantees till they're done. And we certainly will use the necessary time to make sure that we make a deal, we make opportunities and deals that are, you know, great for our long-term success and maximize our value. We certainly focused on that. Other collateral that we could use is not relevant relative to the size of the spectrum. We have significant ability to leverage our spectrum and create liquidity for many, many years and to come on a long runway. I wanted to first position that because it would make no sense for me to talk about other collateral when we have so much dry powder, per se.
But there was a question about cash position and maturities. Look, we believe that obviously we want to meet, and we continue to work on meeting all of our obligations. I will not be able to say much more about it till, you know, a refinancing is there. I think that there may be a misunderstanding in the market that, you know, that the certain lawsuits filed may prevent us from making progress. We don't believe that is the case. We've not seen any evidence of that today. So that, I mean, the runway for us to, you know, make a transaction, it's really dependent on us being able to arrive at a satisfactory landing point with the parties that we or counter parties we're negotiating with.
I think I used probably more words than necessary to explain the situation, but I, but I think I anticipated some other questions related to that, and I thought this would be a good opportunity to address all of it. Did I miss any portion of your question? Please repeat that if I have.
Speaker 12
Nope, that's great. Thank you.
Hamid Akhavan (President and CEO)
Great, thank you.
Operator (participant)
Thank you. Our next question comes from the line of Sebastiano Petti with J.P. Morgan. Please proceed with your question.
Sebastiano Petti (Analyst)
Hi, thanks for taking the question. I mean, you sounded, you know, very positive on the retail wireless efforts. Obviously, Q2, you know, ex-ACP would have been positive, and it seems as though, you know, with the Boost Mobile, you know, rebrand, that should persist. But I think last quarter you did mention that you anticipated, you know, retail wireless net additions to be positive for the year. Obviously, you have a little bit of ACP noise in there in the Q2 and uncertainty on that in the back half. Should we still expect that to be the case if we maybe strip out any potential ACP losses, that you still feel confident in hitting that goal?
And then, on the wireless network, I think you mentioned that the number of subscribers served on your network had doubled quarter-over-quarter. Is that the right way to perhaps think about maybe your on-net versus off-net traffic, as we're trying to think about, you know, the ability and the cost save opportunity on a go-forward basis? Any color around that, to the extent you would like to share, would be great. Thank you.
Hamid Akhavan (President and CEO)
Great. Yes, two questions. I'm happy to answer both. On the net, net positive adds for the year, yes, absolutely, that's our expectation, that's our plan, and we are. We very much seeing that we are able to execute on the plan. So, I remain bullish and positive that that's we're going to meet that objective. As it comes to, the number of subscribers that are on net, you know, we are really limited. The only limitation we have, that stands in our way is the availability of compatible devices. We are adding a significant majority of the devices that are capable on net as they come, new devices that come. We have ported as many compatible devices as we can port over without disrupting the customers.
There's some trade-offs. There's some customers, there's segments of customers that are, have compatible devices, but those devices require, just because they're legacy, they require us to, you know, have the customer take a step or two, you know, change a SIM card or do things because they're legacy. You know, sometimes we pass those, and we, we just accept the fact that it's better not to disrupt the customer and not bring them on net. But really, the availability of devices, is that. But, the traffic is scaling very nicely on net. I think that we're very happy to see that. I mean, usage, customer stat. You know, for now, I just wanted to give you a glimpse of, you know, how rapidly we're putting some customers there.
But I don't necessarily think that just looking at on-net customers will give you the full picture. We'll continue to give you more information about that as we go on. But overall customer base is trending nicely. The business is growing in terms of number of subscribers and ARPU and customer satisfaction. It's a testament. More than anything else, that's a testament to a, you know, good offer, good network that we have. We have not been marketing ourselves that much, and you may have noticed that. This is just purely, primarily, you know, word of mouth in some small marketing we have done and just the fact that we have a very loyal base of remaining customers. I think as much as you might be surprised to some, Boost has a very loyal following.
People see a lot of great value, and they're staying with us.
Sebastiano Petti (Analyst)
If I could ask one quick follow-up. Can you give us maybe a stat on, you know, when does that device compatibility issue maybe, you know, normalize? And then one other quick question, I think in the Q, related to just your overall network spend. I think, you know, obviously, I think Paul mentioned your CapEx would be down year-on-year, but in the Q, I think it does say, though, as you prepare for the next build-out requirements in 2025, you do expect CapEx to increase as you approach those those deadlines. You know, just help on maybe thinking about the phasing of CapEx here on the wireless side would be helpful. Thank you again.
Hamid Akhavan (President and CEO)
Great. Both of those questions are great for John. John, maybe you can comment.
John Swieringa (President of Technology and COO)
Thanks for the questions. It's John Swieringa. We talked about device compatibility on earlier calls, and we're really starting to get ahead of it. So, I think I've mentioned on previous calls, our Android portfolio for new devices is now essentially all compatible with our 5G network. On the flip side, when you look at the Apple portfolio, we're really iPhone 15 and forward. And so if you look at the market, obviously, there's still older iPhones out there. We don't have an opportunity right now to put those on net in our open markets. And we still have a vibrant BYOD business, and we view those activations as future proof for our network. So we're definitely getting ahead of it.
Remember, just two years ago, we had one device, and now we've got well over 20, and that's climbing. We're really on the bus now. So you'd see most devices entering the market is compatible with our network. So I think that was the first part. The second part was on network capital and what we're doing. Obviously, in our prepared remarks, we mentioned that our CapEx is down significantly compared to same quarter last year. When you think about what the back half of the year looks like, we do have some work to do, obviously, to prepare ourselves and get ready to meet our June 2025 commitments. We're doing all the work right now that's not capital intensive to buy down timelines on those sorts of things to get ready to go.
We have good plans. It's not our first rodeo. We, we certainly have the ability to, to hit the gas where, where needed. Some of our capital, quite frankly, is pushed to the second half of the year, pending those outcomes. On top of that, we're really focused on making sure that the 5G voice markets we have are open, right? We'll look to 2025 to have a good capital plan that's really focused on competition and making sure that we can compete in our 5G voice markets with Boost.
Paul Orban (EVP and Principal Financial Officer)
Thanks, Jim.
Hamid Akhavan (President and CEO)
Thanks, Jim.
Operator (participant)
Thank you. Our next question comes from the line of Walter Piecyk with LightShed. Please proceed with your question.
Walter Piecyk (Analyst)
Thanks. I'm gonna go back to the prepared comments. I think you referred to the spectrum being 90% of the carrying value. I assume that's not necessarily 90% of the total spectrum owned, just based on how you're valuing maybe city pops versus rural pop. Can you kinda give a little bit more color on what you would-- like, what you are funded for in terms of those build-out requirements, in terms of maybe percentage of megahertz popped? Are there certain bands that you'd be willing to not meet in that scenario versus other bands that are more, that are more important?
And then I guess the overriding on this is, in the discussion with the bondholders, is it, you know, given that this is an underlying asset overall, that's extremely important to the company, obtaining the funding to get to 100%, a critical item to coming to some resolution, at least in terms of this, this first maturity that you're hitting?
John Swieringa (President of Technology and COO)
Thank you, Walter, for the question. First of all, it's not our intention to lose any spectrum. So I want to be clear, we're not planning, we're not in the process of, or in any way looking to dispose of any of the spectrum or relinquish the ownership of any of the spectrum. Having said that, maybe I ask Paul to comment on the 90%.
Paul Orban (EVP and Principal Financial Officer)
The 90% really relates to spectrum that has a June 25 deadline. So it includes the carrying value of the spectrum that has that deadline, as well as the capitalized interest on that. And so, as you can imagine, most of that probably skews towards cities and larger populations, the 90% does, and obviously, the 10% is probably rural America.
Walter Piecyk (Analyst)
I don't understand. You're saying the comments we were saying was, you're gonna hit 90%, no problem, and then you're just gonna need incremental financing to get the last 10%. Did I understand the prepared comments correctly? Is that?
Paul Orban (EVP and Principal Financial Officer)
No, you have that correct. So right now, we believe we're gonna hit 90% with where we're at.
Walter Piecyk (Analyst)
Right. So, my, I guess my question is, is the I get 90% is carrying value. I'm saying, like, in terms of comparable to pops owned? Because it could be 90% of the value, but 50% of the pops coverage, right? I, to be, to exaggerate, obviously.
Paul Orban (EVP and Principal Financial Officer)
We don't disclose that, but based on the comments that I said, where we're gonna complete most of our large cities and so forth, you can imagine the pops would be large.
John Swieringa (President of Technology and COO)
It's. We don't have a precise map to share with you, but when we talk about 90% of the value, you can imagine that, you know, larger markets, all the metro and all the places where, you know, population in any way significant would be already protected.
Walter Piecyk (Analyst)
Understood. And then you can obviously rely on the wholesale agreements for the rest, which goes into the second question, which is: Do you need, I know you talked about securitization. There's another potential way to monetize rather than using the spectrum to borrow against, is just selling it, you know? I understand that maybe under existing regulations that's not possible, but we have a potential administration change coming up. Do you need all of the spectrum that you currently own in order to operate on your mobile business plan?
John Swieringa (President of Technology and COO)
So, several assumptions and questions. I hope I can parse them, each. We have more spectrum than we need to execute our business plan. We, you know, in our wildest success dreams, we probably won't need all of the spectrum that we've acquired. Do we want to sell that spectrum today, even if we have the opportunity to do that? No, we not. We are looking at refinancing options and liquidity options that are not requiring sale of the spectrum, even, even if that was available today, that would not be something we'd potentially be working on right now.
We think that there are other avenues that we're making progress on that are constructive and be moving forward. Will, in the future, be opportunities for spectrum trades, et cetera. That is always the nature of the industry. You know, we don't know how the world develops. We don't know what areas of wireless we are going to further develop, whether it be fixed wireless, whether it be additional coverage, additional services. You know, that's right now not the immediate focus.
The immediate focus is using the spectrum we have, potentially as collateral and in a prudent way to address our liquidity issues, and then certainly the spectrum ownership is very strong right now, and you should expect that we'll continue to have a strong spectrum position going forward.
Walter Piecyk (Analyst)
Okay. And then just one last one. The, the language in the 10-Q basically says, "Having enough cash for future cash flows or, the maturity." It's not and. So when I look at your, your free cash flow, especially given the asset sale that's gonna be completed in the Q3, assuming you don't have a big working capital need coming up, you should be able to have cash going into next year. So is there- are there things-- are there working capital payments that are required between now and end of year, that you can highlight for us, if any?
Paul Orban (EVP and Principal Financial Officer)
Well, so to clarify, we don't have cash on hand or future cash flows to fund the Q4 operations, as well as the $2 billion maturity past November fourteenth. So if you read that in there, that, I think you
Walter Piecyk (Analyst)
It says, or, though, meaning, like, I get it, like, if you don't have $2 billion, unless it's refi'd, but or implies both, as opposed to combined. It would otherwise be and, no? Maybe I'm overreading that, but-
Paul Orban (EVP and Principal Financial Officer)
I think you're overreading that. But that's the disclosure-
Walter Piecyk (Analyst)
Okay
Paul Orban (EVP and Principal Financial Officer)
The same way for a couple of quarters on that. But, you know, again, we have ample cash on hand to get us through the debt maturity, to fund operations as well as run the business. However, we don't have cash subsequent to the November fifteenth debt maturity payment.
Hamid Akhavan (President and CEO)
Look, as it comes to cash, I wanna make sure everyone on the call realizes that we are, we are fully cognizant and aware of how important it is for us to address our liquidity, and it is not a second or third or fourth priority for us. But having said that, you know, I just wanna reiterate that, you know, we're focused on it. We're making progress. We're having constructive discussions, and we're not allowing it, you know, with good judgment, we're not allowing it to impact our operating business beyond a, you know, certain level that we can't control. What I mean by that is that, you know, we, you know, our team is really heavy focused on, you know, success. You know, we, we're running a business of success. Would I have done a better job?
Would we have done a better job in terms of add subscribers or develop additional, you know, growth if we had access to additional cash? Yes. But is that a, but are we damaging the business just because, or that is the business opportunity getting damaged, the opportunities being fundamentally lost because we, we don't have additional cash at hand? I would say absolutely not. We're not, we're not there. We focus on success and, you know, we hope that with the constructive discussions we are having, all of this will be behind us, we hope. And we certainly are pouring the foundation for a very successful operating business.
Walter Piecyk (Analyst)
Okay. Can I just give one operational one? I mean, the growth ads for wireless, you know, that seems to be the thing that, you know, you're obviously turn its trajectory in the right direction, but what I guess, what are the major friction items? You're an early company, obviously, everyone's got their early learnings, dealing with Amazon, whatever it is. What are the major friction items that are preventing your growth ads from ramping, and what are the plans, specifically, I guess, to get rid of that friction in order for you to get to this positive growth by the end of the year?
Hamid Akhavan (President and CEO)
Well, there are a number of things that have to be developed for us to go from what the company has been, which has been a MVNO, and to a company that is, you know, MNO, has its own network, has probably the best network, you know, if you look at it, you know, even on earlier stages of its life, that it's not even been fully optimized on the load, is already performing better than competition in many areas. So there are many, but I can highlight just a couple of them. And none of them are, you know, fundamentally unsolvable or in any way, you know, issues that we cannot address in due time. But let me say that, you know, first of all, our distribution is less than the, you know, competition.
They have 5 times more stores than we have. We will focus heavily on digital experience. The digital experience, you know, we just launched our combined prepaid and postpaid app and website. And I'll ask you to, so anyone who is interested, I'll challenge you and ask you, please go ahead and download our app, use our app and see if you have seen any better, whether you have seen anything better in the marketplace, and please send me feedback, and I'll take it.
The other issues we have is that, you know, the phones are locked today to the other carriers, and unlocking is a very big issue for us, and I think FCC is heading in the right direction by giving customers and consumers in a market a competitive choice by asking that, you know, the carriers unlock the phones after 60 days, and we'd be very supportive of that competition. We think it, you know, we're willing to go head-on, head on and hand to hand, competing in a fair and open market.
As opposed to a market that is locked to three, you know, oligarchs, essentially, you know, oligopoly that the three carriers are keeping the customers in a locked position for a market this size, that just in the number one market in the world, I think that's just, it's not appropriate, and not appropriate level of competition. So that's, to me, that is, that is, an unfair placement for both the consumers and us. I think to develop our brand is yet another one. You know, our brand has not been a postpaid brand, but it's been a prepaid brand in a community of other prepaid brands.
We need to elevate ourselves, and you will see some of that to the second half of the year, where we show up and how do we position our brand. We're gonna have to fix that. So, you know, the multitude of, you know, areas to develop, every one of those, by the way, have been experienced by other companies. If you go back, look at the incumbents, if you go back 20 years, even, I would say one of the incumbents was in exactly the same position, and now, you know, they're in a much better position. So there's a recipes for doing that. We're looking forward to doing all of that. But, by the way, I wanna say that, you know, we have a network that is excellent and is empty.
I continue to say, there is nothing more dangerous than an empty network. And we certainly intend to take advantage of the available capacity we have with just, you know, the quality and the offers we have in the market. I think we have a path that we have charted for capturing proper market share.
Walter Piecyk (Analyst)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Jonathan Chaplin with New Street. Please proceed with your question.
Jonathan Chaplin (Analyst)
Thanks, guys. Hamid, first, just a quick process question on the lawsuit. So it looks like the trustee has amended the complaint. Do you have to refile a motion to dismiss? And if so, can that be filed and decided on before November? And I'm wondering how the potential to get that resolved quickly may be impacting your discussions on refinancing. And then I was really curious about your comment about there being nothing more dangerous than an empty network last quarter. It suggested the potential for something really disruptive on the pricing front. And the new plans that you guys launched on July 17 looked, the pricing looked pretty similar to pricing you had in the market already, not that disruptive.
I'm wondering if there could be something more disruptive on the way.
Hamid Akhavan (President and CEO)
Let me take the second piece first, and then I'll pass the lawsuit to Dean, our General Counsel, to comment on. Look, I mentioned that not as a prediction of things to come. I certainly would not wanna do that. But I just wanted to say that, you know, this is a marketplace where we do expect, you know, a fair playing field. And, I hope that that fair playing field is established by FCC and by the environment that we are playing in, and there's, you know, many constituents in the environment. But certainly, it is not beyond the options on the table, possibilities on the table for us to, you know, provide service to our consumers with a much greater value.
We certainly have no intention of destroying marketplace. That's not- we're, we're not trying to do that. But I think there's plenty of room for fair competition in the marketplace. We, we are very measured with our, with our approach, but we do have a network that can support a great portion of the marketplace today. And, we are, we are hoping that, under fair conditions and fair, you know, rules of, rules of engagement and play, that, that, FCC and, others allow us to operate in and make it available for us, that we capture a fair market share. I'll-- I can't be more specific today, but you should expect that we continue to remain one of the, most competitive offers in the market.
We continue to provide great service, and our recognition in the marketplace will certainly really rise in the next six months. By end of the year, we'll be in a better position. Hopefully, next year will be a much better year for us. I know that that's somewhat of a softer answer you expect, but you would not expect me to give you all of our strategic planning and all of our pricing and any plans we have on this call. That would be inappropriate. So I hope I gave you some feel for it, but I realize it's probably not as precise as you'd like. Dean, maybe you can answer, please, the lawsuit question.
Dean Manson (CEO and Secretary)
Hi, Jonathan, Dean here. On your question about procedure, yes, we'll have to either file a motion to dismiss or answer that amended complaint. We don't see it as significantly changing the scope of allegations that this group of lenders is asserting. But more to the point, or to the other part of your question, we don't see the need to have that resolved before November as critical. As Hamid alluded to earlier, it's not really getting in the way of the discussions that we're having on the refinancing front. So, you know, we'll deal with the lawsuit in due course, which we're in the process of doing.
Hamid Akhavan (President and CEO)
And just adding to that, not from a legal language, but from my own personal view. You know, certainly there are multiple parties in the market that are working constructively with us to make progress and be working with them. You know, there are each parties that we've been working with, collaborating with, has taken a different approach. You know, some parties have taken the approach of trying to, you know, go through a legal process and be more using the perceive legal options, and, you know, this is the group that you're that we're speaking about. But that doesn't prevent the other groups who are much more constructive, and they're not concerned about this to the degree that you expect.
Speaker 13
Alicia, we'll, we'll take one more, one more question here.
Operator (participant)
Okay. Thank you. Our next question comes from the line of Marilyn Pereira with Bank of America. Please proceed with your question.
Marilyn Pereira (Analyst)
Hi, thank you for taking the question. Just a quick one on your working capital. It looks like your trade payables increased about $85 million. So I'm just curious how, you know, one, we should think about EchoStar's working capital, you know, give us a sense of the seasonality within that, and, you know, can you continue to extend payables? Just some color on how we think about that, and also if you can provide maybe perhaps some of your larger vendors.
Paul Orban (EVP and Principal Financial Officer)
This is Paul. So we won't provide our largest vendors, but I mean, it's pretty apparent to who our biggest customers are. We're continuing to pay in the same pattern and practice that we have historically. The changes that you are seeing are all timing-related seasonality, when things are due, and so forth. But again, we have not changed anything on how we pay people historically. It's the same pattern and practice.
Marilyn Pereira (Analyst)
Got it. I'm sorry, in terms of any seasonality?
Paul Orban (EVP and Principal Financial Officer)
It obviously depends on there's all kinds of purchases when we're buying devices, whether it be for the 5G build, for instance. Obviously, our CapEx and operating costs are the CapEx is down, so obviously, your payables are gonna be down from that or could fluctuate if we're buying more CapEx. Also, it depends on retail wireless, on the devices that we purchase to put in the channel and things of that sort. So there is seasonality that goes into it as well as timing of when the payments are made and so forth.
Marilyn Pereira (Analyst)
Got it. I mean, can you just give us a sense of where you think, you know, working capital will shake out, you know, for the full year?
Paul Orban (EVP and Principal Financial Officer)
You know, I believe where we're at today, you'll probably see working capital get a little bit better for us as we move throughout the year. I think our inventory balances will probably end up coming down slightly, both on a retail wireless and on a pay TV side. So it'll get slightly better, but I think what you see today is probably what you're gonna see come year-end, pretty darn close to it.
Marilyn Pereira (Analyst)
Got it. Thank you. That's all I have.
Speaker 11
Great. Thanks, everyone, for participating. That'll bring our call to a close. Alicia, do you want to give any final-
Operator (participant)
Yep, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.