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Edited Transcript of DISH earnings conference call or presentation 3-May-19 4:00pm GMT

Q1 2019 DISH Network Corp Earnings Call

Englewood May 4, 2019 (Thomson StreetEvents) -- Edited Transcript of DISH Network Corp earnings conference call or presentation Friday, May 3, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Charles W. Ergen

DISH Network Corporation - Co-founder & Chairman of the Board

* Jason Kiser

DISH Network Corporation - IR Contact & Treasurer

* Paul W. Orban

DISH Network Corporation - Senior VP, CAO & Principal Financial Officer

* Timothy A. Messner

DISH Network Corporation - Executive VP & General Counsel

* W. Erik Carlson

DISH Network Corporation - President & CEO

* Warren W. Schlichting

DISH Network Corporation - Executive VP & Group President of Sling TV

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Conference Call Participants

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* Craig Eder Moffett

MoffettNathanson LLC - Founding Partner

* Douglas David Mitchelson

Crédit Suisse AG, Research Division - MD

* Jason B Bazinet

Citigroup Inc, Research Division - MD and U.S. Cable & Satellite Analyst

* Kannan Venkateshwar

Barclays Bank PLC, Research Division - Director & Senior Research Analyst

* Marci Lynn Ryvicker

Wolfe Research, LLC - MD of Equity Research

* Michael L. McCormack

Guggenheim Securities, LLC, Research Division - MD & Telecommunications Senior Analyst

* Philip A. Cusick

JP Morgan Chase & Co, Research Division - MD and Senior Analyst

* Richard Scott Greenfield

BTIG, LLC, Research Division - Co-Head of Research, MD and Media & Technology Analyst

* Walter Paul Piecyk

BTIG, LLC, Research Division - Co-Head of Research and MD

* Drew FitzGerald

* Scott Moritz

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Presentation

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Operator [1]

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Welcome to the DISH Network Q1 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over the Jason Kiser. Please go ahead, sir.

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Jason Kiser, DISH Network Corporation - IR Contact & Treasurer [2]

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Thank you, and thanks for joining us, everybody. I'm joined today by Charlie Ergen, our Chairman; Erik Carlson, our CEO; Brian Neylon, President of DISH; Warren Schlichting, President of Sling; Paul Orban, our Chief Accounting Officer; and Tim Messner, our General Counsel. And ordinarily, Tom Cullen would be in the room with us, but he's traveling out of country this week, so he isn't able to make the call.

I think Erik and Paul have some prepared remarks, but before we do that, Tim needs to do the safe harbor disclosure.

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Timothy A. Messner, DISH Network Corporation - Executive VP & General Counsel [3]

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All right. Thank you, Jason. Good morning, everyone.

Statements that we make during this call that are not statements of historical facts constitute forward-looking statements that are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and/or from our forecasts. For more information, please refer to the risks, uncertainties and other factors discussed in our SEC filings.

All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear.

You should carefully consider the risks, uncertainties and other factors discussed in our SEC filings and should not place undue reliance on forward-looking statements, which we assume no responsibility for updating.

As part of the process for FCC auction 102, we filed an application to potentially participate as a bidder for those spectrum assets. Because of the FCC's anticollusion rules, we will not be answering any questions about the auction during today's call.

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

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W. Erik Carlson, DISH Network Corporation - President & CEO [4]

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Thank you, Tim, and good morning, everyone. Both Paul and I have a few remarks before we open it up to Q&A.

On the Wireless front, we're tracking to complete by March of next year our Phase 1 buildout, and our deployment team is busy this spring as we continue to install towers across the nation. Charlie is here for questions on Wireless.

In the quarter, we really remain committed to our strategy of delivering the best service, technology and value to our customers. The key customer benefits are a way for us to stand out in really a challenged linear TV environment and, in our view, a way to attract loyal, high-quality and profitable subscribers.

Service is a constant priority for us, and I want to take a moment to congratulate our in-home service technicians. Look, these folks really have a tough job 365 days a year. And last quarter, for the second year in a row, our in-home services team earned the second -- the highest score in our segment from J.D. Power for in-home customer satisfaction. So I just want to thank our techs for the work you do with our customers every day.

Now our focus on the overall customer experience, like delivering excellent in-home service, has really yielded consistent results. In the quarter, we reported a monthly churn rate for DISH TV of 1.74%, which compares to the year ago period of 1.47%.

With that said, a few comments on program. First on Univision. After months of work to find a deal that will be fair to all parties and in particular for our customers, we announced an agreement with Univision at the end of the quarter. That hard work was on behalf of our customers and the Hispanic community that we've served for more than 20 years, and we continue to serve with quality content at the right value. Univision has been a good long-term partner. I appreciate the work the new management team did to help us reach an agreement.

With regard to HBO and AT&T, there's nothing new to report. We recently met again with AT&T, but unfortunately, they only offer different words with really the same meaning. AT&T wants DISH subscribers to pay for HBO whether they want the channel or not, and AT&T continues its anticompetitive behavior by really forcing a lose-lose choice for our customers. Switch to AT&T's platforms or have us subsidize HBO so AT&T can give it away free to its customers. Our view hasn't changed. AT&T's stance remains one of the fundamental negatives of the merger with Time Warner.

Now as we've indicated in the past, churn attribution is not a perfect science. There's lots of factors that go into it. But looking at the first quarter, it's fair to say that together, HBO and Univision accounted for something a little less than half of our net sub loss.

I'll wrap up with a quick look at Sling. We continue to grow our Sling subscriber base and continue to lead the live OTT category. While the rest of the marketplace is in turmoil regarding pricing and position, we remain focused, focused on delivering a great experience, meaningful value, [TV] flexibility and category leading stability. Ad sales in the Sling for us in the first quarter nearly doubled year-over-year, and we've enabled live dynamic ad insertion in our more than 90 networks. We continue to see strong penetration of margin-rich add-ons, like premium channels in our Cloud DVR offering. And with every move our competitors make, we become more differentiated, reaffirming our strategy of offering flexibility to the skinny bundle.

With that overview, I'd like to turn it over to Paul who has a few brief remarks in the quarter, and then we'll open it up to Q&A. Paul?

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Paul W. Orban, DISH Network Corporation - Senior VP, CAO & Principal Financial Officer [5]

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Thank you, Erik.

Our core Pay-TV business continues to focus on acquiring and retaining high-quality subscribers with long-term profitability. In the quarter, we adopted the new accounting standard for leases on a prospective basis. This standard requires that we report operating leases on the balance sheet, and this has resulted in an increase to both assets and liabilities of $726 million. The adoption of the new standard does not have any impact on our net income or cash flows.

Q1 operating income and EBITDA were both lower year-over-year by $73 million. This is principally due to a lower Pay-TV subscriber base. We generated free cash flow of $322 million during the quarter, and we ended up the period with $2.4 billion of cash and marketable securities on hand. These amounts will be used to retire $1.3 billion of our senior notes due on September 1 of this year.

Revenue declined 8% year-over-year due to fewer DISH TV subscribers. This is partially offset by higher Pay-TV ARPU and a growth of the Sling subscriber base.

Subscriber-related expenses also decreased 8% as a result of fewer DISH TV subscribers. Programming expenses were positively impacted by the Univision and HBO channel removals. Improvement in our variable expenses continued with increases in operational efficiencies and as a result of fewer subscribers.

We have continued our focus on acquiring and retaining high-quality subscribers. Our subscriber-related margins have remained roughly flat year-over-year.

Our G&A expenses increased as a result of certain litigation accruals and increased costs to support our Wireless initiatives. G&A in Q1 2018 was positively impacted by legal fee reimbursements.

As a reminder, substantially all of our interest expense is being capitalized while we are building our Wireless network. Much of our other spend related to the buildout is also being capitalized, so you will not see that in the P&L.

And now looking at our metrics. Pay-TV ARPU was up due to DISH TV price increases in 2019 and '18 and continue the increases in revenue per subscriber related to Sling. These increases were partially offset by a high percentage of Sling TV subscribers present in the overall Pay-TV subscriber base.

We also saw a decrease in premium channel revenue mainly related to the removal of HBO. The Sling increase was mainly driven by a mix of 3 factors. First, customers taking higher priced packages; second, increased add-on revenue from extras, ad sales and Cloud DVRs; and lastly, a $5 increase on our Orange package from the third quarter of 2018.

DISH TV stack increased to $828 per activation, up from $707 per activation last year. The increase in the Pay-TV stack was due to an increase in hardware costs and advertising costs per activation. Do note the year-over-year comparison -- or for the year-over-year comparison, DISH TV stack in Q1 2018 was positively impacted by the reactivation of 24,000 customers in Puerto Rico at a lower cost per activation. We continue to gain a greater percentage of high credit and -- based customers each quarter. We are continuing to invest in new customers by offering a higher percentage of our subscriber hop receivers, which deliver a better customer experience.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Doug Mitchelson with Credit Suisse.

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Douglas David Mitchelson, Crédit Suisse AG, Research Division - MD [2]

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A couple of questions for Charlie. Charlie, first, I think about this time last year, I asked about financing for Phase 2. You said potentially $10 billion to build out, and you said about this high in this year. I think 2019 will be the time you'd start to address that. Is -- any sort of commentary around that financing?

I think the second question, Charlie, is in terms of getting the IoT Wireless buildout sort of done on time, and you talked about progress towards that, from an FCC standpoint to perfect the licenses, do you also need a bona fide IoT business in place? Do you need customers and marketing the like as well? Or should we just focus on the buildout itself as to what you need? And then I have one more follow-up.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [3]

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Yes. I'll take the second part first. The terms of our flexible use license, I don't believe that it requires a service, doesn't -- I know that really addresses customers. But obviously, it has to be -- our intention is to build a network that is a viable network and viable service. And I'm hoping we'll have lots of customers on the thing. It's a -- it's not ideal in the sense that again, we have one hand tied behind our back because we've only got 5 megahertz of nationwide spectrum, which is H Block, which is a nonstandard kind of frequency and not the deal frequency for uplink and IoT network. Obviously, we'll feel better when we can bring our 600 megahertz into the system, but that can't -- for us, on a nationwide basis, that's not possible until that spectrum is cleared. So -- but it'll be a viable service, and we've received -- we're not spiking a football that in terms of being done that we're making steady progress and learning a lot and making lots of mistakes and getting new business. We're focused on making sure that happens.

In terms of -- to answer the second phase of the network. I think that even your question shows kind of one of the issues we have, which is the FCC is an overhang because obviously, we're coming under a scrutiny with a letter that they wrote to us and other things. That's an overhang in terms of perception out there, and that may not be reality, but it's certainly the perception in terms of a risk factor that we don't think should be there. We don't think it is there. So fortunately, at least for people in the home [work], in this quarter, we saw a couple of things. One is AT&T not only announced a nationwide IoT network, I think, this week or last week, which kind of takes away the argument that IoT is not a service, right? And the second thing that happened a couple of weeks ago is they actually perfected some of their licenses. I think they have about a dozen of their licenses, they perfected those license with the FCC with IoT network as the only service that they had. So -- on it. So the -- what should be good for AT&T should be good for us.

So I think the argument is whether IoT as a service is probably one that some analysts -- a client that does not -- under a license does not allow, but I think that argument has been put to rest. But the FCC -- the government picks winners and losers. The FCC can do whatever they want. They can say that we're not [there].

Having said that -- so that -- so in terms of raising money, we don't need capital today for the Phase 1. Phase 2, we clearly are going to need. We've estimated $10 billion. That could come in a lot of forms because obviously, in terms of partnerships, you may have people contribute things that doesn't -- don't require cash for us, but we certainly realize that we're going to need to do some things there.

Having said that, the story is -- the business is -- the story has gotten -- is really, really good, and the business plan is getting better and better and better. And I think that ideally, with the overhang of the FCC behind us and then be able to tell the story without maybe some of the skepticisms out there and people are a little bit more open minded about where we're going in the power of 5G and the power of stand-alone network in 5G, and what 5G really can do, things aren't really obvious to people today, but that's maybe a more proper time for us, and that might be not -- may not be an issue because I don't think we can solve that -- I don't know we can solve the FCC overhang, so we build our network and meet our internal deadline that we have here and just execute.

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Douglas David Mitchelson, Crédit Suisse AG, Research Division - MD [4]

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Thanks for that. The follow-up is I think for the first time since you've launched service, you're going to have some leverage over Disney with the coming Netflix and Nat Geo renewal and given your willingness to drop HBO and Univision, I just wonder if there's horsetrading that you see there or whether -- any thoughts on programming cost coming down a little bit in the back half of the year following that renewal? And I guess (inaudible) are now with Sinclair and that might be an off-cycle deal as well. But your thoughts on programming cost this second half of the year given the unique renewal structure with FOX having merged with Disney?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [5]

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Well, I mean, I think the big picture is I think that contracts have to change in the linear business, right? You can't -- you've heard this from AT&T, [TO] and others, but you can't have double-digit declines in viewership and have 6%, 7%, 8% increases in pricing when customers are watching less. That's just not sustainable, and some people are asking for more increases than that.

So I think the Univision was very painful, but it was one of the few contracts that we have where the incentives on both -- and the reason we ultimately came to an agreement is the incentives for Univision and DISH are now very much aligned, which is a bit unusual. And I think that's the way contracts in the future should be done so that we share in each other's success. And to some degree -- so we've had a good relationship with Disney. Obviously, they're -- they've got now a direct-to-consumer business. We don't understand where we fit in that strategy. We hope we understand where we fit in that strategy. And to the extent we fit in that strategy and we can do a fair deal with our customers, that should be pretty easy because we've had such a long-term relationship with them.

To the extent that they're -- that the linear TV business is not part of their future, it might be difficult. So we just don't -- we don't know. And obviously, with Sinclair, we're doing a lot of stuff with Sinclair, particularly in ATS-3.0, so hopefully, to the degree they're successful to regional sports, which could be a really good deal for them, hopefully, we can be productive and get aligned in an agreement that will be aligned for both of us, and that will be productive. So we're pretty easy to work with as long as people take -- people look to do something that's fair and not try to take advantage of the situation.

I mean obviously, AT&T probably is going to stack the deck with this because they have the motivation that -- it appears their motivation really was to take our subs, so they never -- they didn't really try to present the deal that will make any -- they knew they wouldn't do something completely stupid, and so they didn't present anything that was really reasonable, but they had a different motivation, which was to take our subscribers.

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Operator [6]

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Now we'll move to a question from Kannan Venkateshwar with Barclays.

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Kannan Venkateshwar, Barclays Bank PLC, Research Division - Director & Senior Research Analyst [7]

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Just a couple. First is stemming from the FCC perspective, just with our understanding, once you build out the network, is there a deadline for the FCC to approve or ask for changes or do anything with respect to the network? Or there's no hard deadline and they can take their time and come -- in approving or rejecting the network?

And secondly, just from a cash perspective, historically, I think you guys have always maintained $1.5 billion to $2 billion of cash on the balance sheet. Now that the business is smaller, just wanted to understand what the minimum cash needs are just for the core business.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [8]

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Our minimum cash deeds are dollars. So we've maintained cash balances for (inaudible) because we're always looking for opportunity out there. And sometimes when you have cash, you have the ability to take advantage of an opportunity out there. Obviously, we believe the best opportunity for us is building a new state-of-the-art stand-alone 5G network. We think that's the best opportunity, that's what we'll use cash for. And obviously, we have debt payments that we have coming up as well. So we're pretty clear probably where our cash balances are going to go absent some change in the marketplace. Those are the [prior] question?

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Unidentified Company Representative [9]

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IoT.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [10]

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Traditionally, companies just file their build out, and that's accepted in short order and life goes on. We would expect that we would be treated the same as President has been in the past. But obviously, the FCC sometimes changes President, and that's always a possibility no matter what you're doing. But again, I don't want to make -- where the FCC wants to go is exactly where this company wants to go, right, which is this FCC, to their credit, wants this country to lead in 5G. And I don't believe that it is possible to lead in 5G based on what I've seen around the world. I don't believe it's possible to lead 5G without somebody entering the marketplace with a new build of 5G and all the 5G can do and the architecture that's required to do that.

Simple examples. Today, you've heard about MIMO antennas. Most people's antennas aren't MIMO antennas. Today, you've heard about virtualized networks, right? Nobody's got a virtualized network today, right? The FCC would like more broadband, particularly rural broadband. That's a pretty interesting thing you could do once you build a new network from scratch. That -- the economics of that gets to be pretty interesting, right? So DISH Network is on -- in fact, I'm going to digress to the question, but there's kind of 3 things that have happened in this quarter that are worthy of note. One is AT&T has perfected licenses with the IoT network. So the last 2 years, we've answered questions as to whether an IoT is acceptable network. I think that question is answered, we think, by AT&T. The second thing is that new band spectrum is now particularly around the world. 5G networks around the world are being built with big band spectrum. T-Mobile's building is going to do some 5G in 600 megahertz low band. And Verizon obviously looks to be at least initially a lone wolf in the world today at the millimeter wave technology. But where the puck is going is people are starting to look more and more mid-band for 5G. That's not surprising to us, right? But we're -- we are well positioned in the mid-band spectrum and low-band spectrum to build a 5G network, and that's becoming more evident that those people who really -- people who -- particularly people who made the test, they took the millimeter wave stuff on the short term. That's not to say that millimeter wave is not going to get their long term, but millimeter wave is going to have some challenges for a full 5G network for most consumers in the short term.

The second and the third thing is that people are -- that the very knowledge of people now understand that architecture has to change for A Wireless network. The legacy of 30 years of wireless networks is unsustainable. And to do -- to unleash the power of 5G. So a company called Rakuten in Japan demonstrated -- or not demonstrated, but talked about at Mobile World Congress of their architecture for a fully virtualized network. They had small companies like Dell, like Intel and Cisco and other people supporting what they're doing and some other names you probably haven't heard of, right? But that architecture is for people who now really understand that that's starting to gain credibility, right? And as we've been talking about architecture for a long time making a difference, we're in a position to build a virtualized network from the ground floor up. That's something that's very, very different for legacy companies to get to. In fact, it will take them a long period of time to do it.

And I think over the next quarters and maybe next years, that architecture people will try to understand that architecture is -- the technology change of 5G is important, but it can't be fully utilized until you change you architecture, which means you got to -- it means you've got to go to every tower and tear everything down and build it back up again. And that's difficult to do when you got 100 million customers. In our case, we don't have any customers, so we can build it right the first time. Sorry for the long answer.

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Operator [11]

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We'll now hear from Philip Cusick with JPMorgan.

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Philip A. Cusick, JP Morgan Chase & Co, Research Division - MD and Senior Analyst [12]

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Two if I can. First, Charlie, to follow up on that, we've been hearing that the complexity of the Rakuten build is creating delays. How are you doing on building the architecture of your 5G network and how reliant are you on their success?

And then second, Erik, you mentioned talking to AT&T about HBO. Can you give us an idea of the impact of Game of Thrones in April? Should we expect churn to pick up again this quarter? Or do you think it's mostly through in the first quarter?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [13]

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Go ahead, Erik.

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W. Erik Carlson, DISH Network Corporation - President & CEO [14]

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Yes. So Phil, obviously, we're not going to -- we know they don't give guidance, so we're not going to give guidance on kind of 2Q and what you see from a HBO perspective, but here's what I will tell you.

Obviously, we talked a little bit about Q1 in my opening remarks. There's really -- when we think about HBO, there's really a few ways to -- that our customers are able to access Game of Thrones, and we've been quoting some of the trades on how we're helping folks to get that, but we kind of put it in 3 cohorts, right? You have folks that are in linear TV today, so on a DISH TV platform that can stream. They have the right broadband throughput to stream, and they do stream, right, for -- could be Netflix, could be a variety of things. Those folks has been -- it's been fairly easy for us to help them understand where Game of Thrones is available. And usually, they've been able to sign up for a month or 2 to get the Season 8 of Game of Thrones.

You've got a second cohort, which are folks that have the ability to stream the right broadband throughput but haven't really streamed before. And so we've been able to help a lot of those folks find a device or mechanism, like an Xbox, something maybe they have in their house already, an iPad, and get them signed up to be able to consume the content -- the Game of Thrones content that they want for the next month or 2.

And then you've got a group of customers, and Charlie alluded to this a little bit earlier, is which they really can't stream, and so they don't have a solution. They rely on satellite TV to get a premium service. And with the removal of HBO from our service, obviously, AT&T through DIRECTV has been able to acquire those subscribers who are interested in it.

And so we're continuing to monitor the situation closely and try to provide the best experience we can in spite of our circumstances that we're in, in order to help get folks Season 8 and kind of get through the next few weeks of Game of Thrones.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [15]

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Phil, it's Charlie. First of all, for Rakuten, I'd say this, when they started on their -- they started on architecture of August of last year, so they've been at it for whatever it is, 8 months. And they -- for me, it's unbelievable what they've been able to do in 8 months in terms of designing a new architecture and bringing together the parties and the partners that they have, again some you've heard of and some you haven't, but they're all incredibly, incredibly talented companies. I mean like kind of best I've ever seen particularly some of the smaller ones that are involved with Rakuten. So I don't have any inside information if they're on schedule or running into roadblocks. It's a complicated thing that they're doing. My expectation is that they will run into roadblocks as they go on as will we. It's just whether you're tenacious enough to overcome them with your partners are going the same direction. And for all indications, they have a lot of that in their companies.

We're somewhat dependent on them in the sense that we're very fortunate that they're -- that they are first because much of what they're doing, I don't know that we would've had the skill set to assemble that powerful -- that good a team -- as good a team as they have. I don't know if we have that skill set. I don't think we understood that -- I don't think -- August of last year, we understood the power of the architecture, the way that they did. And so we're learning an incredible amount. And I think that -- I don't think they have to be a wild success, but I think what -- but I think they do have to make breakthroughs in technology and software. And I think that will happen, and I think that will give to our benefit. And it reminds a lot of 1994 when we started to build our satellites in 1992, we believed that digital compression was going to be there by 1995. But we've never built a digital compressed set-top box before, and we've never done some of the things that were necessary. It's a very complex project.

We were fortunate that DIRECTV and RCA did a lot of heavy lifting in terms of making it digital, although not truly MPEG-2, they did do digital compression first and they did a lot of the heavy lifting, and we were able to come in and take the lessons learned from them and some of the vendors that they used and make a true -- the world's first really MPEG-2 product that we had a better product. We do things like -- we're the first guys to do flash memory, and the set-top box is an example, so we can download software, put an end to replaced equipment. So we were able to take it and build upon what they were able to do. And I think in this case, not just Rakuten, but a couple of other companies around the world as they go to virtualized networks will be able to build on that because our network is not tomorrow. Our Phase 2 is still years out, and we're now confident that enough people are focused on virtualization of the network that we'll be able to find the team to help us.

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Philip A. Cusick, JP Morgan Chase & Co, Research Division - MD and Senior Analyst [16]

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Charlie -- Erik, if I can follow up. You see the data on your customers viewing on your set-top box. Was Game of Thrones a big part of your HBO viewing in the past?

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W. Erik Carlson, DISH Network Corporation - President & CEO [17]

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No. So I think that's probably just a level of detail that we're not going to share here. But you are right, I mean, we do have viewership on our customers, so we understand what content is watched, when, where and the trends.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [18]

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It's not just Game of Thrones for HBO. I mean HBO, if it's Game of Thrones, people will just drop HBO after it's over. So HBO is a powerful brand out there and has a wide variety of following. Having said that, it's an issue of battle because customers -- we're not just really the #1 and they don't service. We've been #1 in customer service for a while now. And people like DISH. And when -- and so there are -- some of our customers say, hey, we'd love to have HBO, but we're going to support you. We don't want higher fees. We don't want to pay money for it when it's available elsewhere or whether somebody else is giving it away for free. We understand, and we like you well enough. We're willing to stay with you. Some people are so HBO, is their life -- is their whole life blood, and they leave us.

And I think in terms of the quarter, to Erik and his teams, with Univision down and HBO down, the results of churn are actually pretty incredible because if you take the churn of the services being down, it's pretty low. I don't know if it's a record low but anything you want to add?

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W. Erik Carlson, DISH Network Corporation - President & CEO [19]

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It's definitely close to a record low. I mean we're definitely seeing very good results. Based on the transition that we've been going through and talking about for quite some time, which is really focusing on the right customer in the right geography and focusing on profitability and getting high-value customers. So obviously, there's less impact. But you're right, I mean, Charlie, in my opening, I mentioned that a little bit less than half of our net sub loss could be attributed to channel removals in Q1.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [20]

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So my point is some of those customers went to our competition, so their numbers are artificially popped up. Ours are artificially negative given that Univision is now back on service, right? We're still going to have the headwind from HBO, obviously. But on the Univision side -- there could be a slight headwind in Univision because now we raised our price so some customers who don't watch Univision say, I'm going to leave you because I don't -- now I'm paying too much money because I didn't care you took Univision off. But I think the vast majority of our customers appreciate Univision. With the right motivation between Univision and DISH, that's actually a place we can start -- maybe start grow the business with the help of Univision. We actually grow that business now.

So it's actually from my perspective, Erik and team did a pretty good job of fighting through the last 2 quarters with some pretty -- since -- I think customers like us, and they'll hang in there. And they like the fact that we're -- we are the company that fights -- we're one company that says the linear TV business is not sustainable. Something has got to change, and we've got a lot of ideas on how to change it.

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Operator [21]

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Our next question will come from Mike McCormack with Guggenheim Partners.

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Michael L. McCormack, Guggenheim Securities, LLC, Research Division - MD & Telecommunications Senior Analyst [22]

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Charlie, maybe just a quick comment on what you're seeing out there. Got a lot of these OTT offerings with price hikes either in the rearview mirror or pending. At the same time, you guys are out there with Sling with pretty aggressive promotions. So maybe just some thoughts around what you're seeing in there from a pricing standpoint and your strategy around Sling.

And then just thinking about the maturities as we look out over the next couple of years, again, put aside Phase 2, but on the 2021 maturity list, I think it's not problematic, but from a cash flow perspective, probably not supportive. So what are the financing options as you approach 2021?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [23]

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Well, I mean I don't necessarily -- I'll take the first part and Warren will take -- I'll take the second part and Warren will take the first part on Sling.

I don't necessarily agree with the premise, but obviously, we are cognizant of the fact that we have obligations to bondholders, and we obviously -- we understand what our maturities are. So it is something that we focus on and something that we develop plans internally to make sure we've been aggressive. So I don't know what else to say on that. Warren, you have the Sling question there.

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Warren W. Schlichting, DISH Network Corporation - Executive VP & Group President of Sling TV [24]

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Sure. So with respect to our strategy with Sling, I mean, Erik mentioned it earlier in terms of providing value and improving our user experience and always focus on stability but -- and profitability. So our Slingers promotions have done well for us.

Look, we are focused on providing -- on attracting profitable customers, and it's a marathon, not a sprint. So I think we like where we are. We like our position in the market with our competitors taking their prices up, that's only improved ROI, we think. And you'll see more of the same, I think, in the second quarter from us.

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Michael L. McCormack, Guggenheim Securities, LLC, Research Division - MD & Telecommunications Senior Analyst [25]

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Are you guys seeing rotation from your linear product into the Sling product?

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Warren W. Schlichting, DISH Network Corporation - Executive VP & Group President of Sling TV [26]

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I think we keep track of cord cutting on linear product, and I think it's inevitable we'll see some of that. But we don't specify between Sling and other OTT providers.

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Operator [27]

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We will now hear from Walter Piecyk with BTIG.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [28]

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Charlie, 6 or 7 years ago when you first started buying spectrum, you -- I think you frame -- you talked about the challenges that Pay-TV was going to face and kind frame spectrum as a hedge and maybe something from a broadband standpoint. But obviously, 5G is kind of a new opportunity. IoT is a new opportunity. When you think about the Pay-TV business, is it necessary to hold onto that just because it generates free cash flow to fund some of this buildout? Or given that 5G buildout could be larger and requiring a partner, are you willing to part with the Pay-TV business and obviously its free cash flow if you had an attractive offer?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [29]

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Yes. Let me start with, hey, should we start buying spectrum, I think, 18 years ago. Actually, we bought the first spectrum ever auctioned I think which was the DVS spectrum -- or we entered it. We didn't buy it, we entered the auction, so we've been in virtually every auction that the FCC's had both times. We don't get a lot because we don't have the money to do it. But we certainly saw 6 or 7 years ago the kind of things that people are writing about now, which is building your TV business because of the heavy advertising load and the disparity between the power of the content owner and the distributor that, that was so -- that things were going to happen where the price was going to go up more than the marketplace could allow it. So -- and that all has happened. And instead of putting money into a guy -- and we got penalized in Wall Street, we get -- because our -- we suddenly didn't grow as a company because we were taking the capital we had and deploying that in much longer-term vision of spectrum in Wireless. And the problem we had is that we wanted to do -- we were in a position to build an LTE advanced network, but the H Block rules got changed on us. And so we needed the H Block rules to stay the same for us to build that network. When they got changed, that threw us down the spiral of going all down [lake] and a bunch of other things that ultimately happened, which means we missed that paradigm shift window. That turns out maybe to be serendipitous because now, the 5G technology is a materially bigger breakthrough than the 4G than the LTE advanced breakthrough. And the architecture required is different. So had we built it, we're building it. We're building a traditional network today in IoT, and we're building it. We've got a receiver and base band process and all of the talent, all the archaic ways, that's what we're forced to do because the technology doesn't exist until next year to do it the right way. And so we're forced to build the network. I -- when I go to one of our towers, I want to throw up because we're building something that we know is -- technically it's going to work. It's technically obsolete compared to taking -- I guess the way I would describe it is when you go home tonight, go look at a tower and go to the [tail] tower. And when you look at the -- you'll see some antennas on top. They'll probably be MIMO antennas, so they've got to be replaced. And then you -- then you see radio. And then you go down to the bottom, you're probably going to see a shed about the size of a seat container. It's all got -- it's got baseband processing, and then it's got power and it's got all kind of wires, cables hanging there. We're taking that shift. We're going to take that shed and we're going to put it in the cloud. And I'm oversimplifying, it's a bit more over complicated than that, but we're thinking that big shed that everybody uses today for the most part, and we're going to put it in the cloud. And we do that, right, and we virtualize it, that means you can do something called network slicing, which means that we're not -- our business plan is not just about phones. In fact, phones may be a very small piece of what we're doing. We're able then to get into the power of 5G, which gets into robotics and smart cities and artificial intelligence and all the things that health care and climate change and agriculture, all the things that you can do with an API to industrial companies and verticals, right, autonomous vehicles, right? You can't do that with an existing network today. So that's why we're excited about what we're doing.

And look, I'm not going to convince anybody in this call, so I'm going to quit talking, right? But just watch us over the next couple of years and (inaudible)

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [30]

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But none of that has to do with the Pay-TV business. So if you can find a partner and fund it...

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [31]

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To answer your question, the Pay-TV business is still the biggest use of the network is probably going to be video. And so there are a lot of reasons why video makes a lot of sense. You saw T-Mobile go out and spend a fair amount of money on a [latent] video company because they believe video is important. So we think video makes sense, right? Having said that, is it as important as maybe we thought 2 or 3 years ago? I'd say maybe not quite as important as we thought.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [32]

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So on the flip side, why don't you push a sale? Rather than waiting for someone, why don't you put that thing on the blocks and try and get what you can get because you're losing 10% of our subscriber base every year and you haven't been positive on it for 6 years?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [33]

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Well, here's the -- a, [fancy] recommendation. We take a look at everything because we find that analysts like you, you have some good ideas, right? So that's one thing. But for a management perspective, at least the way I like to manage this, we want to build value every day. And so I don't believe that Erik and team built value in DISH last quarter. I don't believe that Warren and team built value in Sling last quarter. But they are very close to being able to build value, right? And the challenge for them, if they have enough tenacity and focus, I do believe we had a chance to build value in those. I know we build value in wireless. I know we build value in the last quarter. And if we can build value in video, then we should receive it. If we can't build value, then we've got to figure out a way to do it. But if we have to -- anytime in business, you can change your -- good management is changing things that -- we don't have to do the same thing we did yesterday. We can do something different. Erik, you might -- it's off the subject because you might want to talk about in-home services, right? That's a place we can build value, so maybe take it -- talk about what we're doing at home services.

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W. Erik Carlson, DISH Network Corporation - President & CEO [34]

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I think just for a second, (inaudible), it's one of the things that the capabilities that we built over the years by having to service DISH TV customers. And obviously, today, we're using a variety of different ways and are creating value through our smart home services group, whether it's taking care of DISH customers or Sling customers or other brands that we may not set out or be affiliated with from an owner perspective, right? So helping Amazon, and we've talked about Katie Holmes, and we've talked about the things that we're doing with other big brands to help where the in-home services group, and I mentioned earlier. I mean tough job. And as more things get connected, I mean there's just more complexity into the homeowners environment, and they need help, and we're definitely a resource that can help. And that's an opportunity and a capability that grows kind of from old legacy Pay-TV, so to speak. So it works out about a variety of things here.

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Richard Scott Greenfield, BTIG, LLC, Research Division - Co-Head of Research, MD and Media & Technology Analyst [35]

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It's Rich Greenfield. Just following up. Assuming you don't blow out of the Pay-TV business, as Walt just suggested, but Bob Iger at Disney recently was on CNBC and said consumers don't really want 150 or 200 channels for a significant price. I'm just wondering, as you think about kind of the future of the Pay-TV business, do you have to start tiering certain channels? The RSN deal, whether or not Sinclair buys it or not, I think your deal with RSNs is up this summer. Philosophically, do RSNs need to be tiered? I mean do you have to start putting channels on tiers and make smaller packages like you did with Sling, but do you need to start doing that across all of your business?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [36]

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Rich, it's Charlie. Look, I think the linear business has to change. The linear TV providers have said, hey, we've got long-term contracts. Let's just write it out and make some money and then tell them to try to pivot to direct-to-consumer while they're making that change, right? So with all due respect to Disney, not everybody wants to pay for ESPN either. So -- but they don't really give you a lot of choices about where you tier it. So everybody is looking at it on their own self interest. I believe that you should take a little bit different approach with it, and there's probably some things you can do on you linear TV business that long-term will be better for linear TV providers, but might not help them as much in the short term as they'd like. But long term, it will be better for them to extend the runway and have them more competitive. Because with linear TV, there's better content than there's way better content across the board than you would see on a Netflix or an Amazon or whatever or Hulu that people are paying for. There's way better content in general, but it's hard to get to, and there's a lot of commercials, right? So how would you make that look a little better and how would you make that more -- where would you -- how would you make a better product thinking about consumers first and say, if I'm a consumer, here's what I want because otherwise, it'll be like -- it will continue to kind of the way it is, except in rural America, right? And rural America, the skews are a little older, skews a little bit more -- they read more newspapers, it just skews a little bit more from what we're doing, and we started to focus on rural America about 3 years ago, and I think that's going to pay dividends for us. So there's a longer-term life of what we're doing.

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Operator [37]

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Now moving to a question from Jason Bazinet with Citi.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable & Satellite Analyst [38]

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I just have 2 basic questions. One may be a little bit naïve. If we get to this point where the 5G network is up and running, can you imagine it being a business-to-business relationship or wholesale? Or do you imagine serving consumers as well?

And then second, I think you filed last year some comments against the Sprint, T-Mobile deal. Understanding everything that you've filed on those public comments, are there any advantages if the government approves Sprint, T-Mobile from a business perspective?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [39]

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The first part of the question is that there's no question that within the 5G network, as we envisioned it today, that will have a big part of business to business. In other words, every Fortune 500 company, in my opinion, and we spent the last 3 years talking to CEOs about what they want to see in their wireless network, almost every Fortune 500 company would like to probably want to -- that some part of their business will be an API that they can actually have a slice of our network and it looks like their own network. So that's certainly a big part of it. When you're certainly looking at what we would call a neutral wholesale side of the network, so the creativity that people have to be [unleased] in a network. So think of it as wireless AWS in a funny sort of way. And the consumer -- and the network obviously will work for consumers, but I wouldn't say that the incumbents do a pretty good job with consumers today. They're going to improve their networks in their version of 5G. I'm not naming that 5GE, but the next version of 5G, they're going to improve their network for consumers. And that may be -- because their income is set maybe a little tougher for us without perhaps some pretty big disruption factors, which may happen but might not. So we'll have to see.

But as we architect it and as we roll out the architecture of what we're doing, it becomes more evident of what our network will be and where the profits will be and where we'll get a return on investment for that. We're -- (inaudible) announced Sprint, T-Mobile, yes, we publicly have been against it. The harm -- even their own economists are showing the prices will go up, and they've got it -- so as presented, right, they were against that merger because of the harm that that's going to create unless there's -- unless they solve the [4 to 3] kind of issue that they have with concentration and inevitable price increases.

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Jason B Bazinet, Citigroup Inc, Research Division - MD and U.S. Cable & Satellite Analyst [40]

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Any advantages?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [41]

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There's advantages of T-Mobile and to Sprint and to their executives who get $100 million pay off.

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Operator [42]

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And now we'll move to our next question, and that will come from Craig Moffett with MoffettNathanson.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [43]

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Two, if I could. One, just on the satellite business for a minute. You brought this up a minute ago, Charlie, when you talked about rural. How much of your subscriber base is sufficiently rural that you think it is kind of really well insulated from the competition even from OTT competition to the extent that there are limitations with their broadband connections, but where it's kind of insulated from cable competition at least?

And then on the Wireless business, could you just take us into a little bit of the process with the FCC? I think to some of us from the outside, it looks a little bit like a black box where you're kind of waiting to find out what the FCC says about what you're building. I suspect that's probably not correct, and you've got an ongoing dialogue with the FCC about what does and what doesn't satisfy the buildout requirements. I'm wondering if you can just comment on that a little bit and take us through how that process works.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [44]

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When you think on the FCC, you should do this homework if you haven't already, but just read the terms of the license, and look at the President that the FCC has. FCC generally goes by President, and we have what's called flexible use license. That license is eerily similar to what AT&T just did when they perfected their flexible use license, they perfected spectrum with an IoT network.

I think some of the confusion came -- when we first talked about IoT, which is probably 2.5 years ago or something, that was a new term for a lot of people and even people at the FCC, that was kind of a new thing and there was a lot of skepticism on a lot of people's part that an IoT network wasn't a real network or wasn't something that was -- there wasn't really business there. But in fact, all the major players now launched their own IoT network and in fact, that's kind of a detriment to us, right? We had hoped that they thought maybe with all the skepticism around IoT, we'd be the only guys doing IoT. We were pretty damned excited about that. Now obviously, we're going to have now a competition in IoT, but they have a head start on us. So it's going to be more difficult for us to be successful at least in Phase 1 than maybe we anticipated a couple of years ago. But I don't think the -- again, and I think that with the FCC wrote a letter to us asking about our network and put that out publicly, that -- it was an unusual move on their part and obviously created some skepticism on what we're doing that I think was probably unnecessary. But all I can do is have confidence. My experience on the FCC over 30 years has been as hard-working people that are focused on what's good for this country. And if that's the case, and I don't believe that's changed, and this FCC works really hard and this FCC is working really hard on wireless, then they're going to like what we do.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [45]

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But is there an ongoing dialogue...

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [46]

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They're going to like what we do.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [47]

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Is there an ongoing dialogue with that?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [48]

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I'm pretty confident -- I don't see the risk maybe that other people see there because what we're doing is going to be really good for the country and what we're doing is really impossible is too strong a word, but very difficult in the short term for other incumbents to do, and we're focused maybe on some different parts of the network than they are that -- and we want to beat China or beat the other parts in 5G. I don't believe this country can do it without people like -- companies like DISH, right? And again, I spent a lot of time traveling the world looking at other people's wireless networks. I'm excited about our opportunity to do this the good old-fashioned American way. We have great strength in software, so why not build a network for software? Because we don't have hardware providers in the United States. There isn't an incumbent out there today that's got U.S. hardware radios that I know of. They're all foreign. Some from China, some from Europe. Wow. If we could use good old American ingenuity to have a network that's more secure, does a lot more with software that's more efficient, that would be a good thing, and I think that's where the FCC wants to go. And so I think that -- I'm not expecting anyone to be a cheerleader tomorrow but I'm expecting them to be very curious on what we're doing and want to learn more about what we're doing, and I think they'll be supportive.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [49]

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But do you have an ongoing dialogue about it? I mean is it something where they give you feedback when you talk to them regularly about here's what we're planning to do and that either it does or it doesn't satisfy the buildout requirements so that this uncertainty gets taken out of the process?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [50]

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One thing about DISH is you can have a conversation with us and it goes in the vault. And so as much as you might want that information, we won't comment on that.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [51]

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I'm not asking for this (inaudible)

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [52]

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It's much, much better to have private conversations and know that those conversations will stay private. That is the better way to do business. And so you won't -- as you know, you don't get a lot of leads coming out of DISH.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [53]

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Yes. I'm just trying to understand not on the substance, but on the process of just are those conversations frequent and ongoing? Or is this really a sort of you do one thing and then wait for them to respond? I'm just trying to understand the process.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [54]

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You talk about the public process. We annually file reports on our progress, and those are public, right? And in the FCC's particular case this time, they did -- I will grant you, it was unusual, they did ask us for follow-up questions, right, which we addressed publicly. So that's the process that the world knows about, right? And so you -- but any other process that was private -- and by the way, to the extent there's an ex parte where there's something that would be -- it's ex parte rules so to the extent that there's something that has to be disclosed, we do that as the FCC when they need to. So all that stuff, we just follow the rules. But if there's private conversations between us and any company, right, or any agency, and that legally is not required to be disclosed, that's not something you're going to hear from us.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [55]

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Fair enough. And on the rural platform?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [56]

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Craig, I will tell you, why would a company -- the big picture stuff is we're investing -- we've invested $25 billion in spectrum because we think there's been -- nobody gave us anything for free. We went to auctions, we paid for it, right? Invested 25 years -- $25 billion. I personally invested 38 years in communications, of which the last 7 has been nonstop for wireless. Now why would you do that if you didn't think you could make a difference, right? And I was excited the first day we opened up our business in 1980 with the big DISH. I was excited sitting in China watching the satellite launch, and I'm excited about what I see in Wireless from a 5G architecture perspective, right? And it's fun to get up every day and build a team and work with hard-working people here at DISH to see if we can do that, right? No guarantees. Might fail. And some people are out there rooting against us, and some people see the glass as half-full, right? And we think -- I see it with the decks in our favor and we ought to bet. And we control -- with exception of regulatory, we control our own destiny, right? And if we control our own destiny, I think regulatory will be supportive if we control our own destiny it, let's see what we can do. That's where good management is. That's what's good about business. That's what makes it fun and that makes you get out of bed every day because we have a purpose. We have a purpose, and our employees have a purpose. That makes it a fun company. I don't know if I answered your question. Maybe have a follow-up.

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Craig Eder Moffett, MoffettNathanson LLC - Founding Partner [57]

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Well, I can ask a lot of follow-ups. I sort of beat that dead horse because I'm still trying to get at how much it's an ongoing dialogue, but I'll let it go. I guess there's the rural question that I asked before and how much is rural. But then I would also love to know just has your perspective changed at all as you think about -- it sounds like you're very excited about building a network. Has your perspective about the calculus of ever selling the spectrum versus building changed? And has anything changed over the last year or so that makes you more inclined for one or the other?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [58]

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I mean -- so first on rural, I'll make -- I'll say a majority of our people in rural -- I grew up in rural America. We're a rural company at heart. We think we can make a difference in rural. We're excited about things we can do in 5G broadband in rural America. We already own satellite broadband in rural America. So that's a big focus where we are. We think we're somewhat insulated in some of the things that are going on in linear TV but not totally insulated. So it's still a declining business, right? So I don't want to sugarcoat it, but we think we can build value there. I hope there continue -- can build value there. In terms -- You've never heard me say we're going to sell spectrum. I know a lot of analysts assume that's what we're doing. I certainly think people thought that it seemed kind of crazy that the company would go out and take on AT&T and Verizon and Sprint and T-Mobile and do something that seems kind of a crazy thing to do kind of like when we launched satellite, it seemed like a crazy thing to take on Comcast and AT&T and General Motors. But we want to be disruptive, and we think we can do it. If we fail -- if we're failing or is it regulatory environment as such, and we just can't do it, then in fairness to our shareholders and people who are employees and anything else, yes, we'd be forced in a liquidation situation. I don't know that we'd lose money, but I did see it as a personal failure. I really believe this company can make a difference. And I'm going to go out my soapbox here. Climate change. We can maybe do some things on climate change, right? And we can still have cows because when you go to agriculture with sensors and a 5G network built the right way, you're going to know how much to water or fertilizer. And more importantly, you're going to have data year after year after year on what you're supposed to do during the drought or so forth and so on. So we can have sensors and weather monitoring and air monitory, right, so that we can have that real knowledge about climate change instead of a debate between this side and that side, right? So we can affect climate change. We can delve in health care, particularly in rural America, right, because now you're wearing a device that tells you before you're going to have a heart attack before you have a heart attack. It means you can do robotic surgery in rural America so that people in rural America aren't penalized when it comes to hospital care or medical care. We can affect education, right, because that means we can eliminate or reduce the digital divide. It gets pretty exciting in the company, right? And we've got 15,000 employees who are pretty excited about it. And our job as management is to lead them despite the skeptics.

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Operator [59]

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We will now take our final question from the analyst community. (Operator Instructions) We will begin the media portion of this call following the answer to this final analyst question. And our final analyst question will come from Marci Ryvicker with Wolfe Research.

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Marci Lynn Ryvicker, Wolfe Research, LLC - MD of Equity Research [60]

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I have 2. We all have our own opinions on how Sling and Pay-TV are performing relative to our expectations. But Charlie, I'm curious how you would characterize Sling and Pay-TV relative to your expectations. I'm very curious about Sling especially after this quarter. And then a quick follow-up just from an accounting standpoint. This core CapEx line, is that where Wireless CapEx is being recorded?

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Paul W. Orban, DISH Network Corporation - Senior VP, CAO & Principal Financial Officer [61]

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I'll take that. Yes, if you're referring to the 10-Q, there's general corporate CapEx, and that's where Wireless will be.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [62]

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And to answer your first part of your question, Marci, I think I can't answer that question, but I would say yes, I don't believe we build value in Sling. In fact, I don't think we build value in Sling in the last year, and I think that's disappointing to me because every day I walked in, I try to manage by building value in what we're doing. And maybe a long-term value because one of our principles was think long term, right? And I think -- but having said that, Sling is perilously close to building that value. They just have to -- from a management perspective, they had to go do a few things. They know what those things are. They're executing on those things. They're going to build real value, right? If they don't execute, like anything else, if you don't execute on those things, you don't build value. So yes, I think -- I don't think we built, over the last quarters, value every day in Sling, but I think we can. And I don't know if you want to comment on that one. Warren, you give that speech publicly, but you give that speech every day.

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Warren W. Schlichting, DISH Network Corporation - Executive VP & Group President of Sling TV [63]

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I've never heard of that before. Look, we've made progress on a lot of our internal KPIs. So I guess I would say glass half-full, we continue to march forward. We still believe we're the only profitable gross margin basis OTT provider out there. And so I see wins. To Charlie's point, we need -- there's a lot of opportunity for improvement as well. Our user experience and the value we provide both have places where we can improve.

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Operator [64]

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

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Scott Moritz, [65]

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Charlie, speaking of obsolete 4G networks, the Sprint, T-Mo deal might face some challenges when that goes through. Are you too far down the road on your new network to have an interest in Sprint at this point? Has that window closed?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [66]

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Well, I mean I don't think I have an answer to that question. But obviously, I don't think it's public that 6 years ago, we tried to buy Sprint. I think if you look at the Sprint, T-Mo merger, fast-forward that they filed, you'll see that several companies were in discussions with Sprint in addition to T-Mobile, about their interest in Sprint. So I think Sprint -- I don't think Sprint is going away whether they have $100 billion parent, right? So if the merger doesn't go through, I think Sprint's going to have a lot of -- they could build their own network. They could improve their own network. They can -- they have a lot of options. Let's put it that way. But I don't think -- I think not having infrastructure today is an advantage because every wireless operator, let's say they have 50,000 towers, they are going to touch every one of those towers to get to a 5G network. They're also going to -- it's hard because if you're -- I don't want to get too technical, but when you have one of those big BTF things that you bought, your flexibility is the lowest common denominator. And so you're kind of stuck with incumbent things and tell you, you can break it apart. And what you're doing in a virtualized network, you break apart the physical layer in the user plane. You break all that apart, and then you've got to reassemble it. But you can't do that with vendors and put it all in one place. I mean you can. Those vendors had agreed to do it, right, and their on a path to do that over time. But we get to start from square one and -- they're all broken apart to begin with, and so all we have to do is assemble it. So it -- it's -- what I know about wireless today is taking me 7 years, 365 days a year, 7 years. So it's not all those bits and pieces aren't that well known. I don't know if I answered your question.

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Operator [67]

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We'll now move for our next question, and that will come from Drew FitzGerald with Wall Street Journal.

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Drew FitzGerald, [68]

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Two questions, if I could. First, are you at the stage now where for the Phase 2 buildout of the wireless network where you can have discussions with potential partners strategic, interested parties? And if so, what are they looking for or what do they seem interested in out of the network? And then second, on the Sling TV front, where do you see -- are the recent price increases overall in the market for virtual MVPDs, have those run their course or do you see that continuing?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [69]

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Warren, do you want to take that one on Sling?

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Warren W. Schlichting, DISH Network Corporation - Executive VP & Group President of Sling TV [70]

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Yes. So look, it's -- the Pay-TV business is -- have price increases for long time, and I'm sure they'll continue their price increases. I think Sling is proud of our ability to -- we introduced a skinny bundle, and we've been proud of our ability to keep it skinny and keep our unique structure of add-on tiers. So never say never, but we have kept our price even in the face of those price hikes. And we have -- we benefited from that. And so I think we'll continue to play that a month at a time as we go.

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [71]

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So the big picture is yes, when we talk to the department any time to answer that, but I think -- but not to mislead you, the conversations that we typically have been having have been what would you want to see in a network, so looking for customers to make sure we design the network with potential users in mind and it turns out -- and I'll make it up but they -- I'll make it up but there are certain themes that people want to know. They want security. They want access to data. They want on-demand pricing. It might be different in the middle of the night than it would be during the day. They want a nationwide -- they may want a private network for their factory, but they want to tie into a nationwide network. So there start to be themes that people have that we have a pretty good feel for what it would take in a network. And then most of our conversations with people now are from -- I use the word partner in a different way maybe than the analysts do, but who can help us build that network and what skill sets do they have and are they willing to take some chances on us, right? In other words, who's going to write that software? Who's going to help us with edge compute, right? So you start to hear -- you're starting to hear multi-access edge compute. Well, what the heck does that mean? And how we can -- what would you need to do there? There are people who already do some of that today. And so to the extent that people already doing some of that or have plans to do that, that would be better to partner with them than build that ourselves, right? And then there may be revenue opportunities outside of DISH Wireless for them, and they have to look at it. And so we had conversations with those people to see where they have an interest and where their business play is. But most companies that are involved in communications are peripherally involved in communications have -- are developing their own 5G strategies. And I'm not going to put words in their mouth, right? And I'm not in the inside of their board meetings and their strategy meetings. But when you develop a 5G strategy, you can't help but come to the conclusion that a stand-alone 5G network with mid-band and low-band spectrum is a pretty good place to start.

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Drew FitzGerald, [72]

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Got you. And are any of those potential partners? Would these be -- these would all be companies that would be looking to initially either supply expertise or be customers? Or would these also be potentially partners that could coinvest in the network?

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Charles W. Ergen, DISH Network Corporation - Co-founder & Chairman of the Board [73]

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Well, I mean I think we get -- I think we have equal discussions between people who primary motivation is to supply us some product and services. In other words, they're looking for sales, right, and an equal number of conversations where people are you seeing strategically, we think what you're doing will be important to us and into our business. Right? And therefore, we're interested in what you're doing because it would help our business beyond -- and they're not looking to be necessarily a supplier, right? And some people are waiting for us to fail to pick the pieces up and everything in between.

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Operator [74]

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With that, that does conclude today's question-and-answer session. I'll turn the call back over to your host for any additional or closing remarks.

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Jason Kiser, DISH Network Corporation - IR Contact & Treasurer [75]

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We don't really have any closing remarks, so I want to thank everybody for joining us today, and we'll catch on the next call. Thank you.

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Operator [76]

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And with that, ladies and gentlemen, this does conclude your conference. Thank you for your participation. You may now disconnect.