DISH Network Corp. (DISH) Q2 2020 Earnings Call Transcript

DISH Network Corp. (NASDAQ: DISH) Q2 2020 earnings call dated Aug. 07, 2020

Corporate Participants:

Jason Kiser — Investor Relations

Timothy A. Messner — Executive Vice President and General Counsel

W. Erik Carlson — President and Chief Executive Officer

Paul W. Orban — Executive Vice President and Chief Financial Officer

Charlie Ergen — Co-Founder and Chairman of the Board

Tom Cullen — Executive Vice President, Corporate Development

Michael Schwimmer — Executive Vice President and Group President, SLING TV

Analysts:

David Barden — Bank of America Merrill Lynch — Analyst

Jonathan Chaplin — New Street Research — Analyst

Dave Mayo — Analyst

Walter Piecyk — LightShed — Analyst

Richard Greenfield — LightShed — Analyst

Doug Mitchelson — Credit Suisse — Analyst

Philip Cusick — J.P. Morgan — Analyst

John Hodulik — UBS — Analyst

Bryan Kraft — Deutsche Bank — Analyst

Scott Moritz — Bloomberg — Analyst

Drew Fitzgerald — Wall Street Journal — Analyst

Presentation:

Operator

Good day, and welcome to DISH Network Corporation Q2 2020 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Jason Kiser. Please go ahead.

Jason Kiser — Investor Relations

Thanks, Jennifer. Thanks for joining us, everybody. Joined today by Charlie Ergen, our Chairman; Tom Cullen, EVP of Corporate Development; Erik Carlson, our CEO; Michael Schwimmer, our new President of SLING; Paul Orban, our CFO; and on the Wireless side, we’ve got Stephen Bye our Chief Commercial Officer; and for the first time Dave Mayo, our EVP of Network Development; and finally we’ve got Tim Messner, our General Counsel. Erik and Paul will have some prepared remarks but we [Indecipherable] Safe Harbor disclosures, so turn it over to you Tim.

Timothy A. Messner — Executive Vice President and General Counsel

Yes, I do. Thank you, Jason. Good morning, everyone. Statements we make during this call that are not statements of historical fact constitute forward-looking statements that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results and/or from our forecast. We assume no responsibility for updating forward-looking statements. For more information, please refer to the risks, uncertainties and other factors discussed in our SEC filings. As part of the process for FCC Auction 105, we filed an application to potentially participate as a bidder for those Spectrum assets. Because of the FCC’s anti-collision rules, we’re not able to discuss what if any spectrum resources we may intend to bid on and we will not be answering any questions on that auction on today’s call.

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

W. Erik Carlson — President and Chief Executive Officer

Thank you, Tim and welcome everyone to the call. To our analysts, media, and investor communities, I hope you’re staying well during this tumultuous times. I thank you for being with us today. Before I share a few observations on the quarter, I’d like to take a moment to recognize the entire DISH team and each and for every individual here for their dedication. I’m certainly proud of the job our team has done in responding to the COVID-19 crisis. Now, I’d like to highlight a few items across our business units. On Wireless, we continue to make progress building the nation’s first O-RAN compliant 5G network and since the last call we’ve named several key vendors including Altiostar, OpenRAN, Mavenir, Fujitsu, VMware. Charlie and Tom are with us today and are available to talk progress on our wireless efforts.

Now with regard to the quarter, DISH TV performed well with the gross activations of 268,000. From quarter-to-quarter, we actually increased by 5,000 subscribers. The crisis has an impact to customers’ willingness to open direct mail marketing allowing for in-home technicians into their homes. And as a result, we controlled costs and reduced marketing expenditures and our gross new TV subscribers did decrease. Our DISH TV strategy has been anchored to acquiring and retaining long-term profitable customers. In the past four or five years we focused on a more rural and higher credit subscriber base. We remain committed to that path. We saw DISH TV net subscriber loss of only 40,000. Lower losses are primarily the result of a lower churn rate due to COVID-19 partially offset by lower gross new additions with the DISH TV subscriber base and Paul is going to have more detail on this in a moment.

Turning to Sling, in the quarter, we lost approximately 56,000 subscribers and this is disappointing. The decrease in net Sling TV subscriber additions is primarily related to lower Sling TV subscriber activations, a bit of increased competition and delays and cancellations in sporting events as a result of COVID-19. For both DISH and Sling while the pace of activations has slowed we did adjust our marketing and brought more value to customers at an important time by delivering more content and free previews, with the help of our programming partners. And as always, we’re focused on providing excellent and safe customer experience. Throughout the pandemic we’ve seen customers’ usage of our products increase. We are pleased to see the additional engagements, the excellent Hopper experience that that platform delivers including on-demand apps and DISH Anywhere capabilities.

And that said, while news coverage was up, the loss of sports changed the viewing equation significantly and the increased competitive environment was also aggressive especially from a free and commercial free streaming services that flooded the space with introductory offers and promotions. With that said, we’re going to continue to focus on acquiring and retaining profitable customers. And delivering great customer experience at both DISH TV and Sling TV as we know we have room to grow. Now, as it relates to wireless retail we’ll discuss results in greater detail on our third quarter call, but I want to touch base on a few key updates. First, this week, we announced a partnership with Tucows. We acquired T-Mobile assets including customer relationships and the brand and will also engage with Tucows on technology services.

Next, I want to thank our integration team for their effort over the last several months. Our Boost team has hit the ground running in serving our new customers and welcoming the Boost employees to the DISH family. Our approach to Boost reminds me of only pivoted DISH TV, and that focus four or five years ago. And as I mentioned earlier, we implemented more disciplined strategy in acquiring and retaining profitable customers. And that’s exactly what we’ve begun to do with Boost. Our profitability is determined in part by what we pay to access the network. As most of you know, right now we’re operating as an MVNO, much like a track phone.

As we rollout our own network, we’ll begin to benefit for owner economics and that will drive profitability and allow us to be disruptive. In the meantime, we know we need to pivot the business. While we haven’t yet had a full billing cycle we’re already beginning to focus in acquiring more profitable customers and providing a great customer experience. In closing, I want to express my gratitude again to the entire DISH team. A lot of extra work has gone into taking care of our customers, taking care of each other and taking care of the communities that we serve. The efforts of the team has been commendable.

With that, I’m going to turn it over to Paul for a little commentary on the numbers.

Paul W. Orban — Executive Vice President and Chief Financial Officer

Hey, thank you, Erik. Before we get into the quarterly results I have two items I want to highlight. First, the impact of COVID-19 on our operations. And second, the closing of the Boost acquisition. As I mentioned in the first quarter, we have implemented a series of initiatives in our Pay-TV business to address the impact of COVID-19. We tightened our belt and put in place cost cutting measures to slow the pace of opex and capex. The benefits of this hard work are reflected in our quarterly results. As Erik alluded to gross new activations were negatively impacted and churn were positively impacted by COVID-19. As discussed in Q1, as many commercial establishment are closed or running at reduced capacity we put these accounts on pause or providing temporary rate relief.

These accounts represent approximately 250,000 subscribers and were removed from our Q1 ending DISH TV subscriber count. During the second quarter 45,000 of those subscribers restored service or had temporary rate relief band. These subscribers came back with minimal or no costs and they were added to our ending subscriber count without being counted as a gross activation. Of the remaining commercial accounts that were removed 17,000 of these accounts disconnected. We continue to expect the vast majority of the remaining commercial accounts to restore their service in the coming quarters. Combining the 45,000 subscribers discussed above with the 40,000 net subscriber loss related to the other accounts, DISH TV subscriber count increased by 5,000 during the quarter.

The next item I’d like to discuss is Boost. As Erik noted, we closed the acquisition and we will report Boost results in the first time or for the first time in the third quarter. We believe we will report Boost in our Wireless segment and we will disclose key metrics such as ARPU and subscriber data. We’ll also allocate the consideration paid to the tangible and intangible assets acquired and the liabilities assumed. All right, now looking at our P&L, our operating income and EBITDA for the quarter are both up significantly compared to last year. Our revenue decreased due to a lower subscriber base, partially offset by higher Pay-TV ARPU. The increase in Pay-TV ARPU was driven by price increases at both DISH and Sling and increases in premium and pay per view revenue.

In addition, we had fewer commercial accounts during the quarter. Most commercial relationships are included in ARPU on an equivalent billing unit basis, which means that ARPU for these accounts is lower than residential subs. Our subscriber margins for the quarter were positively impacted by reduced costs related to channel removals including regional sports and by our Pay-TV cost-cutting measures. Our DISH TV SAC is down this quarter due to decrease in subscriber activations. However, the cost per activation increased from $786 last year to $834. This is largely driven by fewer commercial activations this year compared to the prior year. These accounts have lower SAC than residential subscribers.

Satellite and transmission expenses decreased by $67 million. As discussed on prior calls, this reduction in expense was related to the acquisition of certain satellites from EchoStar last year. G&A expenses were up this quarter as a result of cost to support our wireless initiatives, partially offset by the cost-cutting measures that we did in the Pay-TV business. Our free cash flow of $574 million for Q2 benefited from improved operating performance and working capital. We expect some of the working capital benefits to reverse in the second half of this year. After redeeming our $1.1 billion debt maturity in May 1 we ended the quarter with approximately $2.6 billion of cash and marketable securities. On July 1, we acquired Boost for $1.4 billion and also laid $1 billion of debt. We still expect our 2020 wireless build out expenditures to be between $250 million and $500 million.

However, we will probably end up closer to the lower end of that range. Erik mentioned that we had recently entered into agreements with several wireless vendors. We expect the majority of the expenditures under those agreements to impact us in future years. And then lastly, if we manage it successfully our goal is that Boost will be accretive to both free cash flow and EBITDA. However, given the promotional and operational changes we are currently implementing it’s too early to predict. We currently have any or no economics and therefore we are pivoting the business to implement a more disciplined approach to acquire and retain profitable subscribers. As we build our 5G network and benefit from owner economics, this will drive greater profitability.

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

Questions and Answers:

Operator

[Operator Instructions] We’ll go first to David Barden with Bank of America.

David Barden — Bank of America Merrill Lynch — Analyst

Hey guys. Thanks so much for taking the questions and welcome on board to Dave Mayo. I guess the first question would be just kind of coming back to this Boost acquisition. In the past you guys have said that this business will have a track phone like margin recognizing that we’re in the promotional season would you stand by that assertion based on MVNO over the past quarter? And then second, if I could, Charlie, I think you teased last quarter that this quarter, you might have a little bit more kind of concrete information to share with us on the facilities that’s build and we’ve seen a lot of vendor announcements and obviously new people being brought on board. So if you could kind of give us an update on the status of where we are there that’d be super helpful.

Charlie Ergen — Co-Founder and Chairman of the Board

I didn’t quite catch all the second half but on Boost, I would say that first of all, we don’t even have four months of billing information since we paid T-Mobile for the network, so we are flying a little bit blind here and John Swieringa who is running that businesses — we gave him a day off, which we normally don’t do but given his success and the hard work that it was to put that all together and get that closed on July 1 is deserving. So I’ll have a lot of information on that next quarter because we’ll actually have financials. I would say this the margins will be low in MVNO business until you get owner economics with your own network and then the margins are quite good. So we have to pivot that business. The big thing The Street needs to understand is we have to pivot that business.

Sprint ran that without a P&L so Sprint ran that business really on a contribution margin basis because they own the network and the network had excess capacity, so there was no network charge internally for them. We have to pay T-Mobile for the network, so we have to run it a little bit different. So obviously some customers that were very good customers for Sprint potentially aren’t good customers for us. And so there has been clean up where in terms of — and then, we’re a little bit more conservative on how we account for things so we’ll have a little bit of cleanup there that we’ll go through and we’ll try to get all that done in the first quarter rather than wait. So we’ll have to wait and see — in this current quarter, yes. But I think as Paul said, our goal would be that we’re at least at least a $1 positive in EBITDA and cash flow, right, and then, obviously, we do better than that, that’s great.

And as we build our own network out obviously, we expect that to be materially higher. An update on DISH and where DISH is; we’re making very steady progress on our build out of our network. And you saw few vendor announcements. Probably the most important thing is we’re committed to the O-RAN architecture. We’re the only company in the United States that we know of that’s doing that; for a clean sheet of paper, we’re able to do that. Fujitsu is our first radio partner in that. They obviously are a very respected radio manufacturer in Japan, and we’re excited to have them on board to build radios. We’re working with other radio vendors too.

So a lot of excitement about O-RAN radios and the path that we’ll go down there. And obviously Mavenir are now just — are both are doing some of the software for some of — from the baseband distribution unit. And then we added VMware, which really allows us to stitch together the cloud. So everything that we are doing is things [Indecipherable], which is a buzzword for containers and micro services. But when you put all that together, you got to make it work and you got to make it work on different cloud providers and private clouds, and VMware allows us to horizontally go across the stack and stich that stuff together. And the way we look at partnerships, VMware has done a lot of work for us already even before we signed the contract with them.

They’re learning a lot about Telco and O-RAN and so they’re getting a real R&D sandbox to play in and they’re making our business better and we’re making their business better. So it’s a really, really good win-win for both companies and they’ve been a tremendous vendor even before we signed a contract with them. So the big picture thing is there is nothing — there is nothing that stops us from building really the best network in the United States. There is no law of physics — there’s no law of physics, there is no technology that really hasn’t changed. It’s really execution. It’s really execution risk for us and our vendors to make it happen. But we’re not reinventing science, we’re not reinventing anything. We’re just taking really good cloud providers and software providers and making what has been a very clunky, hardware-centered highly operational cost environment, very similar to data centers 20 to 30 years ago.

And we’re turning that — we’re going to make it into a modern network. So everything exists to do that. And we’re just going to go do it. We don’t spend a lot of time talking about it externally because everybody is going to be skeptical up until we light it up and then people will have their opinion about it. So that’s what we’re going to do. I also would be remiss, I wanted to congratulate Erik Carlson. This is his 25th anniversary at DISH. And he started out in a pretty entry level position up in Chicago 25 years ago and has taken on more and more responsibilities and he’s been running an doing an incredible job for us the last three or four years as the CEO of DISH and so congratulations Erik and job well done, and it’s been fun to watch you grow for the last 25 years.

W. Erik Carlson — President and Chief Executive Officer

Thank you, Charlie.

Charlie Ergen — Co-Founder and Chairman of the Board

Operator, next question?

Operator

We’ll go next to Jonathan Chaplin with New Street.

Jonathan Chaplin — New Street Research — Analyst

Great, Charlie, just following up on your, on the last question, when do you think we’ll have a more complete set of who all the vendors are and how the whole plan comes together? Is that something that sort of weeks or months away or do you think this will evolve still over several quarters? And then I know we’re forbidden from speaking about CBRS but I saw the disclosure in the 10-K — in the 10-Q about you being interested in more spectrum generally. I’d love to get your thoughts on the C-band auction that hopefully were not quite prepared for yet, but also on some of the other pieces of spectrum floating out there like the L-band?

Charlie Ergen — Co-Founder and Chairman of the Board

Yeah, in terms of your visibility — internally we, it’s all pretty much come together for us, I guess is a — so we have our senior team in place. We know exactly what we need to do. I’ll let Dave Mayo who is in charge of deployment maybe speak to that in just a second, but we know it’s like — when you focus — when you’re really a focused company, you’re not worrying about the external staff and a lot of times people try to spend a lot of time trying to convince people what they’re doing and we’re not trying to do that. We’re just going to go do it and then you’ll see it. So we’re in discussions with other vendors.

Obviously, there are more that we need to help us to get to where we need to go and they have to share the vision, we are uncompromising that they have to share the vision and take some risk with us to get there and not — and there are many companies — we’ve narrowed — we had about a — over a 100 companies that responded to RFPs, we’re down to usually two or three potential vendors for each category that we have left. It is a focus where we’d like to pick best-in-class vendors where they share the vision with us. And if they don’t share the vision with us then we move on. But I can tell you, the people we’re talking to today all do and I think the people on the inside of technology and inside of where networks can go who don’t have a legacy.

So when you have legacy and you can’t do something obviously you might have a different opinion. You rationalize when maybe something doesn’t make sense. But for people who don’t have legacy, I think it’s — it will become clear to clear the people that the direction we’re going is dramatic and it’s a paradigm shift and we’ll have to wait up till networks are built. And with that, and then in terms, I can’t talk about to CBRS auction. I think that’s in a quiet period. We historically have looked at every auction in case there is an opportunity there. We’ve looked at every piece of spectrum in case there’s an opportunity there. Obviously, we would be challenged from a balance sheet perspective, we’re obviously cognizant of that. But we piece together the kind of spectrum portfolio that need to compete in the modern network and we’ll continue to look for opportunity there now and in the future. With that Dave, may be just a little bit on the deployment.

Dave Mayo — Analyst

Yeah, sure. Sure, thanks, Charlie. And Jonathan thanks for the question. So our approach really is to vector ourselves towards the 70% milestone that must be completed by June of ’23 and in order to do that we’re building a field-based organization to help us with the rollout and that’s kind of really top of mind right now. We’re also in the midway through completing RF designs for all the markets, having conversations with the tower companies, both the national level, the big three, and as well as this — the second tier tower vendors in order to build a portfolio of choices and we think we’re in a great shape there and it’s pretty exciting what we’re seeing in terms of co-location rates. They’re very, very high. There’s lots of choices. In terms of field service vendors to help us get some of the more mundane detailed work done in the field there is lot — again, lots of choices and the team has done a really good job of building a portfolio of selection on a market-by-market basis that we’ll use to help us deploy the network.

Jonathan Chaplin — New Street Research — Analyst

Got it. Thank you.

Charlie Ergen — Co-Founder and Chairman of the Board

Thanks. This is Charlie. I might just add just to get a sense of timing. If we don’t get radios and scale till the second half of next year, because obviously we’re building a different kind of radio with O-RAN. So some of the incumbent vendors weren’t either — weren’t able to or couldn’t or wouldn’t participate in that kind of development but and Dave and team will be ready to go when the radios come in and start climbing towers. So that’s the — getting the supply chain and radios is a [Indecipherable] right now.

Operator

We’ll go next to Walter Piecyk with LightShed.

Walter Piecyk — LightShed — Analyst

Thanks, Charlie. Just a follow-up on — your comments about C-band, saying it will be challenged from a balance fee perspective. Is that something that will factor into discussions that you have with strategic partner to the extent that some type of partnership either through financial or otherwise could provide capital to grab some of that spectrum or do you find that C band spectrum to be not necessarily in terms of giving you enough assets to compete over a five or a 10-year period?

Charlie Ergen — Co-Founder and Chairman of the Board

Well it is still premature to look at C-band. I mean there is an option going on today, we’d like to see the results of that. There is, I think the FCC’s NPRM came out yesterday. I haven’t seen it yet on C-band. So we’d like to see that, but it’s — I think it’s certainly a good band. It certainly is one that we have spent time with overseas and played with and we’re certainly in a unique decision in the clean sheet paper in terms of design and the right network for the future. So we’ll have to wait. We’ll have to wait and see whether strategic. But we feel like we have the information that we need other than reading the FCC and seeing what happens in the current basically C-band auction today and kind of see where that goes. I’m sorry, I’m sorry, that a non-answer answer, but even if I knew what I was going to go and tell you.

Walter Piecyk — LightShed — Analyst

Okay. I was going to ask you another on O-RAN, but I don’t want to dominate the call like it’s an Analyst Day. So I’ll let Rich hop on with a quick one or maybe I’ll call it back to Rich. Go for it Rich.

Richard Greenfield — LightShed — Analyst

Just quickly, Charlie. We’ve seen basically every single media company, legacy media company basically jump — head into streaming from Peacock to HBO Max, Viacom put all of their network brands up on All Access and they’re calling it sort of a super store that’s been or a super service that’s going to re-launch early next year. With so much of the content on streaming now and everyone putting all of their exciting stuff and ESPN putting sports on ESPN Plus is there any point where you ever expect to actually have rate reductions? Like will we start seeing you pay less? I know you just did a deal with Viacom, that I think surprised a lot of people, but are rates ever going down, or are you just going to pay more even as content moves away from the bundle that you’re going for?

Charlie Ergen — Co-Founder and Chairman of the Board

Well, it’s a good question. I think that the rates should come down, and I think that when someone — we look at a couple of things. But we look at — we obviously look at how much people watch something, we watch the cost per hour as a simple example. And we see those trends declining for a lot of people in the industry. And the second thing you look at is, is the product available somewhere else? And if that product is available somewhere else obviously then the value to us because at that point as an industry we’re not exclusive that value goes down. And I think we’re — we approach it financially. We look at it and we make decisions based on the fact that how much it’s going to cost us, how many customers we think we’ll lose a result of that versus how much money we’ll say more in the region — obviously, our cash flow has been a little better than I think we had projected because of loss of regional sports, the loss of customers who’ve been rejected, because we knew that many of our customers don’t watch regional sports.

So there are other categories where they’re approaching regional sports status where those costs are going up beyond what the value is in terms of customers watching those and those will all be – we’ll have to negotiate through that. It’s a shame that we look at it as what the customers customer. I think the incumbent operators look at it for their budget and they just have a number they need to get to and we obviously we saw — Erik and his team saw five or six or seven years ago and which is why the company pivoted to a strategy that we’re less dependent on some of those things. I think it ultimately will lead a certain direction and we’re prepared for it and our linear business is solid and I think Michael is going to get an opportunity to take advantage of some of the streaming but in a way that maybe we had in the past but we’re disciplined there and we’re positioned well. Maybe the trend will change and I’m surprised it hasn’t got worse for us. But so far we’re doing well there.

Operator

We’ll go next to Doug Mitchelson with Credit Suisse.

Doug Mitchelson — Credit Suisse — Analyst

Thanks so much for taking the question. Couple of questions; wonder Michael Schwimmer are you going to be shifting strategy at Sling at all? I’m not sure if that was part of the purview for you coming into that role recently? And Charlie, I’m going to throw three that you. I think the fact that you’re planning on getting the new radio second half of next year is super interesting and the three questions are; one, once you get the radio is how long does it take you to climb the towers and install them? How much cushion do you have relative to those FCC timelines? I think it will be pretty quickly but I’m just curious. And does that suggest Charlie that you don’t really need to procure any financing that last $9 billion of the $10 billion build out really until second half of next year when those radios arrive? And lastly, just any update, I think you talked about the launch of your first market around year-end. And if the radios are coming second half of next year, are you getting some limited supply that you have first market or has that been pushed off? Thank you.

Michael Schwimmer — Executive Vice President and Group President, SLING TV

Okay. Doug. Thanks for the question. I think it was whether or not we are looking to shift our strategy at Sling. Sling has been really good at bringing in customers to watch unique events, sports and whatnot and made it very flexible for them to come in and lead without contracts and so forth. And we’ll certainly continue to be able to do that. I do think that there is a lot of opportunity out there, particularly given our low price point and some of the economic pressures that everybody is experiencing these days. At basically $30 bucks people can get a lot of programming that they want and we think we’re well positioned as folks’ entertainment projects gets compressed, as they take on some of these other SVOD apps, but we can still deliver a lot of what people want, maybe not what everybody wants with live linear sports, news and entertainment and so forth. So I think we will be more cognizant of the opportunity to bring in folks who are going to stay with us.

Charlie Ergen — Co-Founder and Chairman of the Board

And this is Charlie. First thing you have to do in a network is you have to do the RF planning and the site acquisition. So we have to do that anyway. And then get the permitting and zoning and permitting done and that typically takes anywhere from six months to two years, depends on the market. And that’s in progress in place today. And then, assuming we execute on supply chain management, and so forth as the radios come in we will strategically, I think Dave would like to build out and he can comment on this, but we have critical mass for a city — we won’t be able to piecemeal with we’ll have critical mass to build all those towers in that particular city at one time, radios will be there, permits will be there, leases will be there with the towers.

And then it’s a task of climbing the tower and installing the radios and antenna and hooking up everything to make it work. So we have a simpler radio design, we have a simpler antenna design than traditionally you’ve seen from people. It’s going to — the weight will be less. The cabling will be less. The amount of real estate we need at the site will be less, so it’s just a– it’s another leapfrog in how you might design and deploy something. So we’re hopeful that we can build pretty quickly once we get radios. And Dave, you may want to?

Dave Mayo — Analyst

Yeah. I think that’s right Charlie. And I’ll just pile on and say that, as I mentioned earlier, we’re vectoring towards that 70% objective and really getting the activity — early stage activities albeit design work and site acquisition work done across that whole suite of markets with the expectation that there’ll be markets that are much easier from a site act and a zoning perspective. Mostly small, second and third tier markets that we can light up much earlier in order to achieve that 20% threshold. That’s one year, nine months and 27 days away. 23 days away.

Doug Mitchelson — Credit Suisse — Analyst

So Charlie, am I thinking about it right that there’s really no financing needs until second half of next year or perhaps even a little bit after that?

Charlie Ergen — Co-Founder and Chairman of the Board

Yeah, I mean for our build-out, I think we ended up with — I think I heard a couple of billion dollars are in the balance sheet today. So, I think we don’t anticipate that we, that we spend that much money between now and next year but we’ll see.

Doug Mitchelson — Credit Suisse — Analyst

And sorry, lastly just that first market, are you still planning on launching up market this year or is that pushed out?

Charlie Ergen — Co-Founder and Chairman of the Board

We haven’t given up on the doing that. We’re waiting on prototype radios and we hope that we’ll still have a market up this year.

Doug Mitchelson — Credit Suisse — Analyst

All right, thank you so much.

Operator

We’ll go next to Phil Cusick with J.P. Morgan.

Philip Cusick — J.P. Morgan — Analyst

Hey, guys. Thanks. Charlie, thinking about the [Indecipherable] auction, headlines from cable companies going deeper into rural areas and the federal discussion on universal broadband how do you think it impacts the addressable market for satellite video over-time? And with fiber and wireless [Indecipherable] the long-term TAM of satellite broadband looks more [Indecipherable]?

Charlie Ergen — Co-Founder and Chairman of the Board

The addressable market. You have to answer the second — I didn’t hear the second part.

Dave Mayo — Analyst

First of all the addressable market for satellite broadband given the [Indecipherable].

Charlie Ergen — Co-Founder and Chairman of the Board

Well, I mean I think since I was on the EchoStar con, I think they have a little over 1.2 million subscribers in the United States that their capacity is full. There is excess demand by, I think reported today around 600,000 subscribers. The market is 1.8 million today in the United States for satellite broadband. That will get challenged as people build out more in rural America but the market could use a lot more capacity than it has today because I think I can’t speak for ViaSat, but I know EchoStar’s full. This new generation, I think what’s going to happen is as new generation satellites come on speed to go up and people use more and but I think I think there is a — I think there is a solid group of people in rural America that and small businesses and people for back up and then things like aeronautical and other users. And then for our satellite we look at it or they looked at it.

I’ll speak today. We look at it in lot of rural areas, we believe is broadband. There is a wireless backup. So we think there’s a real, we don’t see that going away. We seen that maintain and being a profitable business. And even though the amount of people getting access to high-speed broadband to the cable or perhaps fixed wireless will go up. And obviously one of the ways it’s going to go up is because wireless carriers will have the ability to do fixed wireless or even mobile wireless to compete against some of the cable companies in the future because 5G is going to add a lot more capacity out there so that’s going to be interesting development see how that that goes and we haven’t seen much of an impact from the millimeter wave stuff yet.

I would anticipate that the lower frequency — people will move to the lower frequencies, ultimately they’ll maybe pivot strategies and maybe have a different story next year because the economics are better. And that’s a good place for us. I mean, as a company, we have very good skill sets and satellite. We have very good skill sets in video. We now are incredibly skilled in O-RAN cloud-based architecture for the next generation of telcos. So we have the very unique in assets and the focus is how you put those assets together to have good services to consumers and businesses, enterprises will pay more because they will get a return on investment and obviously we have a huge investment in telco today as we do in satellite and video. But obviously telco [Indecipherable] today.

So, I want to say is everything that we see today is in terms of the core strategy is better than it was last year and it’s better last year than it was a year before. So the technology shift is dramatic, it’s not understood by most people, it reminds me of digital, when we were doing digital compression when people thought it was impossible or they would never make a difference. And we knew it was going to make a difference. We knew that analog video was just not the right way to go, once you could digital and ultimately when the technical problems were solved then it was just execution. And for us that was launching the satellite and building the set-top box.

But we’re in the same situation today. There is nothing in the law of physics or technically that prevents us from building this very modern network. That was different a year ago but the big technical issues that we were worried about particularly vendors and O-RAN radios that some people would call it flying the sky and saying five years out and seven years out and so the big guys aren’t going to do it, you can’t buy Chinese. We resolved that problem and others are doing that as we speak and the issue is in execution risk company right now. And the way you minimize the risk to execution is to built a good team. And we’ve got a good team. We need to strengthen it. We need bench strength and we need to strengthen at the lower levels, but we have an incredibly strong team that’s focused on the mission at hand.

Operator

We’ll go next to John Hodulik with UBS.

John Hodulik — UBS — Analyst

Thanks, Charlie. Maybe just on back to the wireless strategy, first on the prepaid side, you’re focusing on profitability like in light of MVNO economics. I guess should we assume that you guys will be less focused on customer acquisition. And as a result, you may see prepaid sales decline until you get the network back up? And then in terms of your entry into postpaid and then, any thoughts on the timing there and I guess given what you said at the MVNO, should we expect that you really will enter the postpaid market until you’ve got sort of critical mass of sort of facilities based networks towards the end of next year? Thanks.

Charlie Ergen — Co-Founder and Chairman of the Board

If I didn’t get it right Tom you can jump in. But on Boost we have profitable customers that for the most part in the customers that we acquired their subscriber acquisition cost is already been paid. They for the most part are profitable. There are some of those customers that perhaps the say Sprint accounted for them or perhaps the way they ran that business that wouldn’t make sense for us. So we certainly have some cleaning up to do there, but we’ll get that done. As far as new customers we just announced different plans. Today is really kind of the first day we really own Boost because we — it took us that long to get our new plans out in the marketplace. I think there’s five new plans today at Boost stores all under $50.

The postpaid is a place that there is more profitable even as an MBO as well and you saw our Tucows announcement maybe was it Monday? Monday and they are helping us — not only did we acquire a few subscribers but they are helping us with our ability to enter the postpaid business because that’s not something that Sprint or T-Mobile systems would work for us. So as a side light, I’d say that the prepaid business is kind of backwards. The United States is really the only country that I know of where the prepaid business actually is less expensive than the postpaid business. So today in the prepaid business you’d normally can get a free phone our near a free phone, even though you have no credit. And if you’re a credit holding customer and you have postpaid, you actually finance the phone. So you actually pay for it. So it’s actually a little bit backwards from it — if I put my financial analyst hat on I’d kind of scratch my head a little bit at some of the things that are done in the prepaid business. It reminds me of some of the crazy things that we used to see in the video business. Some of the things we saw in the OTT business where you sell below cost and make it up on volume and University of Tennessee freshman class finance 101, that’s the one thing I learned. I only learned one thing in finance class, but I did learn that and so we’re going to try not to do that.

Tom Cullen — Executive Vice President, Corporate Development

So, John, this is Tom. So to Charlie’s point that we’re selling, as some of the activity that goes on in prepaid, the discipline that Erik referenced that we’re going to be injecting into those, but your question is really around wireless strategy in general and we don’t view our opportunity as only prepaid and postpaid. There is a huge wholesale opportunity as we open up a market and unleash a 100 megahertz mid and low band spectrum we’re going to have so much more capacity than we need for pre and post-paid and at the same time with the Huawei push coming out of DC, there is quite a bit of support now for O-RAN. And the desire for a U.S.-based telco ecosystem. So we’re seeing basically — we’re getting inbound activity from every major technology company in the United States was that the enterprise focused companies or cloud-based companies and they’re all successfully now running Telco instances in the cloud. So the progress that we’ve seen over the last call it five to six months around automation, network slicing and the ability to sell wholesale capacity, it has been tremendous. So in our minds now, it’s inevitable that and it’s undeniable that O-RAN will be part of the landscape and while the wholesale wireless opportunity is much, much larger than people expect.

Charlie Ergen — Co-Founder and Chairman of the Board

And I think just as I think we — as we pivoted the world five years ago and obviously our subscriber counts went down and we got chastised for not having — not growing our sub base. But we grew our sub base where accounted and the same thing is going — there was a solid base. What’s going to happen here, we’re not just about handsets, as most of the incumbents are. That’s going to be a very competitive market. But the fact that an enterprise have a slice of our network and they’re able to have their own data and their own security and looks like their own network but that is going to be for a while. That’s going to be one of a kind and there are going to be companies that are going to get a huge return on investment to be part of our network, because we’re going to make their — with the data and the ability to connect we’re going to help them improve their business or their product in a way that they just can’t do today. And that will become more evident, I think the people over the coming years. So, operator, we probably have time for one more call from the analyst community.

Operator

We will now take our final question from the analyst community from Bryan Kraft with Deutsche Bank.

Bryan Kraft — Deutsche Bank — Analyst

Hi, good morning. Wanted to ask you one question on funding and then another on satellites. Just on funding as you do think about sources of funding for the wireless plan what are the most important considerations there as you look at the different options for funding the plan? And then as we think about the capital needs for the legacy business on the satellite side as some of those satellites reach end of life, are you planning to replace them with your own new warrants that you will build or is there an opportunity to go back to leasing capacity from another company such as EchoStar and would you need as many satellites going forward as you have historically? Thank you.

Charlie Ergen — Co-Founder and Chairman of the Board

On the satellites we don’t have a need for additional satellites in the short term. Obviously, we haven’t gotten the question, but obviously I’ve said in the past, I thought I would be inevitable that DISH and DIRECTV probably at some point would to be allowed to merge and that would reduce need for satellites as well. So I don’t think that’s a material cost on capex for DISH in the foreseeable future. With any kind of financing we’re generating a lot of cash flows and obviously to the extent that Dave and his team are successful on their build out and their timelines we’re going to generate cash flow from Boost as well, so that has reduced some of our external funding needs perhaps. And then we raised $2 billion.

We raised $1 billion in the rights offering. I think before the end of last year, and I believe raised a $1 billion this year. So typically, if we look at financing, what are the — we look for flexibility, we look for interest rate, we look for term. I don’t know if we look at the traditional things, you look at it from a financing point of view. So a lot of what we’re doing is infrastructure. So that’s a whole different set of financing opportunities for us because we’re building real assets that you can touch and feel and spectrum. We’re not making any more spectrum any more so they are printing money, but they’re not making spectrum.

Tom Cullen — Executive Vice President, Corporate Development

So Brian, this is Tom. I think what we’re saying is we’ll be opportunistic, if needed. But right now, given our cash position and the build-out timing we don’t see any imminent named. The second thing that we’re seeing that we’re encouraged by is the promise of O-RAN in actually lowering the capital cost of deployment. We’re seeing because you’re able to break apart the proprietary traditional system, we’re getting radio pricing that is a fraction of what a typical radio historically has cost; that’s one area. Second area is as the silicon roadmap matures over the next 18 months the cost will drop even further on capital. And then on the opex side as you’re seeing orchestration becoming more mature in, for instance with VMware, that’s part of the solution that we negotiated with them but the orchestration layer has an opportunity to significantly lower traditional opex associated with wireless.

Bryan Kraft — Deutsche Bank — Analyst

So if I could follow up and it sounds like Tom, I know you’re not backing off the $10 billion number now. But it sounds like you do see some opportunities for that overall build cost to come in below that $10 billion is what you just said, is that fair?

Tom Cullen — Executive Vice President, Corporate Development

Yeah, I’m not, we’re not changing any guidance, and as you know we traditionally don’t give guidance, but that $10 billion been out there for several years. What we’re saying is we have visibility to promising cost curve improvements.

Charlie Ergen — Co-Founder and Chairman of the Board

And this trend, I would say that people who discounted that number and said that was an impossible number to build a network, I think that they will start — I think you’ll start seeing real data that says that’s a given. It’s over 100 to be a little more or less, but that’s a pretty realistic — that number is becoming more and more realistic, I think as people.

Tom Cullen — Executive Vice President, Corporate Development

In addition, that number predated our deal with T-Mo so it assume that you had to build the whole network before you saw $1 of revenue. Given the current structure and the deployment that we’re on, we’ll be generating cash in the interim while we continue to build the network.

Charlie Ergen — Co-Founder and Chairman of the Board

So there are things, one is the cost of network, we still believe we’re spending $10 billion. The question is do we have to finance $10 billion. That might — we might be more optimistic about that today that we wouldn’t have to finance as much.

Bryan Kraft — Deutsche Bank — Analyst

If I could ask one last follow-up, I promise this is the last, is there a tower count that you would share that corresponds with getting to the 70% coverage in three years?

Charlie Ergen — Co-Founder and Chairman of the Board

We’re not sharing the exact tower count, but we’re not really trying to hide the ball where it is. I guess we run the math would say how many people can we cover with the tower and you kind of run that math and you get to 70% population and our total network build is in the 50,000 macro tower range and to cover 70% is a fraction of that.

Tom Cullen — Executive Vice President, Corporate Development

As you know our FCC commitment is 15,000 towers and it’s probably slightly more than that.

Charlie Ergen — Co-Founder and Chairman of the Board

We know we’re building the minimum of 15,000 but we believe it takes a little bit more than that to cover 70%, is that fair?

Tom Cullen — Executive Vice President, Corporate Development

And we’ll give you more guidance on that as we get — as Dave and team have the — as we get the [Indecipherable] and we have strategically, we have to decide just how dense we make that network as well so that’s a piece of it.

Bryan Kraft — Deutsche Bank — Analyst

Thank you very much.

W. Erik Carlson — President and Chief Executive Officer

Alright, operator, we’ll head to the media now.

Operator

We will now take questions from members of the media. [Operator Instructions] Our first media question comes from Scott Moritz with Bloomberg.

Scott Moritz — Bloomberg — Analyst

Hi, thanks. Wireless question, obviously, there’s a lot of discussion about 1 gigabit unprofitable Boost customers. You also have some aggressive offers in the market. Just wanted to know if you start with 9 million customers with the acquisition of Boost, where do you end the year? Are you in the up or down from there?

Charlie Ergen — Co-Founder and Chairman of the Board

We don’t know. I think we said earlier, there is some clean-up on the approximately 9 million Boost customers certainly clean up there for customers that we might count [Indecipherable] there might be an unprofitable customer when you pay for the network. The second thing is we, as we add customers we want to add customers that only add customers that are potentially profitable. We don’t want to add customers that we would lose for — just to have a number for Wall Street. So we’re going to be disciplined about the way we do it. Having said all that, right, rather than look at it from a subscriber count point of view, we look at financial point of view, where we’d like to be at least one $1 positive — $1 EBITDA positive one, $1 cash flow positive. And then as we build as we get owner economics of our own network that obviously shifts to — they’re much more profitable and we’d be obviously more aggressive in trying to attain new customers. So sorry, that’s kind of a non-answer answer in terms of numbers, but it is an answer for profitability.

Scott Moritz — Bloomberg — Analyst

I hear you. Good luck, sticking with that metric.

Charlie Ergen — Co-Founder and Chairman of the Board

I didn’t hear that. I didn’t hear you. Okay, next question.

Operator

We’ll go next to Drew Fitzgerald with Wall Street Journal.

Drew Fitzgerald — Wall Street Journal — Analyst

Two questions if I can. First, you mentioned that you still think for testing you had thought that addition the DBS businesses would eventually be allowed to merge, kind of the best in that inevitability, do you still hold that view? And then second, there are a couple of companies that are going into both into the lowest orbit business with very low latency satellites that might address some of the business customers that you’re targeting to your 5G network. Just wondering if those plans are successful and kind of affect the economics of what you’re trying to do with the 5G network?

Charlie Ergen — Co-Founder and Chairman of the Board

Yeah, I mean, I still think DISH and DIRECTV will be inevitable. Could that be a month from now or 10 years from now? That I don’t know. As far as low latency satellites we’re certainly aware of the plans. I mean, obviously we — I’m on the Board of EchoStar, they potentially invest in more in OneWeb. We certainly understand what StarLink and perhaps what Telesat and others. It might be done. We see that any new technology where you can connect things and provide the information we see that as in general positive and we think that a lot of the assets that we have in place including geosynchronous satellites but also terrestrial markets they play together because people — I think consumers and businesses are going to continue to consume more and more data and there’s going to be more and more demand for data and there is going to be demand for lower latency.

Satellites will never approach the latency that we’re going to be able to get with the modern network. So there’s always going to be latency in there. You’re not going to do gaming and things like that in my opinion with these satellite. You’re not going to do a lot of things. You’re not going to industrial production and things like that through higher latency satellites but they all work together because not every need justifies the expense of low latency and so for us, we’ll try to provide the solutions to our customers that are best for that. If your customer is using 1 gig a month we’ll have a plan for you. If your customer is using 100 gigs a month, we’ll have a plan for you. If you need low latency, we’ll have a plan for you. That’s not a factor we’ll have a plan for you. And we’re a unique company. We actually technically understand most of those things. And again, we’re pretty at good at satellite, we’re pretty good at video. We’re getting really good at 5G open RAN architecture wireless. So, operator, I think that was the last question in queue so thank you everyone for joining and we’ll talk to you again next quarter.

Operator

[Operator Closing Remarks]