DISH Network Corporation (NASDAQ:DISH) Q3 2023 Earnings Call Transcript

But the fact is that that’s a very valuable property. So obviously, there could be ways that from an investment point of view, there may be people that are interested in that sort of thing. But it’s also the same way with our network as well. There’s only 4 companies in the United States that have nationwide network and connectivity. There’s only one of those companies that actually does it in a 21st century architecture where it is a data-centric network built 100% for data, of which voice is just an application. And in the world of things like AI, where data is only valuable to you if you can utilize it, then you want IT, you want IT architecture, you want IT tools like cloud and Kubernetes and so forth and so on. And that’s what we’ve built, and that is a one-of-a-kind thing.

And I think that’s where ultimately the game will be won and lost for us, which is to make sure that we’re not spending all our resources trying to do exactly the same thing that everybody else has done and that we actually go where we have unique capabilities that we can do for folks and customers that others can’t. And so I’m excited about joining next week because that frees me up to do a little bit of that, which is where can we take this thing where we have unique advantages. But perhaps maybe even our competition doesn’t want to go or it’s not economical for them to go and so forth. So I don’t know that answer your question exactly, Jonathan, but that’s the color.

Operator: Our next question comes from David Barden with Bank of America. Please go ahead.

David Barden: We’ve covered a lot of ground, but Charlie, could you explain your thought process on the T-Mobile 800-megahertz option, spending $100 million upfront. Obviously, you’re going to have to spend $70 million-something if you didn’t buy it anyway. But your bonds are yielding 25%. You’re going to get $1.9 billion-ish from the EchoStar deal when it closes, but you said it in your filings that’s not going to be enough to do that deal. So how does that deal happen? And I know you love to use the word options and optionality, but I think now might be a great time to be specific and crystal clear about how you see that happening. And then in a related question, you’ve got $3 billion of debt coming due in ’24. About 9 months ago, you maybe said that your intention was to take the convert that’s coming due in March and use equity to refinance that.

Is that still the plan? And how do you deal with the $2 billion coming due at the end of ’24 would be helpful. Thank you.

Charles Ergen: Yes. Well, certainly, we’re focused on the converts coming up in March. Equity obviously is more difficult because, obviously, the marketplace has been more negative for us over the last year on that piece, but we certainly haven’t given up that equity could be a component part of that. The 800 megahertz is, I probably can’t give you a complete answer. First of all, we owed $72 million regardless, and we’re thankful that we’re able to work out with the Department of Justice and T-Mobile to give us more time to put something together there. I mean, obviously, we think there’s some unique capabilities about that. We have built it out at DISH. So we’re already heavily invested probably more than $1 billion and investing that out.

And so in addition to the $100 million, we’ve obviously invested in that. Now you’re not going to fall for a sunk cost fallacy, obviously, but economically, we think that 800 has some unique characteristics, and we think that there’s use cases for it outside of everything that we’re doing. And the way I would say it is, to the extent that we have a good business plan for that resource that may be financeable, to the extent we don’t, it certainly is not financeable. And it’s possible even with a good business plan, given the marketplace today that it’s not financeable. But that’s certainly going to be a focus for me for the next 6 months and we’ll see where we end up there. But obviously, I think this quarter, we reduced the odds that we’re going to be successful there.

We’re realist about it. The marketplace hasn’t improved since last quarter. So we’ll wait and see but it’s a unique resource. It’s important to what we’re trying to do to compete. And therefore, we’re going to give it our best shot.

Operator: [Operator Instructions] Our next question comes from Ben Swinburne with Morgan Stanley. Please go ahead.

Ben Swinburne: A couple of questions. On the Retail Wireless gross margin, service gross margins, we’ve been expecting to see those get better over the course of time. I know you guys signed two new MVNOs last year, and to this year. You were sort of double paying on back-office stuff. I think that’s ended. Why are we not seeing better unit economics in the Retail Wireless business on the service side as we move through the year? And what should we expect going forward? And then, second, Charlie, I’m not telling you that you don’t know, but when you look at the value that the market is ascribing to the company, especially the market value of the equity and the debt, compare it to the sum of the parts value of what you’ve bought in Spectrum and et cetera, is a massive gap there.

Is there anything that you were looking at that would lead you to change your strategy significantly? And especially in the context of just a higher interest rate environment, where you might look to unlock value differently for asset sales, spectrum sales, et cetera, than the path you’re on. Thank you.

Charles Ergen: I’ll take the second question and then maybe —

Mike Kelly: Yes, I’ll take the first. This is Mike. Ben, I’ll take the first part of this. We’ve been focused on obtaining better customers. And so we’ve been putting better devices in the hands of our customers those that will transfer over to the M&O as we build out. We’ve also been focused on aligning our dealer commissions with the long-term profitable needs of the company. So the dealer commissions had some impact on margins for the quarter. That will change over time. I don’t know, Paul, if you want to add anything to that?

Paul Orban: Yes, I would just add to that. You’ll see a material decrease in the cost of services related to the commissions in Q4. Q3 had more cost run as we transition to the new commission structure. In Q4, we’ll be 100% on that new commission structure.

Charles Ergen: I think the broader question is where do you expect margins to go? They will improve. And then, look, on strategy, my philosophy is I look at it every day. The world events, the competition does something, opportunity that you didn’t know existed happens. So you’re looking at your strategy every day, and you’re looking at that as related to what your strategy is and say, is there anything we should change? And we believe we’re on the right strategy. Maybe we haven’t articulated it as well as many companies do, in part because I think we play our cards a little bit closer to our vest maybe. But we think we’re on the right strategy, but we evaluate it and needs very good at strategy himself and he may have some different ideas that he’ll challenge us on.