EchoStar Corp Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ric Prentiss - Raymond James - Analyst : Good morning, everybody. Couple questions. First, obviously, ACP, it looks like it's over, but can you help us understand -- is there any more ACP to come in 4Q or beyond? And how much was the ACP impact in Hughes?

Question: Ric Prentiss - Raymond James - Analyst : Okay. And obviously, with the pipe done and the spectrum securitization done, money in the bank, start doing some profitable growth of subs. Help us understand what kind of targets you've got or what kind of go-to-market strategy you're going to do to try and grow the scale of the wireless -- the retail wireless business?

Question: Ric Prentiss - Raymond James - Analyst : I assume the profitability is pretty focused on trying to get people on net, both on the device side but also just trying to keep them on net to improve the profitability. Is that one of the focal points on growing subs?

Question: Ric Prentiss - Raymond James - Analyst : Good to have the DISH network and the EchoStar side of those transactions done. Thanks, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 4:00PM, SATS.OQ - Q3 2024 EchoStar Corp Earnings Call

Question: Walter Piecyk - LightShed - Analyst : My first question, I guess, is just on the debt exchange. So assuming that these people are going to continue to dig in their heels. Let's just assume for sake of argument, I know you don't expect this, but how the deal hasn't happened. Is it -- I know you've got all this money now, the $5 billion, the equity portion. But is it reasonable to assume that you can continue to use the free cash flow from DBS to continue to fund the build-out in the marketing of the wireless business?

Question: Walter Piecyk - LightShed - Analyst : Got it. And then just on the wireless business. Obviously, you changed the administration. I think Malone was on the tape somewhere today saying he thinks Comcast and -- can merge with Charter. So obviously, you'd have a larger footprint of fixed assets out there. When you think about the capacity that your network provides to a cable operator today, which doesn't have the network relative to you being a strategic asset in the future -- like I would -- again, first of all, I would guess that Comcast has a great deal of interest in utilizing your network as a second source to Verizon and would potentially expand what they can do beyond bundling today, especially if they own Charter. So I'm just curious like, how do you think about your willingness to add a significant wholesale customer versus not adding them and then maintaining some perhaps rare strategic value for the future?

Question: Walter Piecyk - LightShed - Analyst : That sounds to me like you're more interested in extracting strategic value through partnership as opposed to just basically making them buy the cow, so to speak?

Question: Walter Piecyk - LightShed - Analyst : Thank you very much.

Question: Jonathan Chaplin - New Street Research - Analyst : So two related questions. First, wondering if you can give us an update, Hamid, on how things are progressing with contracts -- contract wins on the private network and the price side of the business? And then you mentioned at the beginning of the call, there's this tremendous unrealized value in your spectrum portfolio. We value the portfolio at $65 billion, for what it's worth. I'm wondering if you can give us a sense of -- you said that your primary objective is to build a business that recognizes that value. At what point of trying to build a business, like how long will you give it a go before potentially shifting cost? Is it sort of two years, three years that you need to figure out whether you can be successful in building a business? And then I'm wondering if you can give us some markers of how the enterprise wholesale piece of the business needs to be progressing for you to know that you're going to achieve that goal of building a business that would justify this $65 billion of value. Like where do we need to be in enterprise and wholesale revenues by the end of next year, say, to be on a trajectory to see that the business value capture the spectrum value?

Question: Jonathan Chaplin - New Street Research - Analyst : And Hamid, just a follow up there. (multiple speakers)

Question: Jonathan Chaplin - New Street Research - Analyst : Yes, I was just going to say, just to follow up. I recognize that these are big contracts with a long-life cycle, takes a long time to land. But when -- so not near term, but do you think sort of by the end of '25 or the end of '26, we'll see real evidence of that hockey stick starting to take shape?

Question: Jonathan Chaplin - New Street Research - Analyst : Thank, Hamid. I really appreciate it.

Question: Michael Rollins - Citibank - Analyst : So you had a lot of retail wireless subs. Can you unpack what's causing that retail business to lose EBITDA on a quarterly basis? And is there a path forward, just even on the current base where the profitability could be significantly enhanced? And this may be related, but I'm curious, if you look at the 5G revenue that you're recognizing in that specific segment, can you unpack the amount of revenue that's coming from spectrum leases REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 4:00PM, SATS.OQ - Q3 2024 EchoStar Corp Earnings Call versus what's being contributed from the retail wireless business? Since you have these separate -- I guess the question is, is the retail business really paying for capacity into that 5G segment? And just how to think about that transfer pricing mechanism on a go-forward basis?

Question: Michael Rollins - Citibank - Analyst : And just maybe more broadly. So as you think about that 5G retail business. What is like that medium or longer-term progression of margins? Like what's the right margin for that retail side? Recognizing that right now you're paying a bunch of resale costs to third parties, and then eventually, you'll be paying that potentially intercompany as you target more traffic to be on that.

Question: Michael Rollins - Citibank - Analyst : Thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 4:00PM, SATS.OQ - Q3 2024 EchoStar Corp Earnings Call

Question: Chris Quilty - Quilty Analytics - Analyst : Got a question, switching over to the satellite side. EchoStar, I guess, along with Globalstar and Iridium, didn't join the MSSA, which is the Viasat-led effort to kind of pool all the spectrum of the MSS operators. So two questions for you. One, can you give us sort of your hot take on MSSA and your view towards it? And number two is, when you look at your strategy to get device manufacturers to adopt your direct device chip, what is your sort of go-to-market approach? Given the fact that we know Iridium-Qualcomm failed when they had a sort of a proprietary chipset effort, chipset service tie-in.

Question: Chris Quilty - Quilty Analytics - Analyst : So maybe just to clarify on a point. I mean, traditionally, the MSS spectrums were not -- MSS spectrum bands were not designed into cellular chipsets. And that's always been the challenge, is to get that sort of design in at the hardware level. So if you're using the MSS spectrum, how do you get those bands designed in?

Question: Sam McHugh - BNP Paribas - Analyst : I just wanted to go back on the retail wireless side. I think under the network service agreement with AT&T, you talked about this $5 billion minimum payment over 10 years. Then the wireless business is quite a bit smaller, maybe than we anticipated at the time of signing that deal. So what I'm just trying to understand is, are you at the peak payments to AT&T? Or is there -- kind of as we see customers transition on that, how quickly should we see those roaming payments fall, if you follow me? Is there kind of a catch-up payment if you don't hit the minimum payment for them? And just had a bit of a timing and saying of that deal would be too helpful.

Question: Sam McHugh - BNP Paribas - Analyst : Thanks very much.