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DISH Network Corporation (NASDAQ:DISH)

Merger of Sprint Nextel Corporation Conference Call

April 15, 2013 8:00 am ET

Executives

Jason Kiser – Investor Relations

Charlie Ergen – Co-founder, Chairman

Tom Cullen – Executive Vice President-Corporate Development

R. Stanton Dodge – Executive Vice President and General Counsel

Analysts

Phil Cusick – JPMorgan

Benjamin Swinburne – Morgan Stanley

Anthony F. Klarman – Deutsche Bank Securities, Inc.

Doug Mitchelson – Deutsche Bank

David Barden – Bank of America/Merrill Lynch

Alex Sherman – Bloomberg News

Liana Baker – Thomson Reuters

Operator

Good morning. My name is Stephanie and I’ll be your conference coordinator today. At this time, I would like to welcome everyone to the DISH Network conference call to discuss its merger proposal with Sprint. Immediately following the investor Q&A, we will take questions directly from the media, so please stay online. Thank you.

I will now introduce and turn the call over to Mr. Jason Kiser, Vice President and Treasurer. You may begin your conference.

Jason Kiser

All right. Thank you very much. Well, thanks everyone for joining us for today’s announcement regarding our proposal to Sprint to combine our respective companies. Before we begin, please note that our press release and presentation for today’s call are available on our dedicated transaction website at www.completedishsolution.com where they will be archived for replay.

With us on the call today are Charlie Ergen, Chairman of DISH Network; Tom Cullen, Executive Vice President and Corporate Development; Stanton Dodge, Executive Vice President and General Counsel. And before we begin, we do need to do our safe harbor disclosures. So for that, we will turn it over to Stan.

R. Stanton Dodge

Thank you, Jason. All statements we make during this call that are not statements of historical facts constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any results expressed or implied by such forward-looking statements. For a list of those factors among others, please refer to the front of our 10-K.

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. And you should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements, which we assume no responsibility for updating.

And with that, I'll turn it back over to Charlie.

Charlie Ergen

Thank you, Stan, and welcome everybody. I apologize for our late start but we had an awful lot of people dialing-in. Obviously, we are going to talk a little bit about Vision and we’re talking then about our Combination Opportunity and the Future.

I’ll start with talking about the fact that we all know that, the world of data is exploding in terms of demands of data. We know that people want video and they want to look at video anywhere they are in a convenient manner and these things are converging together, right. And at the same time in the data world and particularly in the mobile data world, there is going to be big gaps, they are starting to be – I saw Verizon today not going to upgrade for 24 months instead of 20 months. And the DISH Sprint combination will give unique ability across all platforms with some unparalleled capacity and exceptional scale and efficiency. So it makes up a great investment opportunity and it’s going to make a great company.

I first just want to start and compare since Sprint has initially accepted an offer from SoftBank just really compare that to what we’re talking about and obviously we are talking about bringing some things to SoftBank just can’t bring to create a superior company. We are bringing 45 megahertz of unencumbered spectrum to the party, almost $3 billion of EBITDA last year and over 14 million subscribers to the party.

Because we’re already in the subscription business in the United States today with plenty of assets in place, and Tom will talk about this little bit in a minute. We bring $11 billion net present value of cost savings and another $24 billion in new opportunity synergies. And finally our offer is superior. It’s more cash, it’s by about $5 billion, or $4.76 billion this year versus $4.03 billion and it’s more stock. And more importantly, it’s 32%, Sprint shareholders were 32% of our combined company of DISH and Sprint versus 30% of the current Sprint without the combination benefits of DISH.

So first, I think everybody on this call probably would like – has two necessities in life of food and shelter, but after that you probably get to your mobile device and your TV as three and four, and you want to be able to do that in a seamless manner. You want to be able to be connected, no matter where you are, and you want to be able to watch your television, no matter where you are. And you don't want to pay for it twice, you want to understand your bill, and you want to be able to use it as much as you possibly can, and you want to connect to every device in a seamless manner, and you want everybody in your family to be able to connect. And you want to be able to connect with the Cloud, because that’s where a lot of your information is going to be. And the new DISH Sprint is going to be able to do that, always connected in all ways.

Data obviously keeps exploding and you can look at different charts and so forth and so on, but many people in Cisco's reported 50% or 60% compounded annual growth rates. I know my family is probably doubling every year in terms of data rates that people are using. The pipes are fairly clogged, I know most data plans today you have caps on how much you can use or then are you start slowing down after a while and that problem is only going to get worse.

And the reason that the data pipes are getting clogged is primarily due to video, the great expansion of video. Most people think that video is going to today is over 50% and growing to may be 80% or 90% of all the data usage, why is that happening, because the phones are getting, screens are getting better, the screens are getting more precise, the great wave of tablets overtaking the personal computer. All those devices are miniature high-definition televisions that you can take with you anyway to everywhere.

So let me take just a step back and if you’re going to win in the mobile broadband business, you really need four things. And the first thing is you need spectrum, different kinds of spectrum, and you first need low-band spectrum, because that's the spectrum that’s going to propagate long distances. So you build that cost, you’re less expensive, and of course Sprint has the 850 megahertz low-band spectrum. Then you need big-band spectrum where you have higher data usage in more densely populated areas such as cities and so forth, and Sprint already has some spectrum there, but DISH brings that 45 megahertz of unencumbered spectrum for a new build that can be done very efficiently. And finally, you need high band capacity such as in buildings and very high densely populated areas, where data usage is a premium and where most of your data usage takes place today and that's the Clearwire spectrum at 2.5 gigahertz.

And finally little understood, and I think Stan actually talked about this on his last conference call. But more misunderstood I think in the marketplace today is there is a fourth thing that you need which is a Global Standard, and that Global Standard is important, because that's what's going to drive your efficiencies and scale on your devices more than anything else. And just two countries, China and India, are going to drive that. And the TDD Band 41 standard of the Clearwire spectrum is going to be on a global scale dominated by China and India and that's going to drive the device cost down. I read just this morning in India where two companies are introducing smartphones at less than $100 and you compare that with the $600 iPhone you can see where the scale is going to go.

And finally, if you have those four things, then you need a lot of bandwidth and the DISH Sprint will have twice as much bandwidth as the major incumbents of AT&T and Verizon. And I can’t underestimate that I mean this is like a AT&T and Verizon have two four-lane highways, but they are very congested. Sprint has a two-lane highway to date, it’s very congested, but when you add the DISH spectrum and the Clearwire spectrum, you end up with an eight-lane highway, it’s very likely congested. That’s going to be a tremendous strategic advantage to marketplace going forward if you believe that data usage is going to continue to grow.

So we're going to make – this is a continual theme that we’re going to make, but what you really want is you want to be in your home with video, broadband and data and you want to be outside your home with those same things. And while the cable industry does a really good job in your home and the current wireless industry does a really good job outside your home, there is really no one company at a national scale that puts its altogether, the new DISH Sprint will do that.

And with this scale of course comes some opportunities that Tom will talk about in the future, but obviously as a one service provider, you're going to have higher churn than when you have multiple services. And so when you add DISH and Sprint together, you have two services that can grow to four services with mobile video and fixed broadband that Tom will talk about. That gives you churn reductions, economies of scale, it gives you share gain and an increased ARPU revenue opportunity.

And finally, one of the reasons that new DISH Sprint could be so effective is that, it can be a hybrid network. You combine the, what we call, unicast network that most mobile operators have today, in other words when you use your phone, you have a dedicated line to the tower, and combining that with the broadcast platform that DISH has, both from satellite and from terrestrial towers with our broadcast spectrum at 700 megahertz and you end up with a one transmission to many. So, for example, yesterday, we were watching the Masters Tournament in New York where all can sit around and watch that. And in a broadcast mode, we could all watch that with one signal. In the unicast mode that would have gone to dozens of people in our office and would have gone to obviously thousands of people throughout New York.

So this is just a much more efficient way of doing it, if you are more efficient, you can be lower cost, you can gain market share. And this isn’t something that we just thought of yesterday. It’s been a long time coming and for DISH shareholders you understand that people have asked us for a strategy and several years ago we talked about it as the Seinfeld strategy, this will be new probably to Sprint shareholders.

We really said that lot of things, the building blocks that we’ve been putting in place over the years is like a Seinfeld show in the sense that in the first 28 minutes, you see a lot of different things that don’t make sense in that show and in the last 2 minutes, they all kind of come together. And this is a culmination of a lot of years of work where we’ve been putting a lot of things in place whether it be the purchase of spectrum, entering auctions, the acquisition of Sling Media, all those things come together now with the merger with Sprint to putting into a total to make a very unique profitable company.

With that, I’m going to turn it over to Tom, talk a little bit about some of the opportunities.

Tom Cullen

Thanks, Charlie. I want to spend a few minutes here talking about the financial, operational, and consumer benefits that we see as a result of the merger of these companies. The most significant and an important part of this is focusing on the $37 billion of synergies, operating cost, and revenue opportunities. As we’ve seen in the past, bringing together two subscriber based, consumer focused, operating entities will yield those types of benefits and this combination is no exception.

Bringing together the third largest pay-TV operator in the U.S. along with the third largest wireless operator creates options for streamlining and strengthening operations because the business has performed so many common functions. If you see on the next page, we list some of those common areas of costs. Specifically in the cost area, the DISH pay-TV and Sprint wireless businesses jointly spend $39 billion a year. By aligning many of these functions on the left side of the slide, we are forecasting that we will save in the first year of operation reduce spending by $1.3 billion, which sounds like a large number but really its 3.3% of the total spend, which we feel is very conservative. And then we ramp that over time in three years to a $1.8 billion ongoing run rate.

Some of the more obvious areas that we look at are, sales and marketing efficiencies and alignments, being able to do those together using each others channels, for instance, Sprint stores to promote DISH products. We both run large call center operations, billing and collections operations, direct marketing and retention organizations, because the functions of subscriber base businesses are so similar. So again the $37 billion in total and specifically on the $11 billion of cost synergies, we think that 3.3% reduction in year one is very achievable.

In terms of cross-selling, naturally this is the most immediate opportunity, because we have large customer basis respectively, we each have about 15% share of the market, so there is already some overlap between the customers. But DISH will bring in its 14 million households we’re estimating based on average household size of about 35 million mobile users that are potential Sprint customers. Similarly the 46 million Sprint retail subscribers equates to about 17 million U.S. households that we will target for DISH pay-TV services, and the ability to again lower the acquisition costs by using joint marketing platforms, for instance our own add inventory in many cases that we use today for DISH retention to be used for Sprint acquisition.

And then in the short term the opportunity is really through bundled pricing, but then in time and I think it’s really very near intermediate term, there’ll be more and more of this base overlap due to the integration of technology as we’re seeing today with the inclusion of things like DISH Anywhere and DISH Explorer.

In terms of fixed broadband, the combination of more spectrum and DISH’s service and installation force which is over 5,500 trained technicians that we dispatch across the country everyday, that are on rooftops everyday, as well as our own distribution which is in every county in the U.S. with over 5,300 retailers. We think that combination of spectrum and DISH resources allows us to change and improve the deployment of fixed broadband services.

As you’ll see on the top right hand side of the chart, there are 18 million or so homes in the U.S. that still don’t have access to broadband and another 35 million or so that are offered speeds of less than 6 megabits per second. Fixed broadband can compete in these areas and obviously the amount of bandwidth provided is depending upon how much spectrum is utilized. But as we’ve seen in the past with DISH Clearwire using 20 megahertz of spectrum being able to build a base of currently 1.4 million subscribers. There is a market for this that market will improve if we have the ability to deploy more spectrum particularly in more spectral efficient ways like TD-LTE, which Charlie mentioned.

And again as Charlie mentioned, in urban areas, the highest and best use of spectrum may be for mobile data capacity needs, but in the underserved and unserved parts of the country where the spectrum franchising is great, the availability of more spectrum to bring to the fixed broadband equation will allow us to continue to provide better and better services.

So the reason our installation forces is important there is, because we envision using a rooftop antenna, which not only increases the throughput based on the dB gain, but also increases the size of the cell radius and thereby getting more capital efficiency out of the tower build and being able to provide service to more customers.

The next slide talks about mobile video. It’s an area that we think will provide for differentiation of the combined companies service offerings. Its enabled by two things, one DISH has the 700 megahertz band of spectrum that we acquired at auction in 2008. This band is authorized to operate at higher power levels, which will allow us to deliver linear video content packages over a broader area. And the second thing we bring, of course is our programming relationships.

Over the course of the past few years, the market has significantly changed. First of all, in previous mobile video launches, the consumers have its much more non-video they may are today. Secondly, there were no smartphones and no tablets, and we certainly see a correlation between screen size and video consumption. And the other benefit of this type of service using this broadcast like spectrum is that the meter is not running, it's a flat rate monthly service. So consumers can literally stream video to a laptop and not being worried about the data caps continuing to roll.

The next slide talks a little bit about the results of the financing on the transaction. We will finance a portion of this transaction with some additional debt, yet we still have net leverage of a very manageable 4.7 times and we are very satisfied with the deleveraging profile of the combined companies. We forecast the net leverage will continue to decline over the first five years and as you can see on the right side there are substantial assets underlining the combined entity including spectrum subscribers and significant cash flow which we consider just the beginning right now with that cash flow growth profile continuing to grow.

So with that, I will turn it back over to Charlie.

Charlie Ergen

Thank you, Tom. And I think most of the DISH investors on the phone of course know about us and I’m sure most of the Sprint people do, but obviously we’re proud of the fact we have a history of success. We started in 1980 as a small business, but by 1995 we had launched our first satellite. We compete to get some very interesting comments and have grown the company and it tells the third largest media provider in the United States today. And at the same time, we decreased our leverage from 5.6 times, net leverage to 1.6 times currently.

And may be more importantly as we’ve created a lot of shareholder value, we know that we focus everyday in doing that and if you were lucky enough to buy $100 of our stock in IPO in 1995 over the last 18 years, you would have received an annual return of over 20%. We weren’t charging 2% fee, so we are very proud that we work for you and this transaction I hope will help us continue to do that in the future.

We’ve obviously been an innovator, some of the first DVRs, now the award-winning Hopper with automatic prime time recording, slowing, we’ve been a disrupter, we’ve been a builder. In terms of very complex assets launched over 15 satellites, call centres and so forth, a nationwide installation network. So these things can be built overnight, it’s taken a lot of years to do that, a lot of expertise here in very complex situations.

So what’s really exciting about this is the future, and we can run lots of numbers and lots of ratios and so forth, but you really got to take a step back and look in, what’s the future going to be? And this combined company is going to take advantage of that future.

I can think a no better way than may be to visually show you in the sense that when – if you take a look at St. Peter's Square when the former Pope came into leadership role, you can see one, they had several hundred thousand people in St. Peter's Square, you can see one little Motorola flip phone out there may be he was taking a picture, I’m not sure what he was doing, may be making a phone call. But when you looked at it, just a few months ago, we had several hundred thousand people and every single one of them had a phone or tablet or computer, all taking video, all taking pictures, all sending video, all through a wireless network. They had to be connected and that’s the way we’re going – and so you can imagine what the next decade is going to hold and where we are going to be, probably we can’t even predict all the ways that we are going to get there, but we do know that whatever it is, you’re going to need bandwidth of capacity to take advantage of it.

So in closing, we think that we’re offering a superb, we think the business – the DISH Sprint will be a superior company, we bring a lot of things to the party and as Tom said, combining the third largest mobile operator and the third largest pay-TV provider together give us the chance together to become Number 2 or may be Number 1. We bring lots of EBITDA synergies, revenue growth and CapEx savings, and we bring more cash and more stock ownership. And even if you just take the cash aside, I think the most important part is that, Sprint shareholders will own 32% of a much bigger combined company that has tremendous growth and upside and is well positioned for the future.

And with that, I think we’re going to take questions, right. And operator, we will take questions for a while here.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from the line of Phil Cusick from JPMorgan. Please go ahead.

Phil Cusick – JPMorgan

Hi. Thanks. Charlie, I guess you’ve talked a lot about being a broadband and video provider both in the home and outer for the years, its nice to see that this sort of all come together. If this merger would have been completed, when do you think the vision could be realized the sort of both in home and out of home seamless for the customer? Thanks.

Charlie Ergen

Well, some of that would be almost immediately envisioned, right. Obviously we could combined your video subscription and your mobile subscription together. But it probably takes two or three years to really install the vision where you would have a quality of service you could count on and you would know, for example, that if you had your home video and you want to watch it outside the home, and you could in fact watch it and you wouldn’t pay any more for it. And of course some of that has to do with programming opportunities for our programming partners where they can get additional eye balls outside the home and we are working with them in a way that makes sense.

For example, one of the great opportunities to advertising where the Hopper in your home is pretty smart, knows what you are watching and we can pull very specific ads to you. But when you go to outside the home with the smartphone, it’s even smarter. It knows where you go in the web, it knows who you’re following and those physically with GPS where you are, and the future that phone is also going to be your wallet, so it knows where you spent money on. So when you combine those two things together, there is a lot of opportunities for our programming partners and a lot of opportunity that’s probably not in this model from an advertising perspective. But in the long story short, it probably almost immediately we could do may be 50% of what that vision is and it probably take two, three years to get to the end result.

Phil Cusick – JPMorgan

Got it. Thanks. And if I could one more, can you just give us an update on how you think about the Clearwire process at this point?

Charlie Ergen

Well, we haven't formally withdrawn our DISH offer for Clearwire, obviously we’re on record of what we think that value is. But we obviously wanted the Sprint Clearwire merger agreement, and obviously we felt that Sprint and Clearwire and how they want to proceed with that. But about our offer with Sprint itself is not contingent upon the Clearwire shareholders accepting the Sprint offer. So I'd say at this way, I’m offer shareholders making money. I'm offer real values and people getting fair values. I think that's what we built our reputation of over the years and I don't think that we would want to post that reputation in one particular transaction and another.

Phil Cusick – JPMorgan

Great. Thank you.

Operator

Thank you. The next question comes from Ben Swinburne from Morgan Stanley. Please go ahead. Your line is open.

Benjamin Swinburne – Morgan Stanley

Thank you. It’s Benjamin Swinburne. Good morning guys

Charlie Ergen

Good morning.

Benjamin Swinburne – Morgan Stanley

Charlie, if you look around the world that Quad plays out there tend to be wireline plus cellular wireline plus wireless. Do you think and maybe Tom (inaudible) that your spectrum position and the technology curve you’re looking at gives you an opportunity to really compete with fiber and coax as you look out to three to five year road map of where even mobile videos going to be moving lot of mobile videos consumed in the home using WiFi. How does this position you from a technology perspective when you think about the wireline competition.

And then I'll just ask my follow-up now, one of the things on your fact sheet Charlie you mentioned I think is the regulatory review is that, is that another argument to Sprint shareholders that you think you've got an easier pass in Washington and the current SoftBank offer?

Tom Cullen

Yeah, let me take the second part first. Certainly, we don’t see an SEC issue really probably need the one of the merger proposals to Sprint. But we certainly have an advantage in the Justice Department side, because we don’t go through the foreign ownership safety as review. So there would be no controversy there with us as a U.S. company, there are some regulations, but against the foreign corporation owning I think it’s 25% of the telecommunications companies, so that’s a more thorough review that the Justice Department would do on the SoftBank transaction.

As far as how the wireline, and quad-play and so forth play and Tom may jump anywhere after May, but the way I would look at it is, that there’s about 110 million homes in the United States and probably 70 million of those homes a fiber-to-the-curb, fiber-to-the-home, it’s probably going to be the way you are going to get data in the home, because lot of that cable and fiber is already in place today. And you didn’t see populated in that and I think the real opportunity here with Sprint and Clearwire are those 40 million homes aren’t current covered by that and may be 35 million of those homes a fixed wireless where you put up a tower fairly inexpensively, and you broadcast – and you have wireless high-speed data in this new TDD-LTE technology.

You can be very, very economical and what’s great about it is you don’t spend any more money until you actually put a modem in for the person’s house. And the economics are enhanced by about 10X when you look the way we would do, which is we’ll put the antenna on the outside of the house, since we have the ability to do to that, which means we pick up, a lot of gain and lot a speed, for the customers. And obviously the Clearwire spectrum, and this would be – think of it in terms of hundred thousand unit population communities are the outer ring of a city is where this would be the most economical. And then there is about 5 million homes were satellite broadband where you would be the most economical way to do it, because people are so rural, far more [ranger], vacation home, where satellite broadband, obviously we are doing very well with dishNET today and so that’s how we see it. But we don’t see this, I don’t want to mislead anybody, we don’t see this as being a superior product of Fios are one of the cable high speed modems in the density populated areas. Tom?

Tom Cullen

Yeah, Ben, I think Charlie pretty much summed it up, and it comes back to what I said earlier, the priority will be to find the highest and best use of spectrum and that will vary from geography to geography.

Benjamin Swinburne – Morgan Stanley

Got it. Thanks guys.

Operator

Thank you. (Operator Instructions) The next question comes Anthony Klarman from Deutsche Bank. Please go ahead. Your line is open.

Anthony F. Klarman – Deutsche Bank Securities, Inc.

Hi, thanks. Few questions, first, I was wondering if you could talk a little bit about the spectrum position of the combined company and your view as to how the spectrum position would fit in to what the FCC is talking about with future spectrum screens and if there was an assumption of having to make any divestitures of spectrum. And then a question on Sprint, in the current Sprint transaction with SoftBank, they are effectively being overcapitalized with cash to fund future opportunity and so I was wondering if you had a view as to whether you are going to have to inject some additional capital into Sprint to fund a lot of the projects that they have currently underway for the next year.

Charlie Ergen

As far as the spectrum position, obviously it’s a very enviable spectrum position, and what’s more important is, may be more settle, is that if we’re all sitting here in 1776 it’d be pretty easy to put a spectrum app out there make it very efficient, but obviously over the years the spectrum app if you have ever seen one is very, very chopped up between the Department of Defense and everybody and your brother who would be in fed out it by bits and bytes by the government. So overtime its gotten very complicated, but in this particular transaction, particularly since we're bringing about 45 megahertz of basically unencumbered spectrum that's contiguous.

We are able to make a big, big lead in putting things together just as an example, our best band, AWS 4 spectrum is adjacent to the Sprint spectrum with only the H block which is going to go to auction in between. So it gives us a lot of potential rationalization of spectrum. In the Sprint SoftBank merger, AT&T and Verizon have not asked for any kind of divestiture of a pretty big obviously spectrum position. So we don't think that there is a divestiture issue. But we do think that to the extent we got this deal through without a divestiture, the spectrum screen might be increased that AT&T and Verizon could buy more spectrum, right. And if we do have to divest spectrum obviously we just delever the balance sheet. So we can't speculate exactly on the SEC, but it looks like there is not a lot of our opposition. The fact, only DISH is apposed really the spectrum aggregation of SoftBank and Sprint, so…

Tom Cullen

The only thing I would add there is, I believe the ability to provide broadband services to unserved and underserved parts of the country that are not likely to see competitive broadband opportunities is something that we will be of importance to the regulators.

Charlie Ergen

And then on the Sprint SoftBank obviously they would have more excess cash they want than we would in this transaction, but there is two overriding factors. One is we’re bringing spectrum that would probably cost $8 billion or $10 billion or $12 billion in the open market, so we’re bringing that to the party so that we don’t need the cash to go and buy more spectrum. And the second thing is we’re bringing cash flow of about $1.5 billion last year, I think, to the party that can fund future operations. So we do think there’s future growth opportunities, we do think there’s going to be investment in the future, we do think that by the end of 2014 that Sprint has most of its network vision behind it, and Ben has talked about that. And then you probably got a very, very modern network that can really compete against the other guys.

I mean you first need spectrum, then you need a modern network, right and Sprint doesn’t quite have the modern network yet, but they are on a good path to do that. And the third thing is, if you don’t want to just sell, be a commodity and just sell minutes or text messaging or data caps, you want a marketing message that’s something different that the other person can’t get to your customers, or offer your customers and I think with DISH’s video and fixed broadband expertise, we can offer a much, much more compelling product. It differentiates the way from things like data caps and bits and bytes.

Anthony F. Klarman – Deutsche Bank Securities, Inc.

Thanks. And just a follow, in the release it indicates that you have to raise some additional cash for the transaction, and you mentioned a secured debt credit rating. Historically, you guys have avoided the secured debt market. Just wondering if that’s the avenue that you’re going to be going down on the incremental $9 billion or so of debt that needs to be raised, and is that debt that would be raised against the DBS assets, or will it be at the new wireless business and be raised on the wireless side?

Charlie Ergen

I’m going to let Jason take that one.

Jason Kiser

Yeah, Antony it’s Jason. The structure hasn’t fully been set yet and its about $9.3 billion of new funding that we are looking at. It hasn’t been sectors, we are looking at some different alternatives to obviously put together the most – the best way to do it for the cheapest cost of capital within the structure. The vast majority of that would be raised on the Sprint side and the borrowing groups will be separate, very little of that would be on the DBS side.

Anthony F. Klarman – Deutsche Bank Securities, Inc.

Okay, great. Thanks very much guys.

Jason Kiser

None other that on the DBS, we are looking to do secure.

Anthony F. Klarman – Deutsche Bank Securities, Inc.

Great. Thank you very much, Jason.

Operator

Thank you. The next question comes from Doug Mitchelson from Deutsche Bank. Please go ahead. Your line is open.

Doug Mitchelson – Deutsche Bank

I have a question. But Feldman is on the line. He has a question. I will make mine quickly Charlie, so we don’t have made this call. But you’ve talked about years of preparation to arrive at this point, are you worried that this will become – are you prepared for this to become a betting war and Brett, if you have your question.

Brett Feldman – Deutsche Bank

Yeah, this is a quick follow-up to what you are talking out before. You mentioned Sprints Network is almost where it needs to be. Does that mean that you are not assuming any incremental investment in the Sprint Network as part of the synergies you outlined?

Charlie Ergen

Okay. The first part is, the first question is whether prepared to be in betting war. I think obviously we want to see how this plays out, and obviously I think we see the same thing the SoftBank sees. We see a very attractive asset in Sprint and Clearwire. We thought it was undervalued from their offer. So we won’t offer more money, it’s a tremendous amount of spectrum and the Sprint management team has done a lot of hard work over the last five years and they are getting ready to see the fruits of their labor.

So we just see a lot of value there. They see the same thing. We will have to see how it plays out. The one thing that SoftBank cannot do, no matter what is – the best case you’re going to be is on the 30% of basically the same company, right. And I think as a shareholder, I think its no matter, if the money was the same or even if their money was more, you still would rather own 32% of a combined company that’s different they can lead the future and can do something different than AT&T and Verizon. Otherwise you'd be in a commodity business, and that to me wouldn't be as attractive as something that could be very unique. Second part of the question was...

Brett Feldman – Deutsche Bank

The network quality and whether it's need more investment?

Charlie Ergen

The network quality, I think that Sprint's plan and again I'm not an expert on their network vision, we've had lots of discussions obviously on how we could combine our spectrum with their network vision. Very similar to how they did it with LightSquared one time before that kind of fell apart. So we know there's a lot of synergy in that. We don't really have that in the model and that would really be sitting down with them and saying, okay now we've got 45 megahertz additional spectrum, how we would build it up. And I think what you come up with this you build out a little bit less Clearwire, because Clearwire doesn't propagate as well, and you start doing more in building with Clearwire spectrum in last Macroaxis and you do that with our spectrum. And I think you would sound up little bit better model, but again that's going to be joint effort with their expertise. They certainly have more expertise in that than we do.

Doug Mitchelson – Deutsche Bank

Thanks so much, Charlie.

Operator

Thank you. The next question comes from Mr. David Barden from Bank of America. Please go ahead. Your line is open.

David Barden – Bank of America/Merrill Lynch

Hi guys, thanks for hosting this call and taking the question. I guess first if I could, just on the history of innovation and disruption that you guys have brought to the marketplace, you've talked about bringing streaming video into the mobile environment. But with respect to the synergy creation, is there an eye towards rethinking the pricing model in the wireless business and bringing some of that firepower to take market share and shake things up more dramatically then simply bringing a mobile product to the table? And if I could, the second question would be, just with respect to Charlie to the Seinfeld episode, if this episode ends with SoftBank going away and DISH owning a Sprint that's one potential ending. If it turns out that SoftBank is willing to go further then DISH is willing to go, how does the Seinfeld episode end under those circumstances? Thanks.

Charlie Ergen

Okay. Well, the second part, we will just end up at a two part Seinfeld episode. If they had a few of those, they have a one part Seinfeld. So it will be an hour show instead of a half hour show, we will pass that if we get to it. In terms of pricing models, obviously we’ve thought that a lot of innovative ways that we think the business could be better than it is today I mean, I think of it as the consumer, I’ve asked people what they like or don't like about their service and I think – I don’t think it's rocket science, I don't think you have to be a margin expert to just go and say, what do you like about, what you've got, what don't you like, and then you change the things people don't like, and I think we can make it simpler, I think Sprint is well in its way to be a quality network.

I think that we can give you more services and combined services together in a seamless manner, and obviously Sprint will have a lot of ideas about how they think it should be done, obviously there are differentiating item at least from my perspective as there are unlimited data offer, but doesn't really transcend into tablets and today it is really just phones. And so I think there is a lot of room for growth there. I think we’d focus a lot less on pricing difference and more on the services that you get in the seamless manner that make your life just a little bit easier.

I would love to be a DISH Sprint subscriber and pay one bill and now I have got my video everywhere, and now I have got my voice everywhere, and now I have got my broadband everywhere.

David Barden – Bank of America/Merrill Lynch

That’s great. Thanks guys.

Operator

Thank you. (Operator Instructions) Thank you.

Charlie Ergen

Is there any problem?

Operator

Just waiting for questions.

Charlie Ergen

Okay.

Operator

Okay. The next question comes from Alex Sherman from Bloomberg. Please go ahead, your line is open.

Alex Sherman – Bloomberg News

Hi Charlie, hi Tom. Charlie when we spoke on October, I remember we talked about blockbuster, the acquisition of blockbuster some together because of the delay that getting a mobile network. And I’m curious you talked a little – Tom talked a little bit about the sort of liner mobile video package. I was wondering if the two you’ve guys could just sort of elaborate on that a little bit, what you guys had in mind for a mobile video product, is that mean sort of a new DISH over-the-top video product something we haven’t seen before, may be that you have been working on that you would be finally willing to launch other pieces to that and may be haven’t announced that you sort of working on?

Tom Cullen

Hi Alex, it’s Tom. No this is an over-the-top thought, there is two components to what we would envision in terms of the content package. One is, if you’re DISH subscriber, in many cases we have authentication rights available to us over wireless networks, and what's different here is that being able to use the 700 megahertz spectrum and high power, you can authenticate the user and again its flat rate consumption and so it's not consuming the network resources a traditional mobile network would have to dedicate to it.

And secondly, as you know, there has been a number of new and emerging content initiatives that are not necessarily from the family of traditional pay-TV programmers that would also be interested in having their content available under this type of network, and we’ve had many of those conversations over the last few months.

And that’s the best kind of the broadcast mode, right, that we talked about. The other hybrid is the unicast mode, because of the capacity that this network would have. DISH Sprint would be in a very good position to give your own video even on a unicast. So we do that today with Sling for example, so that means that you have a quality of service for your own video, your own subscription from home or you could go out to stream a movie from Netflix or you can go to YouTube and you could do that with the network that’s got plenty of capacity to do that whereas again our competitors might be constrained with their capacity, which is why they’ve gone to data caps and things like that.

I don't think any secret if you can get – if you get a data cap at 2 gigs and you got to start paying, that’s not a lot of data, you start paying off for 2 gigs. Somebody who gives you more than 2 gigs for the same amount of money is going to be attractive. And then because people are going to use more and more data. You guys can just put your data count on your phone and look at what it was last year, look at what it was this year, look at what it will be next year, and you’re going to see using double the data every year, and but no end in side. So if you’re going to have lot of data you bet of a big pipe and nobody is going to have a bigger pipe than DISH Sprint.

Alex Sherman – Bloomberg News

Tom, is there a reference to area, the new emerging content initiative?

Tom Cullen

No, wasn't.

Alex Sherman – Bloomberg News

All right. Or is there other companies that you haven't talk about yet?

Tom Cullen

I'm saying you are seeing content being produced by non-traditional players and they’re interested in expanding distribution and we would be interested in a mobile video package.

Charlie Ergen

I think things like (inaudible) doing today, my gut feel is the broadcasters would do that themselves. There is no reason that the broadcasters not going to broadcast, he can use us or he could use his own frequency to broadcast his network to a mobile environment.

Tom Cullen

And you heard a lot about that last week at NAV.

Alex Sherman – Bloomberg News

Okay, thanks guys.

Operator

Thank you. The next question comes from Liana Baker from Reuters. Please go ahead. Your line is open.

Liana Baker – Thomson Reuters

Hi, Charlie and Tom. Thanks for taking media questions. I was wondering if you are prepared for bidding moreover Sprint and how much higher you would be willing to go? And secondly, with all those talk about data, are you saying you would offer an unlimited data service as part of Sprint DISH?

Charlie Ergen

You’ve asked the same question about three times. I'll try to answer one more time.

Liana Baker – Thomson Reuters

Your last line sales response seems to suggest you would be willing to entertain a higher bid.

Charlie Ergen

The SoftBank’s credit, there is a $600 million breakup fee that we are more than willing to pay. So they're going to do pretty well plus they’ve bought over $3 billion of stock at $5.25 that we’ll have to convert the $5.25. So they would be about a 5% shareholders of new DISH Sprint and we certainly welcome them and their expertise as the major shareholder. Beyond that we’ll have to see what happen. And then far as unlimited data, Sprint has an unlimited data plan today for smartphones or for phones and with our extra capacity and the modernizing of the network, we just have to consult and see with them and see what additional things we could do for the consumer, but if that became a big factor for consumers, I think we’d be well positioned to do it. That doesn’t mean that you would do it, but obviously Sprint has lot more expertise.

I’m not – realize we’re pretty good at video, we know video pretty well, and we know a lot of the picture, about wireless, but we will be relying on Sprint management team and the Sprint expertise, on the wireless side where they have great expert, but they’re well in our way to build and to finish in a very, very modern.

Liana Baker – Thomson Reuters

Yeah, yeah. Thank you.

Operator

Thank you. We have no further questions at this time, I would now turn the call back over to Charlie Ergen, for closing remarks.

Charlie Ergen

Okay. I’ll say thanks to everyone joining us on a very short notice. And obviously we’re excited about the transaction, it obviously would take some time, obviously there’s lots of things that could happen in the marketplace. Obviously the first step for us is to hear back from the Sprint Board and engage in discussions to make this transaction come true. Here are the things that they think we can do better in our offer and have that discussion, we certainly will be communicating with the street. As the process goes on, and obviously at the end of the day the shareholders or the people who are going to make this decision and we’re looking forward to working with all of you.

Thanks.

Tom Cullen

Thank you.

Operator

Thank you for joining ladies and gentlemen this now concludes today’s conference call. You may now disconnect.

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