DISH Network Corporation (DISH) CEO Erik Carlson on Q4 2018 Results - Earnings Call Transcript

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About: DISH Network Corporation (DISH)
by: SA Transcripts
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Earning Call Audio

DISH Network Corporation (NASDAQ:DISH) Q4 2018 Earnings Conference Call February 13, 2018 12:00 PM ET

Company Participants

Jason Kiser - Vice President, Investor Relations and Treasurer

Timothy Messner - Executive Vice President and General Counsel

Erik Carlson - President and Chief Executive Officer

Paul Orban - Senior Vice President and Chief Accounting Officer

Thomas Cullen - Executive Vice President, Corporate Development

Charles Ergen - Co-founder and Chairman of the Board

Warren Schlichting - Executive Vice President and Group President, Sling TV

Conference Call Participants

Kannan Venkateshwar - Barclays

Philip Cusick - JP Morgan

Michael McCormack - Guggenheim Partners

Jonathan Chapman - New Street Research

Jason Bazinet - Citi

Walter Piecyk - BTIG

Richard Greenfield - BTIG

Marci Ryvicker - Wolfe Research

Gregory Williams - Cowen and Company

Sheila Dang - Reuters

Scott Moritz - Bloomberg

Operator

Good day and welcome to the DISH Network Corporation Q4 and Year End 2018 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Jason Kiser. Please go ahead, sir.

Jason Kiser

Great, thank you. And thanks everybody for joining us. Joined today by Charlie Ergen, our Chairman; Tom Cullen, EVP of Corporate Development; Erik Carlson, our CEO; Brian Neylon, the President of DISH; Warren Schlichting, the President of Sling; Paul Orban, our Chief Accounting Officer; and Tim Messner, our General Counsel.

Before we get into Erik's prepared remarks, we do need to do some safe harbor disclosure, so for that I'll turn it over to Tim.

Timothy Messner

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 our actual results to differ materially from historical results and/or from our forecasts. For more information please refer to the risks, uncertainties and other factors discussed in our SEC filings. All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear.

You should carefully consider the risks, uncertainties and other factors discussed in our SEC filings and should not place undue reliance on forward-looking statements which we assume no responsibility for updating. As part of the process for the upcoming FCC Auction 102, we filed an application to potentially participate as a bidder for those spectrum assets. Because of the FCC's rules, we are not able to discuss what if any spectrum resources we may intend to bid on and we will not be answering any questions about the auction on today's call.

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

Erik Carlson

Well, thank you, Tim and good morning everyone. Both Paul and I have a few remarks before we open it up to Q&A. On the wireless front we're 388 days away from our March 7, 2020 build out deadline and the deployment team is in full swing. Crews are working at knitting, staging and installing gear on towers across the nation. A lot of work is ahead. But progress is definitely mounting. And Charlie and Tom are both here for questions on wireless.

Over the past year, I've been fairly consistent on the theme of excellent customer experience as a strategy for DISH. Delivering the best in service, technology and value has been a consistent goal. This is intentional in a category as challenged as this one. This is a rational way for us to stand apart. Our internal metrics confirm our path.

For the year we reported 1.78% churn at DISH TV. That's the full picture including Latino. If you were to look at just general market, we continue to deliver historic company lows for churn. Part and parcel of the customer experiences having the right customer and you may have noticed we're a bit higher and stack year-over-year.

A couple of factors to consider, as many of you know, we've been pursuing a strategy for finding the right customer in the right geography and delivering that household the right service, technology and value that will deliver us the profitable long-term relationship for DISH.

The emphasis has led to a higher commission for an independent retail channel and an increase in hardware costs as a higher percentage of our new customers are activating with higher price receivers like the Hopper 3 instead of some of our remanufactured gear.

Now, another dimension is the SAC picture. In 2017, we had more low SAC, Puerto Rico subscribers, those that were impacted by Hurricane Maria reactivate as compared to 2018, which effectively lowered our DISH TV SAC during 2017.

Let me touch on programming for just a moment, first on Univision. It's fair to conclude that we've been unable to achieve a reasonable deal for our customers. And at this point, customers who are heavy Univision viewers have likely found alternatives including our customers who installed off-air antennas and who are able to leave Univision programming at no cost.

For our part, we expect the situation to offer some advantages over the long-term. Especially as you introduce an OTA into the picture, and we're able to charge less for DISH Latino to our customers. With regard to HBO and AT&T there haven't been meaningful moment. HBO is demanding a contract that would have forced DISH customers to subsidize both HBO and Cinemax even if customers chose not to subscribe to those services.

So our view hasn't changed. AT&T stance remains where the fundamental negatives of their merger with Time Warner. Consistent with the guidance I shared with you in the last call. It's fair to say that together HBO and Univision account for a little bit more than half of our net sub loss in the quarter.

Let me close out a few observations on Sling. We're pleased that sub growth continues in the right direction and that we continue to lead the category in live OTT. I think that's a product with several points coming together. We continue to invest in platform stability, we found that customers are incredibly sensitive to performance and the ad experience in Sling continues to improve and by that I mean we're delivering on DAI driven advertising, programmatic, addressable and cross platform.

That's great for us, that's great for the brands and it creates an advertising environment that's better for customers. In fact we've seen ad revenues on Sling grow three fold in the past year and that's on top of the tenfold increase I shared with you on last February's call.

We remain margin positive on every sub we bring into Sling and that's reflective of a disciplined, dare I say rational program that Warren and his team are running. Drafting the right content, the right add ons like DVR and with the right technical expertise on the mobile and fixed platforms that our customers love. We remain bullish on live OTT and the experience that the Sling team is shaping and delivering is really second to none.

So with that, I'm going to turn it over to Paul who has a few brief remarks on the quarter and then we'll open up for Q&A. Paul.

Paul Orban

Thank you, Eric. Good morning everyone. Our core Pay-TV business made positive strides throughout 2018. Our DISH TV team continued to focus on acquiring and retaining high quality subscribers with long-term profitability. Our Sling TV team added content and grew the subscriber base.

Consistent with previous calls, I want to outline the impact of the new revenue recognition standard. This had $154 million positive impact to both operating income and EBITDA for the full year. The benefit from this new standard will decrease over time as the deferred COGS begin to build up.

2018 operating income and EBITDA were both higher year-over-year by 580 million and 368 million respectively. Adjusted for onetime items such as REV break [ph] and the impacts of the 2017 litigation expense and asset impairment, operating income would have been relatively flat down $16 million year-over-year.

EBITDA would have been down $228 million. In 2017, EBITDA benefited from $105 million of other income primarily related to gains on marketable investment securities. Free cash flow continues to be strong at $1.2 billion.

Now for the P&L details, revenues down 5% year-over-year due to fewer DISH TV subscribers and lower Pay-TV ARPU partially offset by the growth of the Sling subscriber base.

Subscriber related expenses decreased 4%, also as a result of fewer DISH TV subscribers. Our programming expenses were positively impacted by the Univision and HBO channel removals. Our variable expenses improved due to fewer subscribers and increased operational efficiencies.

Our satellite and transmission expenses decreased $81million or 12%. Certain satellite leases expired and cost decreased in our digital broadcast operations.

Our subscriber acquisition costs decreased 435 million or 36%, largely due to fewer DISH TV activations and the impact of capitalizing certain commissioned costs under the new revenue accounting standard.

As a reminder, substantially all of our interest expense is being capitalized while we are building out our network. Also, our effective tax rate is lower in 2018 due to the Federal Tax Reform Act.

Additionally related to our wireless network, it's important to know that because we are currently building that network, much of our spend related to the build out is being capitalized, which you do not see in the P&L

Pay-TV ARPU is down due to a higher percentage of Sling TV subscribers in the Pay-TV subscriber base. In addition, we had a decrease in revenue related to premium channels put into impact of the HBO channel removal and pay Pay-Per-View Boxing Events. This decrease was partially offset by DISH TV programming price increases and increases in revenue per subscriber related to Sling TV.

The Sling increases was mainly driven by the mix of customers taking higher price packages and add on revenue such as extras, cloud DVR and ad sales. In addition, the impact of the $5 increase on our orange package began in the third quarter and was fully realized starting in the fourth quarter.

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

Question-and-Answer Session

Operator

Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions] And our first question today will come from Philip Cusick with JP Morgan. Mr. Cusick, your line is open.

Jason Kiser

Perhaps we should go to the next caller.

Operator

Okay, next we'll move to Kannan Venkateshwar with Barclays.

Kannan Venkateshwar

Thank you, just a couple for me, first on the refinancing risk. Charlie, I guess there's a little bit of a language change in the 10-K in terms of refinancing and there is a risk that's been added there. So just wanted to understand how are you thinking about the balance sheet and all the maturity that are coming up? Is there any difference in the way you're thinking about the balance sheet today versus maybe beginning of last year in terms of maybe raising secured debt or something on those lines, especially as you go into the 10 billion phase of the build out - the phase 2 of the build out? And secondly, more from a core performance trend line perspective, as we go into the first couple of quarters this year, should we see any change in trends given that the biggest impact of sub loss is due to loss of carriage tends to happen close to when the loss of content actually happens and should expect that to moderate in the coming quarters? Thanks.

Jason Kiser

Kannan, this is Jason. I'll take the first one on the refinancing risk. I mean, we continually monitor all of our capital markets options just like we always have. There's nothing really new there. The market got tied up a little bit in the fourth quarter and we keep our eye on that type of stuff all the time. We're constantly evaluating what's available to us. I think we've got many alternatives that are available to us both for RevPar [ph] or for fresh capital. We've looked at things that are at the operating company, we've looked at things that are the holding company, so I think right now we're pretty comfortable that there's not any urgent need to do anything. Everybody's familiar with our maturity profile and as we move on and get into some of the bigger maturities we'll continue to look at that and determine what's the best avenue to take, but we haven't made a determination on anything at this point. Eric you want to take I think the programming question.

Erik Carlson

Yeah, Kannan on the carriage obviously, I think that you normally you see a trend very close to the takedown of contents. In this particular case there's a couple inflection points. On the Univision side obviously, we had a removal midsummer, I think the end of January - June, sorry about that and then Deportes followed that in November, early November along with HBO. So there's no doubt on the Univision front we are seeing declining customer attrition. However, I wouldn't give guidance that we're through all of the customers leaving us. On the HBO front, obviously, HBO had an impact along with Univision in the fourth quarter and I think HBO has the Game of Thrones coming up in April and obviously that could impact us if we're not able to reach an agreement, yeah.

Charles Ergen

And this is Charlie. I think what happens is, it's always disappointing when you lose a long-term partner and both Univision and HBO, particularly HBO were long-term partners, but there's different dynamics there. HBO obviously was acquired by AT&T and AT&T has taken a very anti-competitive approach to carriage because they view DISH potentially as one of their larger competitors and so that's strictly a - they made a decision not to engage in any kind of conversation any company would realistically take. The downside for them is that customers love DISH and are at least within the Pay-TV business I think we're the highest - most polls and most survey show us as most highly rated. So they like their DISH service, they like their Hopper experience and so some customers do leave us because HBO is a very strong brand and has strong content. But some customers find that they can live without it. And then some customers still stay with DISH and love it and they find another way to get HBO. And that means they go - they'll go to their friend's house for 10 weeks during Game of Thrones or there becomes an increased usage of - every young person knows how to go on the internet and get a code and watch HBO for free. And so you end up with a piracy issue that unfortunately, we prefer not to see. But when customers get some taken away, they resort to the other mean. So and then we work with other partners that have movies which are very popular with our customers and we see increased usage of that. It does affect our ARPU obviously, when we sell HBO for $15 and Cinemax $10, you lose those subs. You lose ARPU there, so that's one of the intension. So the Univision, they really had - it's kind of a perfect storm at a change management who would - I think the existing management would say in private that unrealistic expectations of what they're trying to do DISH on a renewal deal.

So the management and DISH probably have a pretty good - actually a pretty good relationship absent the inability to get to a deal and the reason that we haven't been able to get to a deal is that our best customers who love Univision and we have a lot of customers who love Univision they left or they put an off-air antenna to get the programming. So they've made adjustments to view Univision or leave us to go get it, the remaining customers on Univision still like Univision, but not at the level that the customers have left. So that makes it really hard to put Humpty Dumpty back together again, even though the relationship I think is - I think that - but not for lack of trying on both the Univision managements part and the DISH managements part, so HBO is not trying, Univision is tying, but they're difficult situations. What our direction to management is - that's not an excuse to go to continue to lose subs, right. With the Univision we have an advantage in the marketplace now that Latino subs can get - can save $10, $12, $15 from DISH and we'll provide a local antenna, so they can get the program and save $10, $12, $15 over everybody else in the industry. And we have to take advantage of that in some markets because we're the only provider, major provider that's in that situation today. So it's going to be y cost advantage and we can go out and start building our Latino base based on that cost advantage. So that becomes a tail on it and then we move forward.

Kannan Venkateshwar

Thank you

Operator

And next we'll move to Philip Cusick with JP Morgan.

Philip Cusick

Thanks guys. Sorry about that. I need you to get that 5G network up in the air. Charlie, can you talk about timing on the IoT build and the cash needs as we go through the year for that? And then second, what's the latest on timing of your 5G equipment? Assuming you had the money when could you officially start building that network?

Charles Ergen

Okay and Tom may want to jump in on this, but nothing's really changed on the cost or the timing. The cost of our network is between five - initial phase 1 build of Narrowband IoT network, it's somewhere between $500 million and $1billion through 2020. We continue to make progress in building that network. We intend –our expectation is we're going to meet the deadlines, we know there's going to be a lot of obstacles in the way, but we intend to meet that deadline. CapEx will accelerate in 2019 from where it has been in the past and what's the other part of the question?

Erik Carlson

5G equipment.

Charles Ergen

5G equipment the - because we're a - our plan is to build a standalone ground for 5G network. In other words, the only other country that's doing that today is China. So if we really want to compete with China in 5G, in my opinion, you need a standalone 5G network from scratch and India - and then second, more importantly, maybe you need the architecture that goes with it. So if you want to compete with China. It's imperative that in the United States somebody builds that standalone network that specification for 3GPP standalone specification is not out at the earliest until the end of this year. And then it takes several months to get equipment from that. So I would imagine that sometime in a little bit over a year from now we'll start to have equipment in standalone 5G that we can start deploying that equipment. And so today we're basically architecting that network and putting the business plan together. So that will do to the rest of this year and then we will have a business plan for a network like you may only see in China. And how have we believed and we believe that with the record ingenuity and other people help we can build a network that can arrive or that will be better than that.

Philip Cusick

Has there been any change in the discussions with potential partners to help fund that positive or negative?

Charles Ergen

We haven't had - I don't know if we had any negative discussions. We certainly like everybody else - I'd say it this way, people are very interest - those people are very knowledgeable, so perhaps more knowledgeable than an analyst can be because you're in the business or they build product for it or they've studied the architecture for a long time. I think they're pretty positive and I think that the real 5G and the architecture that goes with it when you put those two things together, I think most people virtually any business or any business in the United States realize that can be powerful compared to what they get today in a wireless network. And so we've had discussions from - we've had interest and discussions for from unexpected places, but our strategy really is where somebody has the infrastructure in place or they do things - they do a good job at it, we're going to try to partner with them. We may just be - they just may be a vendor for us, we need to pay them, right. It could be other things that happen there. But rather than try to reinvent it ourselves, say an example, we're not probably going to build towers, we're probably not going to lay a bunch of fiber if somebody already got fiber. So when we need edge compute, if somebody is in the edge compute business that's probably not a business we have to enter. If somebody doesn't do it or doesn't have confidence in us, then by all means, we will do it. Very similar to - we launched our satellites in the DBS business, some vendors refused to launch for us because they didn't think we could pay him. Some people refused to build satellites for us because they didn't think we could pay him or we've been successful. But some people did believe we had a chance to be successful and those people have become long-term vendors and partners for us for a long time. I think the same things going to happen here. Some people will be skeptical as many people in life are and some people will look at our track record and our commitment and our business plan and there'll be opportunistic.

Philip Cusick

Are you any more willing to borrow money against the spectrum through raise that 5G money than you were before?

Charles Ergen

Well, we know it's going to cost us in the magnitude of $10 billion and we're going to raise capital. I think that capital will come in - I think that capital will come from various different capital structures and sources, but I don't think we're dependent upon with.

Philip Cusick

Thanks, Charlie.

Operator

And next we'll to Michael McCormack with Guggenheim Partners.

Michael McCormack

Hey guys, thanks. Charlie, maybe just a quick comment on what you're hearing from Washington with respect to your Narrowband IoT build? When will we get comfort that that's going to meet their desires or needs? And then with respect to Sling, just maybe a comment on the competitive landscape there, whether or not you are share takers from DirecTV now losses and the impact of Hulu Live and YouTube TV? Thanks.

Charles Ergen

Warren why don't you take that first part?

Warren Schlichting

Okay sure, I mean I think it's probably fairly well known that DirecTV was heavily promoting that product and so we just follow our; A, we listen to the customer and B, we follow our sort of guidance internally and fiscal responsibility. So if we look at it, it's taking share as much as we do. We just keep marching in the direction that works for us. And as Eric mentioned, margin positive and we continue to accumulate customers. And frankly, I'm not exactly sure where they come from. But it's a good story for us.

Charles Ergen

Yeah, on Washington, we don't - we haven't heard - obviously, we got - we met with staff and the commissioners, we got questions, follow up questions on that. We've answered those. Those follow up questions. We haven't, to my knowledge have not heard anything since that period of time. And obviously, we're past the point of no return at this point to do something different. I don't think there should be any skepticism about Narrowband IoT or Narrowband IoT build out meaning our commitment for the FCC, because I think the rules are pretty clear in terms of flexible use. And it's pretty clear that the incumbents all have net have followed our lead with Narrowband IoT in the United States and of course other people are doing that around the world. I don't think we're happy that our network is not going to be as robust as perhaps some existing networks because we're limited by five megahertz of nationwide uplink spectrum, so we only have that clear the rest of the spectrum is either tied up in the - in an interference studies by the government and from the auctions and also tied up in DE stuff that's gone to FCC, where all the information is in, but the FCC hasn't ruled yet and so that is more difficult to plan for something that we don't control at this point.

Jason Kiser

In addition to the 600.

Charles Ergen

In addition to the 600, which isn't going to be cleared until June and there's always the risk that the broadcaster's will ask for more time there. So we obviously, if we had ability to use the spectrum that we own and also work at DE partners in a more robust way we could build a more robust network. So that's why - so we're all disappointed that we that we can't do a little bit more and I'm sure that given the kind of race to 5G and the - I think within the Congress and the FCC and additionally also the incumbent operators, we want this country to lead in 5G and I think we're going to play a big part in that.

Michael McCormack

Great thanks guys.

Operator

And next we'll move Jonathan Chapman with New Street Research.

Jonathan Chapman

Thanks a quick one for Mr. Ergen. So a lot of the comments you've made about the 5G network that you're planning in phase 2 has echoes, at least for me of what we saw Jio do with 4g in India. And I'm wondering to what extent you've looked at that example and some of the experience the disruption that Jio bought to India you think could be replicated here. And then just following on from Phil's question, in looking for a partner, are your discussions primarily with strategic and financial players in the US or could international players come into this as a partner as well? Thanks.

Thomas Cullen

Hey, Jonathan, this is Tom. Yes, we of course, have looked at Jio and they've graciously spent some time with us to help us better understand how they approach the market. It's pretty well documented how disruptive they were in terms of elimination of many carriers and forcing prices and competition to respond. There's obviously differences between 4G and 5G and as mentioned earlier on the call, I think everyone in the industry understands that 3GPP has yet to finalize the release 16 documentation or codification of the standard, which really in release 16 are the three pillar elements of 5G, which is enhanced mobile broadband, ultra low latency and massive connectivity. So once that gets finalized late this year or early next then the ecosystem begins to develop. What we're also excited about is what's happening around virtualization and the opening of interfaces within radio access networks, which we think will have a significant impact on capital and operating expense in a network in the 2021 time frame. And of course having a green field with a clean sheet of paper gives us an advantage because you won't be burdened by any legacy previous generation equipment and architecture.

Charles Ergen

Yeah and this is Charlie. I just would add that realize of what Jio did was clean sheet of paper and 4G, very little band - I think they had ran 40 megahertz of bandwidth to work and they have, I think, by last count they're somewhere in the 270, 280 million customers on that network after 18 months. But the most important thing I think that we learned was how important architecture is to the network and the efficiencies that you get in both the CapEx and OpEx situation and flexibility that you get in your network when you architect it and spend your time on architecture and then obviously, part of that architecture is virtualization that Tom alluded. I'd say this way, I believe that 5G with the proper architecture, right and a clean sheet of paper has the ability to be far more reaching then the marketplace understands today. I think T-Mobile understands that which is why they don't want us to be in the business. But I think the external when you're talking about 5G being 28 gigahertz to a couple people in Sacramento, our 5GE being - but I actually don't know what that is. 5GE is something Sprint thinks that the illegal and AT&T thinks that's something the American public is going to latch on to it. I don't know what that is, but what we're doing is different than that. That's all I'd say and I think that as we get farther into this that would become more evident. And it's starting to become avid and obviously the people that have spent time with us and really, really spend time in this industry.

Jonathan Chapman

And Charlie with the one's you're doing on - sorry, go ahead.

Charles Ergen

No, I'm sorry. Go ahead.

Jonathan Chapman

I was going to say just with the work you're doing with vendors on virtualization could that result in a network that costs less than $10 billion to build or is that $10 billion still stand?

Charles Ergen

We've seen estimates for less than that. And we've seen estimates for more than that. So I think one of the - I think in taking on big projects, I think it's imperative that the strategic manager of a company, which is our board and executive staff, that we set out those challenges. They need to be realistic, but they need to be realistic and achievable, but they need to be a stretch to. And so I think that 10 billion gives you a feel for what we really think we're going to do. I hope, you know, we said $500 million to $1 billion on our initial phase. I hope we come I hope I don't know where we're going to end up. I hope we come in look closer to 500 million and a billion but I don't know and 10 billion I think we're going to be in that range, could be a little higher, it could be lower.

Operator

And are you ready to move to your next question?

Charles Ergen

Yes.

Operator

Jason Bazinet with Citi.

Jason Bazinet

Yeah, I guess a couple years ago we were pretty confident you weren't going to get an adverse ruling from the FCC on the DE discount issue. And we're wrong. And I just wonder if you could spend a second and talk about what happens mechanically if the FCC does sort of rule that your network doesn't meet the build out requirements? Not so much what I'm just saying, let's posit that that's true, what are sort of the next steps that happen?

Charles Ergen

Well, I guess in my previous said, that that's not going to happen, but obviously to extent you like anything else, if you thought in life if you think you're right you then - you go to the regulatory process which could include up litigation, so both on the DE side when they ruled against the DE structure, by the way properly the court agreed with them resulted in litigation, but the court also said that the FCC aired and not giving as they head out every other DE and continue to give DEs the right to restructure to meet the DE and I'm proud of what the DEs did and what DISH did in restructuring and taking those 36 things that the FCC had concerns about and restructuring all those 36 things. So now that the - if the FCC serious about getting spectrum put to use, right, we would expect that the FCC would at least rule on the current application in front of them, right. At least rule on it so we can get moved the process down the road. Now, obviously we'd like to have them rule in our in our favor and the DEs favor, but the extent that there's still issues we certainly like to know it sooner rather than later.

Jason Bazinet

And so as this wines it's let's assume that they rule against you in at once its way through court do can you would continue to just sort of build out your network as if you're ultimately going to win in court that's sort of the plan if we go around?

Charles Ergen

Yeah, we're going to build - yeah, we're going to continue IoT network and the 5G network and again we don't believe that's going to come to cook. I think that's been –again, one analyst said there's no way we were building towers, one analyst said there's no way Narrowband IoT or even T-Mobile who's been a big adversary in terms to get in this market. Now, I think actually, now admits in the filing that Narrowband IoT does meet an obligation, so I don't put words in what they said, but that was the gist of it. So I don't think it - I just think that's a bit overblown and I don't think that - look, we have to execute. I mean, I don't think - I think we're coming under a different level of scrutiny than probably any other wireless provider has. But having said that I don't believe that the FCC is looking to change the rule on flexible use; A, I don't think they can do it legally, but I don't think they're looking to do that. And I think that as they understand more, and this is up to us, right, some of this is our fault. But as they understand more about what we're doing, and as they start understanding what the rest of the world's doing and what we're doing and they understand the need to lead in 5G and what a standalone network does that the other guys can't do maybe I'm Pollyanna, but I think that that the FCC for the most part will be supportive of that and I think they'll be very supportive of that.

Jason Bazinet

Very helpful, thank you.

Charles Ergen

Because they are –this is a great FCC for being supportive of trying to get wireless assets used better and to advance the technology and lead the world in 5G. They are to a person on the FCC and staff they are very focused on that and I think they've done just a simple example and kind of controversial, but they did pass regulations for - or improved regulations or lack of regulation for small cell that wasn't easy politically and that wasn't - it's maybe not a popular decision, but that's important if we're going to lead in 5G and they did - this FCC did that and so they do a lot of good things.

Jason Bazinet

Thank you

Operator

And next we'll move to Vijay Jayant with Evercore ISI. Vijay, your line is open.

Charles Ergen

You can move on.

Operator

Thank you. Next we'll hear from Walter Piecyk with BTIG.

Walter Piecyk

Thanks. Charlie, two questions, first on CapEx, I think you were - you've already started putting some radios on towers in 2018, there was - CapEx is imperceptible I guess, it just seemed like a normal run rate. If you think about 2019 when would the bulk of CapEx hit? And then the second question is, the Sprint T-Mobile deal looks like it's coming to its final stages here. If the government blocks it and you have an opportunity to partner with one of those companies, which would be preferable? Now, I would think that Mass and Sprint might be a little bit more desperate for a solution for Sprint from the other side T-Mobile has probably a greater need for mid band spectrum, they get better scale, they can generate free cash flow and help to fund the build, so which of those two partners would you find more attractive if they were both an option to you for the 5G build? Thanks.

Thomas Cullen

Hey Wall, it's Tom. I'll take the first one. Yeah, as you know in order to hang radios on towers, there's many steps that you have to go through in terms of milestones before you can proceed to construction. So much of that is moving through the pipeline in late fourth quarter and early first quarter, but also had some pretty significant weather issues in some parts of the country. So to answer your question, I would expect second and third quarter to ramp activity pretty significantly in terms of tower activity and therefore the associated CapEx.

Charles Ergen

And then - I mean it's no - I mean this is public, we tried to buy Sprint, right and obviously we're continuing discussions with them prior to their merger with T-Mobile. So we'll have to wait and see what the regulators decide. I think Sprint and T-Mobile have done a pretty good job on the political side of their merger and I think we're sympathetic to some of the things that they're saying, but they've done a really poor job on the antitrust side through Economic Study. Their own Economic Studies they've showed the prices would go up and obviously they would become the biggest hoarder spectrum by going over the market - by the limits that the FCC is - the screen limit, so but 300 - really almost two and a half times more spectrum than other people. So that I think they've got challenges there, but let's see where that ends up and then regardless of where that ends up from DISH perspective, we want a chance to compete.

Richard Greenfield

And Charlie, if I could just follow up -

Charles Ergen

And I fail, but I want a chance to compete.

Richard Greenfield

It's Rich Greenfield.

Charles Ergen

Sorry, go ahead, Wall.

Richard Greenfield

No, it's Rich Greenfield, you had said on the - in the release that - or in your comments before that roughly a little bit more than half of your 381,000 subscriber losses were due to your programming issues. So I'm just going around and say roughly 200,000, but I think you were been pretty clear and not just on this call, but prior calls that most of the Univision pain was felt in those first couple of months after the drop in late June, early July. Does that mean that HBO or the loss of HBO contributed the majority of that 200,000 subscriber loss because it sort of surprises me with HBO still available on Amazon Prime and HBO NOW which you can buy on broadband like it just seems surprising to me that HBO would have that much of an impact when there's lots of ways to get HBO, so maybe you could just clear that up for us?

Charles Ergen

yeah I don't quit up, but I think as Eric said in his comments, with Univision there wasn't - there was - Univision per se went down in June, but Univision Deportes which is their Sports Network and all the soccer went down in the end of October. So there was - what I would - I don't have numbers in front, but my guess is that obviously Univision that had pretty dramatic drop through the summer and then maybe started leveling off and then when the soccer fans last soccer there was probably another drop there. And HBO, I think that - the HBO will be interesting because as you say people find another way to get it, in HBO at least HBO hasn't had any real new shows come –their promises - put it this way, their main claim to fame today from a show is Game of Thrones and that hasn't been on during the period that our new shows haven't been on during the period that they've been down. So I think that realistically you would expect that when Game of Thrones comes on you may see a pickup in defections from HBO. But the bosses are - the losses for both take downs, we have certainly had losses and we would have preferred not to add take downs. It's always painful for our customers, when it's painful, our customers painful for us. Warren, do you want to add something there?

Warren Schlichting

I think you covered it, I mean, Charlie and Rich I mean, roughly half of your math works there.

Richard Greenfield

Thanks very much.

Warren Schlichting

I think the thing for analysts on the call is the underlying businesses is actually - I think the steps that Eric and team have taken the last couple of years, the painful steps of right sizing our customers, eliminating customers that aren't profitable, which we had some, of not doing crazy giveaways and just trying to have numbers for the street, but rather run it as a business and run it for the long-term profitability of that business. I think the core business that's paying big dividends. I think AT&T to their credit is probably going through that similar process now and so they'll have a few quarters where they have to right size of that because they were very aggressive on some of their promotions that just couldn't possibly be making money and at some point you have - at some point there's race to the bottom and tell people realize there at the bottom and then people start climbing the way back up. And I think we're kind of there, we're already past that, for the most part I think others in the industry will get there and you'll see some stabilization and result once it happens.

Richard Greenfield

Thank you.

Operator

And next we'll move to Marci Ryvicker with Wolfe Research.

Marci Ryvicker

I have a couple questions the first, the ecosystem is clearly changing and it feels like it's just going to get harder for the core business to continue to run, so I guess why doesn't it make sense at this point to do a JV with at AT&T and share costs?

Warren Schlichting

Well, it's pretty simple if they're sticking a gun to your head and take an HBO where you're probably not have long conversations. I mean, I'd last I looked at HBO is owned by AT&T, you can't - we're not real good at guns at our head?

Marci Ryvicker

And then I want to ask a question on the core business, so without HBO and Univision and is it safe to assume that programming expense in 2019 should be lower than 2018?

Warren Schlichting

It will be lower. Well, there's price increases, they get bounces to out - they will be definitely lower than they otherwise would have been. Those are certainly two of the products that subjectively based on viewer measurement, might be considered overpriced.

Erik Carlson

And on a per subscriber basis you'll see increases in programming costs even in spite of HBO and Univision being down, just because [indiscernible] and other ones have such high increases in them.

Marci Ryvicker

And then third thing there's been some conversation Charlie that either you or DISH or both are backing locast.org [ph], can you give any comments on that?

Charles Ergen

No.

Marci Ryvicker

Thank you.

Warren Schlichting

Operator, we'll play one more from the analyst community and then move to media.

Operator

Thank you. We will now take our final question from the analyst community. [Operator Instructions] Our final analyst question comes from Gregory Williams with Cowen and company

Gregory Williams

Great thanks for squeezing me in. My question is on G&A was up fourth quarter. I get the seasonal aspects to it, but it's up fourth quarter 7 million over a fourth quarter last year. Just wondering that anything specific to call out? And then changing gears just want to talk a little bit about spectrum, in the last quarter or since last earnings the C-band and CBRS spectrum band developments have been occurring and for one C-band it looks like there we can see as much as 300 megahertz to market higher than the 200 that was proposed and just want to know or just be interested in your take on these developments and spectrum in general as it relates to your portfolio? Thanks.

Paul Orban

Yeah, this is Paul. I'll take the G&A question. There's small puts and takes there, there's nothing really to call out on that increase.

Warren Schlichting

And I think as it relates to spectrum, I think that trying to get more spectrum available here for satellite are for [indiscernible] some competition is worthwhile endeavors and I think CBRS is - C-Band is a little bit tougher, CBRS we're moving along and the royalties like kind of out and looks like that's going to proceed. C-Band - the C-Band does a little tougher because base cap for non-U.S. companies, European and Canadian companies that they control that spectrum and you kind of - normally you have an auction process where the government but sharing any proceeds that similar to what maybe the incentive auction, so I think that that's the normal kind of process there at least in the modern era but that's a bit more difficult in this situation. So, on other hand, I think politically windfalls to foreign companies that might not be paying U.S. taxes on it, then might be, you know, have tax treaties and might be interesting effect on CBRS from the interference perspective, or things that people have to look at. But in general, we'd be supportive of CBRS and C-Band additions to the marketplace as long as that's done in a manner that's fair and equitable to both incumbents and new entrants, and to the U.S. Treasury.

Gregory Williams

Got it. Thank you.

Operator

We will now take questions from the members of the media. [Operator Instructions] Our first media question comes from Sheila Dang with Reuters.

Sheila Dang

Thanks for taking my question. I was wondering if you could comment on whether you have any more programming contacts that are up for renewal this year. Do you expect to have conversations with anyone else coming up?

Charles Ergen

It's Charlie, we have - I'd say a couple of things, one is, we always have programming contracts coming up, so that every year there will be no different. I will say that - one of the things that in the AT&T merger with Time Warner that was a positive was that they agreed to baseball-style binding arbitration or they offered everyone baseball-stuff type arbitration. So that's a process where if somebody chose to get into that process or go through that process, those signals were not good, would not be subject going down at those contracts are up.

Sheila Dang

Okay. Thank you.

Operator

And we'll next move to Scott Moritz with Bloomberg.

Scott Moritz

Great. Thanks. Charlie, you're pretty accurate with your prediction about HBO impacting the subscriber levels. And as you look ahead, you're already predicting that, probably, Game of Thrones contributes more subscriber losses. Just curious if and to follow Sheila's question, are there more contracts that might be significant coming up that you can point to and is there a sense that scent of blood in the water that maybe you might not have the leverage and negotiations with future contracts?

Charles Ergen

No, we've never had - we've never had leverage, I don't think that has changed. We're a little pipsqueak in a world of really big companies. So we've never had any leverage. But we do write big checks to programmers and we have real data. I mean, we approach it differently, right? We look at real data about what our customer views and how they - real data what they view and what the cost per viewing our, there is a bunch of - along with a bunch of other data. So we have a relative basis for what people watch and what they're willing to pay. And you also look at what the alternatives to get that product, right. So HBO, obviously, today is available from AT&T Direct. They can get it a variety of different ways. So, and then we - we have a feel for what it is. Most programmers at least historically have said we have a budget to make, we got this - we got this much last year. We want an increase. We want a 5%, 10%, 15% depending on what this local TV it might be more than that an increase and we have to meet their rationale, they're going to make their budgets, they have to increase. But even the CEO of AT&T said, in a world of declining ratings, 6%, 7%, 8% percent increases are not sustainable. I think we figured that out a few years ago that that's not sustainable. So, look, we'd love the partners that we've had, they've helped us grow our business. I think we've done a good job of helping them grow their businesses where somebody wants to work with us. We'll do our dankest to get subscribers and make sure our products good and our signals good and if somebody doesn't want to work with us, we'll move on and we're going to figure out how to run this company profitable and there's ways to do that. But again, I think HBO's unique situation because of the AT&T acquisition of the Time Warner. And Univision was a little bit unique because there was a management change both at the executive level, and also on the other programming department. So there was nobody there that had the history other than the budgetary item in front of them that the previous team had. So they - you know, we got off to a slow start. Let's put that way. Little bit of miscommunication.

Scott Moritz

Thanks.

Charles Ergen

By the way, I think you look at history, we've probably done 10,000 - I'll say 1000 deals we probably had, you know, a very small percentage as ever lead to a takedown and I think in terms of permanent - just a handful of been permanent losses. But if something's unrealistic and if you can make more money and service your customer better by taking some down by all means, I think you should do it. There's no certainty in this business.

Operator

Our next move today today's with [indiscernible].

Unidentified Analyst

Thanks so much. There's so much investment on the content side and direct to consumer offerings, both of the companies, you're in disputes with those. And in HBO's case, they've taken pains to describe HBO now as a compliment; it's neutral in terms of their core business. They're trying to do it collaboratively. But as you step back and kind of look at its evolution over these last couple of years, as well as other partners and other programmers. I mean, isn't it an irritant? How would you view the direct to consumer business, I mean, hasn't made life more complicated I'd just be interested in any thoughts there?

Charles Ergen

Well, first of all I take issue that HBO is collaborative, I think they clearly are going to competition with the distributors out there. And they do two things, at AT&T sells them for free, right, in a bundle. So it's actually free for life, right? It has been in the past and of course they sell direct. So that's not very collaborative for people that have helped build their business over the years. But having said that, that's where the world's going, as management, you have to make decisions based on where things are going. So, yes, the direct to consumer businesses is and that's why we started Sling. It's why we moved into connectivity, transition to connectivity, because we saw those kinds of things happen years, maybe years before, most people saw those things. The other piece of it is that that Eric and team, the businesses is not going away, there are - we have real strength. There are people in rural America that going to customer direct is not possible today. They don't have fast enough broadband connection to do that. There are people that love the fact that the viewing experience on a Dish network system with the hopper with primetime anything and ability to skip through commercials with the ability to record 1000 hours of programming to never miss your show, the ability to get a second subscription for free with Sling and to watch your TV on any device and anywhere you are the fact that we have a voice remote where you don't - where you now you can discover programming different ways. That's a pretty popular product with a lot of people. And I'm pretty omniscient about what's out there and I still love my Hopper and I changed, right, because that viewing experience is far superior to whatever. And I can get broadband and I do have high speed broadband. So second thing is there's places where our competition can't go. If you want to - if you're a truck or an RV or tailgater at a game, right? You can't go there with - have you ever tried it a game to get a connection for stream video just doesn't happen. So we have unique areas of our business that that our team can focus on and grow those sides of business, so absent HBO and Univision, I think you'd see this company in a little bit different. We're not - I'd say maybe we're not as pessimistic as the tone of the analysts on this call to our core business. And Eric, you want to add anything to that? Because we talk about it literally every day.

Warren Schlichting

Operator we're at the top of the hour, so we'll take one more call from the media community.

Operator

Thank you. Next we'll move to Andrew Dotson with Denver Business Journal [ph].

Unidentified Analyst

Thanks, Charlie. You guys did some testing on the ATSC 3.0 standard that broadcasters are working to launch I think it was last spring. I'm just curious, what have you excited about that standard? And how could DISH leverage it as were you mentioned earlier, you're putting up antennas to help people get Univision during the blackout. Does this good? Is it something different that have you more excited about it?

Charles Ergen

Well, the way I would say it is ATSC 3.0 is new broadcasting standard and when I - I don't know if you were on earlier. We talked about we don't want to build infrastructure where we don't have to and the broadcasting community particularly the independent broadcasters, they have a whole set of - what are they going to do long-term, you know, in terms of growing their business what's the shift they need to. So ATSC 3.0 is a new opportunity from our broadcast perspective where we think there might be good partnerships between broadcasters and us in the sense that they can use that technology to broadcast and different revenue stream from them that we probably wouldn't participate in, but we also can be the gap filler for them since we're going to be having towers in more rural communities along highways for autonomous - for vehicles and things like that. In addition, we have uplink spectrum that they don't have from a broadcast side when you put those things together. That looks to me like a potentially interesting match of technology. So we're testing - we continue to test, we're going to do even more test and we continue to work with broadcasters to see where they want to go with that. And look, at this point, we're in the early and in the first inning of ATSC 3.0. I don't think anybody knows exactly where that can go. But I would just say that we normally see technologies, we're not always right, but we have a pretty good track record of identifying technologies and staying focused on them for a long period of time until they come to fruition. And ATSC 3.0 has that potential, but we don't know where it leads we'll continue to monitor and test it.

Unidentified Analyst

Thank you.

Jason Kiser

Operator, that's it for us today. Thank you all for participating.

Operator

And that will conclude today's call. We thank you for your participation.