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Good day, and welcome to the Dish Network Corporation Q3 2019 Earnings Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Jason Kiser. Please go ahead.
Thank you, and thanks for joining us, everybody. Joined today by Charlie Ergen, our Chairman; Tom Cullen, EVP of Corporate Development; Erik Carlson, CEO of the DISH Network; Brian Neylon, the President of DISH; Warren Schlichting, the President of Sling; Paul Orban, our CFO; and Tim Messner, our General Counsel. Erik and Paul have some opening remarks, but we turn over to Tim for our safe harbor disclosure first.
All right. Thanks, Jason. Good morning, everyone. Thanks for joining us. Any forward-looking statements that we make during this call are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and/or from our forecast. Our 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 FCC Auction 103, we filed an application to potentially participate as a bidder for those spectrum assets. Because of the FCC's anticollusion rules, we're not able to discuss what, if any, spectrum resources we may intend to bid on, and we will not be answering any questions on the auction on today's call.
This morning, we announced that our Board approved proposed a rights offering to raise proceeds of approximately $1 billion. Until the prospectus supplements filed in connection with that rights offering, we're not able to discuss any additional details, and we will not be able to answer any questions on that offering on today's call.
With that, I'd like to turn it over to our CEO, Erik Carlson.
Thank you, Tim, and welcome, everyone. We have a lot going on operationally across the industry, and of course, in wireless. I'd like to first congratulate our team here for a solid quarter. It's the first period since the fourth quarter of '17 that we've been able to announce total Pay-TV net sub growth. And I'm pleased to report that our disciplined pursuit of our service technology and value strategy continues to pay off. We're finding the right customers in the right geographies and giving them lots of reasons to buy DISH and stay with DISH. We ended the third quarter with 148,000 total Pay-TV net additions.
Now I recognize that we lost 66,000 net subs on DISH TV, but this is notable progress, and I'm pleased that we're clearly bucking the industry trends. Now we've realized year-over-year growth in DISH TV gross additions, 416,000 subscribers chose DISH in the third quarter compared to a year ago, with 294,000 gross additions. The trend is not accidental. Obviously, there were both headwinds and tailwinds in the third quarter, and it's fair to conclude that we both benefited, and we're like -- and we're impacted by programming disputes across the industry. Again, we're adding the right customers in the right geographies. And in aggregate, additions in the quarter represent the highest average credit scores that we've seen.
On the Sling side, we saw 214,000 net additions, the largest jump in growth we've seen since we started publicly announcing Sling stats. We credit effective promotions, a more flexible value proposition than our direct competition, and as with DISH, Sling did see puts and takes with regard to programming disputes.
Of course, third quarter seasonality continues to play a role in Sling's growth. Organizationally we've closed our acquisition of assets from EchoStar in September and officially welcomed key employees responsible for satellite operations. Paul's going to touch on the impacts of the transition and the impact it's expected to have on our financials.
Moving on to wireless. Charlie and Tom are both here to address our progress. We're pleased to see the FCC issued its order this week approving the proposed T-Mobile/Sprint merger. The framework established by the FCC will facilitate and accelerate DISH's entry as the new nationwide facilities-based provider. Our goal is to spur competition and drive America's leadership in 5G, all to the benefit of American consumers in the industry.
With regard to our announced acquisition of Sprint's prepaid business, including Boost Wireless, we're moving forward, assuming that the T-Mobile/Sprint merger will close. Should the merger receive approval, we're confident in our day 1 plan for Boost, for its team, its partners, and its customers. We will be ready.
And I hope you saw the news. We're welcoming 2 new members to our wireless leadership team, Marc Rouanne, an accomplished wireless executive. Among his many assignments, he served as Nokia's Chief Innovation and Operating Officer, and is the Chairman of Alcatel-Lucent. Marc's a technologist at heart, he'll serve as our Chief Network Officer. And Stephen Bye, former President of C Spire and the CTO of Sprint. He will serve as our Chief Commercial Officer. I guess one way to say it is, Mark will architect the network, and Stephen will commercialize it. Charlie may have more to add, but it's fair to say both individuals are rock stars in our industry. They understand and share our vision, and we're certainly glad to have them aboard.
Finally, let me close on some incredible news. J.D. Power named DISH #1 in overall customer satisfaction among national TV providers for the second year in a row. The top honors in our category, earning the top ranking in all 4 geographic regions, and that's a first for a company in our industry. I credit the entire team for supporting the DISH brand, most especially our frontline personnel, our service and field reps, who day in and day out deliver an excellent customer experience. So congratulations. I'm really proud of the team. Thank you. And with that, I'd like to turn it over to Paul for a bit of color on the quarter. Paul?
Hey, thank you, Erik. As Erik just mentioned, DISH gross additions continued on an upward trend, and just as important, are coming in with all-time high credit scores.
And looking at the P&L, our operating income and EBITDA are both down compared to last year. That's primarily due to a lower subscriber base and higher SAC. These decreases were partially offset by reduced satellite and transmission expense as a result of our acquisition of the EchoStar satellite services segment. I'll discuss that shortly.
Our revenue declined due to a lower subscriber base and lower ARPU. While we were pleased with the ARPU increases at both DISH and Sling, our Pay-TV subscriber base continues to have a higher percentage of Sling TV subscribers, which lowers overall Pay-TV ARPU. We also saw a decrease in premium channel revenue, mainly related to the removal of HBO.
Our subscriber margins for the quarter were positively impacted by reduced costs related to channel removals, including regional sports and HBO. However, we continue to face long-term pressure from programmers who want higher and higher rates even in the face of declining viewership.
DISH TV SAC increased to $827 per activation, up from $721 last year. The increase in DISH TV SAC was due to higher hardware, advertising and installation cost per activation. We continue to supply a greater percent of our new customers with Hopper receivers. This drives additional hardware and installation costs, but we believe offering our best equipment influences loyalty over the long term. It delivers a better customer experience.
G&A expenses were up this quarter as a result of cost to support our wireless initiatives and legal fees. Year-to-date, we generated over $830 million in free cash flow despite increases in wireless CapEx and SAC. Free cash flow is impacted by timing differences between book expenses and cash payments, including taxes. As an example, the third quarter was negatively impacted by the payment of a $61 million litigation judgment that was previously accrued. After the redemption of our $1.3 billion debt maturities back in September, we ended the third quarter with approximately $1.6 billion of cash and marketable securities.
And finally, during the quarter, we closed our agreement to acquire the majority of EchoStar satellite services segment as well as certain real estate in exchange for approximately 23 million shares. Prior to this transaction, EchoStar provided a satellite capacity and other services that was mainly recorded in satellite and transmission expense. Going forward, these satellites are now capitalized on our balance sheet and will be depreciated over their remaining useful life. We no longer make cash payments to EchoStar for the satellites they previously owned, which positively impacted EBITDA and free cash flow for the quarter. For the 2 satellites EchoStar leased from third parties, we assumed the EchoStar leases, and will continue to make payments pursuant to those agreements. We did not realize the full benefit of this transaction in Q3 at the close during the quarter.
With that, I'll turn it over for questions. Operator?
[Operator Instructions] We will take our first question from Doug Mitchelson of Crédit Suisse.
A couple of questions for Charlie. Charlie, I don't think you've paid yourself $1 billion in compensation in the entire history of the company, and you can correct me if I'm wrong on that. But your commitment to backstop the rights offering, does that mean you're willing to borrow against your DISH stock to fund it? And any...
I don't think I can comment on that. I'm looking at the lawyer.
Yes, we're not going to -- look, until the prospective supplement is out, we're not going to say anything about the rights offering that we haven't already said in the press release this morning.
But the only thing I would say is, that I have liquidity.
We can now take our next question from Philip Cusick of JPMorgan.
Congratulations, Stephen and Marc, it would be great to have them onboard. Can you give us any update on, first, on the RFP process and what kind of responses you're getting?
Yes. Phil, this is Tom. Very healthy response rate from both traditional and nontraditional vendors. We cast a wide net, as I said, I think on a previous call. So not only the traditional infrastructure vendors in wireless, but enterprise technology companies, cloud service providers, start-ups, and different respondents for different pieces of the RFP. As you know, it was pretty comprehensive. So the respondents are -- dozens and dozens of them, and we have been meeting with them pretty much nonstop for the last 3 to 4 weeks, trying to isolate and refine the architecture that we want to go forward with. Obviously, as we've said earlier, we're taking a very cloud-centric approach to virtualize the network, which will allow us, we believe, to deploy this at a lower CapEx and OpEx level than not only legacy players, but even what we assumed going into the RFP process. We're encouraged with the responses, even though we have yet to negotiate final agreements.
Okay. Okay. And then any conversation happening with the FCC around the DE process? I mean there hasn't obviously been an announcement, but any progress happening there?
We can't comment on that. It's a [ restriction ] of the proceeding.
We will now take our next question from Walter Piecyk of LightShed.
Charlie, T-Mobile had their call today announcing a new -- some new rate plans that are contingent on the Sprint/T-Mobile deal getting done. One of them was like a $15 plan for 2 gig. It seems like that could have an impact on Boost and the types of subs they get. But in addition to that, you said that they were in some type of discussions with Sprint in terms of extending their agreement. He'd mentioned, I guess, value -- a number of different things that they might be renegotiated. I'm just wondering, is DISH -- does DISH have to be part of those discussions if they're changing any structure of the transaction and -- or they're doing things that potentially impact what DISH is getting as part of this deal? Would you be a part of that discussion that's going on between T-Mobile and Sprint right now?
The short answer is we're -- would not be involved in any kind of renegotiation between Sprint and T-Mobile. And I think they're -- and I have no inside information one way or the other as to whether that's happening, actually happening. Regard to the first question, I think the -- from a big picture's perspective, I think this proposed transaction with T-Mobile and Sprint, I think you could -- the FCC and the Just department can take a lot -- judge FCC to advance 5G and Justice to provide remedies to maintain competition. But I think you've got to give the state attorney generals a lot of credit in incentivizing, I should -- T-Mobile to take a look at lower income people who -- or some of the people that maybe aren't getting the best deals, low-income people are always, credit cards, all parts of our economy. They sometimes don't get -- they sometimes get the worst deal because of their income status. So that's a big step forward that T-Mobile's committed to. I'd only say that based on what they -- we can't publicly talk about our MVNO deal, but obviously, they've made some promises to the FCC and to Justice and based -- assuming they keep those promises, we believe that DISH will be competitive with Boost, and we're going to grow that business.
So any changes that they make that, that's -- you don't envision that triggering a need by you in order to stick with this deal of getting anything altered? It's your kind of, I guess, look forward on the...
The big picture is, T-Mobile has just committed to making sure that the MVNO is competitive.
Charlie, it's Rich Greenfield. When you look at the drop of the RSNs, I think you've sort of shocked the world, only losing 66,000 subs. Back of the envelope math, it looks like you just saved $0.5 billion annually, and you're only going to lose $20-plus million of EBITDA. It seems like a fantastic trade. I'm sure you'll lose some more subscribers as baseball season comes back, et cetera, but this seems like it was a truly amazing decision. Am I missing anything? Or is this sort of, are you teaching the rest of the industry that RSNs aren't needed anymore?
Rich, thank you for that softball question. I'd be a little bit differently. I think that short term, long term, our preference -- there's no question that it's complicated because what -- when Fox owned all the assets that they've sold to Disney and to Sinclair and themselves. They price that uniquely, and to some degree, subsidized the regional sports with some of their own programming because they split that apart, of course, both Disney and Fox wanted their fair share for their -- what their programming was worth in -- and the regional sports were mispriced in marketplaces, at least as it relates to DISH.
The second thing is that DISH's consumers are a little bit different. So as many of you know, in regional sports, there's different zones and people in the cities tend to pay more for regional sports than people in the rural areas. But contractually, that -- contractually Sinclair wanted to go a little different route there. And so there's a lot of complications there. And the biggest complication was that Disney themselves, who have contracted the negotiations out, didn't extend the contract. So we lost the best -- we lost the highest value regional sports customers because the months of August -- August and September, the -- at least for us, are the highest, highest viewed months for regional sports by a long shot.
So to be down during that period of time, they felt that was negotiating leverage against us. And so that's why they did it, but they actually -- in my opinion, the illogical thing because we lost our best customers, therefore, we couldn't pay as much money to put regional sports back up again. So because our costs for the viewers who want it would go up. And you're in a situation -- so having said that, we'd rather have a deal. We like Sinclair. We've got a long-term relationship with Sinclair. We like the company. We like the people there. We'd rather have regional sports, but we're not going to -- as a company, we're not going to subsidize.
We're not going to subsidize regional sports. And so there's economics that may not work for them, and there's economics -- we know what the economics are for us. We actually analyze stuff. We actually look at what we believe our customers, how our customers value. It's a little bit different than some of the others. So we can't be treated -- they always want to treat everybody the same. Just not -- world's not going that way. The other thing is, you have to take at the macro environment, Rich, which is, as things go to streaming, we're going to an ala carte world, and you're going to be able to, I would imagine [indiscernible]
Disney's taking programming off of DISH as we speak, out of TV everywhere and moving it to Disney Plus. I mean they're doing that with all distributors as we speak.
And that doesn't increase their value to us, right? So obviously, that has to be taken into consideration in the negotiations. Additionally, I would imagine that with even regional sports -- even teams themselves will probably stream directly, and we'll -- people will be -- our customers get HBO a different way today. They don't have to get it from us. They can pirate it, they can use code sharing, they can get it through another distributor. They can get it from Amazon. Our customers will be able to get regional sports and local channels when that comes up with Sinclair. They're just going to get it a different way. And sometimes -- we're so in the weeds in this business for so long with -- we just see the world a little bit differently in -- than other people.
But having said that, we like to strike agreements that are good for both companies, and we've had long-term relations, and you'd have to make us leave, kicking and screaming, but HBO did that and refused to negotiate a deal other than one that we would lose a significant amount of money on. They had strategic reason because they wanted to grow subs at DIRECTV. And they had Game of Thrones coming up, so they had a valid strategic reason for wanting to do that. That reason may not be out there anymore, but they certainly did that in Sinclair. Now unfortunately, given Disney's decision not to extend the contract is in a situation where they've got to make decisions.
But if everybody has regional sports, and we don't, and trust me, the vast, vast, vast majority of our customers don't watch a single second of any -- of regional sports in our network. That's an advantage for us, if that's the strategy we have to go down because we won't have to increase the prices to our consumers. And I know what's going to happen. Sinclair will start running -- I've been through this so many times. Sinclair will start running ads and saying you can't get this hockey team on DISH, and you can get them on our competitors, and we'll run an ad that says you're paying more from our competitors because we don't have that hockey team that you don't watch, right? And so it'll be more mindless stuff, but that's the way things go. And we accept it, that, that's probably the illogical thing that happens in this business.
We'll now take our next question from Doug Mitchelson of Crédit Suisse.
Yes. Sorry about the difficulty before. The other question I was going to ask, Charlie, just with T-Mo announcing unlimited today at $15 a month if their deal gets closed, Altice is out there at $20, Cable's selling by the gig. I just wanted to get your latest thoughts on the wireless opportunity, if you're as confident as ever that by the time you build out, the business will be as attractive as you hope, given you are seeing some pricing cuts in the industry.
Yes. I think they're proving our point. The United States has the highest -- some of the highest prices in the world for mobile services. The different plans are maybe not attractive to certain segments of our population. And the margins, 60% margins are really pretty nice margins when you're selling air. So it's ripe for disruptment. But if you're going to get down to $15, the only thing I'm sure of is you better have the most efficient, flexible, lowest CapEx network. And I'm telling you, DISH is going to have a huge, huge advantage there as we build a greenfield virtualized network that's primarily in the cloud. It is huge cost advantages long term for us that allow us to compete wherever they want to go.
We will now take our next question from Kannan Venkateshwar of Barclays.
Charlie, a couple, if I could. The first is on your DBS business. Obviously, Elliott's been pushing AT&T to do something with DIRECTV. And the obvious choice has been a potential combination with DISH. And obviously, it's not a new permutation. You guys have thought about it in the past many times. But structurally, is there -- given your focus on telecom and given the need for capital to build that out, is there any way in which you can partner with DIRECTV, even if there's not an explicit deal in the pipeline, which could make this a win-win for both of you? And then secondly, from a financing time line, without directly addressing the $1 billion rights issue today, what's the time line in terms of the $10 billion number? How are you thinking about it from a capital structure perspective in terms of debt equity mix and so on and so forth? If you could just help us with that, it would be very useful.
I'll take the second part of the question. As far as our capital requirements, as we get further through the RFP process, we'll have a better bit of flavor for that. Obviously, the rights offering is going to secure the first $1 billion of that. The company -- Erik's team is cash flow, and you can look at those numbers, that's in the neighborhood of $100 million a month, the prospectus, so you can kind of calculate that out. And there's obviously other -- any good business plan today can raise way, way more than $10 billion. So as we go to with the RFP process, though -- that guides us a little bit.
And as Tom -- I'll just reiterate what Tom said, I mean the RFP process so far, as you -- the costs have come in below maybe where we expected on that $10 billion number. And obviously, we haven't finalized the vendors. And obviously, it's still more negotiation to go and a lot of people -- there'll be a time next year that we're -- where you won't be hearing DISH saying about the power of 5G virtualized networks. You're going to hear other companies talking about it. You're going to hear it from different sources, the kind of things that we're talking about, just like people talked about, didn't talk about digital compression back in 1991. But boy, did they sure talk about it in 1994, even though we were talking about it in 1991. So you're going to see lots of investment and lots of creativity around the kind of things that we're doing, and it'll be more obvious to people.
It's just -- I spent the last 10 years of my life learning about wireless, and I'm still -- I'm a little better than a novice, but I still have a lot to learn. It's really hard to understand where this whole thing is going without being in the weeds of it, in the nitty-gritty detail, so -- and I forgot the first part of your question.
Oh, DIRECTV. Look, there's industrial logic for DISH and DIRECTV to be doing some things together. There's industrial logic for DISH and AT&T to be doing things together. But when somebody puts a gun to your head with HBO and says you will -- you need to carry HBO, you're going to lose money. That's not a door opener for us as a company. And this merger with T-Mobile and Sprint's got -- we're focused on that. We're -- the FCC has given us an opportunity, Justice is -- we're part of a remedy. We're really focused to make sure the transaction -- this transaction is completed, and we're totally focused on that, and that's going to take all our efforts, along with architecting our network through the end of the year. And we finalized -- my direct reports, we have, arguably, one of the finest teams in wireless now. At the high level, we've got to go fill in some gaps in our -- my direct reports' got to build their teams, and they have carte blanche to go do that with anybody and everybody that can help us. But we've got a really, really solid senior leadership team, both on Erik's side and with Warren on Sling and now with -- on the wireless side. So that's where our focus is.
We'll now take our next question from Ric Prentiss of Raymond James.
One quick one and one longer-term one. I think you mentioned the satellite transmission expense was not fully reflected in the quarter. How much more do you think will come out from the $92 million in third quarter to fourth quarter? And then more long term, on the EchoStar call today, they were pretty excited about the S-band spectrum and their purchase of Helios and then possibly working with the DISH side on the S-band. So Charlie, maybe you can elaborate on what the S-band might bring to things? And third question, line them up, is the 600 with T-Mobile, any progress?
I'll take the first one here. As it relates to satellite and transmission expense, the majority of the benefit was received, so you'll see a little bit more going forward. And I'd just direct you to take a look at the related part footnote, you can see what we've been paying them and how it's dropped. And there's some more of that, it can go down. But we still have services that they provide. So there will be some amounts that we will pay them in the future.
600 megahertz, as you know, T-Mobile is required to negotiate in good faith with DISH to lease some of that capacity until we're able to use it, that you can imagine that they don't want to pay much, what it's worth, so. That's yet to be seen, where that goes. But that's certainly a potential upside capital for DISH. And what was the other...
S-band.
S-band, again, potential for DISH, that, what -- as I understand, what EchoStar is doing, particularly with Helios Wire they're in a position to have priority rights worldwide. An S-band DISH already has priority rights over North America. The EchoStar has it over Europe and Northern Africa. So that combination of that acquisition enables a lot of opportunity to coordinate S-band between terrestrial and satellite, between MEO and LEO. And that particular frequency is very, very flexible from -- anywhere from IoT to -- we used to make calls on S-band with -- when we first bought TerreStar our -- yes. So -- with Tom.
So you can imagine -- you could use your imagination to think about where that might go. Certainly, that's upside for DISH. And certainly, part of -- we're a connectivity company, so we're connecting people and things and machines and microprocessors. And part of that is going to be terrestrial, and part of that is going to be satellite.
We will now take our next question from Bryan Kraft of Deutsche Bank.
Great. As we think about the longer-term economics of your wireless business, can you help us understand how you're thinking about the ongoing operating expense to support the wireless network operations as well as the continued capital investment beyond the $10 billion initial build-out investment? And then just one on the satellite side as well. How should we think about your capital investment requirements to replace satellites going forward, now that you've expanded the fleet through the EchoStar transaction?
Well, I think our CapEx obviously we want to -- big picture is, we're going to build a network that's less expensive to operate, it's more flexible in terms of what it can do, and is more efficient. And because it will -- because we'll be cloud native in that network, we can just do things faster, better, cheaper. We don't have the legacy of 2G, 3G and 4G. So it -- the cost structure goes down across the board. But it's more than just a cost structure. It's -- we're able to do things with features and things we can do for consumers, enterprises that could be difficult or costly for other people. Obviously, you read about slicing of the network as one of the big things you can do for enterprises.
I would say it this way, the vast majority of CapEx for the incumbents is not for 5G, it's to maintain the legacy 2G 3, 4 -- I meant on vast majority of their CapEx is to maintain that legacy. We don't have that cost going forward, and it's tens of billions of dollars for those guys to maintain that. And it's brutal. It's brutal to try to change your software on the network. There's so much computation, there's so much routing. There's so many complex transactions that go through. But it's all happened in -- a lot of it's happened with sophisticated equipment, expensive equipment at the tower, and that's just not the way the world -- that's just not the way things are going to be architected in the future.
So again, we'll -- as we get through the transaction, as T-Mo and Sprint get to do the transaction obviously we owe it to the Street to show you some of our cost structures, but we want to be accurate when we do it. We've given you a generalization of where we think it's going to be. And as we get into the actual vendors that we have, an actual cost that we -- contractually that we have, we'll be able to get that down.
I think one of the analysts has gotten -- there's one analyst that's in The Street today that spent a lot of time thinking about it and started looking at some of the numbers. I don't think they're particularly far off. There's some other analysts that really haven't dug in. They look at us just like a carrier that's an incumbent. And if you looked at us just like an incumbent, we wouldn't be a viable business. So I think that we owe it to you guys to get that to you, and we'll get that to you next year, but we want to make sure it's accurate.
And we already passed the stage internally where we know we know where to get to, but we got to -- we want to be able to prove to you.
What's that part of your question? Yes, that obviously, the acquisition of satellites from EchoStar allow us to form our own destiny a little bit more. We have total control. I mean Erik, maybe you want to speak more to it, because Erik then has to deal with it, but...
Probably, I think where you're headed, obviously we have total control over the customer experience. The agreement with EchoStar has put us in a pretty good position from a fleet perspective. So in the near term, we don't see any CapEx from the satellite perspective.
We'll now take our next question from Ben Swinburne of Morgan Stanley.
I wanted to ask about the core -- today's core business, the video business. I think gross adds were the highest in a couple of years and the same with the Sling net adds. Can you guys just talk maybe, Erik or Warren or both, just your strategy to grow this business? I mean I know you've been focused on quality and churn. But to see the connects grow this quickly and the marketing was up a lot, I'm just wondering how you're thinking about going to market. Any specific drivers you'd call out on either the satellite side or the Sling side? And how much do you think some of the issues your competitors are having -- are helping you? Or if you think this is sustainable? Just would love to get some more color on the strong quarter.
Yes. Ben, this is Erik. I'm glad to jump, and maybe Warren can provide a little color -- a little deeper color on the Sling side. But as with my opening comments, I mean really, from a Pay-TV perspective, we are -- we're focused on service, technology and value. And so we've had a plan on the DISH side that we started with -- back 3, 4, 5 years ago that we've been talking about on these calls to really make sure that we're focused on bringing on quality customers that can be with us from a long-term perspective. And so as we're continuing to build momentum on targeting the right customer in the right geography, and continuing to improve the level of customer experience we provide and the products that we provide, the Hopper with -- just go through a laundry list of a few, right, the ability to skip commercials, the ability to use your voice remote, and now we've added to that with Google, and the ability to browse and find over 100,000 on-demand titles along with your live linear programming, people -- there are cohorts of customers that really want to pay for that experience and see the value. And so we've gotten a lot smarter over the years, in not only the customers that we target to acquire, but the customers that we invest in to retain.
And Sling is a very similar approach, right? Working hard to -- we've got a long way to go, and we've got lots of opportunities, but improve the customer experience and continue to fight to provide choice and flexibility from a packaging perspective. So look, we make hard decisions, and we talked about these a little bit earlier on the call, whether it's not being able to come to an agreement with HBO or RSNs or making sure that on the Sling side, we provide the right choice and value around broadcast TV. These are decisions that we've made to try to grow our customer relationships in a profitable manner.
Look, it's not -- the quarters, the last 4, 5, 6, I may get it off, it might be wrong a little bit, have not come without some tailwinds and headwinds, right? I can't remember a quarter recently that we haven't been in a programming dispute. And so we definitely, as a team, just speak about all the individuals, and as a whole, figure out what decisions we need to make that's best for our company long term and our customer base. And so I think right now, the team's been executing at a decent level, and we'll just continue to reevaluate as we do every day and put strategies and tactics in place to try to win.
Yes. If I could chime in. The cord-cutting trends continue. So those are favorable for Sling. So our job is really to grow responsibly. We still believe we're the only major player in the virtual MVPD world that has a positive gross margin. And so how do we actually take that, grow responsibly and then work on our product, continue to provide value for the subscriber. So we like the trends in the future, and we'll just continue to mind our knitting.
Got it. And just one follow-up for Charlie. You guys announced that deal with the state of Colorado around settling their challenge. Are there -- how are you feeling generally about the sort of position with the states? Are there opportunities you think to sort of chip away at some of the opposition that you found, like what you've been able to pull off in your home state?
Well, I mean obviously, Colorado, I think, is -- Colorado knows us, right? We've been here -- we started 39 years ago in Colorado, where we've been a large -- not the largest private employer in Colorado. We pay our taxes here. So obviously, we'd like to stay here, and we wanted our corporate headquarters to be here. And I think that was -- I think that Colorado has -- state attorney general looks out for Colorado. And obviously, this deal is good -- the transaction is great for Colorado. It's not great for everybody. I got it. You have to get T-Mobile credit. It is not going to be without paying for them to do what they've suggested in an [indiscernible] carrier move today, and I haven't read all -- I just got kind of some of the highlights before I jumped on this call, but -- if -- that goes a long way to some disadvantaged people.
Certainly, they started doing things that I think are important, which are closing the homework gap, which is imperative for this country to move forward. And you're in a situation now where Sprint actually gets stronger as part of T-Mobile. Sprint, we looked to buy Sprint 6.5 years ago. Today, I can tell you objectively that what I saw 6 -- that, that company today, it hasn't improved much, if any over 6.5 years and probably less -- certainly less competitive in the marketplace than they were 6.5 years ago when we looked at it. That company now gets stronger, and T-Mobile gets stronger against the 2 large incumbents, AT&T and Verizon. And as part of the transaction, DISH builds a greenfield network that will be the envy of the world. So -- and which will bring not only competition to the marketplace, but will bring innovation in a way that you just can't do with incumbent networks.
You've got to give the FCC and Justice a lot of credit for that. They may be a little skeptical with DISH going in. They've started to see what we're doing. I think that, if you have private conversations, they're probably less skeptical. I'm not saying that they're -- that they totally understand what we're doing. We have to do a better job with a couple of commissioners on -- that opposed this merger. So we let them know a little bit how that affects everything. So we'll certainly do that because we haven't spent as much time with them. But -- and then you got to get State Attorney Generals letter -- the State Attorney General's credit for encouraging T-Mobile to be aggressive to parts of our society.
So I think -- boy, I don't know how -- I would -- everything we're doing here is assuming this merger is going to go through. We're not working on a plan B. We're totally focused that John is here, he's been in the transition with -- here. If you have any questions, but he's doing the transition with the Sling folks and -- I mean Boost folks. And we -- it's the same way I felt when we knew if we could get our satellite launched in 1995, I knew that if we could get that satellite just launched, that the execution part we can handle, and that we could be disruptive in the video business. And I kind of feel like, as soon as this transaction goes through with T-Mobile and Sprint, we can do the same thing.
We will now take our next question from Mike McCormack of Guggenheim Partners.
Erik, maybe just a quick comment on the Sling side. You guys have had a pretty aggressive, I guess, 1 month promotion in the marketplace for a while now. And I'm guessing you have some view on the tenure of those customers. But as you go forward, is there a risk as we look over the next quarter or 2 that we have your churn spike up again, where you've seen some of these promotional offers by your peers that tend to blow up after the fact? Just some thoughts around that, perhaps. And then maybe, Charlie, just on the HBO side. How does HBO Max sort of change the dynamic or any sort of discussion with AT&T on them?
So Mike, maybe I'll say a few words, and then I'll turn it over to Sling. I mean obviously, I mentioned it in the opening remarks, Q3 has a bit more of a seasonal approach to folks, especially with our -- the way our packaging works to bring value to the customer with our Orange package. We definitely try to have discipline and focus around attracting customers that can be profitable, whether or not they may be more seasonal than linear TV long term. So Warren, do you have any other insights that you want to provide to Mike on that?
Yes. I would just say that we've actually very -- in a measured way, started to bring some of those promotional offers back in -- reel them back in, in terms of value. I mean -- and then and the business itself is more susceptible to churn, for sure. But we don't have contracts the way traditional Pay-TV does. But we don't see anything extraordinary happening in the next few months. It's business as usual, and we continue to take steps forward to attract and retain good subs. And I think we're a little bit better at targeting who those good subs could be.
Do you want to comment on HBO Max?
HBO Max, it's interesting because I don't know everything they're going to do with HBO Max, but I think it's going to be a good product. I think that it will be tougher for linear distributors because, well, HBO, at least -- HBO was requiring, at least from us, guaranteed contracts, certain number of subs. And obviously, that's difficult to do when you're competing against HBO themselves, particularly if they stick a lot of other programming on HBO Max. It certainly will give leverage to distributors in future negotiations as you might be able to get some product from TNT or TBS or CNN or Cartoon, on HBO Max.
And so it's going to be really interesting to see how content providers navigate, because people aren't going to want to watch more TV. I mean they're not material anymore, and there's lots of great programming out there, and they're going to spend about the same amount of money. And it's going to be a lot of mouths to -- and the best product in the country today is Netflix. And I think you heard Reed Hastings talk a little bit about engagement, and that's the key metric, and he did. We just -- and it's not just Netflix, their content is the fact that they're kind of a virtualized network as we've learned about it. They've actually got most of their stuff in the cloud. So they're actually more flexible, and they deliver content cheaper than anybody can do it.
So as you got to follow them and where it goes, I don't know, but I think it's going to take a couple of years to settle out. In the meantime, Erik and his team have focus on where we know we can be strong. If you have an RV, you can't take a cable and hold it around behind you, if you're a tailgater to get a football game. DISH is -- with HDTV, DISH is the best option there. If you're in rural America, we're parts of the community, and we're there with the small business person taking care of those customers they have for 39 years, and our customers appreciate it. And our relationship with customers is strong, and their relationship with programmers is not. And that's one of the things you see reflected in our numbers. And so we'll see where it goes. But we put a lot of things together to have a solid business, and I think that hopefully will continue. And I think we're well positioned for the next generation of communications.
If you're looking at 5G, if you're looking at 5G, you might look at 100 customers. Everybody in this call might look at 100, and it might be looking at 50 to 100 different kind of things. But all of you should be looking at this company.
Charles if I could just indulge in one more, if you don't mind, because you did bring up the sports viewing and the potential for people to find that content elsewhere, perhaps in a not so nice way. But just your thoughts around that whole issue and what you guys are going to get Sling to ensure that you're not having your content still insured, where the case may be.
Well, we're the policeman on the block, and we're a pretty ever-present policeman. Sling's one of the few companies, you can read the press, we're in litigation with any number of companies who steal not only Sling, but they steal HBO and they steal regional sports, and quite frankly, it's pretty easy and pretty inexpensive and we're not a cop on the block for regional sports and HBO right now. And you know when the cop on the block is not there, crime goes up. So there's no executives who understand that in other companies, probably because they don't have the kind of kids that my friends have. And it's going to happen. It's unfortunately going to be a problem for Disney and HBO and all that. And at certain prices, if you can stay at $10, it's not a big factor. You start getting to $15, it starts creeping up on you and, if you can't get something, the American public since the scramble that happened in the wireless business in 1988. If you're going to be mean to them, you're going to make it hard to get. They're going to find a way to get it. And -- but what we're finding out, they do it in the wireless business too right, John?
That's true.
So we're finding out that it can be there. So you have to really be on top of it, and you have to really be -- really make things available in a nice way. Most people are honest, and as long as it's accessible though, you'll be okay. That and affordable.
Anyway, it's just one of those things that the analysts don't really concentrate on. It's out there. I think Tom Rutledge talks a bit about it at Charter and probably Charter and Dish are the only 2 companies talking about it. So operator, we probably have time for 1 more before we go to the media.
We'll now take our final question from the analyst community. [Operator Instructions] Our final analyst question comes from Marci Ryvicker of Wolfe Research.
I have 2. To the extent that you know, how much of the subscriber strength is coming from AT&T, because there's a perception that there's a direct value transfer from them to you. And then secondly, can you remind us what the catalyst was to put Univision back on, and maybe why that one is different than the RSNs and HBO?
So Marci, I alluded to it in our opening comments, I mean I think we have been focused and disciplined on really, on the DISH side and the Sling side now, trying to attract profitable long-term customers where we feel we're going to make an investment, right?
I mean DIRECTV and AT&T are going through a little bit of, maybe what we went through, 4 or 5 years ago. I can tell you that the customers that we're bringing on are of the highest credit quality we have ever had in this business since we started tracking it. So obviously in the quarter, there were tailwinds and headwinds for all Pay-TV providers, depending on the market you're in. We probably had a few more headwinds than tailwinds as it sorts itself out. And so yes, sure, we were the beneficiary from CBS, their Nexstar customers from a DIRECTV perspective. And obviously, we had Meredith drawn along with the RSNs and Fox during the quarter and continue with HBO. And so there's a little bit of -- there's definitely puts and takes there. But the thing that we're focused on, is to continue with our strategy, and that is really to look at where we're targeting customers, who they are and how will they be attracted to our service, and will they be profitable for us long term. And that philosophy didn't really change in Q3.
On Univision, as you say, the reason Univision went back up because of one of the more unusual things I've seen in the programming, but we actually were able to structure a programming contract with Univision where both parties are incentivized for the same thing, which is to get more customers to DISH. And as a result of that, we're kind of rowing in the same direction with Univision and absent that, that wouldn't make any sense. So -- but -- and that's taken a while, to rebuild that base, and they -- and we feel -- we have a feel for the value that people see in Univision. And as long as -- contractually, we can provide Univision for -- and make a profit on it, we'll continue to do that, but we're rowing in the same direction with Univision, which is not always the case with other programmers. Once you sign a programming deal, the next time you see them it's 3 years later, and they don't really focus on you. They just get it from everywhere. In fact now, most of them are competing with you. So that's different with Univision. You had a...
I was just going say -- Marci, it's Warren. The Sling front is a little bit different because the DIRECTV now, or AT&T TV now subs were, really are full bundle and include both affiliates and RSNs. And so we probably saw a little bit of a gain from that, but that's not a directly comparable product of Sling's, so...
But your regional sports customers were gone a week.
Yes. We saw a quick churn. I mean there's almost no switching cost whatever. So which is our headwind from us since and as I mentioned, I'm sure some DIRECTV subs came over, but I wouldn't say many, just because we don't have a comparable product.
We will now take questions from members of the media. [Operator Instructions] Our first question from the media comes from Scott Moritz of Bloomberg.
These were surprisingly strong subscriber numbers and interesting to hear that these are quality subscribers coming on, credit-wise. What do you attribute this to? And is it sustainable? What's the demographic of the people you're seeing coming on?
Yes, sure, Scott. This is Erik. I mean it's really our continued disciplined focus on targeting customers on the DISH side and the right geographies that can be profitable. And we think long -- with this long term, based on their profile.
The other piece that you heard me speak about earlier was, we continue to invest in the customer experience and the product. So the idea that a customer can come home and just literally pick up the remote and say what they want and it's on, has been really, really great for the DISH platform. And it only got better when we added Google Assistant to the remote. And so when we think about our mission of connecting people and things, we're starting to really realize that through the Hopper platform. And so whether it's skipping commercials, or voice remote or on-demand or 2 subscriptions, really you can get about 2 subscriptions for the price of one with our ability to take TV anywhere on an iPad or deliver it to an RV or somebody at a tailgate. Customers are looking for a product that's differentiated in the market, that can provide good service, technology and value. And are tuned in to the new philosophy has been around and we'd be consistent. So just in a consistent drumbeat in a march, and really a strategy in the playbook that we put in place and continue with it.
We'll now take our next question from Jimmy Schaeffer of The Carmel Group.
So Charlie, in the spectrum world, what happens to your satellite delivery Ka band spectrum, as more and more users of every kind of definition fall off the network? So I guess my question is, what are your reuse plans for any part of that satellite Ka band or mobile Ka bands?
Well, I mean I think you're -- you may be aware, Jim, I'm sure you are, knowing you, that we also went to auction and bought the terrestrial rights to the [indiscernible] connection that we use today. And it's only -- I'm a little bit surprised that the FCC has spent a little bit more time looking at that, because that's certainly a place for 5G spectrum. It's only licensed for 1-way today and needs to be restructured for 2-way, but we've got a lot of testing. We built out. We own about [ 35% ] in the country. There's other people involved in it as well.
But we built out our part, and without interference, do the DIRECTV ourselves. So we think that there's a real chance to take what I would call centimeter waves. So it's much lower than 20 gig, it's 12 gig, and it propagates 3, 4, 5x farther, lower cost to deploy, it's 500 megahertz of continuous spectrum. So we think there's a play for that long term. We bought that at auction, I think, 10 or 15 years ago. So we have a long term -- this company thinks long term, but that's all I can tell you. And hopefully, at some point, we can convince the FCC to take a look at it.
All right. Operator, with that, we're at the top of the hour. So thank you all for joining us, and we'll talk to you next quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.