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DISH Network Corp  (NASDAQ:DISH)
Q4 2018 Earnings Conference Call
Feb. 13, 2019, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

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 -- Vice President, Investor Relations and Treasurer

Great. Thank you and thanks everybody for joining us. I'm joined today by Charlie Ergen, our Chairman; Tom Cullen EVP of Corporate Development; Erik Carlson, our CEO; Brian Neylon, 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 disclosures. So for that, I'll turn it over to Tim.

Timothy A. Messner -- Executive Vice President and General Counsel

Thanks, 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.

W. Erik Carlson -- President and Chief Executive Officer

Well, thank you, Tim and good morning everyone. Both Paul and I have a few opening remarks before we open it up to Q&A.

On the wireless front we're 388 days away from our March 7th, 2020 build-out deadline and the deployment team is in full swing. Crews are working at netting, staging, installing gear on towers across the nation. A lot of work is ahead, but progress is definitely in outing (ph) 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 look at just general market, we continued to deliver historic Company lows for churn.

Part and parcel of the customer experience is having the right customer and you may have noticed we're a bit higher on SAC 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 higher commissions at our independent retail channel and an increase in hardware costs as a higher percentage of our new customers are activating with higher-priced 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 receive Univision programming at no cost. For our part, we expect the situation offers some advantages over the long term, especially as you introduce an OTA into the picture and we're able to charge less for DishLATINO to our customers.

With regard to HBO and AT& T, there hasn't been meaningful movement. 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. The AT&T's stance remains one of 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 with 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 of 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 brand and it creates an advertising environment that's better for customers. In fact, we've seen ad revenues on Sling grow threefold in the past year and that's on top of the 10-fold 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 (inaudible) rational program that Warren and his team are running. We're offering the right content, the right add-on, 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 it up to Q&A. Paul?

Paul W. Orban -- Senior Vice President and Chief Accounting Officer

Thank you, Erik. Good morning everyone. Our core Pay-TV business made positive strides throughout 2018. Our DISH TV team continue 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 a $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 costs 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 rec and the impacts of the 2017 litigation expense and asset impairment, operating income would have been relatively flat down $60 million (ph) 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. Revenue is 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 $81 million or 12%. Certain satellite leases expired and costs decreased in our digital broadcast operations. Our subscriber acquisition cost decreased $435 million or 36% largely due to fewer DISH TV activations and the impact of capitalizing certain commission 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 note 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 including the impact of the HBO channel removal and 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 increase was mainly driven by the mix of customers taking higher-priced 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?

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question today will come from Philip Cusick with JPMorgan. Mr. Cusick, your line is open.

Jason Kiser -- Vice President, Investor Relations and Treasurer

Perhaps, we should go to the next caller.

Operator

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

Kannan Venkateshwar -- Barclays Capital -- Analyst

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's a risk that's been added there. Just wanted to understand how are you thinking about the balance sheet and all the maturities 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 two 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 losses due to loss of carriage tends to happen close to when the loss of content actually happens and should we expect that to moderate in the coming quarters? Thanks.

Jason Kiser -- Vice President, Investor Relations and Treasurer

Yeah, 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 mean (ph) 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 reevaluating what's available to us. I think we've got many alternatives that are available to us both for refi or fresh capital. We've looked at things that are at the operating company, we looked at things are at the holding company. I think right now, we're pretty comfortable that there's not any urgent need to do anything. Everybody is familiar with our maturity profile and as we move out 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 any determination on anything at this point.

Charlie Ergen -- Co-founder and Chairman of the Board

Erik, do you want to take the programming question?

W. Erik Carlson -- President and Chief Executive Officer

Yeah, Kannan, on the carriage obviously, I think that normally you see a trend very close to the take down of content. In this particular case, there's a couple of inflection points. On the Univision side, obviously we had a removal midsummer, I think, at the end of January -- June, sorry about that. And then the Fortis (ph) 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 their Game of Thrones coming up in April and obviously that could impact us if we're not able to reach an agreement.

Charlie Ergen -- Co-founder and Chairman of the Board

Yeah. And this is Charlie. I think what happens is, it's not only disappointing when you lose a long-term partner, both Univision and HBO, particularly HBO, were long-term partners. But there's different dynamics there. HBO obviously is acquired by AT&T, and AT&T is taking a very anti-competitive approach to carriage because they view DISH potentially as one of their larger competitors. And so that's strictly -- they've made a decision not to engage in any kind of a conversation that any company would realistically take.

The downside for them is that customers love DISH and at least within the Pay-TV business, I think we're the high -- at least most polls and most surveys show us as the most high-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. That means they go -- I mean, they'll go to their friend's house for 10 weeks during Game of Thrones or they -- 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 other means. So -- and then we work with our other partners that have movies, which are very popular with our customers and we see increased usage of that. It does affect ARPU. Obviously, when we sell HBO for $15 and Cinemax for $10, you lose those subs, you lose ARPU there. So, that's one of the tensions. So, with the Univision, they really had a -- it's kind of perfect storm, made a change in management who had -- who I think the executive 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 have 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 most 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 in 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 are left. So that makes it really hard to put Humpty Dumpty back together again, even though the relationship, I think, is -- I think that it's not for lack of trying on both the Univision management's part and the DISH management's part. So, HBO is not trying, Univision is trying, but there are difficult situations. What our direction of the management is that's not an excuse to go 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 in that situation today. So, we're going to have a cost advantage and we can go out and start building our Latino base, but based on that cost advantage. So, there becomes a tail on it and then we move forward.

Kannan Venkateshwar -- Barclays Capital -- Analyst

Thank you.

Operator

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

Philip Cusick -- JPMorgan -- Analyst

Thanks guys. Sorry about that. I knew you didn't 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 efficiently start building that network?

Charlie Ergen -- Co-founder and Chairman of the Board

Okay, and Tom may want to jump in on this. But nothing has really changed on the cost or the timing. The cost of our network is between -- initial phase one build of narrowband IoT network is somewhere between $500 million and $1 billion 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 was the other part of the question?

Timothy A. Messner -- Executive Vice President and General Counsel

5G equipment?

Charlie Ergen -- Co-founder and Chairman of the Board

Yes, oh, 5G equipment, because we're -- our plan is to build a stand-alone ground for a 5G network, in other words, the only other country that's doing that today is China, so if you really want to compete with China in 5G, in my opinion, you need a stand-alone 5G network from scratch and then, 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 stand-alone network. That's specification for 3GP stand-alone 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 stand-alone 5G then we can start deploying that equipment. And so, today we're basically architecting that network and putting the business plan together. So, that we'll 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 we believe that with the record ingenuity and other people help, we can build a network that can rival that or will be better than that.

Philip Cusick -- JPMorgan -- Analyst

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

Thomas A. Cullen -- Executive Vice President, Corporate Development

We haven't had -- I don't know we've had any negative discussions. We certainly, like everybody else -- I'd say it this way. People who are very interested -- those people are very knowledgeable, so perhaps more knowledgeable than an analyst can be, because they're in the business or they build product forward 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 who are virtually in any business or any business in the United States realize that that can be powerful compared to what they get today in a wireless network.

And so, we've had discussions from people -- 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 that they do a good job at, we're going to try to partner with them. We may just be -- they'd just may be a vendor for us. We just pay them, right? It could be other things that happened 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 has already got fiber. When we need to 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 can pay them. Some people refused to build satellites for us because they didn't think we could pay them or we'd be 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 thing is 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 they will be opportunistic.

Philip Cusick -- JPMorgan -- Analyst

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

Charlie Ergen -- Co-founder and Chairman of the Board

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 and -- I think that capital will come from various different capital structures and sources. But, I don't think we are definitive onward.

Philip Cusick -- JPMorgan -- Analyst

Thanks Charlie.

Operator

And next, we'll move to Mike McCormack with Guggenheim Partners.

Michael McCormack -- Guggenheim Partners -- Analyst

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 your share takers from DIRECTV now losses and the impact of WhoWeLive (ph) and YouTube TV. Thanks.

Charlie Ergen -- Co-founder and Chairman of the Board

Warren, why don't you take the first part?

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

Okay. Sure. I mean, I think it's probably very well known that DIRECTV was heavily promoting their product. And so we just follow our; A, we listen to the customer and B; we follow our sort of guidance internally of fiscal responsibility. So, I don't know if we look at it as taking shares as much as we do. We just keep marching in the direction that works for us. I think Erik 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.

Charlie Ergen -- Co-founder and Chairman of the Board

Yes, on Washington, we don't -- I don't -- we haven't heard -- obviously, we got -- I've met with staff and the commissioners. We got questions, follow-up questions on that. We've answered those follow-up questions. We have, 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 -- our 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 -- 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 5 megahertz of nationwide spectrum -- uplink spectrum. So we only have that cleared. The rest of the spectrum is either tied up in interference studies by the government and from the auctions and also tied up in the DE sub that's going to FCC, where all the information is in, but the FCC hasn't ruled yet. And -- so that's -- it's more difficult to plan for something that we don't control at this point. So...

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

In addition to the 600.

Charlie Ergen -- Co-founder and Chairman of the Board

In addition to the 600, which isn't going to be cleared until June and there's always the risk that broadcasters will ask for more time there. So obviously if we had -- if we had the ability to use the spectrum that we own and also work with 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 can't do a little bit more. And I'm sure that given the kind of race to 5G and I think within the Congress and the FCC and at DISH and 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 -- Guggenheim Partners -- Analyst

Great. Thanks guys.

Operator

And next, we'll move to Jonathan Chaplin with New Street Research.

Jonathan Chaplin -- New Street Research -- Analyst

Thanks. A quick one for Mr. Ergen. So a lot of the comments you made about the 5G network that you're planning in phase two, 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 brought to India you think could be replicated here? And then just following on from Bill's question, in looking for a partner -- your discussions primarily with strategic and financial players in the U.S. or could international players come into this as a partner as well? Thanks.

Thomas A. Cullen -- Executive Vice President, Corporate Development

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 becomes developed.

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 greenfield with a clean sheet of paper, gives us an advantage because you won't be burdened by any legacy previous-generation equipment and architecture.

Charlie Ergen -- Co-founder and Chairman of the Board

Yeah. And this is Charlie. I just would just add that, realize what Jio did was clean sheet of paper in 4G, very limited band, I think, they ran 40 megahertz of bandwidth to work. And they have, I think, by last count, they're somewhere in the 270 million, 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 a virtualization that Tom alluded to. That makes -- I'd say it this way.

I believe that 5G with a proper architecture, right and a clean sheet of paper has the ability to be far more reaching than 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 of people in Sacramento, our 5G E being -- I actually don't know what that is. 5G E is something Sprint think that's illegal and AT&T thinks that's something the American public is going to latch on to.

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 as we get farther into this, that will become more evident and it is starting to become evident, obviously the people that have spent time with us and really really spent time in this industry.

Jonathan Chaplin -- New Street Research -- Analyst

And Charlie the work you're doing on -- sorry go ahead.

Charlie Ergen -- Co-founder and Chairman of the Board

No, I'm sorry, go ahead.

Jonathan Chaplin -- New Street Research -- Analyst

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?

Charlie Ergen -- Co-founder and Chairman of the Board

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 our company, which is our Board and our executive staff that we set out those challenges. They need to be realistic, but they need to be -- they need to be -- they need to be realistic and achievable, but they need to be stretched too. And so I think that $10 billion gives you a feel for what we really think we're going to do. I hope -- we set $500 million to $1 billion on our initial phase. I hope we -- I don't know where we're going to end up, but I hope we come in closer to $500 million than $1 billion, but I don't know. And $10 billion, I think we're going to be in that range. Could be a little higher, could be a little lower.

Operator

And are you ready to move to your next question?

Charlie Ergen -- Co-founder and Chairman of the Board

Yes.

Operator

Jason Bazinet with Citi.

Jason Bazinet -- Citigroup -- Analyst

I guess a couple of 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 were 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 -- I'm just saying let's positive, if that's true, what are sort of the next steps that happen?

Charlie Ergen -- Co-founder and Chairman of the Board

Well, I guess (inaudible) that that's not going to happen, but obviously to extent, like anything else if you thought -- even in life, if you think you're right. You then -- you go through the regulatory processes, 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 it resulted in a litigation. But the court also said that the FCC erred in not giving as they had every other DE and continued 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 -- if the FCC is 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 -- move the process down the road. Obviously, we'd like to have them rule in our favor than the DE's favor, but to the extent that there's still issues we certainly like to know sooner rather than later.

Jason Bazinet -- Citigroup -- Analyst

And so as this winds, let's assume that they rule against you, and it winds its way through court, you 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 to through that route?

Charlie Ergen -- Co-founder and Chairman of the Board

Well, we're going to build -- yeah, we're going to continue on the IoT network and the 5G network. And again, we don't believe that's going to -- we don't believe that's going to come to -- I think that's been -- again, one analyst said there's no way we were building towers, one analyst said there's no way that narrowband IoT, even T-Mobile who's been a big adversary in terms of getting to this market, I think actually now admits in the filing that narrowband IoT does meet required -- 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 think -- I don't think that -- look, we have to execute. I mean, I don't think -- I think, we are 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 are 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 is doing, and what we're doing, and they understand the need to lead in 5G and what a stand-alone network does that the other guys can't do, maybe I'm Pollyanna, but I think that the FCC for the most part will be supportive of that and I think they will be very supportive of that.

Jason Bazinet -- Citigroup -- Analyst

Very helpful. Thank you.

Charlie Ergen -- Co-founder and Chairman of the Board

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 -- that'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 -- Citigroup -- Analyst

Thank you.

Operator

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

Jason Kiser -- Vice President, Investor Relations and Treasurer

You could move on.

Operator

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

Walter Piecyk -- BTIG LLC -- Analyst

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 was imperceptible, I guess, it just seem 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 will be preferable? I would think that Moss and Sprint might be a little bit more desperate for a solution for Sprint. But on the other side, T-Mobile has probably a greater need for mid-band spectrum. They got 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 A. Cullen -- Executive Vice President, Corporate Development

Hey Walter, 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. We 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.

Charlie Ergen -- Co-founder and Chairman of the Board

And then, I mean, this is public, we tried to buy Sprint. So -- right? And obviously we continued discussions with them prior to their merger with T-Mo. So, we'll have to wait and see what the regulators decide. I think Sprint and T-Mobile has done a pretty good job on the political side of their merger. And I think we're sympathetic as some of the things that they're saying. But they've done a really poor job on the antitrust side. Through three economics studies -- their own economic studies, they've showed the prices would go up. And obviously they would become the biggest order of spectrum by going over the market by the limits that the FCC is screening them and so, but 300 would be really almost 2.5 times more spectrum than other people. So, I think they've got challenges there, but let's see where that ends up. And then regardless to where that ends up, from a DISH perspective, we want a chance to compete.

Walter Piecyk -- BTIG LLC -- Analyst

And Charlie if I could just follow up...

Charlie Ergen -- Co-founder and Chairman of the Board

I might fail, but we want a chance to compete.

Richard Greenfield -- BTIG LLC -- Analyst

It's Rich Greenfield. (inaudible).

Charlie Ergen -- Co-founder and Chairman of the Board

Sorry. Go ahead Walter.

Richard Greenfield -- BTIG LLC -- Analyst

No, no, it's Rich Greenfield. You had said 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 to round and say roughly 200,000. But I think you have been pretty clear 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 is lots of ways to get HBO. So maybe you could just clear that up for us?

Charlie Ergen -- Co-founder and Chairman of the Board

Yeah, I don't like to clear that for everybody, but I think as Erik said in his comments that with Univision there was -- Univision per se went down in June but Univision Deportes which is a sports network and all that the soccer went down at the end of October. So there was -- what I would -- I don't have numbers in front of me, but my guess is that obviously Univision had a pretty dramatic drop through the summer and then maybe started leveling off. And then when the soccer fans lost soccer, they probably another drop there.

And HBO, I think that -- HBO will be interesting because as you say people find another way to get it. And HBO at least HBO hasn't had any real new shows -- let me 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 or 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 losses are -- the losses are -- for both takedowns, we have, certainly have losses and we would have preferred not to have takedowns, because it's always painful for our customers and when it's painful for our customers, painful for us. Do you want to add something, Erik?

W. Erik Carlson -- President and Chief Executive Officer

No, I think you covered it Rich, I mean, Charlie and Rich, I mean, roughly half of your math works there. So --

Richard Greenfield -- BTIG LLC -- Analyst

Thanks very much.

Charlie Ergen -- Co-founder and Chairman of the Board

I think the thing for analysts in the call is, the underlying business is actually -- I think the steps that Erik and team have taken over the last couple of years, the painful steps of rightsizing our customers, of eliminating customers that are not 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 rightsize 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 until people realize they're at the bottom and then people start climbing their way back up. And I think we're kind of there, we're already past that for the most part and I think others in the industry will get there, and you'll see some stabilization as a result once that happens.

Richard Greenfield -- BTIG LLC -- Analyst

Thank you.

Operator

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

Marci Ryvicker -- Wolfe Research -- Analyst

I have a couple of 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&T and share costs?

Charlie Ergen -- Co-founder and Chairman of the Board

Well, that's pretty simple. If they're sticking a gun to your head and take HBO, you are probably not having lot of conversations. I mean, at last I looked HBO is owned by AT&T, you can't -- we're not real good at guns at our head.

Marci Ryvicker -- Wolfe Research -- Analyst

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

Charlie Ergen -- Co-founder and Chairman of the Board

It will be lower -- well there's price increases, so you get bounces throughout. (multiple speakers) They will be definitely lower than they otherwise would have been. Those are certainly -- those are certainly two of the products that objectively based on viewer measurement, might be considered overpriced. Go ahead, Paul.

Marci Ryvicker -- Wolfe Research -- Analyst

Got it. And then third...

Paul W. Orban -- Senior Vice President and Chief Accounting Officer

On a per subscriber basis, you'll see increases in programming cost in spite of HBO and Univision being down, just because locals and other ones have to tie and increases in them.

Marci Ryvicker -- Wolfe Research -- Analyst

And then third thing, there's been some conversation Charlie, that either you or DISH or both, are backing locast.org. So do you have any comments on that?

Charlie Ergen -- Co-founder and Chairman of the Board

No.

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you.

Jason Kiser -- Vice President, Investor Relations and Treasurer

Operator, we will take 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) We will begin the media portion of this call following the answer to this final analyst question. Our final analyst question comes from Gregory Williams with Cowen and Company.

Gregory Williams -- Cowen and Company -- Analyst

Great. Thanks for squeezing me in. My question is on G&A, it was up fourth quarter, I get the seasonal aspects to it, but it's up fourth quarter $7 million over fourth quarter last year. Just wondering if there was 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 that 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 W. Orban -- Senior Vice President and Chief Accounting Officer

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

Charlie Ergen -- Co-founder and Chairman of the Board

I think as it relates to spectrum, I think that trying to get more spectrum available either for satellite or for (inaudible) some competition is worthwhile endeavors and I think CBRS is -- C-band is a little bit tougher. CBRS seems to be moving along and the rumors are like kind of out and looks like that's going to proceed. C-band does a little tougher because -- base gap 4 (ph) for non-U. S. companies, European and Canadian companies that control that spectrum and you kind of can't -- normally you have an auction process where the government would share in any proceeds, 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 the other hand, I think politically windfalls to foreign companies that might not be paying U.S. taxes on it -- might be -- have tax treaties and might be interesting and the effect on CBRS from an interference perspective or things that people have to look at. But in general, we'd be supportive of both 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 -- Cowen and Company -- Analyst

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 -- Thomson Reuters -- Analyst

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

Charlie Ergen -- Co-founder and Chairman of the Board

Yeah, this is Charlie. We have -- I'd say couple of things. One is, we always have programming contracts coming up, so that every year that 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 a baseball star buying arbitration or they offered everyone baseball type arbitration. So, that's a process where -- if somebody chose to get into that process or go through that process, those signals would not be subject to going down if those contracts were up.

Sheila Dang -- Thomson Reuters -- Analyst

Okay, thank you.

Operator

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

Scott Moritz -- Bloomberg -- Analyst

Great, thanks. Charlie, you're pretty accurate with your prediction about HBO impacting subscriber levels. And as you look ahead, you're already predicting that probably Game of Thrones contributes to 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 in negotiations with future contracts?

Charlie Ergen -- Co-founder and Chairman of the Board

Well, we've never had any leverage. I don't think that's 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 and what they view and they cost per viewing hour is a bunch -- along with a bunch of other data and 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. So, you can get it -- a variety of different ways. So -- and then, we have a feel for what it is. Most programmers at least historically have said, we have a budget to make. We got this much last year. We want an increase. We want a 5%, 10%, 15% depending on what this local TV might be more than that, an increase in, we have to met their rationale, if you're going to make their budgets, so you have to increase. But even the CEO of AT&T said in a world of declining ratings 6%, 7%, 8% increases are not sustainable. I think we figured that out a few years ago, but that's not sustainable.

So, look, we love the partners that we've had. They've helped us grow our business. I think that we've done a good job of helping them grow their businesses where somebody wants to work with us, we'll do our darn just to get subscribers and make sure our product is good and our signal is good. And if somebody doesn't want to work with us, life will move on and we're going to figure out how to run this Company profitable and there is ways to do that.

But again, I think HBO is unique situation because of the AT&T acquisition with Time Warner. And Univision was a little bit unique because there was a management change both at the executive level and also all their programming department, so there was nobody there that had the history other than a budgetary item in front of them that the previous team had. So, they -- we got off to a slow start, let's put it that way, little bit of miscommunication.

Scott Moritz -- Bloomberg -- Analyst

Thanks.

Charlie Ergen -- Co-founder and Chairman of the Board

(multiple speakers) By the way, I think when you look at history, we've probably done 10,000 -- I'll say a 1,000 deals we probably had a very small percentage as ever lead to a take-down. And I think in terms of permanent -- just a handful have 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.

And next move to with Dade Hayes with Deadline.

Dade Hayes -- Deadline -- Analyst

Thank so much. There's so much investment on the content side in direct-to-consumer offerings. Both of the companies you're in disputes with have those. And in HBO's case, they've taken pains to describe HBO NOW as a complement, 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 it's 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 it made life more complicated? I just be interested in any thoughts there?

Charlie Ergen -- Co-founder and Chairman of the Board

First of all, I'd take issue that HBO's collaborative. I think they clearly are going -- I think they clearly are going to competition with their distributors and they do two things. AT&T sells it for free, right, in bundle. So, it's actually free for life, right, or has been in the past and of course they sell direct. So, that's not very collaborative for people that help build their business over the years. But having said that, that's where the world is going as management, you have to make decisions based on where things are going.

So, yes, the direct-to-consumer business is -- and that's why we started Sling and that's why we moved into connectivity, transitioned 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 Erik and team the business is not going away. We have real strengths. 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 viewing experience on a DISH network system with a Hopper with primetime anything, an ability to skip through commercials with the ability to record 1,000 hours of programming and never miss a 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 a program in a different way. 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 ain't change, right because our viewing experience is far superior to whatever. And I can't 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 a tailgater at a game, right, you can't go there with -- if you ever tried at a game to get a connection for stream video, just don't happen. So, we have unique areas of our business that our team can focus on and grow those size of business. So, absent HBO and Univision, I think you'd see this Company a little different. Like I would say maybe we're not as pessimistic as the tone of the analysts on this call, it's our core business. Erik, you want to add anything to that? As we talk about it literally every day.

Jason Kiser -- Vice President, Investor Relations and Treasurer

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

Operator

Thank you. Next, we'll move to Andrew Dodson with Denver Business Journal.

Andrew Dodson -- Denver Business Journal -- 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 has you excited about that standard and how could DISH leverage it. As you mentioned earlier you're putting up antennas to help people get Univision during this blackout. Is it something different or is it have you more excited about it?

Charlie Ergen -- Co-founder and Chairman of the Board

Well, the way I would say it is ATSC 3.0 new broadcasting standard. I don't know if you were on early, but 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 in terms of growing their business? What's the shift they need to? So ATSC 3.0 is a new opportunity from a broadcast perspective where we think there might be good partnerships between broadcasters and us in a sense that they could use that technology to broadcast in different revenue streams 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 and 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 potentially interesting match of technology, so we are testing -- we continue to test. We're going to do even more tests and we continue to work with broadcasters to see whether -- where they want to go with that and -- look at this point we're in the early -- we're 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.

Andrew Dodson -- Denver Business Journal -- Analyst

Thank you.

Jason Kiser -- Vice President, Investor Relations and Treasurer

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.

Duration: 60 minutes

Call participants:

Jason Kiser -- Vice President, Investor Relations and Treasurer

Timothy A. Messner -- Executive Vice President and General Counsel

W. Erik Carlson -- President and Chief Executive Officer

Paul W. Orban -- Senior Vice President and Chief Accounting Officer

Kannan Venkateshwar -- Barclays Capital -- Analyst

Charlie Ergen -- Co-founder and Chairman of the Board

Philip Cusick -- JPMorgan -- Analyst

Thomas A. Cullen -- Executive Vice President, Corporate Development

Michael McCormack -- Guggenheim Partners -- Analyst

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

Jonathan Chaplin -- New Street Research -- Analyst

Jason Bazinet -- Citigroup -- Analyst

Walter Piecyk -- BTIG LLC -- Analyst

Richard Greenfield -- BTIG LLC -- Analyst

Marci Ryvicker -- Wolfe Research -- Analyst

Gregory Williams -- Cowen and Company -- Analyst

Sheila Dang -- Thomson Reuters -- Analyst

Scott Moritz -- Bloomberg -- Analyst

Dade Hayes -- Deadline -- Analyst

Andrew Dodson -- Denver Business Journal -- Analyst

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