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DISH Network Corp (NASDAQ:DISH)
Q3 2019 Earnings Call
Nov 7, 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 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.

Jason Kiser -- Investor Relations Contact & Treasurer

Thank you. And thanks for joining us, everybody. Joined today by Charlie Ergen, our Chairman; Tom Cullen, EVP of Corporate Development; Erik Carlson, CEO for 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 it over to Tim for our Safe Harbor disclosure first.

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

All right. Thanks, Jason. And 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 forecasts. 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 FCC Auction 103, we filed an application to potentially participate as a bidder for those Spectrum assets. Because of the FCC's anti-collision 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 rights offering to raise proceeds of approximately $1 billion. Until the prospectus supplement 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.

Erik Carlson -- President and Chief Executive Officer

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 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 to 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 a 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 bottling the industry trends. Now, we've realized year-over-year growth in our DISH TV gross additions 416,000 subscribers chose DISH in the third quarter compared to a year ago with 294,000 growth addition. The trend's not accidental. Obviously, there are both headwinds and tailwinds in the third quarter and it's fair to conclude that we both benefited and we 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, largest growth we've seen since we started publicly announcing Sling Stat. We credit effective promotion and more flexible value proposition that our direct competition, and as with DISH, going to see puts and takes with regard to programing disputes. Of course, third quarter seasonality continues to play a role in Sling's growth.

Organizationally, we closed our acquisition of assets from EchoStar in September and officially welcome to key employees responsible for satellite operation. Paul is going to touch on the impacts of the transition and the impact is expected to have in our financial.

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 inventory as a new nationwide facilities-based provider. Our goal is to spur competition and drive America's leadership in 5G, all of the benefit of American consumers and 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 one 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 two new members to our wireless leadership team-Marc Rouanne, an accomplished wireless executive. Among his many assignments, he served as as Nokia's Chief Innovation and Operating Officer and as the Chairman of Alcatel-Lucent. Marc is a technologist at heart, who'll serve as our Chief Network Officer. And Stephen Bye, former President of C-Spire and was CTO of Sprint. He will serve as our Chief Commercial Officer. I guess one way to stated is Marc 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 with some incredible news. J.D. Power named DISH number one 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 four geographic regions, and that's the first for a company in our industry. I credit the entire team for supporting this brand, most especially our front-line personnel, our service and field reps, who day in and day out delivered 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?

Paul W. Orban -- Executive Vice President and Chief Financial Officer

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 to low ARPU. While we are 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 phase 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 was impacted by timing differences between book expenses and cash payments, including taxes. As an example, our third quarter was negatively impacted by the payment of a $51 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 the 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, the satellites are now capitalized on our balance sheet and will be and will be depreciated over the 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 two satellites EchoStar leased from third parties, we assumed the EchoStar leases and we'll continue to make payments pursuant to those agreements. We did not realize the full benefit of this transaction in Q3 as they closed during the quarter.

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

Questions and Answers:

Operator

Thanks you. [Operator Instructions] We will take our first question from Doug Mitchelson of Credit Suisse. Please go ahead. Your line is open.

Doug Mitchelson -- Credit Suisse -- Analyst

Thank you so much. 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 in any...

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

I don't think I can comment on that. I'm looking at the lawyer.

Unidentified Participant

Yeah, we're not going to -- look until the prospectus 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.

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

But the only think I would say is that I have liquidity.

Operator

Thank you. We can now take our next question from Philip Cusick of JPMorgan. Please go ahead. Your line is open.

Philip Cusick -- JPMorgan -- Analyst

Hey, guys. Thanks and congratulations to Stephen and Marc. It'd be great to have them on board. Can you give us any update on, first on the RFP process and what kind of responses you're getting. Thanks.

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

Take that, Tom.

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

Okay. Yeah, Phil. This is Tom. Very healthy response rate from both traditional and non-traditional 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, was pretty comprehensive. So the respondents are dozens and dozens of them and we have been meeting with them pretty much non-stop 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.

Philip Cusick -- JPMorgan -- Analyst

Okay. And then any conversation happening with the FCC around the DE process? And there hasn't obviously been an announcement, but any progress happening there?

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

We can't comment on that. It's a restricted proceeding.

Philip Cusick -- JPMorgan -- Analyst

Thanks, guys.

Operator

Thank you. We will now take our next question from Walter Piecyk [Phonetic] of [Indecipherable]. Please go ahead. Your line is open.

Analyst

Thanks. Hi, Charlie. T-Mobile had their call today announcing a new -- some new rate plans that are contingent on 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 Boosts and the types of subs they get. But in addition to that, they said that they were in some type of discussions with Sprint in terms of extending their agreement. He mentioned I guess value indemnification, a number of different things that they might be renegotiating. 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 -- of this deal. Would you be a part of that discussion that's going on between T-Mobile and Sprint right now?

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

The short answer is, we are -- we would not be involved in any kind of renegotiation between Sprint and T-Mobile, and I think there -- and I have no inside information one way or the others where that's happening -- actually happening. In regard to the first question, I think the -- from a big picture's perspective, I think this proposed transaction in T-Mobile and Sprint said I think you could -- the FCC and the Just department can take a lot -- FCC to advance 5G and Just is 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 say -- T-Mobile to take a look at lower income people who -- or some of the people that may be are -- that aren't getting the best deals. Low income people 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've -- we can't publicly talk about our MVNO deal, but obviously they've made some promises to the FCC and Justice and based -- assuming they keep those promises, we believe that the DISH will be competitive with Boost and we're going to grow that business.

Analyst

So any changes that they make -- that that's envision that triggering a need by you in order to stick with this deal of getting anything altered. It's, you're kind of, I guess, all the steps forward on that.

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

The big picture is T-Mobile has committed to making sure that the MVNO is competitive.

Rich Greenfield -- BTIG -- Analyst

Charlie, it's Rich Greenfield. When you look at it drop of the RSNs, I think you've sort of shocked the world only losing 66,000 subs. Back of the envelope math looks like you just saved $0.5 billion annually and you're only going to $20-plus million of EBITDA. It seems like in a fantastic trade. I'm sure you'll lose some more subscribers as baseball season comes back, etc. 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?

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

Rich, thank you for the softball question. I'd beat a little bit differently. I think that short term, long term, our preference -- there's no question that -- it's complicated because what happened -- when Fox owned all the assets, but they've sold Disney into Sinclair and themselves, they priced that uniquely and to some degree subsidized the regional sports with some of their programming, because they split that apart, of course, both Disney and Fox, one of their fair share for their -- what their programming was worth and the regional sports were mispriced in the marketplace as 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 want to go a little different route there. And so there was a lot of complications there and the biggest complication was that Disney themselves who had contracted the negotiations out didn't extend the contract. So we lost the best. We lost the the highest value regional sports customers, because the months of August and September are the high at least for us or the highest viewed months for regional sports by a long shot. So to beat 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 logical 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 put that viewers who want would go up and you're in a situation -- so having said that, we'd rather have a deal. We like Sinclair. We've had 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 is economics that may not work for them, but there is 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 is a little bit different than some of the other, so we can't be treated -- they always want to treated by the same. It's just not -- world's not going that way. The other thing is -- you have to look at the macro environment. Rich, which is as thing go to streaming, we're going to an Olicar [Phonetic] world, and you're going to be able to -- I would imagine...

Rich Greenfield -- BTIG -- Analyst

Disney is 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.

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

And that doesn't increase their value to us, right. So obviously that has to be taken consideration into negotiations. Additionally, your -- I would imagine that even regional sports, even teams themselves will probably stream directly and will -- people will be -- our customers, our customers get HBO different way today. They don't have to get it from us. They can pirated it. They can use code-sharing. They can get it through another distributor or they can get 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 still into the leads in this business for so long, but we just see the world a little bit differently than other people. But having said that, we like to strike agreements that are good for both companies, and with that long-term relations and you have to make us leave kicking and screaming, but HBO did that and refused to negotiate a deal doesn't than one that we would lose a significant amount of money on. They had a strategic reason because they wanted to grow subs at DIRECTV. And they have Game of Thrones coming up, so they had a valid strategic reason for wanted to do that. That reason may not be out there anymore, but that they certainly did that and Sinclair now unfortunately, given Disney decision not to extend the contract, is in a situation where they've got to make -- they'v e got to make decisions. But 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 on 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 adds saying you can't get this hockey team on DISH and you get 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. All right. And so it will be more mindless stuff, but that's way things go and we accept that, that's probably the logical thing that happened in this business.

Rich Greenfield -- BTIG -- Analyst

Thank you.

Operator

Thank you. We will now take our next question from Doug Mitchelson of Credit Suisse.

Doug Mitchelson -- Credit Suisse -- Analyst

Yeah, I'm sorry about the difficulty before. The other question I was going to asked, Charlie, just with T-Mobile announcing unlimited today at $15 a month of your deal gets closed, Altice is out there at $20, cable 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 we're seeing some pricing cuts in the industry. Thanks.

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

I think they're proving our point. The United States has the highest -- some of the highest, the prices in the world for mobile services. The different plans or maybe not -- are not attractive to certain segments of our population. And the margin -- 60% margins are really pretty nice margins when you're selling Air. So it's right for DISH, but if you're going to get down to $15, the only thing I'm sure of as 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.

Doug Mitchelson -- Credit Suisse -- Analyst

All right, thank you.

Operator

Thank you. We will now take our next question from Kannan Venkateshwar of Barclays. Please go ahead. Your line is open.

Kannan Venkateshwar -- Barclays Bank -- Analyst

Thank you, Charlie, a couple if I could. The first is on your DBS business. Obviously Eliet's [Phonetic] 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 talked 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 is not an explicit deal in the pipeline, which could make this a win-win for both of you.

And then secondly, from a financing timeline, without directly addressing the $1 billion rights issue today, what's the timeline 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 will be very useful. Thanks.

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

I'll take second part of question. As far as our capital requirements -- as we get farther through the RFP process, we'll have a better play for that. Obviously, the rights offering is going to secure the first 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 perspective. 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 got through RFP process, that guides us a little bit and -- just to reiterate what Tom said, I mean the RFP process so far, as you -- the cost have come in below maybe where we expected on that $10 billion number, and obviously we haven't finalized the vendors. And obviously we're still in the more negotiation to go and a lot of people -- there'll be a time next year where you won't be hearing DISH saying about the power 5G virtualized network. You're going to hear other companies talking about it and you're going to hear 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[Indecipherable] talk about at 1994, even though we were talking about it in 1991. So you're going to see a lots of investment and lots of creativity around the kind of things that we're doing, and it will be more obvious to people. It's just -- I've spent the last 10 years of my life learning about wireless and I'm still -- I'm a little better than an in August, but I still have a lot to learn. It's really hard to understand where this whole thing is going with that been in the weeds of it in the nitty-gritty details.

And I forgot the first part of your question. Oh, DIRECTV? There is industrial logic for DISH and DIRECTV to be doing some things together. There is industrial logic for DISH and AT&T will be doing things together, but when somebody put the guns to your head with HBO and as you will new 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 got -- we're focused on that. Where the FCC has given us an opportunity just as were part of a remedy, we're really focused to make sure that this transaction is completed and we are totally focused on that, and that's going to take all our efforts, along -- along with architecting our network at the end of the year, and we finalized my direct reports. We have arguably one of the finest teams and wireless now. At the high level, we've got to go fill in some gaps and in our my direct reports is going to build their teams, and they have [Indecipherable] to go do that. With anybody and everybody that can help us. But we've got a really solid senior leadership team, both on Erik side of with the one on Sling and now on the wireless side. So that's where our focus is.

Kannan Venkateshwar -- Barclays Bank -- Analyst

All right, thank you.

Operator

Thank you. We will now take our next question from Rick Prentiss of Raymond James.

Rick Prentiss -- Raymond James -- Analyst

Thanks. One quick one, 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 S-band might bring to things. Third question line them up is the 600 with T-Mobile, any progress?

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

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 just direct you to take a look at the related party footnote, you can see what we've been paying them. I mean how it's dropped and there is some more that I can go down, but we're still have a services that they provide. So there will be some amount that we will pay them in the future.

Unidentified Participant

Okay, 600 megahertz, as you know, the T-Mobile's required to negotiate and 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 is worth. So that's yet to be seen where that goes, but that certainly potential capital for DISH. And what was the other thing?

Rick Prentiss -- Raymond James -- Analyst

S-band?

Unidentified Speaker

S-band is again potential for DISH what as I understand what EchoStar's doing, particularly with Healios why are they in a position to have priority rights worldwide. And S-band DISH has already has priority rights over North America. The EchoStar has if 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 mio and leo and that particular frequency is very, very flexible from anywhere from IoT to we used to make calls on S-band when we first bought [Indecipherable]. So with phone. 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 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.

Rick Prentiss -- Raymond James -- Analyst

Great, thank you.

Operator

Thank you. We will now take our next question from Bryan Kraft of Deutsche Bank. Please go ahead. Your line is now open.

Bryan Kraft -- Deutsche Bank -- Analyst

Great, thanks. 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? Thank you.

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

Well, I think our capex obviously, we wanted to -- a big picture is, we're going to build a network that's less expensive to operate, that'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 the cost structure goes down across the board, but it's more than just a cost structure it's -- able to do things and features and things that 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 .

And I would say it this way. The vast majority capex for the incumbents is is not -- is not for 5G, it's to maintain the legacy 2G, -- I mean, I'm talking -- vast majority of our 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 and network. There's so much computation, so much routing, there's so many complex transactions to go through. But it's all happen in -- a lot of it's happening 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 yeah. Again, as we get through the transaction, as T-mobile-sprint to 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're giving 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 is one analyst that's in the street today that's spend a lot of time thinking about it and we started looking at some of the numbers. I don't think there particularly far off. There's my other analysts of really haven't -- dug it. They look at us just like a carrier that's an incumbent. And if you looked at us like an incumbent, we wouldn't be a viable business. So I think that we elected 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 past the stage internally where we know -- we know where we get to, but we got -- we want to be able to prove it to you.

Bryan Kraft -- Deutsche Bank -- Analyst

Okay, thanks. And the other question.

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

Obviously, the acquisition of satellites from EchoStar allow us to reach our own destiny a little bit more -- we have total control, I mean Erik maybe want to speak more because there someone has a deal with it.

Erik Carlson -- President and Chief Executive Officer

I mean I think where your head is obviously we have total control the end customer experience -- the agreement with EchoStar has put us sort of a pretty good position from a fleet perspective. So the near term, we don't see any capex from new satellite perspective.

Bryan Kraft -- Deutsche Bank -- Analyst

Okay, thank you.

Operator

Thank you. We'll now take our next question from Ben Swinburne of Morgan Stanley. Please go ahead, your line is now open.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thank you. 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 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 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.

Erik Carlson -- President and Chief Executive Officer

Yeah, Ben. This is Erik. I'm trying to jump, and maybe warn can provide a little color -- little deeper color on the Sling side. But but as with my opening comments, I mean really from a Pay TV perspective, we are focused on service, technology and value, And so we've had a 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 are 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 does just go through a laundry list of a view right, the ability to skip commercial, the ability to use your voice remote and now we've added to that with Google, and the ability to browse and find over a 100,000 demand titles along with your linear programming.

Yeah, Ben. This is Erik. I'm glad to jump and maybe Warren can provide a little color, little deeper color on the Sling side. But as with my opening comments, I mean really from a Pay-TV perspective, we are 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 are 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 you just go through a laundry list of a view right the ability to skip commercial, 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 demand titles along with your line linear programming.

People there are, there are -- cohorts of customers that really want to to pay for that experience and see the value. And so we've gotten a lot smarter over the years. I know the customers that we target to acquire, but the customers that we -- that we invest into 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 at we make hard decisions, and we talked about these a little bit earlier in the call, whether it's nothing on to committed agreement with HBO or RSMs or making sure that on the Sling side, we provide the right choice and value round broadcast TV.

These are decisions that we've made to try to grow our customer relationships in a profitable manner. Look at, it's not the quarter is the last 4 or 5, 6 I may get it off, I might be wrong a little bit, have not come without some tailwinds and headwinds. I can't remember a quarter recently that we have in a programing dispute. So we definitely as a team just think about all the individuals and as a whole and 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 that the team has 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.

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

Yeah, 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 mine our netting.

Bryan Kraft -- Deutsche Bank -- Analyst

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 or their 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?

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

Well, I mean -- obviously, Colorado, I think is a -- Colorado knows us, right. We've been -- we started 39 years ago in Colorado. We've been a large -- and if not the largest private employer in Colorado, we pay our taxes here. So obviously, that we'd like to stay here and we wanted our corporate headquarters to be here, and and I think that was -- I think the Colorado has State Attorney General looks out for Colorado and obviously this deal is good, the transaction is great for Colorado. It's now grade for everybody. I got it -- you have to give T-Mobile credit. It is not going to be without paying for them to do what they have suggested in a non-carrier move today. And I haven't read all -- I just got kind of some of the highlights before I jumped in this call, but -- if that goes along way to some disadvantaged people, certainly they start doing things that I think are important, which are closing the Homeware 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 at to buy Sprint 6.5 years ago today I can tell you objectively that what I saw -- that company today hasn't improved much of any over 6.5 years and probably certainly less competitive in the marketplace and they were 6.5 years ago when we looked at it. That company now gets stronger. T-Mobile get stronger against the two-bit large and compensane AT&T and Verizon, and as part of the transaction, DISH build a greenfield network that will be the envy of the world. So and what 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 got to give the FCC and Justice a lot of credit for that. They -- maybe a little skeptical of DISH going in. They started to see what we're doing. I think if you add private conversations, they're probably less skeptical. I'm not saying that they totally understand what we're doing. We have to do a better job with a couple of the commissioners that opposed this merger, so we let them know a little bit how that affects every things. 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 General's letter -- State Attorney General's credit for encouraging T-Mobile to be aggressive to parts of our society. So I think -- I don't know how -- everything we're doing here is assuming this merger is going to go through. We're not working on plan B. We're totally focused -- John is here in the transition with -- if you have any questions, but he's doing the transition with the Sling folks and -- and we've -- it's the same way I felt when we know if we can get our satellite launch in 1995. I knew that if we could get that satellite -- just launch just launched that the execution part we can handle and then we could be disruptive in the video business and I kind of feel like as soon as this transaction goes with T-Mobile and Sprint, we could do the same thing.

Bryan Kraft -- Deutsche Bank -- Analyst

Thanks, everyone.

Operator

Thank you. We will now take our next question from Mike McCormack of Guggenheim Partners.

Mike McCormack -- Guggenheim Partners -- Analyst

Hey, guys, thanks. Erik, maybe just a quick comment on the Sling side. You guys have had a pretty aggressive, I guess one month promotion in the marketplace for a while now. And I guess 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 two that we have churn spike up again. We'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 and then?

Erik Carlson -- President and Chief Executive Officer

So Mark, maybe 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 disciplined focus around attracting customers that can be profitable, whether or not they may be more seasonal than Linear TV long term. So -- or do you have at other insight that you want to provide to my comments?

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

Yeah, I would you say that we've actually very in measured way started to bring some of the promotional offers back end real and back end in terms of value, I mean and the business itself is more susceptible to churn for sure, we don't have contracts the way traditional Pay-TV does, but we don't see anything extraordinary happening in the next few months, mids business as usual and we can continue to take steps forward to attract and retain good subs and I think we're a little bit better at targeting through those good subs can be. You want to cover on ?

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 contract certain number subs and obviously that's difficult to do when you're competing against HBO themselves particularly they to dig a lot of the programing on HBO Max. It certainly will certainly will give leverage to distributors and future negotiations. As you might be able to get some product from TNT or TBS are CNC or cartoon on HBO and HBO Max. And so it's going to be really interesting to see how content providers navigate because people aren't going to watch more TV -- I mean are not materially more, and there is lots of great programing out there and they're going to spend about the same amount of money, and it's going to be a lot of miles. And the best product in the country today is Netflix, and I think you heard right Hastings talk a little bit about engagement and that's the key metric and he just -- and it's not just Netflix. The content -- the fact that they're kind of a virtualized network as we've learned about it, they've actually got most of their stuff on the cloud, so there actually, more flexible and they deliver content cheaper than anybody can do it. So you got to follow them and where it goes, I don't know, but I think it can take a couple of years to settle out.

In the meantime, Erik and his team have focused on where we know we can be strong. If you have an RV, you can take a cable and haul around behind you. If you're Tailgater to get football game, this is with HDTV, DISH's the best option there. If you're in rural America, we're part of the community and we're there with the small business person taking care of those customers have for 39 years and our customers appreciate it. And our relationship with customers is strong and the 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've 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. I mean if you -- if you're looking at 5G, you might look at 100 customers, and everybody in this call might look at -- it might be looking at 50 to 100 different kind of things, but all of you should be looking at this company. All of you should be looking at this company. .

Mike McCormack -- Guggenheim Partners -- Analyst

If I could just 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 a nice way, but just your thoughts around that whole issue and what you guys are doing it Sling to ensure that you're not having your content still insured whatever the case may be?

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

We're a policeman on the block. And we're pretty ever present placements. Sling is one of the few companies you may 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 expensive, and we're not a cop on the block for regional sports and HBO right now. And you know it when the cop on the block is not there, crime goes up. So there is no executive who understand that in other companies probably because they don't have the kind of kids that my friends have, but anyway -- and it's going to happen. It's unfortunately going to be a problem for Disney and HBO and all things, and there is certain price. If you can stay at $10, is not a big factor. You start getting a $15, starts creeping up on you. And if you can get something, American public since scramble happened in the wireless business in 1988, if you're going to be meantime, you're going to get hard to get, they're going to find a way to get it. But what we're buying and how they do in the wireless business too. All right, John.

Unidentified Participant

That's true.

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

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 the successful -- be OK and afforded. Anyway, that just one of those things that the analysts don't really concentrated is out there. I think Tom Rutledge talks a bit about it at Charter and probably charter and DISH are the only do companies talk about it.

So operator, we probably have time for one more before we go to the media.

Operator

Thank you. We will now take our final question from the analyst community. [Operator Instructions] Our final analyst question comes from Marci Ryvicker of Wolfe Research . Please go ahead, your line is open.

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you. I have two. To the extent that you know, how much of the subscriber strength is coming from AT&T, because there is a perception that there is 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? Thanks.

Unidentified Speaker

So, Marci, I alluded to it in our opening comments. I mean I think we have been focused and disciplined on really the DISH side and the Sling side now trying to attract profitable long-term customers, where we feel we can 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 the 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 your in. We probably had a few more headwinds and tailwinds as it sorts self out. And so, yeah, sure we were the beneficiary from CBS or next start customers from a DirecTV perspective and obviously we had -- down along with RSMs returns and Fox during the quarter and it continue with HBO.

And so there is a little bit of -- there is the definitely puts and takes there. But you know 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.

Unidentified Speaker

And Marci, on Univision, as I say -- the reason Univision went back up, because one of the more unusual things that I've seen in programming but we actually were able to structure programming contract with Univision were 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 growing in the same direction with Univision, and absent that that would. it would make any sense. So but that -- and that's taken a while to rebuild that that base, 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 in the same direction with Univision, which is not always the case with other programmers. Once you sign a programming deal, they need next time you seem is 3 years later on and they don't really focus on. They just get it from everywhere. In fact, now most of them are competing with you. So it's different with the Univision. Do you want add?

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

I was just going to say -- Marci, it's Warren. The Sling front a little bit different because the DirecTV now or AT&T TV now subs were really our full bundle and include both affiliates in our sands. And so we probably saw a little bit of a gain from that, but that's not a directly comparable product of Sling and so.

Marci Ryvicker -- Wolfe Research -- Analyst

New regional sports customers were gone in a weak.

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

Yeah. We saw a quick churn. I mean, it's almost no switching cost whatsoever. So we actually saw a headwind north and as I mentioned, I'm sure some DIRECTV subs came over, but I wouldn't say many just because we have comparable product.

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you very much.

Operator

[Operator Instructions] Our first question from the media comes from Scott Moritz of Bloomberg. Please go ahead, your line is open.

Scott Moritz -- Bloomberg. -- Analyst

Great, thanks, good afternoon. 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 with the demographic of the people you're seeing coming on?

Erik Carlson -- President and Chief Executive Officer

Sure. Scott, this is Erik. I mean it's really are our continued disciplined focus on targeting customers on the DISH side in the right geographies that can be profitable. And if we think 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 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 you think about our vision of connecting people and things, we're starting to really realize that through the Hopper platform. And so whether it's getting commercials or voice remote, or on-demand or two subscriptions, really kind of two subscriptions for the price to one with our ability to take TV anywhere on an iPad or deliver to an RV or somebody at a tailgate. Customers are looking for product differentiated in the market provided good service, technology and value. To you philosophy has been around only to consistent. So it's just been a consistent drumbeat in a March end up really a strategy and a playbook that we put in place and continue with it.

Scott Moritz -- Bloomberg. -- Analyst

Thanks.

Operator

Thank you. We will now take our next question from [indecipherable] Group.

Analyst

For Charlie. In the spectrum world what, what happens to your satellite delivery Ku-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 reused plans for any part of that satellite Ku- band or mobile Ku-band?

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

Well, I mean I think -- I think here you may be aware, Jim. I'm sure you are, no new, but we -- we also went to auction and bought the terrestrial rights to the [Indecipherable] connection that we use today. And it's only -- I'm a little bit surprised that the FCC has been a little bit more time looking at that, because certainly a place for 5G spectrum. It's only license for one way today that needs to be restructured for 2-way, but we've got a lot of testing. We've built out. We have about 35% of the countries, there's other people involved in it as well. But we've built out our part and without interference to the DIRECTV ourselves. So we think that there is a real chance to take what I would call centimeter waves that's much lower than 28 gig. it's 12 gig and it propagates 3, 4, 5 times farther lower cost to deploy. it's 500-megahertz a continuous spectrum. So we think there is 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. That's all I can tell you. And hopefully at some point we can convince them the FCC to take a look at it.

Analyst

Thank you.

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

All right. Operator, with that we're at the top of the hours. So thank you all for joining us and we'll talk to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Jason Kiser -- Investor Relations Contact & Treasurer

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

Erik Carlson -- President and Chief Executive Officer

Paul W. Orban -- Executive Vice President and Chief Financial Officer

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

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

Unidentified Speaker

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

Doug Mitchelson -- Credit Suisse -- Analyst

Unidentified Participant

Philip Cusick -- JPMorgan -- Analyst

Analyst

Rich Greenfield -- BTIG -- Analyst

Kannan Venkateshwar -- Barclays Bank -- Analyst

Rick Prentiss -- Raymond James -- Analyst

Bryan Kraft -- Deutsche Bank -- Analyst

Benjamin Swinburne -- Morgan Stanley -- Analyst

Mike McCormack -- Guggenheim Partners -- Analyst

Marci Ryvicker -- Wolfe Research -- Analyst

Scott Moritz -- Bloomberg. -- Analyst

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