DISH NETWORK CORPORATION You should read the following management's discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and notes to our financial statements included elsewhere in this Quarterly Report on Form 10-Q. This management's discussion and analysis is intended to help provide an understanding of our financial condition, changes in financial condition and results of our operations and contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 and this Quarterly Report on Form 10-Q under the caption "Item 1A. Risk Factors." Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and we expressly disclaim any obligation to update any forward-looking statements.
Overview
We currently operate two primary business segments, Pay-TV and Wireless. Our Wireless business segment consists of two business units,Retail Wireless and 5G Network Deployment. Our Pay-TV business strategy is to be the best provider of video services inthe United States by providing products with the best technology, outstanding customer service, and great value. We offer pay-TV services under the DISH® brand and the SLING® brand (collectively "Pay-TV" services). The DISH branded pay-TV service consists of, among other things,FCC licenses authorizing us to use direct broadcast satellite ("DBS") and Fixed Satellite Service ("FSS") spectrum, our owned and leased satellites, receiver systems, broadcast operations, a leased fiber optic network, in-home service and call center operations, and certain other assets utilized in our operations ("DISH TV"). We also design, develop and distribute receiver systems and provide digital broadcast operations, including satellite uplinking/downlinking, transmission and other services to third-party pay-TV providers. The SLING branded pay-TV services consist of, among other things, multichannel, live-linear and on-demand streaming over-the-top ("OTT") Internet-based domestic, international and Latino video programming services ("SLING TV"). We promote our Pay-TV services as providing our subscribers with a better "price-to-value" relationship and experience than those available from other subscription television service providers. We market our SLING TV services to consumers who do not subscribe to traditional satellite and cable pay-TV services, as well as to current and recent traditional pay-TV subscribers who desire a lower cost alternative. OurRetail Wireless business unit offers prepaid and postpaid retail wireless services to subscribers under our Boost Mobile, Ting Mobile,Republic Wireless and Gen Mobile brands, as well as a competitive portfolio of wireless devices. We offer customers value by providing choice and flexibility in our wireless services. We offer competitive consumer plans with no annual service contracts. Our retail wireless business strategy is to expand our current target segments and profitably grow our subscriber base by acquiring and retaining high quality subscribers while we complete our 5G Network Deployment. We intend to acquire high quality subscribers by providing competitive offers with innovative new value-added services that better meet those subscribers' needs and budget. We intend to retain those subscribers through those compelling new value-added services and outstanding customer service. As we work to integrate our retail wireless brands, one of our focuses is to ensure that our Pay-TV subscribers are aware of the increased value available to them through our retail wireless
brands.
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Our 5G Network Deployment business unit strategy is to commercialize our
wireless spectrum licenses through the completion of the nation's first
cloud-native, Open Radio Access Network ("O-RAN") based 5G network (our "5G
Network Deployment"). We have committed to deploy a facilities-based 5G
broadband network capable of serving increasingly larger portions of the U.S.
population at different deadlines, including 20% of the U.S. population by June
2022 and 70% by June 2023 . As previously disclosed, if by June 2023 , we are
offering 5G broadband service to at least 50% of the U.S. population but less
than 70% of the U.S. population, the 70% June 2023 deadline will be extended
automatically to June 2025 ; however, as a result, we may under certain
circumstances be subject to penalties. On June 14, 2022 , we announced we had
successfully reached our 20% population coverage requirement. In conjunction
with our next milestone, we currently have over 300 cities with populations of
at least 50,000 under construction.
Recent Developments
COVID-19 Update
A novel strain of coronavirus which causes the disease COVID-19 has resulted in a worldwide pandemic. COVID-19 has surfaced in nearly all regions around the world and resulted in global travel restrictions and business slowdowns or shutdowns. The COVID-19 pandemic has also created unanticipated circumstances and uncertainty, disruption, and significant volatility in the economic environment generally, which have adversely affected, and may continue to adversely affect, our business operations and could materially and adversely affect our business, financial condition and results of operations. As the COVID-19 pandemic continues, many of our subscribers are impacted by recommendations and/or mandates from federal, state, and local authorities to, among other things, practice social distancing and to refrain from gathering in groups. While certain government regulations and/or mandates have eased and COVID-19 vaccines have become broadly available, governmental authorities are continuing to monitor the situation and take various actions in an effort to slow or prevent an increase in the spread of COVID-19. COVID-19 continues to impact our business during 2022, in particular in the following areas:
In response to the pandemic and business disruption, first and foremost, we
? have prioritized the health and safety of our employees. We have implemented
increased health and safety practices. Our DISH TV andRetail Wireless businesses have been and may be further
impacted by: (i) government recommendations and/or mandates for commercial
? establishments to operate at reduced capacity; and (ii) reduced in person
selling opportunities due to subscriber preferences and actions as well as
government restrictions.
Our supply chain has been impacted by COVID-19, and there have been and could
be additional significant and unanticipated interruptions and/or delays in the
supply of materials and/or equipment across our supply chain, due to, among
other things, surges in COVID-19. Moreover, any surges in COVID-19 cases in
areas outside
response to such surges may cause interruptions and/or delays that may
adversely impact, among other things, the software, hardware and testing
related to our 5G Network Deployment. In addition, worldwide interruptions and
? delays in the supply of electronic components including, but not limited to,
semi-conductors, have negatively impacted our ability to obtain set-top boxes,
wireless devices and wireless network equipment. Furthermore, we may not be
able to diversify sources of supply in a timely manner to mitigate any such
interruptions and/or delays or find new suppliers on reasonable terms or at
all. Any interruptions and/or delays in our supply chain could have a material
adverse effect on our business, including our Pay-TV and
operations, our ability to meet our build-out requirement deadlines for our
wireless spectrum licenses and our 5G Network Deployment generally.
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We continue to monitor the evolving situation and guidance from international and domestic authorities, including federal, state and local public health agencies and may take additional actions based on their recommendations. In these circumstances, there may be developments beyond our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.
EXPLANATION OF KEY METRICS AND OTHER ITEMS
Service revenue. "Service revenue" consists principally of Pay-TV and Wireless subscriber revenue. Certain of the amounts included in "Service revenue" are not recurring on a monthly basis.
Equipment sales and other revenue. "Equipment sales and other revenue" principally includes the sale of wireless devices and the non-subsidized sales of Pay-TV equipment.
Cost of services. "Cost of services" principally includes Pay-TV programming expenses and other operating costs related to our Pay-TV segment and costs of wireless services (including costs incurred under the MNSA andNSA ). Cost of sales - equipment and other. "Cost of sales - equipment and other" principally includes the cost of wireless devices and other related items as well as costs related to the non-subsidized sales of Pay-TV equipment. Costs are generally recognized as products are delivered to customers and the related revenue is recognized. Selling, general and administrative expenses. "Selling, general and administrative expenses" consists primarily of direct sales costs, advertising, third-party commissions related to the acquisition of subscribers, costs related to the installation of equipment for our new Pay-TV subscribers, the cost of subsidized sales of Pay-TV equipment for new subscribers and employee-related costs associated with administrative services such as legal, information systems, and accounting and finance. Interest expense, net of amounts capitalized. "Interest expense, net of amounts capitalized" primarily includes interest expense associated with our long-term debt (net of capitalized interest), prepayment premiums, amortization of debt discounts and debt issuance costs associated with our long-term debt, and interest expense associated with our finance lease obligations. Other, net. The main components of "Other, net" are gains and losses realized on the sale and/or conversion of marketable and non-marketable investment securities and derivative instruments, impairment of marketable and non-marketable investment securities, unrealized gains and losses from changes in fair value of certain marketable investment securities and derivative instruments, and equity in earnings and losses of our affiliates. Earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is defined as "Net income (loss) attributable toDISH Network " plus "Interest expense, net of amounts capitalized" and net of "Interest income," "Income tax (provision) benefit, net" and "Depreciation and amortization." This "non-GAAP measure" is reconciled to "Net income (loss) attributable toDISH Network " in our discussion of "Results of Operations" below. Operating income before depreciation and amortization ("OIBDA"). OIBDA is defined as "Operating income (loss)" plus "Depreciation and amortization." This "non-GAAP measure" is reconciled to "Operating income (loss)" in our discussion of "Results of Operations" below. DISH TV subscribers. We include customers obtained through direct sales, independent third-party retailers and other independent third-party distribution relationships in our DISH TV subscriber count. We also provide DISH TV services to hotels, motels and other commercial accounts. For certain of these commercial accounts, we divide our total revenue for these commercial accounts by$34.99 , and include the resulting number, which is substantially smaller than the actual number of commercial units served, in our DISH TV subscriber count. 62
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SLING TV subscribers. We include customers obtained through direct sales and
third-party marketing agreements in our SLING TV subscriber count. SLING TV
subscriber additions are recorded net of disconnects. SLING TV customers
receiving service for no charge, under certain new subscriber promotions, are
excluded from our SLING TV subscriber count. For customers who subscribe to
multiple SLING TV packages, each customer is only counted as one SLING TV
subscriber.
Pay-TV subscribers. Our Pay-TV subscriber count includes all DISH TV and SLING
TV subscribers discussed above. For customers who subscribe to both our DISH TV
services and our SLING TV services, each subscription is counted as a separate
Pay-TV subscriber.
Pay-TV average monthly revenue per subscriber ("Pay-TV ARPU"). We are not aware
of any uniform standards for calculating ARPU and believe presentations of ARPU
may not be calculated consistently by other companies in the same or similar
businesses. We calculate Pay-TV average monthly revenue per Pay-TV subscriber,
or Pay-TV ARPU, by dividing average monthly Pay-TV segment "Service revenue,"
excluding revenue from broadband services, for the period by our average number
of Pay-TV subscribers for the period. The average number of Pay-TV subscribers
is calculated for the period by adding the average number of Pay-TV subscribers
for each month and dividing by the number of months in the period. The average
number of Pay-TV subscribers for each month is calculated by adding the
beginning and ending Pay-TV subscribers for the month and dividing by two. SLING
TV subscribers on average purchase lower priced programming services than DISH
TV subscribers, and therefore, as SLING TV subscribers increase as a percentage
of total Pay-TV subscribers, it has had a negative impact on Pay-TV ARPU.
DISH TV average monthly subscriber churn rate ("DISH TV churn rate"). We are not
aware of any uniform standards for calculating subscriber churn rate and believe
presentations of subscriber churn rates may not be calculated consistently by
different companies in the same or similar businesses. We calculate our "DISH TV
churn rate" for any period by dividing the number of DISH TV subscribers who
terminated service during the period by the average number of DISH TV
subscribers for the same period, and further dividing by the number of months in
the period. The average number of DISH TV subscribers is calculated for the
period by adding the average number of DISH TV subscribers for each month and
dividing by the number of months in the period. The average number of DISH TV
subscribers for each month is calculated by adding the beginning and ending DISH
TV subscribers for the month and dividing by two.
DISH TV SAC. Subscriber acquisition cost measures are commonly used by those
evaluating traditional companies in the pay-TV industry. We are not aware of
any uniform standards for calculating the "average subscriber acquisition costs
per new DISH TV subscriber activation," or DISH TV SAC, and we believe
presentations of pay-TV SAC may not be calculated consistently by different
companies in the same or similar businesses. Our DISH TV SAC is calculated
using all costs of acquiring DISH TV subscribers (e.g., subsidized equipment,
advertising, installation, commissions and direct sales, etc.) which are
included in "Selling, general and administrative expenses," plus capitalized
payments made under certain sales incentive programs and the value of equipment
capitalized under our lease program for new DISH TV subscribers, divided by
gross new DISH TV subscriber activations. We include all new DISH TV subscribers
in our calculation, including DISH TV subscribers added with little or no
subscriber acquisition costs.
Wireless subscribers. We include prepaid and postpaid customers obtained through
direct sales, independent third-party retailers and other independent
third-party distribution relationships in our Wireless subscriber count. Our
Wireless subscriber count includes all ACP subscribers discussed below. Our
gross new Wireless subscriber activations exclude all ACP subscribers.
Affordable Connectivity Program subscribers ("ACP subscribers"). The Emergency
Broadband Benefit Program ("EBBP") was launched by the FCC in February of 2021
to support broadband services and devices to help low-income individuals that
meet certain eligibility criteria. The Affordable Connectivity Program ("ACP")
replaced the EBBP on December 31, 2021 . ACP subscribers have a significantly
higher churn rate compared to other retail Wireless subscribers and we incur
significantly lower costs to acquire these subscribers. Therefore, ACP
subscriber additions are recorded net of disconnects.
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Wireless average monthly revenue per subscriber ("Wireless ARPU"). We are not
aware of any uniform standards for calculating ARPU and believe presentations of
ARPU may not be calculated consistently by other companies in the same or
similar businesses. We calculate average monthly revenue per Wireless
subscriber, or Wireless ARPU, by dividing average monthly Retail Wireless
business unit "Service revenue" for the period by our average number of Wireless
subscribers for the period. The average number of Wireless subscribers is
calculated for the period by adding the average number of Wireless subscribers
for each month and dividing by the number of months in the period. The average
number of Wireless subscribers for each month is calculated by adding the
beginning and ending Wireless subscribers for the month and dividing by two.
Wireless average monthly subscriber churn rate ("Wireless churn rate"). We are
not aware of any uniform standards for calculating subscriber churn rate and
believe presentations of subscriber churn rates may not be calculated
consistently by different companies in the same or similar businesses. We
calculate our "Wireless churn rate" for any period by dividing the number of
Wireless subscribers who terminated service during the period by the average
number of Wireless subscribers for the same period, and further dividing by the
number of months in the period. The average number of Wireless subscribers is
calculated for the period by adding the average number of Wireless subscribers
for each month and dividing by the number of months in the period. The average
number of Wireless subscribers for each month is calculated by adding the
beginning and ending Wireless subscribers for the month and dividing by two. ACP
subscribers are excluded from our calculation of our Wireless churn rate.
Free cash flow. We define free cash flow as "Net cash flows from operating
activities" less "Purchases of property and equipment" and "Capitalized interest
related to
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RESULTS OF OPERATIONS - Segments
Business Segments
We currently operate two primary business segments: (1) Pay-TV; and (2)
Wireless. Our Wireless segment consists of two business units, the
Three Months EndedJune 30, 2022 Compared to the Three Months EndedJune 30, 2021 . For the Three Months Ended June 30, Variance 2022 2021 Amount % (In thousands) Revenue: Pay-TV$ 3,153,263 $ 3,252,390 $ (99,127) (3.0) Wireless 1,058,001 1,237,113 (179,112) (14.5) Eliminations (1,301) (2,543) 1,242 48.8 Total revenue$ 4,209,963 $ 4,486,960 $ (276,997) (6.2) Operating income (loss): Pay-TV$ 785,471 $ 826,914 $ (41,443) (5.0) Wireless (92,536) 79,824 (172,360) * Total operating income (loss)$ 692,935 $ 906,738 $ (213,803) (23.6) *Percentage is not meaningful Total revenue. Our consolidated revenue totaled$4.210 billion for the three months endedJune 30, 2022 , a decrease of$277 million or 6.2% compared to the same period in 2021. The net decrease primarily resulted from the decrease in revenue from our Wireless segment and to a lesser extent our Pay-TV segment. Total operating income (loss). Our consolidated operating income totaled$693 million for the three months endedJune 30, 2022 , a decrease of$214 million compared to the same period in 2021. The net decrease primarily resulted from the decrease in operating income from our Wireless segment and to a lesser
extent our Pay-TV segment.
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Six Months EndedJune 30, 2022 Compared to the Six Months EndedJune 30, 2021 . For the Six Months Ended Variance 2022 2021 Amount % (In thousands) Revenue: Pay-TV$ 6,320,826 $ 6,456,359 $ (135,533) (2.1) Wireless 2,223,458 2,531,762 (308,304) (12.2) Eliminations (3,701) (3,308) (393) (11.9) Total revenue$ 8,540,583 $ 8,984,813 $ (444,230) (4.9) Operating income (loss): Pay-TV$ 1,537,517 $ 1,599,657 $ (62,140) (3.9) Wireless (294,222) 171,657 (465,879) *
Total operating income (loss)
*Percentage is not meaningful
Total revenue. Our consolidated revenue totaled$8.541 billion for the six months endedJune 30, 2022 , a decrease of$444 million or 4.9% compared to the same period in 2021. The net decrease primarily resulted from the decrease in revenue from our Wireless segment and to a lesser extent our Pay-TV segment. Total operating income (loss). Our consolidated operating income totaled$1.243 billion for the six months endedJune 30, 2022 , a decrease of$528 million compared to the same period in 2021. The net decrease primarily resulted from the decrease in operating income from our Wireless segment and to a lesser
extent our Pay-TV segment.
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Pay-TV Segment
We offer Pay-TV services under the DISH® brand and the SLING® brand. As of
We promote our Pay-TV services as providing our subscribers with better service, technology and value than those available from other subscription television service providers. We offer a wide selection of video services under the DISH TV brand, with access to hundreds of channels depending on the level of subscription. Our standard programming packages generally include programming provided by national and regional cable networks. We also offer programming packages that include local broadcast networks, specialty sports channels, premium movie channels and Latino and international programming. We market our SLING TV services to consumers who do not subscribe to traditional satellite and cable pay-TV services, as well as to current and recent traditional pay-TV subscribers who desire a lower cost alternative. Our SLING TV services require an Internet connection and are available on multiple streaming-capable devices including, among others, streaming media devices, TVs, tablets, computers, game consoles and phones. We offer SLING domestic,SLING International , and SLING Latino video programming services.
Trends in our Pay-TV Segment
Competition
Competition has intensified in recent years as the pay-TV industry has matured.
We and our competitors increasingly must seek to attract a greater proportion of
new subscribers from each other's existing subscriber bases rather than from
first-time purchasers of pay-TV services. We face substantial competition from
established pay-TV providers and broadband service providers and increasing
competition from companies providing/facilitating the delivery of video content
via the Internet to computers, televisions, and other streaming and mobile
devices, including wireless service providers. In recent years, industry
consolidation and convergence has created competitors with greater scale and
multiple product/service offerings. These developments, among others, have
contributed to intense and increasing competition, and we expect such
competition to continue.
We incur significant costs to retain our existing DISH TV subscribers, generally
as a result of upgrading their equipment to next generation receivers, primarily
including our Hopper® receivers, and by providing retention credits. Our DISH TV
subscriber retention costs may vary significantly from period to period.
Many of our competitors have been especially aggressive by offering discounted
programming and services for both new and existing subscribers, including
bundled offers combining broadband, video and/or wireless services and other
promotional offers. Certain competitors have been able to subsidize the price of
video services with the price of broadband and/or wireless services.
Our Pay-TV services also face increased competition from programmers and other
companies who distribute video directly to consumers over the Internet, as well
as traditional satellite television providers, cable companies and large
telecommunications companies that are increasing their Internet-based video
offerings. We also face competition from providers of video content, many of
which are providers of our programming content, that distribute content over the
Internet including services with live-linear television programming, as well as
single programmer offerings and offerings of large libraries of on-demand
content, including in certain cases original content. These product offerings
include, among others, Netflix, Hulu, Apple+, Prime Video, YouTube TV, Disney+,
ESPN+, ViacomCBS, HBO Max, STARZ, Peacock, Fubo and Philo.
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Significant changes in consumer behavior regarding the means by which consumers
obtain video entertainment and information in response to digital media
competition could have a material adverse effect on our business, results of
operations and financial condition or otherwise disrupt our business.
In particular, consumers have shown increased interest in viewing certain video
programming in any place, at any time and/or on any broadband or
internet-connected device they choose. Online content providers may cause our
subscribers to disconnect our DISH TV services ("cord cutting"), downgrade to
smaller, less expensive programming packages ("cord shaving") or elect to
purchase through these online content providers a certain portion of the
services that they would have historically purchased from us, such as
pay-per-view movies.
Mergers and acquisitions, joint ventures and alliances among cable television
providers, telecommunications companies, programming providers and others may
result in, among other things, greater scale and financial leverage and increase
the availability of offerings from providers capable of bundling video,
broadband and/or wireless services in competition with our services and may
exacerbate the risks described under the caption "Item 1A. Risk Factors" of our
Annual Report on Form 10-K for the year ended December 31, 2021 and elsewhere in
our public filings. These transactions may affect us adversely by, among other
things, making it more difficult for us to obtain access to certain programming
networks on nondiscriminatory and fair terms, or at all.
Our Pay-TV subscriber base has been declining due to, among other things, the
factors described above. There can be no assurance that our Pay-TV subscriber
base will not continue to decline and that the pace of such decline will not
accelerate. As our Pay-TV subscriber base continues to decline, it could have a
material adverse long-term effect on our business, results of operations,
financial condition and cash flow.
Programming
Our ability to compete successfully will depend, among other things, on our
ability to continue to obtain desirable programming and deliver it to our
subscribers at competitive prices. Programming costs represent a large
percentage of our "Cost of services" and the largest component of our total
expense. We expect these costs to continue to increase due to contractual price
increases and the renewal of long-term programming contracts on less favorable
pricing terms and certain programming costs are rising at a much faster rate
than wages or inflation. In particular, the rates we are charged for
retransmitting local broadcast channels have been increasing substantially and
may exceed our ability to increase our prices to our subscribers. Going forward,
our margins may face pressure if we are unable to renew our long-term
programming contracts on acceptable pricing and other economic terms or if we
are unable to pass these increased programming costs on to our subscribers.
Increases in programming costs have caused us to increase the rates that we
charge to our subscribers, which could in turn cause our existing Pay-TV
subscribers to disconnect our service or cause potential new Pay-TV subscribers
to choose not to subscribe to our service. Additionally, even if our subscribers
do not disconnect our services, they may purchase through new and existing
online content providers a certain portion of the services that they would have
historically purchased from us, such as pay-per-view movies.
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Furthermore, our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate may be negatively impacted if we are unable to renew our long-term programming carriage contracts before they expire. Our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate have been negatively impacted as a result of programming interruptions and threatened programming interruptions in connection with the scheduled expiration of programming carriage contracts with content providers. OnOctober 6, 2021 , Tegna Inc. ("Tegna") removed its channels from our DISH TV programming lineup in 53 markets. OnFebruary 4, 2022 , we and Tegna signed a new programming carriage contract which restored these channels to our DISH TV programming lineup. Although subscriber demand for local network stations has decreased in recent years as a result of, among other things, programming being available to subscribers through alternative methods, including over the air antennas, there can be no assurance that the removal of these or other channels will not have a material adverse effect on our business, results of operations and financial condition or otherwise disrupt our business. In addition, we cannot predict with any certainty the impact to our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate resulting from additional programming interruptions or threatened programming interruptions that may occur in the future. As a result, we may at times suffer from periods of lower net Pay-TV subscriber additions or higher net Pay-TV
subscriber losses.
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RESULTS OF OPERATIONS -
Three Months EndedJune 30, 2022 Compared to the Three Months EndedJune 30, 2021 . For the Three Months EndedJune 30 , Variance Statements of Operations Data 2022
2021 Amount %
(In thousands)
Revenue:
Service revenue $ 3,113,608 $ 3,202,042 $ (88,434) (2.8)Equipment sales and other revenue 39,655
50,348 (10,693) (21.2)
Total revenue 3,153,263 3,252,390 (99,127) (3.0)
Costs and expenses:
Cost of services 1,861,774 1,916,607 (54,833) (2.9)
% of Service revenue 59.8 % 59.9 %Cost of sales - equipment and other 27,015 27,803 (788) (2.8) Selling, general and administrative expenses 371,163 343,490 27,673 8.1 % of Total revenue 11.8 % 10.6 % Depreciation and amortization 107,840
137,576 (29,736) (21.6)
Total costs and expenses 2,367,792 2,425,476 (57,684) (2.4)
Operating income (loss) $ 785,471 $ 826,914 $ (41,443) (5.0)
Other data:Pay-TV subscribers, as of period end (in millions) 9.988 10.993 (1.005) (9.1) DISH TV subscribers, as of period end (in millions) 7.791 8.554 (0.763) (8.9) SLING TV subscribers, as of period end (in millions) 2.197 2.439 (0.242) (9.9) Pay-TV subscriber additions (losses), net (in millions) (0.257) (0.067) (0.190) * DISH TV subscriber additions (losses), net (in millions) (0.202) (0.132) (0.070) (53.0) SLING TV subscriber additions (losses), net (in millions) (0.055) 0.065 (0.120) * Pay-TV ARPU$ 101.30 $ 96.32$ 4.98 5.2 DISH TV subscriber additions, gross (in millions) 0.156
0.201 (0.045) (22.4)
DISH TV churn rate 1.51 % 1.29 % 0.22 % 17.1
DISH TV SAC $ 980 $ 890 $ 90 10.1Purchases of property and equipment$ 31,249
$ 43,303$ (12,054) (27.8) OIBDA$ 893,311 $ 964,490$ (71,179) (7.4)
* Percentage is not meaningful.
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Pay-TV Subscribers
DISH TV subscribers. We lost approximately 202,000 net DISH TV subscribers during the three months endedJune 30, 2022 compared to the loss of approximately 132,000 net DISH TV subscribers during the same period in 2021. This increase in net DISH TV subscriber losses primarily resulted from lower gross new DISH TV subscriber activations and a higher DISH TV churn rate. SLING TV subscribers. We lost approximately 55,000 net SLING TV subscribers during the three months endedJune 30, 2022 compared to the addition of approximately 65,000 net SLING TV subscribers during the same period in 2021. The decrease in net SLING TV subscribers was primarily related to higher subscriber disconnects following seasonal sports activity. We continue to experience increased competition, including competition from other subscription video on-demand and live-linear OTT service providers. DISH TV subscribers, gross. During the three months endedJune 30, 2022 , we activated approximately 156,000 gross new DISH TV subscribers compared to approximately 201,000 gross new DISH TV subscribers during the same period in 2021, a decrease of 22.4%. This decrease in our gross new DISH TV subscriber activations was primarily related to the lack of demand and shifting consumer behavior, as well as increased competitive pressures, including aggressive short term introductory pricing and bundled offers combining broadband, video and/or wireless services and other discounted promotional offers, live-linear OTT service providers, and direct-to-consumer offerings by certain of our programmers. Our gross new DISH TV subscriber activations continue to be negatively impacted by stricter customer acquisition policies for our DISH TV subscribers, including, but not limited to, an emphasis on acquiring higher quality subscribers. Furthermore, we continue to assess the impact of COVID-19 and cannot predict with certainty the impact to our gross new DISH TV subscriber activations. DISH TV churn rate. Our DISH TV churn rate for the three months endedJune 30, 2022 was 1.51% compared to 1.29% for the same period in 2021. Our DISH TV churn rate continues to be adversely impacted by external factors, such as, among other things, cord cutting, shifting consumer behavior and increased competitive pressures, including aggressive marketing, bundled discount offers combining broadband, video and/or wireless services and other discounted promotional offers. In addition, our DISH TV churn rate was positively impacted by COVID-19 beginning in the second quarter of 2020, including, among other things, the recommendations and/or mandates from federal, state, and/or local authorities that customers refrain from non-essential movements outside of their homes and the resulting increased consumption of our Pay-TV services. We continue to assess the impact of COVID-19 and while certain government regulations and/or mandates have eased, we cannot predict with certainty the impact to our DISH TV churn rate. Our DISH TV churn rate continues to be positively impacted by our emphasis on acquiring and retaining higher quality subscribers. Our DISH TV churn rate is also impacted by internal factors, such as, among other things, our ability to consistently provide outstanding customer service, price increases, programming interruptions in connection with the scheduled expiration of certain programming carriage contracts, our ability to control piracy and other forms of fraud, and the level of our retention efforts. Our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate have been negatively impacted as a result of programming interruptions and threatened programming interruptions in connection with the scheduled expiration of programming carriage contracts with content providers. We cannot predict with any certainty the impact to our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV subscriber churn rate resulting from programming interruptions or threatened programming interruptions that may occur in the future. As a result, we may at times suffer from periods of lower net Pay-TV subscriber additions or higher net Pay-TV
subscriber losses.
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We have not always met our own standards for performing high-quality installations, effectively resolving subscriber issues when they arise, answering subscriber calls in an acceptable timeframe, effectively communicating with our subscriber base, reducing calls driven by the complexity of our business, improving the reliability of certain systems and subscriber equipment and aligning the interests of certain independent third-party retailers and installers to provide high-quality service. Most of these factors have affected both gross new DISH TV subscriber activations as well as DISH TV subscriber churn rate. Our future gross new DISH TV subscriber activations and our DISH TV subscriber churn rate may be negatively impacted by these factors, which could in turn adversely affect our revenue. Service revenue. "Service revenue" totaled$3.114 billion for the three months endedJune 30, 2022 , a decrease of$88 million or 2.8% compared to the same period in 2021. The decrease in "Service revenue" compared to the same period in 2021 was primarily related to lower average Pay-TV subscriber base, partially offset by an increase in Pay-TV ARPU, discussed below. Pay-TV ARPU. Pay-TV ARPU was$101.30 during the three months endedJune 30, 2022 versus$96.32 during the same period in 2021. The$4.98 or 5.2% increase in Pay-TV ARPU was primarily attributable to the DISH TV programming package price increases effective in the fourth quarter of 2021, the 2021 SLING TV programming package price increase and higher ad sales revenue, partially offset by an increase in SLING TV service revenue as a percentage of our total Pay-TV service revenue. SLING TV subscribers on average purchase lower priced programming services than DISH TV subscribers, and therefore, the increase in SLING TV service revenue as a percentage of our total Pay-TV service revenue had a negative impact on Pay-TV ARPU. Cost of services. "Cost of services" totaled$1.862 billion during the three months endedJune 30, 2022 , a decrease of$55 million or 2.9% compared to the same period in 2021. The decrease in "Cost of services" was primarily attributable to a lower average Pay-TV subscriber base, partially offset by higher programming costs per subscriber and higher variable and retention costs per subscriber. Programming costs per subscriber increased during the three months endedJune 30, 2022 due to rate increases in certain of our programming contracts, including the renewal of certain contracts at higher rates, particularly for local broadcast channels. Variable and retention costs per subscriber increased during the three months endedJune 30, 2022 due to, among other things, higher labor and installation costs. "Cost of services" represented 59.8% and 59.9% of "Service revenue" during the three months endedJune 30, 2022 and 2021, respectively. In the normal course of business, we enter into contracts to purchase programming content in which our payment obligations are generally contingent on the number of Pay-TV subscribers to whom we provide the respective content. Our "Cost of services" have and will continue to face further upward pressure from price increases and the renewal of long-term programming contracts on less favorable pricing terms. In addition, our programming expenses will increase to the extent we are successful in growing our Pay-TV subscriber base. Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled$371 million during the three months endedJune 30, 2022 , a$28 million or 8.1% increase compared to the same period in 2021. This change was primarily driven by an increase in costs to support the Pay-TV segment, partially offset by a decrease in subscriber acquisition costs. Depreciation and amortization. "Depreciation and amortization" expense totaled$108 million during the three months endedJune 30, 2022 , a$30 million or 21.6% decrease compared to the same period in 2021. This change was primarily driven by a decrease in depreciation expense from equipment leased to new and existing DISH TV subscribers and from the expiration of our QuetzSat-1 finance lease during the fourth quarter of 2021. 72
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DISH TV SAC. DISH TV SAC was$980 during the three months endedJune 30, 2022 compared to$890 during the same period in 2021, an increase of$90 or 10.1%. This change was primarily attributable to an increase in advertising costs per subscriber and higher installation costs due to an increase in labor and other installation costs, partially offset by a decrease in hardware costs per activation. The decrease in hardware costs per activation resulted from a higher percentage of remanufactured receivers being activated on new subscriber accounts, partially offset by higher manufacturing costs. During the three months endedJune 30, 2022 and 2021, the amount of equipment capitalized under our lease program for new DISH TV subscribers totaled$12 million and$18 million , respectively. This decrease in capital expenditures primarily resulted from a decrease in gross new DISH TV subscriber activations and a higher percentage of remanufactured receivers being activated on new subscriber accounts.
To remain competitive, we upgrade or replace subscriber equipment periodically as technology changes, and the costs associated with these upgrades may be substantial. To the extent technological changes render a portion of our existing equipment obsolete, we would be unable to redeploy all returned equipment and consequently would realize less benefit from the DISH TV SAC reduction associated with redeployment of that returned lease equipment.
Our "DISH TV SAC" may materially increase in the future to the extent that we,
among other things, transition to newer technologies, introduce more aggressive
promotions, or provide greater equipment subsidies. See further information
under "Liquidity and Capital Resources - Subscriber Acquisition and Retention
Costs."
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Six Months Ended
For the Six Months Ended June 30 , Variance
Statements of Operations Data 2022
2021 Amount %
(In thousands)
Revenue:
Service revenue $
6,243,342
77,484 89,950 (12,466) (13.9) Total revenue 6,320,826 6,456,359 (135,533) (2.1) Costs and expenses: Cost of services 3,726,152 3,846,441 (120,289) (3.1) % of Service revenue 59.7 % 60.4 % Cost of sales - equipment and other 52,441 47,939 4,502 9.4 Selling, general and administrative expenses 782,591 681,899 100,692 14.8 % of Total revenue 12.4 % 10.6 % Depreciation and amortization 222,125 280,423 (58,298) (20.8) Total costs and expenses 4,783,309 4,856,702 (73,393) (1.5) Operating income (loss) $
1,537,517
Other data: Pay-TV subscribers, as of period end (in millions) 9.988 10.993 (1.005) (9.1) DISH TV subscribers, as of period end (in millions) 7.791 8.554 (0.763) (8.9) SLING TV subscribers, as of period end (in millions) 2.197 2.439 (0.242) (9.9) Pay-TV subscriber additions (losses), net (in millions) (0.719) (0.297) (0.422) * DISH TV subscriber additions (losses), net (in millions) (0.430) (0.262) (0.168) (64.1) SLING TV subscriber additions (losses), net (in millions) (0.289) (0.035) (0.254) * Pay-TV ARPU $ 100.35 $ 94.97$ 5.38 5.7 DISH TV subscriber additions, gross (in millions) 0.315 0.411 (0.096) (23.4) DISH TV churn rate 1.55 % 1.29 % 0.26 % 20.2 DISH TV SAC $ 1,035 $ 839$ 196 23.4 Purchases of property and equipment $ 63,255 $ 96,136$ (32,881) (34.2) OIBDA$ 1,759,642 $ 1,880,080 $ (120,438) (6.4)
* Percentage is not meaningful.
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Pay-TV Subscribers
DISH TV subscribers. We lost approximately 430,000 net DISH TV subscribers during the six months endedJune 30, 2022 compared to the loss of approximately 262,000 net DISH TV subscribers during the same period in 2021. This increase in net DISH TV subscriber losses primarily resulted from lower gross new DISH TV subscriber activations and a higher DISH TV churn rate. SLING TV subscribers. We lost approximately 289,000 net SLING TV subscribers during the six months endedJune 30, 2022 compared to the loss of approximately 35,000 net SLING TV subscribers during the same period in 2021. The increase in net SLING TV subscriber losses was primarily related to higher subscriber disconnects following seasonal sports activity and lower SLING TV subscriber activations. We continue to experience increased competition, including competition from other subscription video on-demand and live-linear OTT service providers. DISH TV subscribers, gross. During the six months endedJune 30, 2022 , we activated approximately 315,000 gross new DISH TV subscribers compared to approximately 411,000 gross new DISH TV subscribers during the same period in 2021, a decrease of 23.4%. This decrease in our gross new DISH TV subscriber activations was primarily related to the lack of demand, shifting consumer behavior and channel removals, including Tegna, as well as increased competitive pressures, including aggressive short term introductory pricing and bundled offers combining broadband, video and/or wireless services and other discounted promotional offers, live-linear OTT service providers, and direct-to-consumer offerings by certain of our programmers. Our gross new DISH TV subscriber activations continue to be negatively impacted by stricter customer acquisition policies for our DISH TV subscribers, including, but not limited to, an emphasis on acquiring higher quality subscribers. Furthermore, we continue to assess the impact of COVID-19 and cannot predict with certainty the impact to our gross new DISH TV subscriber activations. DISH TV churn rate. Our DISH TV churn rate for the six months endedJune 30, 2022 was 1.55% compared to 1.29% for the same period in 2021. Our DISH TV churn rate for the six months endedJune 30, 2022 was negatively impacted by programming interruptions in connection with the scheduled expiration of certain programming carriage contracts, including Tegna. Our DISH TV churn rate continues to be adversely impacted by external factors, such as, among other things, cord cutting, shifting consumer behavior and increased competitive pressures, including aggressive marketing, bundled discount offers combining broadband, video and/or wireless services and other discounted promotional offers. In addition, our DISH TV churn rate was positively impacted by COVID-19 beginning in the second quarter of 2020, including, among other things, the recommendations and/or mandates from federal, state, and/or local authorities that customers refrain from non-essential movements outside of their homes and the resulting increased consumption of our Pay-TV services. We continue to assess the impact of COVID-19 and while certain government regulations and/or mandates have eased, we cannot predict with certainty the impact to our DISH TV churn rate. Our DISH TV churn rate continues to be positively impacted by our emphasis on acquiring and retaining higher quality subscribers. Our DISH TV churn rate is also impacted by internal factors, such as, among other things, our ability to consistently provide outstanding customer service, price increases, our ability to control piracy and other forms of fraud, and the level of our retention efforts. Our net Pay-TV subscriber additions, gross new DISH TV subscriber activations, and DISH TV churn rate have been negatively impacted as a result of programming interruptions and threatened programming interruptions in connection with the scheduled expiration of programming carriage contracts with content providers. OnOctober 6, 2021 , Tegna removed its channels from our DISH TV programming lineup in 53 markets. OnFebruary 4, 2022 , we and Tegna signed a new programming carriage contract which restored these channels to our DISH TV programming lineup. Although subscriber demand for local network stations has decreased in recent years as a result of, among other things, programming being available to subscribers through alternative methods, including over the air antennas, there can be no assurance that the removal of these or other channels will not have a material adverse effect on our business, results of operations and financial condition or otherwise disrupt our business. 75
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Service revenue. "Service revenue" totaled$6.243 billion for the six months endedJune 30, 2022 , a decrease of$123 million or 1.9% compared to the same period in 2021. The decrease in "Service revenue" compared to the same period in 2021 was primarily related to lower average Pay-TV subscriber base, partially offset by an increase in Pay-TV ARPU, discussed below. Pay-TV ARPU. Pay-TV ARPU was$100.35 during the six months endedJune 30, 2022 versus$94.97 during the same period in 2021. The$5.38 or 5.7% increase in Pay-TV ARPU was primarily attributable to the DISH TV programming package price increases effective in the first and fourth quarters of 2021, the 2021 SLING TV programming package price increase and higher ad sales revenue, partially offset by an increase in SLING TV service revenue as a percentage of our total Pay-TV service revenue. SLING TV subscribers on average purchase lower priced programming services than DISH TV subscribers, and therefore, the increase in SLING TV service revenue as a percentage of our total Pay-TV service revenue had a negative impact on Pay-TV ARPU. Cost of services. "Cost of services" totaled$3.726 billion during the six months endedJune 30, 2022 , a decrease of$120 million or 3.1% compared to the same period in 2021. The decrease in "Cost of services" was primarily attributable to a lower average Pay-TV subscriber base, partially offset by higher programming costs per subscriber and higher variable and retention costs per subscriber. Programming costs per subscriber increased during the six months endedJune 30, 2022 due to rate increases in certain of our programming contracts, including the renewal of certain contracts at higher rates, particularly for local broadcast channels. Variable and retention costs per subscriber increased during the six months endedJune 30, 2022 due to, among other things, higher labor and installation costs. "Cost of services" represented 59.7% and 60.4% of "Service revenue" during the six months endedJune 30, 2022 and 2021, respectively. Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled$783 million during the six months endedJune 30, 2022 , a$101 million or 14.8% increase compared to the same period in 2021. This change was primarily driven by an increase in costs to support the Pay-TV segment and an increase in subscriber acquisition costs resulting from higher marketing expenditures. Depreciation and amortization. "Depreciation and amortization" expense totaled$222 million during the six months endedJune 30, 2022 , a$58 million or 20.8% decrease compared to the same period in 2021. This change was primarily driven by a decrease in depreciation expense from equipment leased to new and existing DISH TV subscribers and from the expiration of our QuetzSat-1 finance lease during the fourth quarter of 2021. DISH TV SAC. DISH TV SAC was$1,035 during the six months endedJune 30, 2022 compared to$839 during the same period in 2021, an increase of$196 or 23.4%. This change was primarily attributable to an increase in advertising costs per subscriber, higher installation costs due to an increase in labor and other installation costs, and higher hardware costs per activation. The increase in hardware costs per activation resulted from higher manufacturing costs, partially offset by a higher percentage of remanufactured receivers being activated on new subscriber accounts. During the six months endedJune 30, 2022 and 2021, the amount of equipment capitalized under our lease program for new DISH TV subscribers totaled$27 million and$40 million , respectively. This decrease in capital expenditures primarily resulted from a decrease in gross new DISH TV subscriber activations and a higher percentage of remanufactured receivers being activated on new
subscriber accounts.
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Wireless Segment
Our Wireless business segment operates in two business units,Retail Wireless and 5G Network Deployment. Revenue and operating income (loss) by business
unit are shown in the table below: For the Three Retail 5G Network Months Ended June 30, 2022 Wireless Deployment EliminationsTotal Wireless (In thousands) Total revenue$ 1,047,191 $ 17,722 $ (6,912) $ 1,058,001 Operating income (loss)$ 103,071 $ (195,607) $ -$ (92,536) For the Three Retail 5G Network
Months Ended
(In thousands)
Total revenue $ 1,219,764 $ 17,349 $ - $ 1,237,113
Operating income (loss) $ 116,547 $ (36,723) $ - $ 79,824
For the three months ended June 30, 2022 and 2021, total purchases of property
and equipment for our wireless segment were $626 million and $220 million ,
respectively. This increase primarily resulted from capital expenditures related
to our 5G Network Deployment. We anticipate expenditures for our 5G Network
Deployment to continue to increase in 2022.
For the 5G Network
Six Months Ended June 30, 2022 Retail Wireless Deployment Eliminations Total Wireless
(In thousands)
Total revenue $ 2,199,611 $ 36,902 $ (13,055) $ 2,223,458
Operating income (loss) $ 44,079 $ (338,301) $ - $ (294,222)
For the 5G Network
Six Months Ended June 30, 2021 Retail Wireless Deployment Eliminations Total Wireless
(In thousands)
Total revenue $ 2,499,719 $ 32,043 $ - $ 2,531,762
Operating income (loss) $ 240,426 $ (68,769) $ - $ 171,657
For the six months ended June 30, 2022 and 2021, total purchases of property and
equipment for our wireless segment were $1.223 billion and $282 million ,
respectively. This increase primarily resulted from capital expenditures related
to our 5G Network Deployment. We anticipate expenditures for our 5G Network
Deployment to continue to increase in 2022.
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Wireless -
We offer nationwide prepaid and postpaid retail wireless services to subscribers under our Boost Mobile, Ting Mobile,Republic Wireless and Gen Mobile brands, as well as a competitive portfolio of wireless devices. Prepaid wireless subscribers generally pay in advance for monthly access to wireless talk, text, and data services. Postpaid wireless subscribers are qualified to pay after receiving wireless talk, text, and data services. We are currently operating ourRetail Wireless business unit as a mobile virtual network operator ("MVNO") as we continue to complete our 5G Network Deployment. OnJuly 14, 2021 , we entered into a ten-year Network Services Agreement (the "NSA") with AT&T to provide us with network services. Under theNSA , we expect AT&T will become our primary network services provider. As an MVNO, today we depend on T-Mobile and AT&T to provide us with network services under the amended master network services agreement ("MNSA") andNSA , respectively. A portion of our retail Wireless subscribers received services through T-Mobile's CDMA Network. However, T-Mobile previously provided notice that it intended to shutdown the CDMA Network onMarch 31, 2022 . The shutdown began onMarch 31, 2022 and was completed during the second quarter of 2022. While we worked to mitigate the harms of this shutdown, we have incurred significant costs to migrate subscribers on this timeline. We have implemented targeted efforts and promotions directed at impacted customers, which resulted in the successful migration of the vast majority of our CDMA subscribers. Our efforts to mitigate the effects of the CDMA shutdown during 2021 were impacted by, among other things, wireless device shortages. Access to wireless devices improved during the first and second quarters of 2022, which aided our migration efforts but the mix of available wireless devices came at a significant cost. The CDMA shutdown has negatively impact our gross new Wireless subscriber activations, our Wireless churn rate, and our results of operations. During the second quarter of 2022, we removed approximately 126,000 subscribers from our ending Wireless subscriber count representing wireless subscribers who did not migrate off the CDMA network prior to the shutdown. The effect of the removal of the 126,000 subscribers was excluded from the calculation of our net Wireless subscriber additions/losses and Wireless churn rate. OnJune 21, 2022 , we and T-Mobile signed an amendment to the MNSA. In connection with this amendment T-Mobile agreed to transfer to us (subject to required regulatory approvals) all Boost branded customers of former Sprint affiliates, Shentel and Swiftel, as well as Boost branded customers who were previously part of the California Public Utilities Commission CARE program. We expect to receive more than 100,000 customers as a result of this transfer. In addition, this amendment, among other things, settled all open disputes, including CDMA matters, with terms providing improved pricing and enhanced roaming solutions for our consumers. Prior to the signing of this agreement, the first and second quarters of 2022 were adversely impacted by, among other things, our CDMA migration costs and our ability to launch more competitive service plans in the marketplace. As a result, during the first and second quarters of 2022 we experienced lower gross new Wireless subscriber activations and higher Wireless churn.
As of
CompetitionRetail Wireless is a mature market with moderate year over year organic growth. Competitors include providers who offer similar communication services, such as talk, text and data. Competitive factors within the wireless communications services industry include, but are not limited to, pricing, market saturation, service and product offerings, customer experience and service quality. We compete with a number of national wireless carriers, including Verizon, AT&T and T-Mobile, all of which are significantly larger than us, serve a significant percentage of all wireless subscribers and enjoy scale advantages compared to us. Verizon, AT&T, and T-Mobile are currently the only nationwide MNOs inthe United States . 78 Table of Contents
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Primary competitors to ourRetail Wireless business unit include, but are not limited to, Metro PCS (owned by T-Mobile),Cricket Wireless (owned by AT&T), Visible (owned by Verizon),Tracfone Wireless (owned by Verizon), and other MVNOs such as Consumer Cellular, Mint Mobile and Xfinity Mobile.
Wireless - 5G Network Deployment
We have invested a total of approximately$30 billion related to wireless spectrum licenses. We have directly invested approximately$20 billion to acquire certain wireless spectrum licenses and made over$10 billion in non-controlling investments in certain entities. The$30 billion of investments related to wireless spectrum licenses does not include$7 billion of capitalized interest related to the carrying value of such licenses. See Note 2 and Note 10 in the Notes to our Condensed Consolidated Financial Statements for further information.
DISH Network Spectrum
We have directly invested approximately
We plan to commercialize our wireless spectrum licenses through the completion of our 5G Network Deployment. We have committed to deploy a facilities-based 5G broadband network capable of serving increasingly larger portions of theU.S. population at different deadlines, including 20% of theU.S. population byJune 2022 and 70% byJune 2023 . As previously disclosed, if byJune 2023 , we are offering 5G broadband service to at least 50% of theU.S. population but less than 70% of theU.S. population, the 70%June 2023 deadline will be extended automatically toJune 2025 ; however, as a result, we may under certain circumstances be subject to penalties. OnJune 14, 2022 , we announced we had successfully reached our 20% population coverage requirement. In conjunction with our next milestone, we currently have over 300 cities with populations of at least 50,000 under construction. We will need to make significant additional investments or partner with others to, among other things, complete our 5G Network Deployment and further commercialize, build-out and integrate these licenses and related assets and any additional acquired licenses and related assets, as well as to comply with regulations applicable to such licenses. Depending on the nature and scope of such activities, any such investments or partnerships could vary significantly. In addition, as we complete our 5G Network Deployment, we have and will continue to incur significant additional expenses related to, among other things, research and development, wireless testing and ongoing upgrades to the wireless network infrastructure, and third party integration. As a result of these investments, among other factors, we plan to raise additional capital, which may not be available on favorable terms. We may also determine that additional wireless spectrum licenses may be required to complete our 5G Network Deployment and to compete with other wireless service providers. See Note 9 and Note 10 for further information in the Notes to our Condensed Consolidated Financial Statements for further information. 79
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
DISH Network Non-Controlling Investments in the Northstar Entities and the SNR Entities Related to AWS-3 Wireless Spectrum Licenses
During 2015, through our wholly-owned subsidiariesAmerican AWS-3 Wireless II L.L.C. ("American II") andAmerican AWS-3 Wireless III L.L.C. ("American III"), we initially made over$10 billion in certain non-controlling investments inNorthstar Spectrum, LLC ("Northstar Spectrum"), the parent company ofNorthstar Wireless, L.L.C. ("Northstar Wireless ," and collectively with Northstar Spectrum, the "Northstar Entities"), and inSNR Wireless HoldCo, LLC ("SNR HoldCo"), the parent company ofSNR Wireless LicenseCo, LLC ("SNR Wireless ," and collectively with SNR HoldCo, the "SNR Entities"), respectively. OnOctober 27, 2015 , theFCC granted certain AWS-3 wireless spectrum licenses (the "AWS-3 Licenses") toNorthstar Wireless and toSNR Wireless , respectively, which are recorded in "FCC authorizations" on our Condensed Consolidated Balance Sheets. Under the applicable accounting guidance in Accounting Standards Codification 810, Consolidation ("ASC 810"), Northstar Spectrum and SNR HoldCo are considered variable interest entities and, based on the characteristics of the structure of these entities and in accordance with the applicable accounting guidance, we consolidate these entities into our financial statements. See Note 2 in the Notes to our Condensed Consolidated Financial Statements for further information. The AWS-3 Licenses are subject to certain interim and final build-out requirements, as well as certain renewal requirements. The Northstar Entities and/or the SNR Entities may need to raise significant additional capital in the future, which may be obtained from third party sources or from us, so that the Northstar Entities and the SNR Entities may commercialize, build-out and integrate these AWS-3 Licenses, comply with regulations applicable to such AWS-3 Licenses, and make any potential Northstar Re-Auction Payment and SNR Re-Auction Payment for the AWS-3 licenses retained by theFCC . Depending upon the nature and scope of such commercialization, build-out and integration efforts, regulatory compliance, and potential Northstar Re-Auction Payment and SNR Re-Auction Payment, any loans, equity contributions or partnerships could vary significantly. See Note 10 in the Notes to our Condensed Consolidated Financial Statements for further information. We may need to raise significant additional capital in the future to fund the efforts described above, which may not be available on favorable terms. There can be no assurance that we, the Northstar Entities and/or the SNR Entities will be able to develop and implement business models that will realize a return on these wireless spectrum licenses or that we, the Northstar Entities and/or the SNR Entities will be able to profitably deploy the assets represented by these wireless spectrum licenses, which may affect the carrying amount of these assets and our future financial condition or results of operations. See Note 10 in the Notes to our Condensed Consolidated Financial Statements for further information. 80 Table of Contents
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
RESULTS OF OPERATIONS - Wireless Segment - Retail Wireless Business Unit
Three Months EndedJune 30, 2022 Compared to the Three Months EndedJune 30, 2021 . For the Three Months EndedJune 30 , Variance
Statements of Operations Data 2022 2021 Amount %
(In thousands)
Revenue:
Service revenue $ 915,800 $ 1,052,807 $ (137,007) (13.0)
Equipment sales and other revenue 131,391 166,957 (35,566) (21.3)
Total revenue 1,047,191 1,219,764 (172,573) (14.1)
Costs and expenses:
Cost of services 467,268 619,554 (152,286) (24.6)
% of Service revenue 51.0 % 58.8 %
Cost of sales - equipment and other 254,424 309,979 (55,555) (17.9)
Selling, general and administrative expenses 180,631 128,826 51,805 40.2
% of Total revenue 17.2 % 10.6 %
Depreciation and amortization 41,797 44,858 (3,061) (6.8)
Total costs and expenses 944,120 1,103,217 (159,097) (14.4)
Operating income (loss) $
103,071
Other data: Wireless subscribers, as of period end (in millions) ** 7.867 8.895 (1.028) (11.6) Wireless subscriber additions, gross (in millions) 0.793 0.944 (0.151) (16.0) Wireless subscriber additions (losses), net (in millions) *** (0.210) (0.201) (0.009) (4.5) Wireless ARPU$ 37.90 $ 39.10 $ (1.20) (3.1) Wireless churn rate 4.39 % 4.33 % 0.06 % 1.4 OIBDA$ 144,868 $ 161,405 $ (16,537) (10.2)
* Percentage is not meaningful.
**During the second quarter of 2022, we removed approximately 126,000 subscribers from our ending Wireless subscriber count representing wireless subscribers who did not migrate off the CDMA network prior to the shutdown.
The
effect of the removal of the 126,000 subscribers was excluded from the
calculation of our net Wireless subscriber additions/losses and Wireless churn
rate. See "Wireless -
***Includes ACP subscribers.
We entered the retail wireless business in 2020 as a result of the Boost Mobile Acquisition and the Ting Mobile Acquisition and we expanded the business in 2021 through the Republic Wireless Acquisition. During the second quarter of 2021, we acquired over 200,000 subscribers as a result of theRepublic Wireless Acquisition. We are currently in the process of integrating ourRetail Wireless operations and have made and continue to make targeted changes to our marketing, sales, and operations to further enhance our profitability. 81
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Wireless subscribers. We lost approximately 210,000 net Wireless subscribers during the three months endedJune 30, 2022 compared to the loss of approximately 201,000 net Wireless subscribers during the same period in 2021. This increase in net Wireless subscriber losses primarily resulted from the shutdown of the CDMA Network and competitive pressures. During the three months endedJune 30, 2022 , our CDMA migration efforts required significant focus and resources from management and our sales personnel, which adversely impacted our gross new Wireless subscriber activations. Furthermore, we have and continue to face increased competitive pressures, including aggressive competitor marketing, discounted service plans and deeper wireless device subsidies. Wireless churn rate. Our Wireless churn rate for the three months endedJune 30, 2022 was 4.39% compared to 4.33% for the same period in 2021. Our Wireless churn rate for the three months endedJune 30, 2022 was negatively impacted by the shutdown of the CDMA Network and competitive pressures, including deeper wireless device subsidies. Service revenue. "Service revenue" totaled$916 million for the three months endedJune 30, 2022 , a decrease of$137 million or 13.0% compared to the same period in 2021. The decrease in "Service revenue" compared to the same period in 2021 was primarily related to a lower average Wireless subscriber base and a decrease in Wireless ARPU, discussed below. Wireless ARPU. Wireless ARPU was$37.90 during the three months endedJune 30, 2022 versus$39.10 during the same period in 2021. The$1.20 or 3.1% decrease in Wireless ARPU was primarily attributable to, among other things, CDMA migration credits and subscriber plan mix to lower priced service plans. Equipment sales and other revenue. "Equipment sales and other revenue" totaled$131 million for the three months endedJune 30, 2022 , a decrease of$36 million or 21.3% compared to the same period in 2021. The decrease in "Equipment sales and other revenue" compared to the same period in 2021 was primarily related to a decrease in units shipped, partially offset by higher net revenue realized per unit. Cost of services. "Cost of services" totaled$467 million for the three months endedJune 30, 2022 , a decrease of$152 million or 24.6% compared to the same period in 2021. The decrease in "Cost of services" was primarily attributable to lower network services costs per subscriber and a lower average retail Wireless subscriber base, partially offset by higher customer data usage. Our lower network services costs per subscriber during the three months endedJune 30, 2022 resulted from the new MVNO rates, as a result of our amendment to the MNSA with T-Mobile. In addition, the new MVNO rates are retroactive toJanuary 2022 and the first quarter of 2022 impact was recorded in the three months endedJune 30, 2022 . Cost of sales - equipment and other. "Cost of sales - equipment and other" totaled$254 million for the three months endedJune 30, 2022 , a decrease of$56 million or 17.9% compared to the same period in 2021. The decrease in "Cost of sales - equipment and other" compared to the same period in 2021 was primarily related to a decrease in units shipped, partially offset by higher costs per unit shipped due to unit mix. Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled$181 million during the three months endedJune 30, 2022 , a$52 million or 40.2% increase compared to the same period in 2021. This change was primarily driven by higher amortization of capitalized sales commissions, an increase in costs to support theRetail Wireless business unit, and higher marketing expenditures. 82
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Six Months Ended
For the Six Months Ended June 30 , Variance
Statements of Operations Data 2022
2021 Amount %
(In thousands)
Revenue:
Service revenue $
1,861,188
338,423 401,745 (63,322) (15.8) Total revenue 2,199,611 2,499,719 (300,108) (12.0) Costs and expenses: Cost of services 1,085,519 1,227,389 (141,870) (11.6) % of Service revenue 58.3 % 58.5 %
Cost of sales - equipment and other 643,892 704,734 (60,842) (8.6) Selling, general and administrative expenses 337,031 237,961 99,070 41.6 % of Total revenue 15.3 % 9.5 % Depreciation and amortization 89,090 89,209 (119) (0.1) Total costs and expenses 2,155,532 2,259,293 (103,761) (4.6) Operating income (loss) $
44,079 $ 240,426
Other data: Wireless subscribers, as of period end (in millions) ** 7.867 8.895 (1.028) (11.6) Wireless subscriber additions, gross (in millions) 1.588 1.976 (0.388) (19.6) Wireless subscriber additions (losses), net (in millions) ***
(0.553) (0.362) (0.191) 52.8 Wireless ARPU $ 37.81 $ 38.99$ (1.18) (3.0) Wireless churn rate 4.51 % 4.38 % 0.13 % 3.0 OIBDA $ 133,169 $ 329,635$ (196,466) (59.6)
* Percentage is not meaningful.
**During the second quarter of 2022, we removed approximately 126,000 subscribers from our ending Wireless subscriber count representing wireless subscribers who did not migrate off the CDMA network prior to the shutdown.
The
effect of the removal of the 126,000 subscribers was excluded from the
calculation of our net Wireless subscriber additions/losses and Wireless churn
rate. See "Wireless -
***Includes ACP subscribers.
Wireless subscribers. We lost approximately 553,000 net Wireless subscribers during the six months endedJune 30, 2022 compared to the loss of approximately 362,000 net Wireless subscribers during the same period in 2021. This increase in net Wireless subscriber losses primarily resulted from the shutdown of the CDMA Network and competitive pressures. During the six months endedJune 30, 2022 , our CDMA migration efforts required significant focus and resources from management and our sales personnel, which adversely impacted our gross new Wireless subscriber activations. Furthermore, we have and continue to face increased competitive pressures, including aggressive competitor marketing, discounted service plans and deeper wireless device subsidies. 83
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Wireless churn rate. Our Wireless churn rate for the six months endedJune 30, 2022 was 4.51% compared to 4.38% for the same period in 2021. Our Wireless churn rate for the six months endedJune 30, 2022 was negatively impacted by the shutdown of the CDMA Network and competitive pressures, including deeper wireless device subsidies. Service revenue. "Service revenue" totaled$1.861 billion for the six months endedJune 30, 2022 , a decrease of$237 million or 11.3% compared to the same period in 2021. The decrease in "Service revenue" compared to the same period in 2021 was primarily related to a lower average Wireless subscriber base and a decrease in Wireless ARPU, discussed below. Wireless ARPU. Wireless ARPU was$37.81 during the six months endedJune 30, 2022 versus$38.99 during the same period in 2021. The$1.18 or 3.0% decrease in Wireless ARPU was primarily attributable to, among other things, CDMA migration credits and subscriber plan mix to lower priced service plans. Equipment sales and other revenue. "Equipment sales and other revenue" totaled$338 million for the six months endedJune 30, 2022 , a decrease of$63 million or 15.8% compared to the same period in 2021. The decrease in "Equipment sales and other revenue" compared to the same period in 2021 was primarily related to a decrease in units shipped. Cost of services. "Cost of services" totaled$1.086 million for the six months endedJune 30, 2022 , a decrease of$142 million or 11.6% compared to the same period in 2021. The decrease in "Cost of services" was primarily attributable to a lower average retail Wireless subscriber base and lower network services costs per subscriber, partially offset by higher customer data usage. Our lower network services costs per subscriber during the six months endedJune 30, 2022 resulted from the new MVNO rates, as a result of our amendment to the MNSA with T-Mobile. In addition, the new MVNO rates are retroactive toJanuary 2022 . Cost of sales - equipment and other. "Cost of sales - equipment and other" totaled$644 million for the six months endedJune 30, 2022 , a decrease of$61 million or 8.6% compared to the same period in 2021. The decrease in "Cost of sales - equipment and other" compared to the same period in 2021 was primarily related to a decrease in units shipped and a one-time reimbursement from T-Mobile as a result of our amendment to the MNSA with T-Mobile. Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled$337 million during the six months endedJune 30, 2022 , a$99 million or 41.6% increase compared to the same period in 2021. This change was primarily driven by higher amortization of capitalized sales commissions, an increase in costs to support theRetail Wireless business unit and higher marketing expenditures. 84
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
RESULTS OF OPERATIONS - Wireless Segment - 5G Network Deployment Business Unit
Three Months EndedJune 30, 2022 Compared to the Three Months EndedJune 30, 2021 . For the Three Months EndedJune 30 , Variance
Statements of Operations Data 2022 2021 Amount %
(In thousands)
Revenue:Equipment sales and other revenue $ 17,722 $
17,349 $ 373 2.1
Total revenue 17,722 17,349 373 2.1
Costs and expenses:Cost of sales - equipment and other 127,378 11,987 115,391 * Selling, general and administrative expenses 60,453
38,129 22,324 58.5
Depreciation and amortization 25,498 3,956 21,542 *
Total costs and expenses 213,329 54,072 159,257 *
Operating income (loss) $ (195,607) $ (36,723) $ (158,884) *
Other data:
OIBDA $ (170,109) $ (32,767) $ (137,342) *
* Percentage is not meaningful.
Cost of sales - equipment and other. "Cost of sales - equipment and other" totaled$127 million during the three months endedJune 30, 2022 , an increase of$115 million compared to the same period in 2021. The increase primarily resulted from an increase in lease expense on communication towers and costs related to our 5G Network Deployment. Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled$60 million during the three months endedJune 30, 2022 , a$22 million increase compared to the same period in 2021. This change was primarily driven by an increase in costs to support our 5G Network Deployment. Depreciation and amortization. "Depreciation and amortization" expense totaled$25 million during the three months endedJune 30, 2022 , a$22 million increase compared to the same period in 2021. This change was primarily driven by an increase in amortization expense related to certain software licenses. 85
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Six Months Ended
For the Six Months Ended June 30 , Variance
Statements of Operations Data 2022
2021 Amount %
(In thousands)
Revenue:Equipment sales and other revenue $ 36,902 $
32,043 $ 4,859 15.2
Total revenue 36,902 32,043 4,859 15.2
Costs and expenses:Cost of sales - equipment and other 215,076 20,637 194,439 * Selling, general and administrative expenses 113,723
73,032 40,691 55.7
Depreciation and amortization 46,404 7,143 39,261 *
Total costs and expenses 375,203 100,812 274,391 *
Operating income (loss) $ (338,301) $ (68,769) $ (269,532) *
Other data:
OIBDA $ (291,897) $ (61,626) $ (230,271) *
* Percentage is not meaningful.
Cost of sales - equipment and other. "Cost of sales - equipment and other" totaled$215 million during the six months endedJune 30, 2022 , an increase of$194 million compared to the same period in 2021. The increase primarily resulted from an increase in lease expense on communication towers and costs related to our 5G Network Deployment. Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled$114 million during the six months endedJune 30, 2022 , a$41 million increase compared to the same period in 2021. This change was primarily driven by an increase in costs to support our 5G Network Deployment. Depreciation and amortization. "Depreciation and amortization" expense totaled$46 million during the six months endedJune 30 2022 , a$39 million increase compared to the same period in 2021. This change was primarily driven by an increase in amortization expense related to certain software licenses. 86
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