EchoStar CORP Q3 FY2025 Earnings Call

Greetings, and welcome to the EchoStar Corporation Third Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Dean Manson, Chief Legal Officer.

Thank you, Joe. Welcome, everyone, to EchoStar's Third Quarter 2025 Earnings Call. We will begin with opening remarks from Hamid Akhavan, President and CEO of EchoStar Capital, followed by Charles Ergen, CEO and Chairman of EchoStar. We are also joined by other members of the leadership team. We request that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recording, which we ask that you respect. All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2024, filed on February 27, 2025, and our subsequent filings made with the SEC. This information and supplemental materials related to today's call will be posted on our Investor Relations website. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. We refer to OIBDA and free cash flow during this call. The comparable GAAP measure and a reconciliation for OIBDA is presented in our earnings release and in the case of free cash flow in our Form 10-Q as filed with the SEC today. With that, I'll turn it over to Hamid.

Thank you, Dean. Welcome, everyone, and thank you for joining us today. I would like to start by addressing the change in our call format this morning in that we have Charlie Ergen, our Founder and Chairman, here with us today. Charlie and I will provide some updates on our business, our recent transactions and discuss some changes within our organization. As you know, we recently announced the signing of a series of major transactions, one with AT&T at the end of August and another with SpaceX in September, valued at approximately $23 billion and $19 billion, respectively. These transactions were instrumental in resolving the FCC's review of the company's spectrum utilization. Further, just this morning, we announced an amended definitive agreement with SpaceX, which builds on the agreement the company entered into in September to sell EchoStar's unpaired AWS-3 spectrum license for approximately $2.6 billion in SpaceX stock. Once these transactions close, we will have the capital runway necessary to continue to expand our existing operations, as well as the freedom to pursue new opportunities. This focus on new growth avenues significantly broadens the aperture of our business going forward. In light of this increase in the scope of responsibilities for the company, Charlie and I have decided to create a new division focused primarily on capital management and M&A. Going forward, I will lead this new division as the CEO of EchoStar Capital. I will also continue to manage Hughes Network Systems. Charlie will take on the position of EchoStar CEO in addition to his role as Chairman, managing our video and wireless operating business units. These changes are effective immediately. Building on a 45-year operating heritage across communications, media, and technology infrastructure, EchoStar Capital will be a great steward of our resources, a vision and thesis-driven and strategic investment-oriented operation with a global perspective and a proven track record of value creation. Our institutional knowledge and experience uniquely positions us in the marketplace to create superior and lasting value through innovation, execution, and integration, allowing us to invest in operating businesses. We can expand our capabilities and market reach and focus on initiatives that generate sustainable shareholder value. I'm incredibly excited about this opportunity and ability to usher in this new phase for EchoStar. I will now hand off to Charlie for a few comments.

Well, it's good to be back on the call, and it's funny in a kind of way. But I just have a couple of comments, and you know my style is just to take questions because I never know what's on your mind. Hamid and I will do that and the team. One housekeeping issue is we agree with the President in the sense that we think corporations should only have to file twice a year instead of quarterly because it just takes – by the time you finish the quarter, you're almost starting to work on the next one. It takes an enormous amount of time. But since that hasn't changed, obviously, we'll still continue to file quarterly. But we may, from time to time, not do quarterly conference calls like this because we'll try to stay focused on our business. We will do a call next quarter for year-end. And obviously, we'll have a lot of things change between now and then. But after that, we may be sporadic in terms of how we do these calls. So with that, let's take questions.

And the first question comes from John Hodulik with UBS.

Maybe first on EchoStar Capital. Charlie, could you talk about how it will be capitalized? Will all the proceeds from the spectrum sales go into EchoStar Capital? Or just anything you could tell us about those proceeds would be great. And just what areas do you expect to invest in? And then lastly, if I could, you still have the AWS-3 spectrum. Any update you can give us on the potential sale of that block? And just how do you think of relative value for the paired versus the unpaired transaction we just saw?

Thanks, John. I'll address the second part of your question. Regarding EchoStar Capital, I believe Hamid is better suited to answer that. As for AWS-3, the sale to SpaceX is well-timed. We still retain the paired AWS-3 spectrum, and the unpaired spectrum we sold to AT&T was not particularly useful for us. In SpaceX's hands, however, it provides significant flexibility for combining uplink and downlink, as well as potential for future spectrum acquisitions. Although they acquired it at a lower price, they will be able to utilize it more effectively than we can currently. We're also pleased to receive SpaceX stock, which aligns with EchoStar Capital's investment strategy. We can further discuss why we view this as a strong investment. We still possess the paired spectrum and would consider a transaction if a significant opportunity arises. The AWS-3 spectrum holds considerable value. When evaluating spectrum, value derives from three main factors. Firstly, its compatibility with devices. Historically, obtaining device support for our own network was challenging, but our paired AWS-3 spectrum has consistently been integrated into devices for many years. I doubt any phones in the U.S. lack AWS-3 spectrum. This integration adds to its value by minimizing additional costs for devices. Secondly, all three major carriers utilize AWS-3 spectrum. With a wide bandwidth of 70 by 90 megahertz, it is collectively accessed by these carriers, often adjacent to our spectrum. Lastly, deployment costs are another consideration; most existing radios can handle our AWS-3 spectrum without requiring significant upgrades, which enhances its value. We'll gain more insights as the auction for a smaller portion of spectrum approaches next year, but we are quite confident in the AWS-3 spectrum. We will collaborate with the FCC regarding auction regulations and processes. I consider it our most valuable spectrum asset, and we'll see how that evolves. Hamid?

Yes. Thank you. I'll answer the question regarding the proceeds from the sales. Our intention is that all of that would be within the EchoStar Capital. And EchoStar Capital will I believe our shareholders would be remiss if we didn't take advantage of 45 years of our institutional heritage and thesis-driven innovation and execution in the broad fields that EchoStar has been involved in to maximize the value that they can get for that capital that comes into the company. I can't see too many companies that have the strategic understanding and the breadth that EchoStar brings to the table across telco, space, aero, defense and all the fields that the portfolio families of EchoStar have been leading and involved in. Now obviously, we always will be great stewards of capital, and we'll maximize the use of the capital. And if distribution of capital is necessary, we'll do that in an optimized way to our shareholders as necessary. So the roadmap is not 100% laid out at the moment, depending on how we see the market and opportunities come to us; we'll try to take advantage of every opportunity in the best way. And as I said, I can't imagine too many companies out there with the breadth and knowledge that EchoStar has gathered over the past 45 years. That's our plan at the moment. Obviously, as time goes on, we will be more specific about how and where we deploy that capital or any sort of distribution that could be decided in the future. But to start, we need to get all of that in place. The money is not here yet, so we have time to organize ourselves around how we would maximize the use of that capital.

Great. And one more follow-up, if I can. Just Charlie, any update on negotiations with the tower companies? And what happens to the entity, the DISH network that has the deals with the towers? Will that entity sort of stay in place?

Well, the obviously, we had some unprecedented kind of curve out on us when the SEC informed us that they were going to investigate take the spectrum. So obviously, we believe that's a force majeure event. And so we're happy to – we'll work with all our vendors. Obviously, we're the biggest company that got affected by that. But obviously, we also have other vendors and people we worked with for a long time they're affected by that, and we'll work with them to the extent that they want to work with us to try to resolve those issues. Unfortunately, one company has already commenced litigation, and that kind of sours some of the ability to talk to people because once things go into litigation, it's lawyers talking to lawyers and it's not business people talking to business people. And so that's a bit unfortunate. But – the network is obviously an independent company when we did it, still an independent company. And it will obviously handle this through that entity. It will handle all these negotiations through that entity. So we'll see where that shakes out, and we hope that everything can – other than the current litigation, we hope that those things can be resolved, and we're open to have those discussions.

The next question comes from the line of Brent Penter with Raymond James.

A couple of follow-ups on some of John's questions. So you clearly are excited about the SpaceX stake that's now getting bigger. As you bring in some of this net cash, how do you think about that as an additional area to deploy capital? And as SpaceX raises additional capital, do you have rights in terms of maintaining or potentially growing your stake? Just help us think about that SpaceX stake and then where you might put your capital.

First of all, we are very excited about having that equity on our balance sheet. We consider that our first investment in EchoStar Capital. We believe that Equity has tremendous growth opportunities just by the fact that SpaceX has such a significant lead in the technology within the space, and space is becoming the next infrastructure in the world as launch capabilities and cost have become economical, and also global security and communication have become more important in the age of AI. So we see that as being a strategic holding. We obviously will keep that in our balance sheet, excited about having the additional $2.6 billion that joins it. We certainly look to have additional investments of similar strategic nature as we – as I mentioned, there's a number of areas, a number of industries that we have a heritage and a deep thesis about understanding of those trends within the industry. We'll be very careful about investments that are synergistic with our thesis and understanding – very excited about that opportunity. I can't comment about us getting more SpaceX equity or some other transaction. As I said, we are just – this is the first day of our announcement about how we're going to go forward. But we will be diversified. We'll certainly have – we'll be great stewards of capital. And as time goes on, we'll be more specific about the transactions. The good news is that we still have a few more months before we even have the capital on our balance sheet. So we do have the time to do a proper job of planning and communicating with you where we're headed.

Yes. And I'm just going to follow up a little bit with – this will give you some insight, I think, to the way Hamid and EchoStar will think about extra capital. But SpaceX in terms of – we're excited about that as an investment. And what things we look at – first thing we look at is management. And SpaceX management, we've got to work and gotten to know over the last 10 years because we've launched on them. And they really have been the best vendor that we've worked with in space and solved very complex problems for us to move very quickly. And then we've worked a lot closer, obviously, as we've gone through these deals. And so they don't brag about themselves. They're pretty understated, but they are doing – based on my experience, they are doing incredible things with space, whether it be launching or satellites or services. So the second thing you look at is, obviously, are they – is this a place that over the next decade, there's going to be business? And as Hamid said, space is going to continue to grow particularly as you see governments with global security, but it's also the consumer and the ability to do broadband from satellite and also connected devices, those two things fit together. There's a lot of synergy between those two things in one company. And the third thing is who's going to be the winners and losers. And we look at other industries, I don't know who the winner in AI is going to be. One thing I'm sure of, there will be winners and there will be losers. I just don't know which one will be winners and which ones will be losers. But in space, I think it's pretty obvious that while there are some companies doing some very interesting and creative things, SpaceX is going to be the leader for the foreseeable future because they have the most efficient launch capability and satellite manufacturing capability, in my opinion, that I've seen. So when you add all that together, and then I think we built for 17 years, this ability to technically be able to go satellite device and regulatory-wise in the spectrum and all those kinds of things. We've now – that's now in SpaceX's hands or will be in SpaceX's hands. And we know that worldwide capability and the same frequency; we know that that's – we would have built a good system, but they're going to build even a greater system in a faster period of time. So that's going to be – that business by itself is going to be a huge part of where they grow. That's not probably in people's calculations of their value today. So that gives you a feel how we think about things.

Okay. Great. I appreciate all the detail there. And then a follow-up on the tower side. Since you all feel that you're relieved of those tower payments, what would actually cause you to stop making your payments to the tower companies? And then just any update on the timing of when we might have a resolution as we think about litigation and negotiations with them?

Yes. I just don't think we would get into that. I mean the only thing I would say is litigation is not positive.

The next question comes from the line of David Barden with New Street Research.

I guess my first question, Charlie, there weren't many numbers in the press release today about the SpaceX AWS-3 unpaired deal. But one of those numbers was that you pay or you invested at a $212 price. So could you, for the public side investors, tell us what information do you have? What information can you share to support what apparently is your belief that $212 is an appropriate valuation for the SpaceX company today? And then I guess my second question is maybe for Hamid or maybe also Charlie. The taxes on the asset sales, Joe, what the taxes would be helpful kind of given all the different moving parts on depreciation and capitalized interest. But also there's a theory out there that if your frustration of purpose argument works with respect to the towers that you have access to the 1033 stepped-up basis on these spectrum sales and that the taxes could be far less than maybe the market imagined. So I wonder if you could kind of opine on that.

Yes. So I really – in terms of valuation of SpaceX, I would just say that I think I might always repeat myself that we don't – we have a pretty good feel of what they're doing and where they are. I think they just publicly announced 8 million customers in broadband. I think you could overlay their growth in broadband and then overlay a device growth and look along that same curve, and you would see a much greater valuation than the $400 million. So – and again, as I said, the management team is excellent and understated in my opinion, in terms of what they do. And they have a pretty big moat around their business. They have 90% of the launch business, and they've launched the new generation of satellites, which is at least twice as big as anything else out there, maybe even bigger. They've launched it 12 times and they've caught it, returned back, right? And other people, unfortunately, are struggling to get their first ones up. So I just think – I actually think their lead is actually growing. Their biggest competitor is China, probably, but I don't know that China has even successfully landed a rocket. So their lead is big and growing. So if you had to pick a winner in an industry, from my opinion, I could be wrong on this, of course. And while they'll face competition and there's creative things going on in their space, they're the most obvious, of any industry that I know, they're the most kind of obvious winner, right, in terms of every other industry, you just got a lot of people that you just don't know who roughly ends up on top. And of course, SpaceX still has challenges to get through, but – and there's still risk there. But that's the way we think about it. That's the way we'll think about things that our capital, who has those characteristics.

I'll make a comment and then we go with Paul. First of all, I absolutely endorse Charlie's statements on SpaceX. But first, we want to mention that we are not insiders to SpaceX. So we have no inside knowledge of SpaceX. And Charlie and I views are 100% aligned and common on how great SpaceX is, but that's just personal views. And based on what we have seen, you should rely on SpaceX's statements on what they see about the valuation of the business. We are excited about having that equity; just – as Charlie said, we see all the trends in the space being good and SpaceX being a leader in there. Naturally, we think that this is a good place for us to go. Now on taxes, we have not broken out the taxes separately from our other liabilities in the towers and others that we just referenced. As we have previously said, we've not sharpened our numbers since the last time we spoke in Paris. We still believe that somewhere in the range of $7 billion to $10 billion is the combination of our unoptimized taxes and unoptimized value of our liabilities. So that range is what we essentially think we have. Now can 1033 provide additional benefit and reduce that number? I'll ask Paul. He might have some knowledge in terms of how applicable that may be, Paul. Maybe you can comment on that.

Thanks. So there's a lot of puts and takes there. Obviously, the AT&T transaction is going to close in '26. The SpaceX transactions expected to close in '27. We have NOLs that play into the mix. And we're going to do everything we possibly can to mitigate the exposure. We're working on that currently. But the range that Hamid gave that includes both decommissioning costs and tax of $7 million to $10 million is still currently our best estimate.

To follow up briefly, the 1033 is not included in the $7 to $10 million range, but there's a possibility. Is it dependent on how these litigations progress and if you're successful in making the frustration of purpose argument, which would enable you to adjust the basis and transfer assets to another class?

I'll just say, it's been used. I think some of the 600 megahertz broadcasters when they put a spectrum in auction, I think they used 1033 in some cases successfully. So we're aware of it. And obviously, it's – there seems to be a lot of similarities between how it's been used in the past, but everything is specific, and we'll look at that as part of our strategy. And I don't think it's contingent.

Yes. I would just add to what Charlie said, it's not contingent on what happens with the litigation. Those are totally independent concepts.

The next question comes from the line of Walter Piecyk with LightShed.

On SATS cap, I assume all the cash from all the spectrum sales is going into there. Does that keep it away from DBS shareholders and any OpEx obligations, meaning like the tower companies? And then, Hamid, you kind of like danced around returning the capital saying if it's necessary to do it. I don't know when it's ever like required that you distribute cash. But can you give us a little bit more color on kind of at what point do you say, hey, we've used our 45 years of experience. We’ve looked around. There's not enough interesting stuff, and we're going to send cash to the shareholders.

Let me take that piece first. Look, first of all, comments of dancing around. First of all, Walter, it's a little early for me to give you an exact formula or recipe or roadmap for how we're going to utilize the cash. But as you would expect, as any great company that has institutional knowledge and heritage within certain verticals, the best ability, the best option usually is to use that knowledge to deploy the capital because they're strategic. They're the insiders to an industry that a financial investor from outside will never, never get that insight, right? So we would be remiss not to take advantage of all that institutional knowledge and return the capital to shareholders that would now they have to deploy that capital in a way that they would not take advantage of this disability. I think the shareholders that have been with us, and we have great ones around the table right here, Charlie himself, would certainly want us to maximize the value. Now there's a limit to that. If I had $2 trillion, I couldn't use all of it. How much institutional knowledge I have, I probably couldn't use enough because the industry just doesn't have that ability or just the opportunity is not there because the market is not good or the industries that we are focused on are out of favor or they just don't have enough great opportunities for us, then we obviously, as great stewards of capital, we figure out how we would distribute that capital back to the shareholders in a tax-optimized way. We are not novices in this. And certainly, we're not walking into this without a full understanding of the options ahead. The only thing I can say is that we have deep heritage. This company has proven it can return value by the fact that you have seen for the past year, the thesis that Charlie had put in place decades ago has come to play. There's much more we could do there. But if at the end of the day, we have excess capital beyond what we can properly use – strategically use, we certainly will not sit on it in an unoptimized way. Very, very early stage for me to make any further detail on that. It would be premature for me to say that. Just trust us that we'd be great stewards of capital. We manage it like our own capital as it is our own capital primarily.

And then just is this protected from DBSD and the tower companies? And then just really a follow-up on that. Can you at least say that you're not going to like build a network or something of that ilk? These are really more passive investments that you're giving – that you're using your years of expertise to look at?

Yes. This is Charlie. I'll take – maybe Paul wants to jump in there, but the – obviously, our capital structure is well known, and they are obviously separate independent entities for specialized purposes. One thing that is clear for the AT&T transaction is we will be paying to DBS. DBS will receive about $2.8 billion for Tranche B, which is the C-band spectrum that we're selling to – that's collateral there. So the one thing you can say is that there will be capital moving into DBS at at least $2.8 billion.

And then just on the types of investments, I assume these are not operational. These are all passive investments, such as investing in great new opportunities that maybe SpaceX provides us access to?

So, well, we certainly don't intend to be purely passive investors. We don't intend to do that because, obviously, we do not want to be, and it does not – it's not in our best interest of our shareholders to become a fully active regulated company, investment company. We will have to manage this according to those rules, which means we'll make a combination of active and passive investments. And even when we make a passive investment, it will be strategic for us. It will be a thesis-driven investment. It will not be just – we're not wealth managers. We don't view ourselves as just broadly deploying capital in the marketplace. And we only focus on areas where we understand. Now in some cases, that investment cannot be a controlled investment or significant influence investment as is the case for SpaceX. The valuation of that company is very high. We would not be able to provide enough and we would not have access to enough equity to make that a control or significant influence as defined by the '40 Act. But we will balance that with other investments that we will have control and we will have operating influence to the point that we manage around any sort of regulation that will be in front of us. We will be much more precise in all of this as time goes on. Great questions for today, but we are aware of how we need to manage that, and we are not going to become a passive investment company. We like to rely on our heritage of operations. As I mentioned, we think we can – a combination of our understanding of technology, our ability to execute and our heritage of innovation will give us a very good platform to create great value.

And I would just add, realize we own and run three different companies today and Hughes and DISH and Sling and Boost. So – and clearly, obviously, from a Boost perspective, we think we have – that's a business that should grow. And obviously, the video business is somewhat challenged as it has been for a decade, but we still see those businesses lasting for a long time.

Yes. And we obviously have – both Charlie and I have extensive operating experience, not just domestically, but also globally. We have a very broad range and scope of places and domains and verticals that we can deploy the capital effectively.

The next question comes from the line of Michael Rollins with Citi.

Charlie, in your brief opening comments, you described the reasons that you're going to do an earnings call for the fourth quarter was it's end of the year. And there's – you alluded to changes that could be coming between now and then. I was just curious if you could give us a little bit of a preview or a roadmap of the range of potential changes that can continue to happen for EchoStar between now and your fourth quarter earnings call? And then secondly, just a follow-up on kind of moving beyond being a wireless network operator. As you're selling the spectrum, at what point can you unplug the radios so that you're no longer meeting the minimum use requirements, but you're able to start saving money from doing that? Is it when these transactions close? Is it now that you've announced a few transactions and you have maybe some more possibly that you have to kind of figure things out for? Or what's the formula where you could just start unplugging?

Yes. Regarding the second part, we need to engage with regulators on that, and those discussions are ongoing, so it wouldn't be appropriate to discuss it further now. However, we expect to provide more details early next year. To give a general perspective, you've asked an excellent question about what developments could occur between now and February. We are undergoing two significant transitions within our company. First, we are shifting to become a capital-rich, more asset-light organization. The second pivot is taking place within EchoStar, where I will be more involved in daily operations, and this involves a shift toward long-term planning. Historically, we focused on the short term as we invested heavily in building out our network, which had various regulatory requirements. As a result, we operated with a short-term mindset in our other business areas, which is not typically our approach. One of our core principles is to maintain a long-term perspective, and we're now returning to that mindset. Consequently, while we might take a small step back in the short term as we transition from a short-term to long-term focus, it will ultimately make us more competitive across our businesses. We consider long-term cash flow rather than just EBITDA and similar metrics. This strategic outlook allows us to assess where we can deploy capital for a return, especially in wireless, where we're one of only a few companies doing similar things. We are transitioning from being the builder—like Uber building highways—to renting the highways instead. This change positions us differently. Additionally, I believe many do not fully grasp the efficiency of our hybrid mobile network operator model, where we rent the radios but manage the core operations in the cloud. This allows us to offer a unique customer experience and leverage data to improve and automate that experience. Plus, we avoid the challenges of building and maintaining towers, which can be problematic given our smaller scale. While I may not have fully addressed your question, overall, we will be adopting a longer-term approach in our core business.

The next question comes from the line of Ben Swinburne with Morgan Stanley.

Charlie, good to have you back on the call. Appreciate your time. I was curious if you could talk about any opportunity to sort of wrap the remaining AWS-3 spectrum that hasn't been sold with the upcoming auction where you are, as you know, on the hook for any shortfall with a multibillion-dollar liability. Is there any opportunity with the FCC to sort of combine those two to try to monetize the spectrum and also kind of derisk the auction from an EchoStar perspective? Would love any thoughts if you have any to share.

Yes, Ben, it's a good question, and I'm not going to answer it, but I'll talk around the edges of it. But I mean, obviously, this FCC put us in a difficult situation. We went kind of through the five stages of grief – denial and anger and depression, and now we're in acceptance, of course. And that's the first thing from our perspective. The second thing is we really hadn't talked with the FCC folks for a couple of years. And once we started having conversations, we've gotten on the same path. And this FCC has quite the vision of – we didn't totally agree with it, but they want spectrum to get used more quickly and for the benefit of more Americans. And it's hard to argue with that vision. And once we've started communicating, now we're in lockstep really with where the FCC wants to go, and it's our job to now work with them and make sure that every – all our assets get put to the best use for the American public. Part of that indirectly goes to your question, as you look at the AWS-3 auction coming up, there potentially are ways to make that the most efficient auction. There may be – and we're in the process of those discussions with the FCC, and they will – obviously, others will have input into that as well. But we at least have a sounding board to say, how can we share your vision this FCC to get the spectrum in use as quickly as possible and in the hands of people that will compete with it. One of the great things about the AT&T deal we did is because of our MNO hybrid MNO deal with AT&T, we could actually use the spectrum that we sold to. So you can think about those things in a different way. And so this FCC is going to – they have a vision of where they want to go; they're going to be the most influential FCC that I've worked with ever. And so it's our job to help them get there where they want to go, and that's what we're going to do.

That's helpful. And just a follow-up on the Boost business now that you're running it. The history of MVNOs, these are typically not great businesses, and I know this is a hybrid MVNO. But you sound excited about the opportunity. It's got revenue scale, but it's at least to a degree, but it's still burning a lot of cash flow. I know you're going to start decommissioning, and you've started decommissioning the network. Just can you talk about, I guess, the strategic vision for the business? And then I don't know if there's any help you can give us on the path to getting this thing to cash flow positive now that you've switched models.

Yes. So the strategy is simple. We have to do two things, right? And if you look at any company that's the fourth or fifth player, this is what they have to do to be successful. You have to do two things. You have to use technology in a way to be different. And you have to do things that the other guys aren't doing or they could do, but they won't do. It didn't make sense for them to do it. So on the technology side, we've already made our first strategic move, which is an agreement with SpaceX for our Boost customers to have worldwide connectivity to the handset, both for voice, text, and broadband. So I'm sure others will follow suit with SpaceX. But carriers now are – many carriers have some choice as to who they might sign up with. And so there's a wide variety of where those carriers are going. We are highly confident that we have aligned with which the company is going to have the best technology, and we can do some things different than others. So we've already started that. That's two years away, probably realistically, but that we've already started. How we do things differently, I think, is for our team to come up, we'll – I officially start like Monday. So we'll start having strategic sessions on how we can think about how we do some things differently. I don't think it's a good path. I don't think we can be successful if we look just like the other guys. They just have too much scale. Those of you who have been with us for 30 years as a public company know that we prefer to operate for cash and avoid losing money. I don't have a lot to share on that right now, but I believe that as we shift to long-term thinking, the path becomes clearer. Short-term challenges are always difficult, and we have had to navigate those limitations. Now we have the opportunity to improve. Our company performs better when we focus on the long term. I believe the market underestimates the nature of our hybrid MNO. People often categorize it strictly as an MNO, but it's a unique entity. The AT&T network we utilize is excellent, and they are already implementing some of our C-band spectrum. This network will continue to improve, and I believe we can become more competitive. We certainly will be more competitive than we have been in the past.

Yes, one factor that may help us achieve profitability sooner is the significant reduction in our fixed costs. From a network perspective, reaching that profitability requires a larger scale to effectively manage those fixed costs. Without that scale, our timelines for profitability are greatly shortened. Additionally, our MVNO agreement with AT&T allows our costs to become more variable based on usage, providing us with operating leverage. As we increase sales, we don't necessarily need to achieve large scale to drive growth. All the strategic initiatives Charlie mentioned should help us reach profitability much sooner than previously anticipated. We won’t provide specific timelines today, but we expect that information will become available over time. We are very enthusiastic about our potential to develop our business as the largest scaled hybrid MNO-MVNO model in the market, particularly with our access to space and the strong coverage provided by AT&T. With our spectrum being utilized, we believe it will result in the best coverage in the nation.

The next question comes from the line of Bryan Kraft with Deutsche Bank.

Had a few, if I could. First is a follow-up on the tax side. I was wondering if you could confirm that there will be a tax benefit from the impairment charge that you're taking today? And is that benefit excluded from the $7 billion to $10 billion range that you cited? Secondly, just a follow-up on AWS-3 and the auction. Does the timing of the auction matter as it relates to you selling the paired AWS-3 licenses? Is it optimal to wait? Is it better to do it first? Just wondering how you're thinking about that? And then also the converts, I was wondering if ultimately you plan to settle those in cash or stock? And then lastly, I would just love to hear your latest thoughts, Charlie, on a potential DBS merger with DIRECTV at this point in time.

Yes. This is Paul. Good question there. I'll take the tax question. As it relates to the impairment charge, some of the items have already been deducted. For instance, we take bonus depreciation on the network or amortize the FCC spectrum. So we won't get a benefit of that. But the other costs, we will. And to answer your question, is that included in the $7 billion to $10 billion range? Yes, that is.

And this is Charlie. In terms of AWS timing, and so again, that's – I wish I could give you more information, but we're really working with the FCC to make that the most successful auction possible and that spectrum gets used as quickly as possible. But we're – again, it's pretty valuable spectrum, I'd say that. And as part as the converts, we'll make a decision at the time that we can call those converts as to whether we call them or not. And if so, is it cash or stock or some combination of that. That would just be premature to speculate on that today.

Yes. Certainly, at EchoStar Capital, we look at every opportunity for value creation through inorganic transactions. The DISH and DIRECTV always has seemed like a natural combination, and it's been an in-house combination. Our track record of making that work has not been great. So it's hard to predict how it might go. But certainly, we will always look at any opportunity to take advantage of assets we have in-house with a transaction. I can't make any prediction right now about how that might go, but that item has always been on our radar, and Charlie has been very vocal about the fact that the combination of the two companies would create significant and tremendous value.

The next question comes from the line of Chris Quilty with Quilty Space.

I was hoping you could possibly give a long-term update on the plans for one of those operating businesses, Hughes. You've obviously got downturns in the VSAT business and the consumer broadband. It looks like IFC is growing. Are there thoughts on either growing that business organically or non-organically? And what markets are you most focused on?

Chris, thank you. Regarding Hughes, as you know, we have been on a multiyear journey at Hughes for at least three years now to transition that business more towards an enterprise business from a consumer business and purely from the realization and understanding that the consumer connectivity to satellite is now highly competitive given SpaceX's offerings and perhaps in the future, other LEO offerings such as Kuiper. We recognized years ago that we could not have a LEO system on the broadband side to compete with those. So we started shifting towards enterprise. Our expectation is that as early as next year, we'll be crossing over the 50% mark on enterprise revenue. We have had significant progress in an aero, which we had almost no share on three years ago, and now we are only one of the couple of companies in the world that are growing on the aero side. So there are some progress being made in there. We're happy with that. We still have a long journey to make Hughes much larger scale in the enterprise. We are on the Gartner's leader quadrant as one of the few – in fact, in this industry, in their industry, there is none other than Hughes on the Gartner's leader quadrant. So it shows the ability of Hughes to serve global brands across the world. We'll try to monetize and maximize that if there's any sort of M&A opportunity. As I mentioned, on the list of areas, domains where we will be looking for additional M&A. You saw three or four of those actually fall within the Hughes purview. That's aero, space. we talked about enterprise services. We talked about defense and domestic manufacturing, which I think all of those are areas where we have green shoots and a good understanding of the trends. And if there's – at EchoStar Capital, if we find opportunities in any of those domains that would enhance users' position, we'll take advantage of that.

That concludes our call. Thanks for joining. Thanks, everybody.