Yummy Century Egg's Guowei Zhang Echostar follow up $SATS
Summary
Spectrum Deal: EchoStar/SATS recently completed a significant spectrum sale to AT&T for $22.7 billion, marking a major milestone in unlocking the value of a long-held spectrum portfolio.
Market Dynamics: The sale has reset spectrum market valuations higher, with AT&T's aggressive bid reflecting strong demand for mid-band spectrum, potentially impacting future competitive dynamics.
Investment Strategy: The podcast discusses the potential for further liquidation of EchoStar's spectrum assets, with a focus on maximizing shareholder value versus pursuing new business ventures like direct-to-device satellite services.
Regulatory Considerations: There is an ongoing debate about the Department of Justice's stance on maintaining four wireless competitors in the market, which could influence future transactions and spectrum sales.
Broadcasting M&A: The podcast highlights recent consolidation trends in the broadcasting sector, with significant deals like Nexstar's acquisition of Tegna, as broadcasters seek scale to compete with tech platforms.
Investment Risks: Concerns are raised about potential overvaluation and strategic missteps in the broadcasting and telecommunications sectors, emphasizing the importance of careful analysis and timing in investment decisions.
Psychology of Investing: The discussion touches on the pitfalls of "bagholding" and the psychological challenges investors face when doubling down on declining stocks, using QVC as a case study.
Transcript
You're about to listen to the yet another value podcast with your host me Andrew Walker. Today's episode we have Weey from Yummy Century Stocks back on the podcast. Look, we did a podcast about a month ago on Echoar/SATS and a ton of news has happened. I mean, the stock is up a absolute ton, but because they did a massive spectrum deal and we talk about everything. We talk about the spectrum deal, we talk about the go forward paths, the risk, the opportunities, all that sort of stuff. And then we end the podcast with a quick little discussion that I really enjoyed on first broadcast affiliates with the Nexr Techno deal and then a little bit on bag holding and as I like to call it sucking your thumb and trying not to, you know, losers average losers and all that sort of stuff. So, it's a really informative podcast. I've said it several times. Yummy Century Stocks is the best substack to launch so far this year. You should absolutely subscribe, follow it if you're not subscribed and following it. You're really going to enjoy this one. We'll get there in a second. But first, a word from our sponsors. Today's episode is sponsored by AlphaSense. Look, over the years, you've heard me talk about it non-stop. AlphaSense, Tigus, they've become core to how I do investment research. They they've got a burgeoning set of AI tools. They've got the expert calls, which I absolutely love, the expert call library. They've got over, as they tell me, over 500 million premium sources from company filings, broker reports, news, trade journals, everything. Plus the expert calls. They put it all in one place. Their II tools let you search unique data sources in really interesting ways. This October they're hosting their first ever Alpha Summit 2025 in Brooklyn. I'll be dropping in and out. So the event will feature all sorts of lead leaders from finance, UBS, Wells Fargo, Asenture, Google, and who's who are going to be there sharing how AI is reshaping the investment research and decision-making landscape. Uh what's going to make special is it's just not just about the ideas. It's about really talking about how AI can improve workflows and the strategies that top firms are using right now. So I'd love to see you there. If you're going, you can join me there. AlphaSense, Alphasummit 2025, October 6th through 8th at the refinery at the Domino. You can sign up at alphasense.comyavp. That's alpha-sense.comyavp. All right. Hello and welcome to yet another value podcast. I'm your host Andrew Walker. With me today, I'm happy to have on for the second time. And it's been pretty fast, too. This might be the fastest repeat appearance we've had, Weey from Yummy Century Stocks. Weey, how's it going? >> Good. How are you? Good to be here. I'm doing great. Uh before we start this podcast off, disclaimer mind everyone nothing on this podcast is investing advice. We're going to be talking and maybe a couple things today, but particularly sats. Uh I've got a little position. I I don't know ways position, but please do your own work. Highly leverage situation. It's wild over there. It's truly the wild wild west. And the second disclaimer I'll give is I've said it several times on this podcast. Way right Century Stocks. It is literally the best substack to launch this year in terms of investing. So I might have been your first subscriber. I I don't know. But, uh, go subscribe if you haven't. It It's the analysis is absolutely fantastic. So, unless there's anything else you want to talk about, uh, let's hop into SAS. >> That's cool. That's cool. >> Cool. >> So, go ahead. >> I said thank you for the kind words. By the way, >> they were welld deserved. So, there's no need thanks on them. Look, wait, we did a podcast about a month ago on the Bergening situation over at uh, Echosar Sats, whatever you want to call it. They announced a big spectrum sale a week or two ago to AT&T. So, I'd love to just pause there. People can go listen to the the whole thing that we did. I'll include a link in the show notes, the whole first thing for overview, but it it's really worth an update on what happened there, what the go forward path is. So, I'll just pause there and say, hey, Spectrum sale to AT&T, what was it, why is this a big deal, all that type of stuff. >> Yeah. Yeah. So, I mean, just to give like a 30 second background. So, this story has been um ongoing for the last 15 years. this portfolio of spectrum that that was accumulated by Charlie Urggon and uh it's always been there's value there. It's always been trapped inside of SAS and Dish over these 15-year periods and it's just started to come out. This value started to be realized. So that's why it's so significant. >> So the the uh update is that AT&T came in and paid 22.7 billion for two parts of the spectrum. there more in the portfolio. I would say that's about in terms of a value that's about a third of the portfolio. So there's still twothird of the portfolio that haven't um come out yet, but that's the start. You know, that's a fairly large deal. It was surprising at h at how quickly it was put together. Uh I was expecting, you know, them to take a longer period of time to put that deal together, but AT&T came in bid a pretty high price for those spectrum without an auction. So they they I guess outbid um everyone's expectation because they wanted to get it first and early uh without going into an auction process and that worked out for Urgan and SAS at the end of the day. So >> let's again I really would encourage people to either go listen actually not either or do both go listen to our first podcast and then go read everything Yummy Century Egg has written on this including particularly the most recent pieces because it is hard to talk about this without some background but let's have just on the the spectrum sale itself to baseline AT&T paid I I believe it was $23 billion for this is the 600 meghertz and the 3.4 4 GZ spectrum. You have done great work on each and every block of spectrum that Dish that Dish Sats owns. What did you think the spectrum was worth? Just the baseline for people. >> Yeah. So the 3.45 gigs I thought that was worth eight billion. They just bought it in 2022. So it's a pretty recent auction. So I didn't give them a lot of premium on that. They paid $7.3 billion for it. So I said, you know what, eight eight billion. I'll just round up. There's really no, you know, transactions, right, other than those auction numbers. Uh, and then the 16 the the 600 megahertz, I had 10 billion for that. Now, they didn't break out how much they paid for each piece in in the press release and the call afterwards. But, >> y, >> I'm assuming if you paid 8 billion for 3.45, that's, you know, uh, 15 billion uh, for 600 meghertz. So, that's a 50% premium. And that's you know if you look at the ranges of expectations that's at the very high end of the market. Uh so people had anywhere between 10 to 15 16 billion for that uh piece of the spectrum. >> What impressed me the most about it and there were a few things but number one you mentioned that that the 3.45 it was it was 2022 was when they bought it right? >> Yeah. Yeah. >> It it was a recent bid and one thing I had always worried about and people can listen to the last podcast. I I've always been as a longtime dish bull who just like you know the monetization story has been there for 10 years. I've always been like, hey, it >> if it hasn't happened now, win. And then the other worry you would have in the back of your mind is look, every price that you saw happened at an auction where there were four players, right? Dish was your fourth player, then Verizon, AT&T, T-Mobile, and you worried when you kind of pulled the fourth player out there and you were left with Verizon, AT&T, and T-Mobile who are all against the Spectrum caps, you kind of worried that the competitive dynamics fell apart. So to me, one of the interesting things about this bid is a a recent bid where the fourth player was the winner in the 3.45. It it seems that at minimum they got cost and probably a premium for that. And that was just to me just one of the most bullish signs because again the fourth player's gone and the largest players are saying, "Hey, we need the spectrum so bad we'll pay big premiums to this stuff that just went off." I I if you have anything to add or disagree, agree, I'd love to hear it. >> No, I think the 3.45 four or five gigs when Dish bought it uh three years ago, they paid a very good price, I thought because the auction dynamics were such a way where they benefited uh from I guess a slightly reduced u competitive pressure and then AT&T really needed that that spectrum because AT&T was the other big winner in that auction. So, you know, that fit very well with uh AT&T. AT&T is short mid-band spectrum. So, that deal looked great. I mean that was what everyone expected. Um and and that just happened. So but the 30 300 megahertz was sorry not 300 600 y >> 600 meghertz that was a little bit strange because AT&T doesn't need that. um they paid a big price for it and on the call that they had after uh the announcement they said that it would take them several years for that 600 meghertz to be put into use which is I mean shocking to me that they paid such a big price for that part of the spectrum which comes back to your point which is that the spectrum market is has reset based on these two transactions uh and it's um you know it's re it's reset higher right and I don't know what the competitive of um dynamics are for the remaining spectrum, but I would say it's better than where we were a month ago. >> Let let me pause you there because I agree it's reset higher. It seems like that's the case and we'll talk about the rest of the spectrum, the other biders, all that sort of stuff. But I did have one bear who emailed me and said, "Hey, everybody at SATS is selling right is celebrating right now." And rightly so, right? This was a big price. But when you're starting to think about the rest of the spectrum portfolio or deals, remember the one there are a few constants in life. There's death, there's taxes, and there's AT&T wildly overpaying for telecom assets when they whenever they have the chance. So, they were kind of saying, look, you had the sucker here. They did the first blowout bid, but as you go to the rest of stuff, I mean, it seems AT&T won't be around to bid for the rest of the stuff just because this was a big deal. This probably takes them out unless the rest of the stuff is going for a real song. They're saying, "Look, Verizon and T-Mobile are going to be much more disciplined buyers. Like, kind of dial back your expectations on those because now they know there's only two players. We're the last game in town and nobody's going to pay AT&T." I thought that was an interesting zig to zag to the zig. Go ahead, please. >> I would push back on two points here. One is that um uh Verizon is not a disciplined buyer in the market. I I just had to look up who bought Straight Path 18 or Verizon to remember which one. So when you say not discipline Yes. Yes. Yes. Yes. >> And Verizon was the winner in that in in in that bidding process. Okay. They way overpaid for that. They went crazy for that one. And they they paid a lot for for CBAN right back in 2021. So I wouldn't say they're uh conservative by any means. So that's one point. The the second point is AT&T in their call said that after paying 23 billion for these two pieces of spectrum they're actually accreted to earnings. Um so which is shocking to me right because twothird of the price was for 600 meghertz which they won't even put into use. So what they're modeling is using 3.45 gigs for uh fixed wireless. That's what they said in in their uh in on their call. So that's going to make them you know, make the deal accretive for them, which to me feels like they underpaid for the spectrum, right? And so, I don't know, like I I feel like you're right from a competitive standpoint, one guy is potentially out of market, but on the other hand, if you look at some of these use cases, I don't know. I mean, there's still value there, right? AT&T could have paid more for those spectrum if they wanted to and still make the case that it's hey you know accreative or not dilutive to earnings. >> I do hear you though you you do wonder about the fun with math and games of like buying spectrum and what they're saying same but let me stick on the AT&T use case for a second. I was going to say this later, but talking AT&T on the call comes out and says, "Hey, like they really started pumping up fixed wireless assets, fixed wireless assets with this uh, you know, wireless internet basically for those who don't know. They really started pumping it up and it's been interesting to watch their evolution on FWA over the past five years. You know, AT&T historically was the most opposed to it and over the past couple of years they've warmed up to it. you know, they started saying, "Hey, it's a great bridgeway for places where we have copper." I would say with this deal, they really warmed up to it, right? They're still not saying it's full speed ahead. They still want to do fiber, but they're really talking about it. I thought that was interesting from a lot of competitive angles. You know, we can talk cable, we can talk anything, but I just love to ask you just high level as you see AT&T buy this big block and this is really the 3.45 45 that they're using for the FWA. But you see this and you see their tone change on fixed wireless. Do you think that has any read through to just across the board competitive dynamics? >> Oh, absolutely. Absolutely. I mean, the first thing that came to my mind was cable, you know. >> Yes. >> It's been getting killed by fixed wireless. Uh now you got a big player coming in uh who's who's just gonna take more market share from them. So that's that's a concern for cable. I mean that the the risk has been there for the last three to four years, but now you got a big guy coming. Um, so >> it's not just you have a big guy. I mean you have T-Mobile who's been doing it like they were the pioneers. Verizon's really started ramping it up. And now you kind of look at it and you say it seems like AT&T is going to ramp it up, right? And you got cable going from monopoly in every market to duopoly, cable versus fiber. >> And it seems to me like you're going to have cable kind of in a lay, right? It's going to be cable versus a fiber player. And those two will probably be converged. I think you and I defer a little bit on the cable, MVNO, and the converge side. But then you're going to have in every market, 5% of that market is going to get really attacked by T-Mobile's fixed wireless. And if AT&T is the fiber, Verizon's fixed wireless, if Verizon's the fiber, the AT&T's fix wireless. So, it seems like you go oligopoly and that that's a really tough situation. >> Hey, that's like, you know, I'm I'm doing a series on cable. I haven't gotten to the meat of it yet, but I mean the the gist of it is if you look at all these guys and their plans for fiber and fixed wireless for the next five years and you scratch your head, you say, "Hey, there's like, you know, 40 million, you know, customers that they need. Where's, >> you know, it's going to come from cable." So, I mean, this is a big deal for cable, right? I mean over over the next five years and you just see AT&T spending a lot of money to to to try to attack it more. So >> as a look I'm with as a longtime cable bull like you see AT&T really add into that add into there and you say hey like what is what is kind of left like it seems like for years you said hey once the fiber build outs happen and the fiber build outs have it's tough to say peaks but like it's not going to get much more competitive right cable is already 60% overbuilt by fiber it's probably going to 80% but you've probably seen the impacts the issue is now you're saying Hey, all of our markets going from zeroix wireless to it's going to be two players, maybe three players. Like it's a lot of competition left to come and it's it's concerning. U >> yeah. >> Yeah. Yeah. But you do wonder on the other side and this might tie us back to Dish nicely. Hey, if cable is looking at this and saying fix wireless is coming, we need a competitive response. The response cable has been saying for the past 5 years has been conversions and that's relied on the Verizon NVNO. You know, if cable wanted to take it a step further, I I increasingly think the remaining dish spectrum, I mean, cable might be the bidder, right? And then you say, hey, you get the uh the AWS spectrum, you use that to power and then you can still rent the network from Verizon, AT&T, whoever is going to be your MBNO in more rural places where you need less. But maybe you're talking about, hey, it makes sense for them to go and really start this buildout if it's it's going to go converged. I I don't know how you where you fall on that. >> You know, I think the 600 megahertz deal is a pretty big deal because that's the spectrum that they need for coverage if they want to start owning network assets. So, with that 600 meghertz out from the market, uh cable is put into a tough spot. You know, there's no real major alternative for them to have that low band coverage. So, that's >> Do they need low band though? cuz I I would think you could still rent cuz low band is mainly voice, right? So I think you could still rent that on decently attractive from Verizon, T-Mobile, AT&T and just offload like do you really need low band? Can't you rent that? >> They could lease it. Yeah, they could lease it. But I mean, you know, see it's a bit strange, right? I mean I feel like I feel like the the the low band is more important than the midband because that's coverage. I mean you need it to work everywhere, right? If you if if you have a blotchy network, then you know the cable guys are are not going to be competitive in this product. So the low band is the coverage is really important. So but but you're right, they can lease it from AT&T. It's just uh it's just a weird deal because AT&T doesn't need it. It's kind of like very, you know, >> I I was basically thinking if you took what cable's doing right now to its most extreme, right? Because right now cable's on the Verizon thing and they're trying to offload as much as they can in the heaviest spots. I was thinking basically, hey, if you take CBRS and then you buy the dish spectrum and you run that forward five years and all the heavy spots like you're trying to offload and then you use whether it's Verizon, AT&T or T-Mobile, you say, "Hey, wherever we can't build coverage, we rent the network for you." Uh that that's kind of what I was thinking. >> Yeah. Yeah. I mean, it could work if they want to own the, you know, if if if they want to own network assets. I'm just not I don't know when they're going to actually make that decision, you know, and whether now it's the right time for them to bid I don't know 30 40 billion dollars for the remaining >> assets that they have. So, um you know, I hope they're in the process, but I'm not I'm not 100% sure. And you know, if you talk to a lot of cable shareholders, they don't want mobile, right? I mean, they're they're they're kind of negative on the whole space. And I don't know from their perspective, they don't view that as a good capital allocation strategy. And I don't disagree with that. I think it's it's a big decision. And if I were a c I'm not a c I'm not long cable, but if I were long cable, I would be very concerned if charter goes and pay charter and Comcast go and pay 3040 billion dollars for the spectrum. >> No, you know, I I don't disagree because they it's not just the 30 40 billion spectrum. then they'd have to go build towers or rent to like there's a lot of tack on to that though it is interesting right like cable does have a fiber richch network as as any cable company would say hey if you have get broadband >> uh you know 90% of your data at this point is going over your broadband subscription 10% is going over your wireless but you're probably paying more for your wireless line than your broadband like that is a natural argument for convergence and we're sitting here saying hey fix wireless access which is going to take 5% broadband plus the mobile is eating is eating cables lunch. Like it seems weird that they're in a spot where we're credibly saying, hey, they can't go by the spectrum to get fully converged and by the way, they're getting their lunch eaten by one fiber player plus the peace meal fixed wireless players. >> Yeah, it's really no good choice for them, right? I mean, either they pay up for the spectrum and, you know, do do the buildout or, you know, they get their lunch eaten. But but then again, you know, 600 megahertz is gone and the spectral and and and the network assets that Echoar has, they're they're getting shut down. So I would assume, you know, Echoar has had conversations with cable and they're not interested. That's why the whole network is getting shut down. I mean, think about >> Echoar spent 10 billion, probably not, uh, eight billion on their network assets at this point. That's a lot of money that I mean, that's gone basically. Actually, that's a great point to come back to because I want to talk about Echo Stars Go forward and the hybrid M and everything, but you know, I know some people I I think you might have mentioned it who thought that the endgame for this was the cable operators banding together and just buying boost, right? There's 10 billion that would get them the fourth network. Uh, now they would have to pay for the spectrum, everything, but that would get them instantly running day one with the network nationwide that had been invested 10 billion in the ground. Let's say they paid five billion for it. Let's pay say they pay 12 of you, whatever. But are you surprised that the this was the endgame versus the cable buying and going into the fourth player mode. >> Yeah. Yeah. I was I was surprised by it. Um mainly because they they I mean spent a lot of money and effort and technology they put into this very spanking new network that's supposedly very valuable, right? No one else had this open rand network. And you know, I mean, I'm more realistic than a lot of people, you know, in the marketplace about this network, but there's still some value there. And they're just literally going to take the radios down. And that was shocking to me. That's that's a lot of wasted capital. Uh that that must mean to me that must mean that cable is not interested, right? that that just I mean why why give that up if >> it's it's just it's funny to me because if you and I were having this conversation a year ago right now the the conversation would have always centered on the spectrum value right but the bulls would say hey they've got the spectrum value they've got the spectrum it's untapped and they put 10 billion into as you said this brand spaking new completely modern network unh you know unburdened by legacy voice and all this sort of stuff and it's going to the moon because they've got this new network and here we are a year later. The network was literally worthless, right? They're shutting it down. They're giving the spectrum over to AT&T. Cable apparently wanted nothing to do with it and the stocks are triple because this spectrum was so valuable. >> It's going to cost Echoar to take to to take everything down, right? Because all the all the all the tower leases and stuff and that's not cheap. That's a very expensive process. So, I was, you know, I don't know. I mean, that's just a complete waste of capital, right? >> Let me go, let's let's go back to uh Echoars. Go for it. So, uh let let's start with the rest of the spectrum, right? The there's an article. This deal gets announced. I think it's on a Monday. The stock screams higher. And then after market, the day that the deal is announced, Semaphore comes out with an article that says, "Hey, T-Mobile was sniffing around these uh SpaceX was was sniffing around. There's a lot of spectrum left. Both of those players are very interested in the remaining spectrum." I I'd love to just ask what do you think the remaining stuff's worth? What do you think the go forward path here? Actually, if I can put one more, there is an open debate on the go forward path of is this a liquidation? Is the candy shop open and we're selling all the spectrum? Or is Charlie gonna pursue I I think you put in one of your posts, is Captain Urgan going to pursue his whale and go build up the DTD satellite business, spend $5 billion, keep the spectrum, and try to build a business? So, I threw tons of stuff at you, but I'd love to hear what you think about the go forward uh spectrum, this go forward echoar here. >> Yeah. So, first of all, I'm very interested at this point about the stock. the stock's riskreward is a lot better now than before even though stock has gone up. Okay. So the the reason for that is I think the stock is worth triple digits at least. Um and uh and and the reason is that um just from a very simple back of the envelope math perspective they sold 23 billion of spectrum. There is um 11 to 12 billion of spectrum outside of AWS4. Right? That's going that's going to get sold one way or another. You add that up, you take away taxes, you take away debt, that gets you to low low to mid50s in terms of stock price, which is not that far from the current stock price of 62, $63. So, you got pretty good downside protection. I mean, this is a liquidation, right? I mean, and and you're going to get 50, let's call it 55 bucks back, right, in the next year, right? Year or two. So, that's pretty good downside protection. On the upside, you have the crown jewel, the AWS uh 4 spectrum. That's the 2 gigahertz spectrum. That's worth probably 26 27 billion dollars on top of that. And that's 80 bucks of value um that needs to be realized now. So that so the question is how do you realize that value? Um, my perspective, the base case is that because they're not running a network, the a the AWS4 spectrum now is in limbo with FCC because the FCC has these buildout requirements, right, for for your spectrum. You you own the permit. You own the license, but that license has conditions, buildout conditions to it. Now, you don't have the network. You're not running the terrestrial network. Everything else you do in the future with this network has to be approved by the FCC. So, so the question is what does FCC want to do with the spectrum rather than what URG wants to do with the spectrum to some extent. Uh, so I think that the FCC probably wants it sold, right? Up the spectrum. And so the other option like you mentioned is Urgan on their second quarter, not Urgan, but the CEO Hamemed um on the second uh quarter earnings call said that they wanted to go into D2D uh LEO satellite business. um they're potentially going to spend $5 billion investing in this business and we're going to be a wholesale provider uh for for the global network operators basically providing you know D2D connections in places that don't have cell cell coverage right now and the and the uh I guess the idea is you provide service to the network operators you save them capex because they don't need to have towers in these places anymore so a good value ad for for them to offer. And in order to do that business, you need uh the two gigahertz spectrum. Now, there are two pieces to that two gigahertz spectrum. One is the terrestrial part, the other is the satellite part. So, they're authorized to do both. Um so you can see a scenario where uh Urgan either sells the terrestrial part or leases the terrestrial part uh to to a mobile operator and then he'll use the MSS part, the satellite part for their uh D2D business. Um so that's one scenario. I think that's a good and efficient use of the spectrum, right? Uh, I'd much rather see it being sold and having the cash come back to shareholders than having Urgan lease it. Um, but that's one solution. What what you don't want to see is the whole spectrum, the terrestrial and the satellite part stuck in SAS. >> Yeah. >> Organ to invest in this D2D business, which frankly I don't I don't have a very good um, you know, I don't have high expectations, right? because they're competing against SpaceX and um you know Amazon they're at least 5 years late to the party uh and uh they don't have any knowhow in running LEO satellites I mean they they do geo satellites which is a completely different business um and they don't have the people most importantly they don't have the people that I've seen that can actually operate a LEO satellite constellation that's got hundreds if not thousands of satellites globally Right. >> Look, this is this is the worry, right? Like I I think again you and I talked the day this happened and you said, "Hey, once something once someone starts going down the path of liquidation, they tend to follow through." And I think I think it was a different chair told me this. Look at us Cellular. Once they started selling, they they follow through. But the counterpoint to that was look, Charlie's been building the spectrum for a year, for years, over a decade. His hands were basically tied, right? He was forced to sell this because of regulatory pressures, balance sheet pressures, everything. But he maybe he sees this and he says, "Look, if I go build this DTD thing, I I've got the cash. I've got the proof. If I do this, these things just get more and more valuable. Why would I sell now when if I do this DTD thing, maybe I can, you know, hit a grand slam? And if not, the spectrum value will be there in eight years or something." And I while I do hear that, I think as a shareholder, potential share or whatever, that's terrifying, right? Because then you're just you're >> Yeah, I'm reallyful all over again. >> Yeah. I'm really hopeful that the FCC won't allow him to do that. Um because they don't want this getting stuck for the next five years, right? And they've had experience with him with >> holding the spectrum, building this, you know, you know, this dream. And it doesn't work because he's late to the party. he was late to the mobile party and now he's going to be late to the satellite D2D party. So you know a and and you know importantly it's not efficient for Urggon as well because that whole spectrum is worth let's say 26 27 billion dollars you're you're holding it for five years you know the holding cost alone is ridiculous right I mean you have it or you have to sell it and let's say turn off this alarm here that oh okay >> I can hear Okay. So um so you know from even if you don't assume to hold um the the the cost of holding this spectrum um you need a big business to support 26 27 billion of spectrum right you need I don't know 8% ROI on that on an unlevered basis that's $2 billion of unlevered net income >> and five years from now the the cost to build out I I mean you've got to you got to have line of sight I'd say to five billion of operating income to justify this and show me a satellite business that's thrown up five billion of operating income. By the way, when you're competing with, as you said, SpaceX and Kyper, you know, five years ahead of you, it's it he can do it because he controls the company, but it, you know, the worry is he did it once before with the with the wireless network, but it it seems insane to me. I I have no idea how you can justify it. >> Yeah. So like the I mean so I I'm really hopeful that the FCC doesn't allow him to do that unless unless there's some sort of a deal where there's a big government contract. There's some defense angle to this constellation that he's building. >> Yeah. >> To the overall objective of the administration. There's something there has to be something right that that would allow that that would say you know hey it's it's reasonable for Urgan to hold this spectrum and build this thing right. And I just, you know, that's not my base case. My my base case is a continued liquidation, especially because he's not in the terrestrial mobile business anymore, right? And he doesn't have leverage. He can't just go out and say, "Hey, I'm doing this satellite business. I'm holding this spectrum." No, he can't do that because he has to get approval from the FCC to to the future use of the spectrum. >> Let me go. So the the biggest risk that when I talk to people is the risk of they're just worried Charlie's going to chase the whale with the the satellite business and the spectrum the spectrum sale emboldens him to burn billions and think that he can you know just roll roll a yolo at the end and turn up. The second biggest risk I've heard which I do think is interesting and the market in my mind is giving zero risk very little risk this but I do think there is a some it's the DOJ risk right the DOJ has historically said the wireless the wireless business needs four competitors right AT&T T-Mobile Verizon and then Dish Boosts whatever it is is supposed to be your fourth business that's gone they're doing a hybrid M with AT&T whatever it's going to be the fourth business is gone FCC clearly wants the spectrum in other people's hands, but the DOJ could come out and say, "Hey, no, you can't shut Boost down. You can't do the sale because it results in a three-player marketplace." Uh, I I I'd love to just And I think you even had a quote from somebody pretty high up at the DOJ two months ago saying, "Hey, we need four players in this marketplace." So, I I'd love to ask you, what do you think about the DOJ risk here? Like the DOJ and FCC, it seems clear they they're at odds with what should happen here. What do you think about the DOJ? Yeah, I think the um DOJ um I I the more I think about the DOJ risk, the less I'm concerned about it. Uh and I think the DOJ has no other choice but to approve this deal. That's the thing. They would like to have a fourth functioning network. They would like to have the spectrum sit there for if not Boost, but some other fourth network to come along and use the spectrum and provide competition in the mobile market. Uh but that's just not reality. There's no one out there who's willing to step up other than cable. Um and so I think um what else are they going to do, right? If they could block the transaction, in which case Uran would just file for bankruptcy, Spectrum will get stuck in court for years. I mean, it could be it could be years. And when it comes out, if it comes out, the three biders are going to be still the three biders today. So there's not no one no one is going to come in and say hey I want to be the fourth network anymore because hey look at what happened to Dish right you you destroy so much value by blocking this transaction now they can't they can't realize value on their assets because of your stupid ideology on this fourth network it doesn't work so the DOJ knows this too right so I think he they really don't have a choice what they can do is structurally um you know uh find some ways to save face and to provide some support in terms of uh stronger MVNO agreements uh to provide semblance of additional competition in the market but as of now I don't know I mean what else do right >> look I'm with you I I think now I will say I think the DOJ's original sin here was allowing Sprint T-Mobile to merge but look that's in the past you can't do anything about that I I don't know what I feel like the DOJ's just completely checkmated cool you want a fourth network well you let you basically let the the company the country get down to three. Nobody wants to go build the fourth. Like there there's nothing for you to do. I do think your behavioral remedies issue is interesting to go back to cable. Like you know as part of the T-Mobile Sprint transaction, T-Mobile and Sprint were very heavily arguing, hey, cable is here. Cable is a competitive player as well. I wonder if as part of the behavioral remedies for this deal, cable gets a new real sweetheart deal with AT&T on the MVNO side that, you know, I think their MVNO with Verizon's pretty good, but I do think Verizon can dial it back if the network's overstrained and stuff. I I wonder if they get a very sweetheart deal with AT&T to to create some competition there. >> Great for them. It's great for them. So, I mean, they would be highly supportive of this deal because I don't think they I mean, they may be forced into owning network assets, but I don't think they want to at the at the end of the day. And this, you know, if they get a sweetheart deal from these M Moss, I mean, it's perfect. Great. >> You and I are recording this. Let me make sure I get the day right. September 3rd, >> the Paris show, which everybody's pointing to. You know, you go back to the Echoar Q2 call. They said we're going to have announcement at the Paris show. Every sax bowl I talk to says the Paris show is coming. Get ready for the Paris show. Uh I I think the Paris show is the week of the 14th. Am I remembering that correctly? I >> think. Yeah. >> Yeah. So I I just love to ask you, are you expecting fireworks at the Paris show? Are the fireworks already in the past? Like h how do you because I just know the bulls are always pointing to the Paris show for you know we might see more. What do you think happens there? Yeah, I think um you know I think they they will have to announce some sort of um resolution on a AWS4 um at the at the Paris show. That's the thing that I'm most focused on is what and how they're going to realize value on AWS4. Uh with respect to D2D, I don't really I mean doesn't really matter to me. I mean that's that's the value that may be meaningful in the future but at this point I just want to make sure that uh you know we we get to I don't know 100 bucks a share with just the spectrum value that's going to get liquidated right that would make me feel comfortable about the near term. So uh I but but having said that I think what what they're going to do is announce some sort of partnership uh on the D2D side. I mean, the second quarter earnings call, they alluded to the Paris show a number of times. They said a couple times that just wait, we're going to have some new stuff coming, right? So, you would assume that that's going to be some sort of a partner on the D2D business. Uh, and then AWS4, I mean, that's going to be the natural question for everybody is what are you going to do with AWS4? And I thought it was interesting that, you know, they announced that they're going to shut down their network before finding a deal for AWS4 because that Yeah. >> But if I were a buyer, I'd be like, okay, you know, you got to sell it anyway. So, there's leverage for me to I don't know, just, you know, you know, negotiate a lower price. So, I would assume they probably have a deal pretty close to being signed at this point, right? in order for them to come out with AT&T and say, "Hey, we're not going to be in the m in the terrestrial business anymore." >> And look, maybe that's part of why AT&T pays the premium, right? They they get the first strike. They say, "Hey, look, we're pay we're paying a little bit of a premium because we've got to start rejiggering our network now for the 600 megahertz that we're buying and we'll pay a little bit of a premium because we're hurting your negotiating leverage with AWS 4." And we realize that, but we, you know, speed is a factor here and getting a three-month head start in the regulatory process, the closing, the re might have been worth it. Let me I want to quickly switch to unless you have any closing thoughts on SATs, I actually want to talk about two other things you've written about uh quite a bit recently. >> Yeah. So, I just want to say the riskreward here is fantastic in my opinion. Much better than a month or two months ago when we uh spoke first. Uh, and I know that sounds weird, uh, especially, um, for value guys, but it's true. I mean, that the and and you have this near-term catalyst here. Um, so you're going to know in the next two to three months whether this thing works or not. Um, so pretty pretty interesting opportunity. >> I'm with you. It's it's a struggle because it's always a struggle to buy. I mean, the stock was 55 last week, it's 65 now. It was 25 a month ago. But yeah, >> one thing you have to factor in a lot of things. This is a complicated structure. So a lot of the the value they've sold, this is a highly leveraged business, but a lot of the value they sold is actually going to pay down hold notes. So you're actually transporting a lot of cash up to the hold co. So you're really, as you said, taking you're really boosting the downside, right? You're really protecting downside because of that hold note structure where if everything else goes wrong, you're still going to have value because of that cash. uh you've eliminated I mean even at 25 a month ago after the Trump sit down after your worry was Charlie was going to go full speed ahead we want more spectrum we're gonna build this out right and those are mainly off the table so I'm I'm with you it's very interesting let's >> and the spectrum value has has gone up >> another great point another great point two other things quickly want to mention you've been covering really extensively M&A and the broadcasters Uh for those who don't know, Lexar best and one of the best runs companies in in the companies bar none like forget broadcasters just in general best run companies announces to build deal to buy techna broadcaster M&A is back on. I just love to get your thoughts on there's a lot of moving parts around there, right? Sinclair the night before the Techna deal breaks, Sinclair is rumored to offer $25 to $30 per share for Techna. Now, that was stock. It involved a split off, but Sinclair's looking to dance. Gray, I think, needs a dancing partner. There are a few others out there. I'd love to just hear your thoughts on where we're kind of falling in the broadcast or M&A. Uh >> yeah, >> it's going to be a really interesting next 12 to 24 months because the broadcasters need to consolidate in order to compete against tech platforms and the FCC uh is willing to allow them to do that. So you got this uh mix where people you know are ready to combine basically right now the the market is fairly consolidated but you know next is the biggest and there are four other public guys and there a handful of smaller guys. I think over the next 12 months they're all going to come together into two big station groups. Um you know they're going to be owning two of the large four affiliates in any local market. So ABC, CBS, Fox, and uh what was it? NBC. Yeah. So, so I think um it's going to be a pretty interesting um um period because there's going to be a lot of synergies coming from the consolidations. Uh NextStar is trading at I think six times IBIDA right now. After their deal with Techna, um they're going to look a lot better, right? I mean, on the post synergy basis, they're still going to trade at six times. um um but um you know be you know because they're paying a premium for for Tegna but they're much better in in terms of able to compete in the marketplace uh you know with respect to scale and the thing that I'm focused on in the broadcasting space is local scale that's highly highly important historically you know these broadcasters um you know their competitive advantage is local news and local content and this is something that the large tech platforms cannot uh replicate and it's very special um and no one else has it in the media place so it's a very very unique business you know >> can I pause you there >> local news and local news local sports all this sort of stuff they will tell you out the wu this is their special sauce and while I do hear that I do wonder like my issue with the broadcasters has always been they get paid huge amounts of money because of this regulatory barrier that was put up where CBS BBC the parent co can't own the local broadcaster across the country and they get cut in on YouTube TV all this sort of stuff and when I look at local everywhere else right whether it's the athletic whether it's local newspapers whatever you want it doesn't monetize anywhere close to the rates that you see local broadcasters monetize so my worry with them has always been look I get it they trade for super treat valuations I don't know if the spectrum has as much value as people think it did from the the 10 years ago like I I was a onetime thing there is some but I don't think it's that much but I see the valuations I see the rollup story but I always worry that >> as the regulatory landscape changes like if I was ABC and I was doing Hulu or you YouTube TV and I was paying NextStar $2 ahead for the local thing at some point I should be like why don't we just cut them the f out and let somebody let them go find their local news elsewhere and if that happens. You know, I just don't see local monetizing at anywhere close to what these guys get because of their regulatory. So, I'm always worried I'm going to be the chicken that gets its head cut off when at some point somebody pulls the trigger and kicks one of these groups out. >> Yeah. Yeah. That's uh I I I'm I'm less concerned about that. I'm more concerned about that prices will continue to go up and at some point it's the you know consumers who are cutting the cord. I mean, you've seen that over the last 5 years, but it's going to be worse and worse to the point where, you know, there's not going to be enough critical mass for local content. >> But are we saying the same thing? Because consumers cut the cord, right? And the only reason you subscribe to legacy bundle right now is sports, right? It's really sports. >> And what I worry is is sports is national. >> Uh you're not subscribing to uh you know, $100 a month legacy video product because you want to see the local high school team play football, right? like you can find that elsewhere. You're getting Nextar is getting cut in on that because they have access to the ABC sports or the Fox Sports >> as the bundle unwinds. Like at some point doesn't ABC look and say, "Hey, how much is Nextar's taking a third of our local revenue for you know some football games? Like why don't we just cut them out?" Like I think we're saying the the same risk in the long term. >> Yeah. I mean I um so there's the dynamic where um the networks and the affiliates have this kind of lovehate relationship. >> Yeah. >> And uh you know over the last say 20 30 years the networks have come out ahead of the affiliates because of their ownership of these sport national sports contents. I think going forward with the consolidation of the affiliates, it's going to be the other way around because now you have four networks, right? And then you got two of these large superstation groups. So if you look at what these two sides offer, I would say the more differentiated side is the affiliate side because they have the local news that the networks don't and the affiliates can go and bid for national sports contents like the networks. I don't see why that can't be the case. So you think next next star with like CW you think next next move is starting to bid? I mean they've already done a little bit. I think next is tennis if I remember correctly or maybe that's >> they have a bunch of they have a bunch of uh sports assets on their CW network. I think 40% of their programming is sports. I mean they're niche and small small sports but you you know you're starting to see that right? And you know it doesn't even have to be the CW. You can you can just bid as a group. I don't know. I mean, so my point is my point is that balance of power is shifting very quickly after this consolidation wave. Um, but hey, like I'm I don't want to get, you know, I don't want to there to be any misunderstanding. I'm not going long on the broadcasters. I'm actually uh I'm I'm doing a lot of work on it because it's interesting and there's a lot of high yield and a lot of credit in this structure that could provide trading opportunities. Uh well, I'm not long the structure and I still think there's a lot of work to get from now to once they close those transactions and realize the synergies and then you have this big problem, right? I mean, you're still competing against large tech platforms and you're still going to be uncompetitive. So, you know, there may be it could be a short, right, after this foundation. >> I mean, that's the that's definitely the other question, right? because we're talking I'm talking about it in like a closed ecosystem of the networks the the let's just call it the cable providers and the affiliates all pulling at each other and it's like look Netflix is advert is going to do what six NFL games this year they've got the WWE now Paramount's going to be I I think they're going to put a lot of the UFC on CBS Legacy but Paramount's got the UFC like a lot of this NBA Amazon's got the third tier NBA packages like a lot of this is going online and you wonder if you look up five years from now and you say, "Oh, we were worried about these guys fighting and all of the sports assets have quietly quietly left the entire playing field and uh you know then everything rebundles." But I just worry to me the affiliates like they're if you and I recreated the world today, there would be no world there would be no place for affiliates, right? Like they they are kind of a leech on the back. And I I just worry as this bundle breaks, the affiliates were fighting over a small piece of the pie that history tells me go goes away or is not as valuable as what they're getting paid for. >> I actually think the complete complete opposite. Okay. I sorry I was not >> No, no, no. I I love to hear that. >> Yeah. Yeah. So my my point is what the affiliates are doing with respect to local news and content that's uh not replicable with by other folks in the media ecosystem. So that's actually unique and I don't think they will go away. I think it's actually the networks that don't provide differentiated programming, right? I mean they're doing all these shows, anybody else can do them. They can bid on sports content, but everybody else can. So that's not differentiated. I mean the the >> the underlying differentiated asset is the local news and local content. >> So I I do agree. I just to go back to my earlier I mean I do hear what you're saying but so Nextstar is buying Tegna for $6.2 2 billion, right? I can't remember if that's market cap or EV. I'm just Yeah, it's EV. >> If I looked at Tega, right, and you said their differentiator is local news and local sports, I'd say I don't disagree with you, but there is not a local news business or local spirits business on the planet that monetizes at the rate that Techna does, right? The reason they monetize so high is because of that legacy, hey, ABC, CBS, and they own that legacy station. And if you told me, hey, that legacy station's going away and now we're just monetizing the local news and local sports and all that sort of stuff. I'd say I'd say good good luck, right? Like I I've seen this movie before and as it breaks I I think that's very valuable stuff, but it just doesn't get paid for. >> I think this is this is why it's so interesting to to do work now because there could be I mean, if they lose the national sports content, so be it. that to to me that's not differentiated at all. I mean someone else can overpay for it, right? What and at the end of the day they could become a lot smaller and they could just offer local news and local content and that's highly highly valuable. I mean they could they they could get 10 15 times IDA for that differentiated content. Now, it's going to be a much smaller organization that does that, right? Without the sport, the national sports, but it is that's the more valuable piece that we got to focus on. Now, from here to there, there's going to be a lot of pain, right? So, so that's why it's it's interesting. I mean, I could see a scenario in three to five years these guys all go into bankruptcy and then when they come out, they're going to be worth a lot of money because that >> I I actually do I kind of agree with you there, but it's the bankruptcy in between there and here that I work, >> right? So, that's that's that's the interesting thing. It's timing is very important here, but but there's this this morsel of like value that you see in there and you're just trying to figure out, okay, how is it coming out? It's similar to the Echoar situation. There's value there, but how's it coming out? The timing is very, very important because it took Echoar 15 years, you know. So, I don't know. >> And to out myself, I've been worried about this risk with the affiliates for eight years. And to date, I mean, not that any of the stocks aside from maybe Nextar have been screamers, but to date that fear has been I'm not going to say unfounded because they've obviously all had a lot of troubles. Like just look at Technith. Techn is selling to Nexttar a strategic for less than they were going to sell to Apollo a standard general Apollo a financial three years ago right like and that's a good exit for them go look at the stock of gray or Sinclair like it's been really rough for them but to date my fears have largely been unfounded but I want to go to unless you have something else on the broadcaster I want to ask you one last thing before we wrap >> yeah go ahead >> you had one of definitely my favorite post of the week maybe it'll probably be my favorite post of the month I'm not going to use the terminology but it was the psychology of a Well, uh, people can figure it out. It It was a little over the top, but I just loved it because I sometimes on my random ramblings or I talk all the time about sucking my thumb. Like, value investors, it is a huge problem of ours. A stock goes down 20%. And you say it is cheaper than I, it is cheaper than when I bought it. Uh, buy when there's fear in the streets, whatever you want to say, and then the stock's down 80% and you you're just wrecked. And many a firm have gone bankrupt by double down, double down, double down, double down, and the stock goes down and down down. Fortunately, I've largely voted that though I I've definitely doubled down on stocks once or twice too many times. And it it takes your results from great to average to bad real fast when you have one of those. Anyway, you had this great post on it, uh, talking about that. And I I just love to ask you, you know, why did you publish this? What were you kind of thinking of when you published this post? >> I mean, I just thought, you know, I'm writing this series on QVC. QVC is a value investor favorite and people have lost a lot of money in that investment uh over the last 10 years and it's a Malone special right I mean so you know there's certain sort of you know attractiveness of this situation to the value investing crowd so um so as I was writing it there's some uh people who got in contact with me arguing why this equity is worth anything at all and I find that interesting because the senior debt is trading at like 40 cents, you know, and um there's bunch of debt in between that and the and the equity. So for someone to argue that the equity has value is interesting and you know that bring that that sort of and I have a lot of experience with backholding, okay? So don't get me wrong, I'm not like I'm a bad investor to some extent on this as well because I was, you know, I'm a value investor at heart. So, I've struggled a lot, right, with the psychology of it and with it's it's interesting, you know, you know, you're not supposed to do it, but sometimes you still do it. I mean, just that part interests me a lot, you know, that you know, it's it's like don't touch the fire, but you still, you know, stick your hand in for some reason. Um, so anyway, it's the it's the gambling instinct at the at the end of the day. And, uh, I just wanted to put it on paper. I one I want me to, you know, look back and think about it whenever I'm trying to, you know, add to a position when it's down, right? Uh so just remind myself, hey, dude, you might be right, you know, 70% of the time, but that other 30% is you're going to lose all your money. Um and then um and and to and to also just, you know, make sure that some of the people in the QVC crowd know that >> Well, I love that you called it the QC. So I John Malone, he wrote a memoir and I think it comes out tomorrow, but it's gonna be my book club uh my book club book month this month. But I love that you called it because a I remember one of the moments I started Sar and John Malone. I think it was the 2021 or 22 annual meeting, but I could be mistaken. >> He came out and somebody asked what's your favorite stock in your empire? And he said QVC and I had been long QVC previously. I wasn't long fortunately. I like didn't do too poorly on it, but I had been long and I so I followed it closely and I was like, "What is this guy talking about? QVC is like drawing dead. Your your only hope is like it it some type of miracle, some type of operational miracle." And I I think QVC kind of got dealt an unlucky hand. You know, they had the distributor fire and all that, but QVC was clearly drawing at the time. I was like, "Hey, he's just looking at free cash flow yield." And I remember a few years later he was like, "Discovery is a cash flow machine." And I was like, man, Discovery the as this was before the Warner Brothers merger and even after they have no sports, they have no premium. Like they are in a really tough position. And it made me wonder, you know, John Malone for all his legend, for all his was he a product of the time he grew up in, right? He starts putting cable systems together in the late 70s, early 80s, you know, interest rates come from 18 to four. Guess what? any longived assets going to do great under that particularly when you're running it with a levered financial engineering style like Malone runs and uh you know it really or hey the dude's 75 guess what everyone starts to lose their fastball at some point except for maybe Warren Buffett apparently but maybe he just kind of lost his basketball but it really made me question a lot of it and look QVC the preferred might be interesting I know there's hold co- arguments and all this sort of stuff but if you're here saying hey I'm long to equity and look at the free last year, I'd be like, man, I'd love for you to be on the other side of all of my drains. >> Yeah. Yeah. Yeah. I mean, I I mean, I think my my view is that uh you know, we come in cycles and uh uh I think Malone is uh I mean, he had a fantastic track record. Um but this whole uh internet and especially mobile has just been such a big wave over the last 10 to 15 years. It carried out a lot of people. all the stuff in old media if you look at the stress I mean I don't know 50% of it is media old media and telecom right I mean SAS unfortunately is one of those as well so all these old guys in media who's you know larger than life maybe 15 20 years ago have been carried out by the internet u companies platforms so it's just a wave and now we have AI coming so who knows who who else is get carried out so you have to think about that but It's uh it's it's interesting. I think it's more of the time than anybody being so smart or anybody being so dumb. Was just luck. >> It's one of the tough things, you know, every you can point to a lot of people and say, "Hey, this guy got lucky, right? He yoloed Bitcoin and just bought it the whole way." And maybe there was some genius there, but a lot of it's probably luck like one trade. But, you know, you look at Malone from 80s to 2010, the man can do no wrong. And it's not just cable, right? Because he goes to the he also puts together the cable nets and everything. But then from 2010 on, the man can basically do no right to be honest. I mean, Formula 1's a killer, but I I hate to say 2010 because that misses the Sirius XM bankruptcy grand slam, which you know, you can't take that away. But go to 2013, Liberty Global, Lilac, uh, all the Discovery mergers, and you kind of look and you wonder, was this handled that like what happened? But probably a conversation for another day. all these you know all these every one of his companies was old media and they weren't able to kind of get over the hump right with this you know internet platforming everything so it's a it's I mean you know he was an investor in one theme and that theme unfortunately didn't >> but that's when you wonder was the man a a genius or was he a one theme lucky like it it was all it was all one cyclical bet but we might have to the next time you come on forget sats you and I will we'll talk about I I just love the post so much. I sent it to so many people. I was like this is what I talk about when I talk about maybe not quite as explicitly, but this is what I'm talking about when I'm talking about sucking my thumb value traps. You just put it so perfectly. And uh the contempt that you felt for bagolding is the contempt that I feel for myself when I bagold. So it really >> Oh, that was that was first of all that was written mainly for me to me. Okay. >> Yeah. Yeah. Yeah. I wasn't Yes. Yes. >> the QVC guys of anything. In fact, I wish they make a lot of money. I wish everybody makes a lot of money. It's more me me. They they inspired me to write that for me, not not for >> I look I'll I'll have somebody all the time email me and be like, I've ridden this from 100 to 15, but now's the time XYZ reason. I'm like, dude, this is the reason you were long at 100 and maybe, but I'm seeing a lot of the mistakes that I have made in the past and what you're saying. So, uh, yeah. Anyway, I just love the post. I thought it was great way. Yummy century stocks again, the best subsack of the year. you should go subscribe right now. Uh we'll we'll talk about one other thing once I press record, but thanks so much for coming on for the second time and looking forward to the third time. >> Thank you very much. Enjoyed it. >> A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.
Yummy Century Egg's Guowei Zhang Echostar follow up $SATS
Summary
Transcript
You're about to listen to the yet another value podcast with your host me Andrew Walker. Today's episode we have Weey from Yummy Century Stocks back on the podcast. Look, we did a podcast about a month ago on Echoar/SATS and a ton of news has happened. I mean, the stock is up a absolute ton, but because they did a massive spectrum deal and we talk about everything. We talk about the spectrum deal, we talk about the go forward paths, the risk, the opportunities, all that sort of stuff. And then we end the podcast with a quick little discussion that I really enjoyed on first broadcast affiliates with the Nexr Techno deal and then a little bit on bag holding and as I like to call it sucking your thumb and trying not to, you know, losers average losers and all that sort of stuff. So, it's a really informative podcast. I've said it several times. Yummy Century Stocks is the best substack to launch so far this year. You should absolutely subscribe, follow it if you're not subscribed and following it. You're really going to enjoy this one. We'll get there in a second. But first, a word from our sponsors. Today's episode is sponsored by AlphaSense. Look, over the years, you've heard me talk about it non-stop. AlphaSense, Tigus, they've become core to how I do investment research. They they've got a burgeoning set of AI tools. They've got the expert calls, which I absolutely love, the expert call library. They've got over, as they tell me, over 500 million premium sources from company filings, broker reports, news, trade journals, everything. Plus the expert calls. They put it all in one place. Their II tools let you search unique data sources in really interesting ways. This October they're hosting their first ever Alpha Summit 2025 in Brooklyn. I'll be dropping in and out. So the event will feature all sorts of lead leaders from finance, UBS, Wells Fargo, Asenture, Google, and who's who are going to be there sharing how AI is reshaping the investment research and decision-making landscape. Uh what's going to make special is it's just not just about the ideas. It's about really talking about how AI can improve workflows and the strategies that top firms are using right now. So I'd love to see you there. If you're going, you can join me there. AlphaSense, Alphasummit 2025, October 6th through 8th at the refinery at the Domino. You can sign up at alphasense.comyavp. That's alpha-sense.comyavp. All right. Hello and welcome to yet another value podcast. I'm your host Andrew Walker. With me today, I'm happy to have on for the second time. And it's been pretty fast, too. This might be the fastest repeat appearance we've had, Weey from Yummy Century Stocks. Weey, how's it going? >> Good. How are you? Good to be here. I'm doing great. Uh before we start this podcast off, disclaimer mind everyone nothing on this podcast is investing advice. We're going to be talking and maybe a couple things today, but particularly sats. Uh I've got a little position. I I don't know ways position, but please do your own work. Highly leverage situation. It's wild over there. It's truly the wild wild west. And the second disclaimer I'll give is I've said it several times on this podcast. Way right Century Stocks. It is literally the best substack to launch this year in terms of investing. So I might have been your first subscriber. I I don't know. But, uh, go subscribe if you haven't. It It's the analysis is absolutely fantastic. So, unless there's anything else you want to talk about, uh, let's hop into SAS. >> That's cool. That's cool. >> Cool. >> So, go ahead. >> I said thank you for the kind words. By the way, >> they were welld deserved. So, there's no need thanks on them. Look, wait, we did a podcast about a month ago on the Bergening situation over at uh, Echosar Sats, whatever you want to call it. They announced a big spectrum sale a week or two ago to AT&T. So, I'd love to just pause there. People can go listen to the the whole thing that we did. I'll include a link in the show notes, the whole first thing for overview, but it it's really worth an update on what happened there, what the go forward path is. So, I'll just pause there and say, hey, Spectrum sale to AT&T, what was it, why is this a big deal, all that type of stuff. >> Yeah. Yeah. So, I mean, just to give like a 30 second background. So, this story has been um ongoing for the last 15 years. this portfolio of spectrum that that was accumulated by Charlie Urggon and uh it's always been there's value there. It's always been trapped inside of SAS and Dish over these 15-year periods and it's just started to come out. This value started to be realized. So that's why it's so significant. >> So the the uh update is that AT&T came in and paid 22.7 billion for two parts of the spectrum. there more in the portfolio. I would say that's about in terms of a value that's about a third of the portfolio. So there's still twothird of the portfolio that haven't um come out yet, but that's the start. You know, that's a fairly large deal. It was surprising at h at how quickly it was put together. Uh I was expecting, you know, them to take a longer period of time to put that deal together, but AT&T came in bid a pretty high price for those spectrum without an auction. So they they I guess outbid um everyone's expectation because they wanted to get it first and early uh without going into an auction process and that worked out for Urgan and SAS at the end of the day. So >> let's again I really would encourage people to either go listen actually not either or do both go listen to our first podcast and then go read everything Yummy Century Egg has written on this including particularly the most recent pieces because it is hard to talk about this without some background but let's have just on the the spectrum sale itself to baseline AT&T paid I I believe it was $23 billion for this is the 600 meghertz and the 3.4 4 GZ spectrum. You have done great work on each and every block of spectrum that Dish that Dish Sats owns. What did you think the spectrum was worth? Just the baseline for people. >> Yeah. So the 3.45 gigs I thought that was worth eight billion. They just bought it in 2022. So it's a pretty recent auction. So I didn't give them a lot of premium on that. They paid $7.3 billion for it. So I said, you know what, eight eight billion. I'll just round up. There's really no, you know, transactions, right, other than those auction numbers. Uh, and then the 16 the the 600 megahertz, I had 10 billion for that. Now, they didn't break out how much they paid for each piece in in the press release and the call afterwards. But, >> y, >> I'm assuming if you paid 8 billion for 3.45, that's, you know, uh, 15 billion uh, for 600 meghertz. So, that's a 50% premium. And that's you know if you look at the ranges of expectations that's at the very high end of the market. Uh so people had anywhere between 10 to 15 16 billion for that uh piece of the spectrum. >> What impressed me the most about it and there were a few things but number one you mentioned that that the 3.45 it was it was 2022 was when they bought it right? >> Yeah. Yeah. >> It it was a recent bid and one thing I had always worried about and people can listen to the last podcast. I I've always been as a longtime dish bull who just like you know the monetization story has been there for 10 years. I've always been like, hey, it >> if it hasn't happened now, win. And then the other worry you would have in the back of your mind is look, every price that you saw happened at an auction where there were four players, right? Dish was your fourth player, then Verizon, AT&T, T-Mobile, and you worried when you kind of pulled the fourth player out there and you were left with Verizon, AT&T, and T-Mobile who are all against the Spectrum caps, you kind of worried that the competitive dynamics fell apart. So to me, one of the interesting things about this bid is a a recent bid where the fourth player was the winner in the 3.45. It it seems that at minimum they got cost and probably a premium for that. And that was just to me just one of the most bullish signs because again the fourth player's gone and the largest players are saying, "Hey, we need the spectrum so bad we'll pay big premiums to this stuff that just went off." I I if you have anything to add or disagree, agree, I'd love to hear it. >> No, I think the 3.45 four or five gigs when Dish bought it uh three years ago, they paid a very good price, I thought because the auction dynamics were such a way where they benefited uh from I guess a slightly reduced u competitive pressure and then AT&T really needed that that spectrum because AT&T was the other big winner in that auction. So, you know, that fit very well with uh AT&T. AT&T is short mid-band spectrum. So, that deal looked great. I mean that was what everyone expected. Um and and that just happened. So but the 30 300 megahertz was sorry not 300 600 y >> 600 meghertz that was a little bit strange because AT&T doesn't need that. um they paid a big price for it and on the call that they had after uh the announcement they said that it would take them several years for that 600 meghertz to be put into use which is I mean shocking to me that they paid such a big price for that part of the spectrum which comes back to your point which is that the spectrum market is has reset based on these two transactions uh and it's um you know it's re it's reset higher right and I don't know what the competitive of um dynamics are for the remaining spectrum, but I would say it's better than where we were a month ago. >> Let let me pause you there because I agree it's reset higher. It seems like that's the case and we'll talk about the rest of the spectrum, the other biders, all that sort of stuff. But I did have one bear who emailed me and said, "Hey, everybody at SATS is selling right is celebrating right now." And rightly so, right? This was a big price. But when you're starting to think about the rest of the spectrum portfolio or deals, remember the one there are a few constants in life. There's death, there's taxes, and there's AT&T wildly overpaying for telecom assets when they whenever they have the chance. So, they were kind of saying, look, you had the sucker here. They did the first blowout bid, but as you go to the rest of stuff, I mean, it seems AT&T won't be around to bid for the rest of the stuff just because this was a big deal. This probably takes them out unless the rest of the stuff is going for a real song. They're saying, "Look, Verizon and T-Mobile are going to be much more disciplined buyers. Like, kind of dial back your expectations on those because now they know there's only two players. We're the last game in town and nobody's going to pay AT&T." I thought that was an interesting zig to zag to the zig. Go ahead, please. >> I would push back on two points here. One is that um uh Verizon is not a disciplined buyer in the market. I I just had to look up who bought Straight Path 18 or Verizon to remember which one. So when you say not discipline Yes. Yes. Yes. Yes. >> And Verizon was the winner in that in in in that bidding process. Okay. They way overpaid for that. They went crazy for that one. And they they paid a lot for for CBAN right back in 2021. So I wouldn't say they're uh conservative by any means. So that's one point. The the second point is AT&T in their call said that after paying 23 billion for these two pieces of spectrum they're actually accreted to earnings. Um so which is shocking to me right because twothird of the price was for 600 meghertz which they won't even put into use. So what they're modeling is using 3.45 gigs for uh fixed wireless. That's what they said in in their uh in on their call. So that's going to make them you know, make the deal accretive for them, which to me feels like they underpaid for the spectrum, right? And so, I don't know, like I I feel like you're right from a competitive standpoint, one guy is potentially out of market, but on the other hand, if you look at some of these use cases, I don't know. I mean, there's still value there, right? AT&T could have paid more for those spectrum if they wanted to and still make the case that it's hey you know accreative or not dilutive to earnings. >> I do hear you though you you do wonder about the fun with math and games of like buying spectrum and what they're saying same but let me stick on the AT&T use case for a second. I was going to say this later, but talking AT&T on the call comes out and says, "Hey, like they really started pumping up fixed wireless assets, fixed wireless assets with this uh, you know, wireless internet basically for those who don't know. They really started pumping it up and it's been interesting to watch their evolution on FWA over the past five years. You know, AT&T historically was the most opposed to it and over the past couple of years they've warmed up to it. you know, they started saying, "Hey, it's a great bridgeway for places where we have copper." I would say with this deal, they really warmed up to it, right? They're still not saying it's full speed ahead. They still want to do fiber, but they're really talking about it. I thought that was interesting from a lot of competitive angles. You know, we can talk cable, we can talk anything, but I just love to ask you just high level as you see AT&T buy this big block and this is really the 3.45 45 that they're using for the FWA. But you see this and you see their tone change on fixed wireless. Do you think that has any read through to just across the board competitive dynamics? >> Oh, absolutely. Absolutely. I mean, the first thing that came to my mind was cable, you know. >> Yes. >> It's been getting killed by fixed wireless. Uh now you got a big player coming in uh who's who's just gonna take more market share from them. So that's that's a concern for cable. I mean that the the risk has been there for the last three to four years, but now you got a big guy coming. Um, so >> it's not just you have a big guy. I mean you have T-Mobile who's been doing it like they were the pioneers. Verizon's really started ramping it up. And now you kind of look at it and you say it seems like AT&T is going to ramp it up, right? And you got cable going from monopoly in every market to duopoly, cable versus fiber. >> And it seems to me like you're going to have cable kind of in a lay, right? It's going to be cable versus a fiber player. And those two will probably be converged. I think you and I defer a little bit on the cable, MVNO, and the converge side. But then you're going to have in every market, 5% of that market is going to get really attacked by T-Mobile's fixed wireless. And if AT&T is the fiber, Verizon's fixed wireless, if Verizon's the fiber, the AT&T's fix wireless. So, it seems like you go oligopoly and that that's a really tough situation. >> Hey, that's like, you know, I'm I'm doing a series on cable. I haven't gotten to the meat of it yet, but I mean the the gist of it is if you look at all these guys and their plans for fiber and fixed wireless for the next five years and you scratch your head, you say, "Hey, there's like, you know, 40 million, you know, customers that they need. Where's, >> you know, it's going to come from cable." So, I mean, this is a big deal for cable, right? I mean over over the next five years and you just see AT&T spending a lot of money to to to try to attack it more. So >> as a look I'm with as a longtime cable bull like you see AT&T really add into that add into there and you say hey like what is what is kind of left like it seems like for years you said hey once the fiber build outs happen and the fiber build outs have it's tough to say peaks but like it's not going to get much more competitive right cable is already 60% overbuilt by fiber it's probably going to 80% but you've probably seen the impacts the issue is now you're saying Hey, all of our markets going from zeroix wireless to it's going to be two players, maybe three players. Like it's a lot of competition left to come and it's it's concerning. U >> yeah. >> Yeah. Yeah. But you do wonder on the other side and this might tie us back to Dish nicely. Hey, if cable is looking at this and saying fix wireless is coming, we need a competitive response. The response cable has been saying for the past 5 years has been conversions and that's relied on the Verizon NVNO. You know, if cable wanted to take it a step further, I I increasingly think the remaining dish spectrum, I mean, cable might be the bidder, right? And then you say, hey, you get the uh the AWS spectrum, you use that to power and then you can still rent the network from Verizon, AT&T, whoever is going to be your MBNO in more rural places where you need less. But maybe you're talking about, hey, it makes sense for them to go and really start this buildout if it's it's going to go converged. I I don't know how you where you fall on that. >> You know, I think the 600 megahertz deal is a pretty big deal because that's the spectrum that they need for coverage if they want to start owning network assets. So, with that 600 meghertz out from the market, uh cable is put into a tough spot. You know, there's no real major alternative for them to have that low band coverage. So, that's >> Do they need low band though? cuz I I would think you could still rent cuz low band is mainly voice, right? So I think you could still rent that on decently attractive from Verizon, T-Mobile, AT&T and just offload like do you really need low band? Can't you rent that? >> They could lease it. Yeah, they could lease it. But I mean, you know, see it's a bit strange, right? I mean I feel like I feel like the the the low band is more important than the midband because that's coverage. I mean you need it to work everywhere, right? If you if if you have a blotchy network, then you know the cable guys are are not going to be competitive in this product. So the low band is the coverage is really important. So but but you're right, they can lease it from AT&T. It's just uh it's just a weird deal because AT&T doesn't need it. It's kind of like very, you know, >> I I was basically thinking if you took what cable's doing right now to its most extreme, right? Because right now cable's on the Verizon thing and they're trying to offload as much as they can in the heaviest spots. I was thinking basically, hey, if you take CBRS and then you buy the dish spectrum and you run that forward five years and all the heavy spots like you're trying to offload and then you use whether it's Verizon, AT&T or T-Mobile, you say, "Hey, wherever we can't build coverage, we rent the network for you." Uh that that's kind of what I was thinking. >> Yeah. Yeah. I mean, it could work if they want to own the, you know, if if if they want to own network assets. I'm just not I don't know when they're going to actually make that decision, you know, and whether now it's the right time for them to bid I don't know 30 40 billion dollars for the remaining >> assets that they have. So, um you know, I hope they're in the process, but I'm not I'm not 100% sure. And you know, if you talk to a lot of cable shareholders, they don't want mobile, right? I mean, they're they're they're kind of negative on the whole space. And I don't know from their perspective, they don't view that as a good capital allocation strategy. And I don't disagree with that. I think it's it's a big decision. And if I were a c I'm not a c I'm not long cable, but if I were long cable, I would be very concerned if charter goes and pay charter and Comcast go and pay 3040 billion dollars for the spectrum. >> No, you know, I I don't disagree because they it's not just the 30 40 billion spectrum. then they'd have to go build towers or rent to like there's a lot of tack on to that though it is interesting right like cable does have a fiber richch network as as any cable company would say hey if you have get broadband >> uh you know 90% of your data at this point is going over your broadband subscription 10% is going over your wireless but you're probably paying more for your wireless line than your broadband like that is a natural argument for convergence and we're sitting here saying hey fix wireless access which is going to take 5% broadband plus the mobile is eating is eating cables lunch. Like it seems weird that they're in a spot where we're credibly saying, hey, they can't go by the spectrum to get fully converged and by the way, they're getting their lunch eaten by one fiber player plus the peace meal fixed wireless players. >> Yeah, it's really no good choice for them, right? I mean, either they pay up for the spectrum and, you know, do do the buildout or, you know, they get their lunch eaten. But but then again, you know, 600 megahertz is gone and the spectral and and and the network assets that Echoar has, they're they're getting shut down. So I would assume, you know, Echoar has had conversations with cable and they're not interested. That's why the whole network is getting shut down. I mean, think about >> Echoar spent 10 billion, probably not, uh, eight billion on their network assets at this point. That's a lot of money that I mean, that's gone basically. Actually, that's a great point to come back to because I want to talk about Echo Stars Go forward and the hybrid M and everything, but you know, I know some people I I think you might have mentioned it who thought that the endgame for this was the cable operators banding together and just buying boost, right? There's 10 billion that would get them the fourth network. Uh, now they would have to pay for the spectrum, everything, but that would get them instantly running day one with the network nationwide that had been invested 10 billion in the ground. Let's say they paid five billion for it. Let's pay say they pay 12 of you, whatever. But are you surprised that the this was the endgame versus the cable buying and going into the fourth player mode. >> Yeah. Yeah. I was I was surprised by it. Um mainly because they they I mean spent a lot of money and effort and technology they put into this very spanking new network that's supposedly very valuable, right? No one else had this open rand network. And you know, I mean, I'm more realistic than a lot of people, you know, in the marketplace about this network, but there's still some value there. And they're just literally going to take the radios down. And that was shocking to me. That's that's a lot of wasted capital. Uh that that must mean to me that must mean that cable is not interested, right? that that just I mean why why give that up if >> it's it's just it's funny to me because if you and I were having this conversation a year ago right now the the conversation would have always centered on the spectrum value right but the bulls would say hey they've got the spectrum value they've got the spectrum it's untapped and they put 10 billion into as you said this brand spaking new completely modern network unh you know unburdened by legacy voice and all this sort of stuff and it's going to the moon because they've got this new network and here we are a year later. The network was literally worthless, right? They're shutting it down. They're giving the spectrum over to AT&T. Cable apparently wanted nothing to do with it and the stocks are triple because this spectrum was so valuable. >> It's going to cost Echoar to take to to take everything down, right? Because all the all the all the tower leases and stuff and that's not cheap. That's a very expensive process. So, I was, you know, I don't know. I mean, that's just a complete waste of capital, right? >> Let me go, let's let's go back to uh Echoars. Go for it. So, uh let let's start with the rest of the spectrum, right? The there's an article. This deal gets announced. I think it's on a Monday. The stock screams higher. And then after market, the day that the deal is announced, Semaphore comes out with an article that says, "Hey, T-Mobile was sniffing around these uh SpaceX was was sniffing around. There's a lot of spectrum left. Both of those players are very interested in the remaining spectrum." I I'd love to just ask what do you think the remaining stuff's worth? What do you think the go forward path here? Actually, if I can put one more, there is an open debate on the go forward path of is this a liquidation? Is the candy shop open and we're selling all the spectrum? Or is Charlie gonna pursue I I think you put in one of your posts, is Captain Urgan going to pursue his whale and go build up the DTD satellite business, spend $5 billion, keep the spectrum, and try to build a business? So, I threw tons of stuff at you, but I'd love to hear what you think about the go forward uh spectrum, this go forward echoar here. >> Yeah. So, first of all, I'm very interested at this point about the stock. the stock's riskreward is a lot better now than before even though stock has gone up. Okay. So the the reason for that is I think the stock is worth triple digits at least. Um and uh and and the reason is that um just from a very simple back of the envelope math perspective they sold 23 billion of spectrum. There is um 11 to 12 billion of spectrum outside of AWS4. Right? That's going that's going to get sold one way or another. You add that up, you take away taxes, you take away debt, that gets you to low low to mid50s in terms of stock price, which is not that far from the current stock price of 62, $63. So, you got pretty good downside protection. I mean, this is a liquidation, right? I mean, and and you're going to get 50, let's call it 55 bucks back, right, in the next year, right? Year or two. So, that's pretty good downside protection. On the upside, you have the crown jewel, the AWS uh 4 spectrum. That's the 2 gigahertz spectrum. That's worth probably 26 27 billion dollars on top of that. And that's 80 bucks of value um that needs to be realized now. So that so the question is how do you realize that value? Um, my perspective, the base case is that because they're not running a network, the a the AWS4 spectrum now is in limbo with FCC because the FCC has these buildout requirements, right, for for your spectrum. You you own the permit. You own the license, but that license has conditions, buildout conditions to it. Now, you don't have the network. You're not running the terrestrial network. Everything else you do in the future with this network has to be approved by the FCC. So, so the question is what does FCC want to do with the spectrum rather than what URG wants to do with the spectrum to some extent. Uh, so I think that the FCC probably wants it sold, right? Up the spectrum. And so the other option like you mentioned is Urgan on their second quarter, not Urgan, but the CEO Hamemed um on the second uh quarter earnings call said that they wanted to go into D2D uh LEO satellite business. um they're potentially going to spend $5 billion investing in this business and we're going to be a wholesale provider uh for for the global network operators basically providing you know D2D connections in places that don't have cell cell coverage right now and the and the uh I guess the idea is you provide service to the network operators you save them capex because they don't need to have towers in these places anymore so a good value ad for for them to offer. And in order to do that business, you need uh the two gigahertz spectrum. Now, there are two pieces to that two gigahertz spectrum. One is the terrestrial part, the other is the satellite part. So, they're authorized to do both. Um so you can see a scenario where uh Urgan either sells the terrestrial part or leases the terrestrial part uh to to a mobile operator and then he'll use the MSS part, the satellite part for their uh D2D business. Um so that's one scenario. I think that's a good and efficient use of the spectrum, right? Uh, I'd much rather see it being sold and having the cash come back to shareholders than having Urgan lease it. Um, but that's one solution. What what you don't want to see is the whole spectrum, the terrestrial and the satellite part stuck in SAS. >> Yeah. >> Organ to invest in this D2D business, which frankly I don't I don't have a very good um, you know, I don't have high expectations, right? because they're competing against SpaceX and um you know Amazon they're at least 5 years late to the party uh and uh they don't have any knowhow in running LEO satellites I mean they they do geo satellites which is a completely different business um and they don't have the people most importantly they don't have the people that I've seen that can actually operate a LEO satellite constellation that's got hundreds if not thousands of satellites globally Right. >> Look, this is this is the worry, right? Like I I think again you and I talked the day this happened and you said, "Hey, once something once someone starts going down the path of liquidation, they tend to follow through." And I think I think it was a different chair told me this. Look at us Cellular. Once they started selling, they they follow through. But the counterpoint to that was look, Charlie's been building the spectrum for a year, for years, over a decade. His hands were basically tied, right? He was forced to sell this because of regulatory pressures, balance sheet pressures, everything. But he maybe he sees this and he says, "Look, if I go build this DTD thing, I I've got the cash. I've got the proof. If I do this, these things just get more and more valuable. Why would I sell now when if I do this DTD thing, maybe I can, you know, hit a grand slam? And if not, the spectrum value will be there in eight years or something." And I while I do hear that, I think as a shareholder, potential share or whatever, that's terrifying, right? Because then you're just you're >> Yeah, I'm reallyful all over again. >> Yeah. I'm really hopeful that the FCC won't allow him to do that. Um because they don't want this getting stuck for the next five years, right? And they've had experience with him with >> holding the spectrum, building this, you know, you know, this dream. And it doesn't work because he's late to the party. he was late to the mobile party and now he's going to be late to the satellite D2D party. So you know a and and you know importantly it's not efficient for Urggon as well because that whole spectrum is worth let's say 26 27 billion dollars you're you're holding it for five years you know the holding cost alone is ridiculous right I mean you have it or you have to sell it and let's say turn off this alarm here that oh okay >> I can hear Okay. So um so you know from even if you don't assume to hold um the the the cost of holding this spectrum um you need a big business to support 26 27 billion of spectrum right you need I don't know 8% ROI on that on an unlevered basis that's $2 billion of unlevered net income >> and five years from now the the cost to build out I I mean you've got to you got to have line of sight I'd say to five billion of operating income to justify this and show me a satellite business that's thrown up five billion of operating income. By the way, when you're competing with, as you said, SpaceX and Kyper, you know, five years ahead of you, it's it he can do it because he controls the company, but it, you know, the worry is he did it once before with the with the wireless network, but it it seems insane to me. I I have no idea how you can justify it. >> Yeah. So like the I mean so I I'm really hopeful that the FCC doesn't allow him to do that unless unless there's some sort of a deal where there's a big government contract. There's some defense angle to this constellation that he's building. >> Yeah. >> To the overall objective of the administration. There's something there has to be something right that that would allow that that would say you know hey it's it's reasonable for Urgan to hold this spectrum and build this thing right. And I just, you know, that's not my base case. My my base case is a continued liquidation, especially because he's not in the terrestrial mobile business anymore, right? And he doesn't have leverage. He can't just go out and say, "Hey, I'm doing this satellite business. I'm holding this spectrum." No, he can't do that because he has to get approval from the FCC to to the future use of the spectrum. >> Let me go. So the the biggest risk that when I talk to people is the risk of they're just worried Charlie's going to chase the whale with the the satellite business and the spectrum the spectrum sale emboldens him to burn billions and think that he can you know just roll roll a yolo at the end and turn up. The second biggest risk I've heard which I do think is interesting and the market in my mind is giving zero risk very little risk this but I do think there is a some it's the DOJ risk right the DOJ has historically said the wireless the wireless business needs four competitors right AT&T T-Mobile Verizon and then Dish Boosts whatever it is is supposed to be your fourth business that's gone they're doing a hybrid M with AT&T whatever it's going to be the fourth business is gone FCC clearly wants the spectrum in other people's hands, but the DOJ could come out and say, "Hey, no, you can't shut Boost down. You can't do the sale because it results in a three-player marketplace." Uh, I I I'd love to just And I think you even had a quote from somebody pretty high up at the DOJ two months ago saying, "Hey, we need four players in this marketplace." So, I I'd love to ask you, what do you think about the DOJ risk here? Like the DOJ and FCC, it seems clear they they're at odds with what should happen here. What do you think about the DOJ? Yeah, I think the um DOJ um I I the more I think about the DOJ risk, the less I'm concerned about it. Uh and I think the DOJ has no other choice but to approve this deal. That's the thing. They would like to have a fourth functioning network. They would like to have the spectrum sit there for if not Boost, but some other fourth network to come along and use the spectrum and provide competition in the mobile market. Uh but that's just not reality. There's no one out there who's willing to step up other than cable. Um and so I think um what else are they going to do, right? If they could block the transaction, in which case Uran would just file for bankruptcy, Spectrum will get stuck in court for years. I mean, it could be it could be years. And when it comes out, if it comes out, the three biders are going to be still the three biders today. So there's not no one no one is going to come in and say hey I want to be the fourth network anymore because hey look at what happened to Dish right you you destroy so much value by blocking this transaction now they can't they can't realize value on their assets because of your stupid ideology on this fourth network it doesn't work so the DOJ knows this too right so I think he they really don't have a choice what they can do is structurally um you know uh find some ways to save face and to provide some support in terms of uh stronger MVNO agreements uh to provide semblance of additional competition in the market but as of now I don't know I mean what else do right >> look I'm with you I I think now I will say I think the DOJ's original sin here was allowing Sprint T-Mobile to merge but look that's in the past you can't do anything about that I I don't know what I feel like the DOJ's just completely checkmated cool you want a fourth network well you let you basically let the the company the country get down to three. Nobody wants to go build the fourth. Like there there's nothing for you to do. I do think your behavioral remedies issue is interesting to go back to cable. Like you know as part of the T-Mobile Sprint transaction, T-Mobile and Sprint were very heavily arguing, hey, cable is here. Cable is a competitive player as well. I wonder if as part of the behavioral remedies for this deal, cable gets a new real sweetheart deal with AT&T on the MVNO side that, you know, I think their MVNO with Verizon's pretty good, but I do think Verizon can dial it back if the network's overstrained and stuff. I I wonder if they get a very sweetheart deal with AT&T to to create some competition there. >> Great for them. It's great for them. So, I mean, they would be highly supportive of this deal because I don't think they I mean, they may be forced into owning network assets, but I don't think they want to at the at the end of the day. And this, you know, if they get a sweetheart deal from these M Moss, I mean, it's perfect. Great. >> You and I are recording this. Let me make sure I get the day right. September 3rd, >> the Paris show, which everybody's pointing to. You know, you go back to the Echoar Q2 call. They said we're going to have announcement at the Paris show. Every sax bowl I talk to says the Paris show is coming. Get ready for the Paris show. Uh I I think the Paris show is the week of the 14th. Am I remembering that correctly? I >> think. Yeah. >> Yeah. So I I just love to ask you, are you expecting fireworks at the Paris show? Are the fireworks already in the past? Like h how do you because I just know the bulls are always pointing to the Paris show for you know we might see more. What do you think happens there? Yeah, I think um you know I think they they will have to announce some sort of um resolution on a AWS4 um at the at the Paris show. That's the thing that I'm most focused on is what and how they're going to realize value on AWS4. Uh with respect to D2D, I don't really I mean doesn't really matter to me. I mean that's that's the value that may be meaningful in the future but at this point I just want to make sure that uh you know we we get to I don't know 100 bucks a share with just the spectrum value that's going to get liquidated right that would make me feel comfortable about the near term. So uh I but but having said that I think what what they're going to do is announce some sort of partnership uh on the D2D side. I mean, the second quarter earnings call, they alluded to the Paris show a number of times. They said a couple times that just wait, we're going to have some new stuff coming, right? So, you would assume that that's going to be some sort of a partner on the D2D business. Uh, and then AWS4, I mean, that's going to be the natural question for everybody is what are you going to do with AWS4? And I thought it was interesting that, you know, they announced that they're going to shut down their network before finding a deal for AWS4 because that Yeah. >> But if I were a buyer, I'd be like, okay, you know, you got to sell it anyway. So, there's leverage for me to I don't know, just, you know, you know, negotiate a lower price. So, I would assume they probably have a deal pretty close to being signed at this point, right? in order for them to come out with AT&T and say, "Hey, we're not going to be in the m in the terrestrial business anymore." >> And look, maybe that's part of why AT&T pays the premium, right? They they get the first strike. They say, "Hey, look, we're pay we're paying a little bit of a premium because we've got to start rejiggering our network now for the 600 megahertz that we're buying and we'll pay a little bit of a premium because we're hurting your negotiating leverage with AWS 4." And we realize that, but we, you know, speed is a factor here and getting a three-month head start in the regulatory process, the closing, the re might have been worth it. Let me I want to quickly switch to unless you have any closing thoughts on SATs, I actually want to talk about two other things you've written about uh quite a bit recently. >> Yeah. So, I just want to say the riskreward here is fantastic in my opinion. Much better than a month or two months ago when we uh spoke first. Uh, and I know that sounds weird, uh, especially, um, for value guys, but it's true. I mean, that the and and you have this near-term catalyst here. Um, so you're going to know in the next two to three months whether this thing works or not. Um, so pretty pretty interesting opportunity. >> I'm with you. It's it's a struggle because it's always a struggle to buy. I mean, the stock was 55 last week, it's 65 now. It was 25 a month ago. But yeah, >> one thing you have to factor in a lot of things. This is a complicated structure. So a lot of the the value they've sold, this is a highly leveraged business, but a lot of the value they sold is actually going to pay down hold notes. So you're actually transporting a lot of cash up to the hold co. So you're really, as you said, taking you're really boosting the downside, right? You're really protecting downside because of that hold note structure where if everything else goes wrong, you're still going to have value because of that cash. uh you've eliminated I mean even at 25 a month ago after the Trump sit down after your worry was Charlie was going to go full speed ahead we want more spectrum we're gonna build this out right and those are mainly off the table so I'm I'm with you it's very interesting let's >> and the spectrum value has has gone up >> another great point another great point two other things quickly want to mention you've been covering really extensively M&A and the broadcasters Uh for those who don't know, Lexar best and one of the best runs companies in in the companies bar none like forget broadcasters just in general best run companies announces to build deal to buy techna broadcaster M&A is back on. I just love to get your thoughts on there's a lot of moving parts around there, right? Sinclair the night before the Techna deal breaks, Sinclair is rumored to offer $25 to $30 per share for Techna. Now, that was stock. It involved a split off, but Sinclair's looking to dance. Gray, I think, needs a dancing partner. There are a few others out there. I'd love to just hear your thoughts on where we're kind of falling in the broadcast or M&A. Uh >> yeah, >> it's going to be a really interesting next 12 to 24 months because the broadcasters need to consolidate in order to compete against tech platforms and the FCC uh is willing to allow them to do that. So you got this uh mix where people you know are ready to combine basically right now the the market is fairly consolidated but you know next is the biggest and there are four other public guys and there a handful of smaller guys. I think over the next 12 months they're all going to come together into two big station groups. Um you know they're going to be owning two of the large four affiliates in any local market. So ABC, CBS, Fox, and uh what was it? NBC. Yeah. So, so I think um it's going to be a pretty interesting um um period because there's going to be a lot of synergies coming from the consolidations. Uh NextStar is trading at I think six times IBIDA right now. After their deal with Techna, um they're going to look a lot better, right? I mean, on the post synergy basis, they're still going to trade at six times. um um but um you know be you know because they're paying a premium for for Tegna but they're much better in in terms of able to compete in the marketplace uh you know with respect to scale and the thing that I'm focused on in the broadcasting space is local scale that's highly highly important historically you know these broadcasters um you know their competitive advantage is local news and local content and this is something that the large tech platforms cannot uh replicate and it's very special um and no one else has it in the media place so it's a very very unique business you know >> can I pause you there >> local news and local news local sports all this sort of stuff they will tell you out the wu this is their special sauce and while I do hear that I do wonder like my issue with the broadcasters has always been they get paid huge amounts of money because of this regulatory barrier that was put up where CBS BBC the parent co can't own the local broadcaster across the country and they get cut in on YouTube TV all this sort of stuff and when I look at local everywhere else right whether it's the athletic whether it's local newspapers whatever you want it doesn't monetize anywhere close to the rates that you see local broadcasters monetize so my worry with them has always been look I get it they trade for super treat valuations I don't know if the spectrum has as much value as people think it did from the the 10 years ago like I I was a onetime thing there is some but I don't think it's that much but I see the valuations I see the rollup story but I always worry that >> as the regulatory landscape changes like if I was ABC and I was doing Hulu or you YouTube TV and I was paying NextStar $2 ahead for the local thing at some point I should be like why don't we just cut them the f out and let somebody let them go find their local news elsewhere and if that happens. You know, I just don't see local monetizing at anywhere close to what these guys get because of their regulatory. So, I'm always worried I'm going to be the chicken that gets its head cut off when at some point somebody pulls the trigger and kicks one of these groups out. >> Yeah. Yeah. That's uh I I I'm I'm less concerned about that. I'm more concerned about that prices will continue to go up and at some point it's the you know consumers who are cutting the cord. I mean, you've seen that over the last 5 years, but it's going to be worse and worse to the point where, you know, there's not going to be enough critical mass for local content. >> But are we saying the same thing? Because consumers cut the cord, right? And the only reason you subscribe to legacy bundle right now is sports, right? It's really sports. >> And what I worry is is sports is national. >> Uh you're not subscribing to uh you know, $100 a month legacy video product because you want to see the local high school team play football, right? like you can find that elsewhere. You're getting Nextar is getting cut in on that because they have access to the ABC sports or the Fox Sports >> as the bundle unwinds. Like at some point doesn't ABC look and say, "Hey, how much is Nextar's taking a third of our local revenue for you know some football games? Like why don't we just cut them out?" Like I think we're saying the the same risk in the long term. >> Yeah. I mean I um so there's the dynamic where um the networks and the affiliates have this kind of lovehate relationship. >> Yeah. >> And uh you know over the last say 20 30 years the networks have come out ahead of the affiliates because of their ownership of these sport national sports contents. I think going forward with the consolidation of the affiliates, it's going to be the other way around because now you have four networks, right? And then you got two of these large superstation groups. So if you look at what these two sides offer, I would say the more differentiated side is the affiliate side because they have the local news that the networks don't and the affiliates can go and bid for national sports contents like the networks. I don't see why that can't be the case. So you think next next star with like CW you think next next move is starting to bid? I mean they've already done a little bit. I think next is tennis if I remember correctly or maybe that's >> they have a bunch of they have a bunch of uh sports assets on their CW network. I think 40% of their programming is sports. I mean they're niche and small small sports but you you know you're starting to see that right? And you know it doesn't even have to be the CW. You can you can just bid as a group. I don't know. I mean, so my point is my point is that balance of power is shifting very quickly after this consolidation wave. Um, but hey, like I'm I don't want to get, you know, I don't want to there to be any misunderstanding. I'm not going long on the broadcasters. I'm actually uh I'm I'm doing a lot of work on it because it's interesting and there's a lot of high yield and a lot of credit in this structure that could provide trading opportunities. Uh well, I'm not long the structure and I still think there's a lot of work to get from now to once they close those transactions and realize the synergies and then you have this big problem, right? I mean, you're still competing against large tech platforms and you're still going to be uncompetitive. So, you know, there may be it could be a short, right, after this foundation. >> I mean, that's the that's definitely the other question, right? because we're talking I'm talking about it in like a closed ecosystem of the networks the the let's just call it the cable providers and the affiliates all pulling at each other and it's like look Netflix is advert is going to do what six NFL games this year they've got the WWE now Paramount's going to be I I think they're going to put a lot of the UFC on CBS Legacy but Paramount's got the UFC like a lot of this NBA Amazon's got the third tier NBA packages like a lot of this is going online and you wonder if you look up five years from now and you say, "Oh, we were worried about these guys fighting and all of the sports assets have quietly quietly left the entire playing field and uh you know then everything rebundles." But I just worry to me the affiliates like they're if you and I recreated the world today, there would be no world there would be no place for affiliates, right? Like they they are kind of a leech on the back. And I I just worry as this bundle breaks, the affiliates were fighting over a small piece of the pie that history tells me go goes away or is not as valuable as what they're getting paid for. >> I actually think the complete complete opposite. Okay. I sorry I was not >> No, no, no. I I love to hear that. >> Yeah. Yeah. So my my point is what the affiliates are doing with respect to local news and content that's uh not replicable with by other folks in the media ecosystem. So that's actually unique and I don't think they will go away. I think it's actually the networks that don't provide differentiated programming, right? I mean they're doing all these shows, anybody else can do them. They can bid on sports content, but everybody else can. So that's not differentiated. I mean the the >> the underlying differentiated asset is the local news and local content. >> So I I do agree. I just to go back to my earlier I mean I do hear what you're saying but so Nextstar is buying Tegna for $6.2 2 billion, right? I can't remember if that's market cap or EV. I'm just Yeah, it's EV. >> If I looked at Tega, right, and you said their differentiator is local news and local sports, I'd say I don't disagree with you, but there is not a local news business or local spirits business on the planet that monetizes at the rate that Techna does, right? The reason they monetize so high is because of that legacy, hey, ABC, CBS, and they own that legacy station. And if you told me, hey, that legacy station's going away and now we're just monetizing the local news and local sports and all that sort of stuff. I'd say I'd say good good luck, right? Like I I've seen this movie before and as it breaks I I think that's very valuable stuff, but it just doesn't get paid for. >> I think this is this is why it's so interesting to to do work now because there could be I mean, if they lose the national sports content, so be it. that to to me that's not differentiated at all. I mean someone else can overpay for it, right? What and at the end of the day they could become a lot smaller and they could just offer local news and local content and that's highly highly valuable. I mean they could they they could get 10 15 times IDA for that differentiated content. Now, it's going to be a much smaller organization that does that, right? Without the sport, the national sports, but it is that's the more valuable piece that we got to focus on. Now, from here to there, there's going to be a lot of pain, right? So, so that's why it's it's interesting. I mean, I could see a scenario in three to five years these guys all go into bankruptcy and then when they come out, they're going to be worth a lot of money because that >> I I actually do I kind of agree with you there, but it's the bankruptcy in between there and here that I work, >> right? So, that's that's that's the interesting thing. It's timing is very important here, but but there's this this morsel of like value that you see in there and you're just trying to figure out, okay, how is it coming out? It's similar to the Echoar situation. There's value there, but how's it coming out? The timing is very, very important because it took Echoar 15 years, you know. So, I don't know. >> And to out myself, I've been worried about this risk with the affiliates for eight years. And to date, I mean, not that any of the stocks aside from maybe Nextar have been screamers, but to date that fear has been I'm not going to say unfounded because they've obviously all had a lot of troubles. Like just look at Technith. Techn is selling to Nexttar a strategic for less than they were going to sell to Apollo a standard general Apollo a financial three years ago right like and that's a good exit for them go look at the stock of gray or Sinclair like it's been really rough for them but to date my fears have largely been unfounded but I want to go to unless you have something else on the broadcaster I want to ask you one last thing before we wrap >> yeah go ahead >> you had one of definitely my favorite post of the week maybe it'll probably be my favorite post of the month I'm not going to use the terminology but it was the psychology of a Well, uh, people can figure it out. It It was a little over the top, but I just loved it because I sometimes on my random ramblings or I talk all the time about sucking my thumb. Like, value investors, it is a huge problem of ours. A stock goes down 20%. And you say it is cheaper than I, it is cheaper than when I bought it. Uh, buy when there's fear in the streets, whatever you want to say, and then the stock's down 80% and you you're just wrecked. And many a firm have gone bankrupt by double down, double down, double down, double down, and the stock goes down and down down. Fortunately, I've largely voted that though I I've definitely doubled down on stocks once or twice too many times. And it it takes your results from great to average to bad real fast when you have one of those. Anyway, you had this great post on it, uh, talking about that. And I I just love to ask you, you know, why did you publish this? What were you kind of thinking of when you published this post? >> I mean, I just thought, you know, I'm writing this series on QVC. QVC is a value investor favorite and people have lost a lot of money in that investment uh over the last 10 years and it's a Malone special right I mean so you know there's certain sort of you know attractiveness of this situation to the value investing crowd so um so as I was writing it there's some uh people who got in contact with me arguing why this equity is worth anything at all and I find that interesting because the senior debt is trading at like 40 cents, you know, and um there's bunch of debt in between that and the and the equity. So for someone to argue that the equity has value is interesting and you know that bring that that sort of and I have a lot of experience with backholding, okay? So don't get me wrong, I'm not like I'm a bad investor to some extent on this as well because I was, you know, I'm a value investor at heart. So, I've struggled a lot, right, with the psychology of it and with it's it's interesting, you know, you know, you're not supposed to do it, but sometimes you still do it. I mean, just that part interests me a lot, you know, that you know, it's it's like don't touch the fire, but you still, you know, stick your hand in for some reason. Um, so anyway, it's the it's the gambling instinct at the at the end of the day. And, uh, I just wanted to put it on paper. I one I want me to, you know, look back and think about it whenever I'm trying to, you know, add to a position when it's down, right? Uh so just remind myself, hey, dude, you might be right, you know, 70% of the time, but that other 30% is you're going to lose all your money. Um and then um and and to and to also just, you know, make sure that some of the people in the QVC crowd know that >> Well, I love that you called it the QC. So I John Malone, he wrote a memoir and I think it comes out tomorrow, but it's gonna be my book club uh my book club book month this month. But I love that you called it because a I remember one of the moments I started Sar and John Malone. I think it was the 2021 or 22 annual meeting, but I could be mistaken. >> He came out and somebody asked what's your favorite stock in your empire? And he said QVC and I had been long QVC previously. I wasn't long fortunately. I like didn't do too poorly on it, but I had been long and I so I followed it closely and I was like, "What is this guy talking about? QVC is like drawing dead. Your your only hope is like it it some type of miracle, some type of operational miracle." And I I think QVC kind of got dealt an unlucky hand. You know, they had the distributor fire and all that, but QVC was clearly drawing at the time. I was like, "Hey, he's just looking at free cash flow yield." And I remember a few years later he was like, "Discovery is a cash flow machine." And I was like, man, Discovery the as this was before the Warner Brothers merger and even after they have no sports, they have no premium. Like they are in a really tough position. And it made me wonder, you know, John Malone for all his legend, for all his was he a product of the time he grew up in, right? He starts putting cable systems together in the late 70s, early 80s, you know, interest rates come from 18 to four. Guess what? any longived assets going to do great under that particularly when you're running it with a levered financial engineering style like Malone runs and uh you know it really or hey the dude's 75 guess what everyone starts to lose their fastball at some point except for maybe Warren Buffett apparently but maybe he just kind of lost his basketball but it really made me question a lot of it and look QVC the preferred might be interesting I know there's hold co- arguments and all this sort of stuff but if you're here saying hey I'm long to equity and look at the free last year, I'd be like, man, I'd love for you to be on the other side of all of my drains. >> Yeah. Yeah. Yeah. I mean, I I mean, I think my my view is that uh you know, we come in cycles and uh uh I think Malone is uh I mean, he had a fantastic track record. Um but this whole uh internet and especially mobile has just been such a big wave over the last 10 to 15 years. It carried out a lot of people. all the stuff in old media if you look at the stress I mean I don't know 50% of it is media old media and telecom right I mean SAS unfortunately is one of those as well so all these old guys in media who's you know larger than life maybe 15 20 years ago have been carried out by the internet u companies platforms so it's just a wave and now we have AI coming so who knows who who else is get carried out so you have to think about that but It's uh it's it's interesting. I think it's more of the time than anybody being so smart or anybody being so dumb. Was just luck. >> It's one of the tough things, you know, every you can point to a lot of people and say, "Hey, this guy got lucky, right? He yoloed Bitcoin and just bought it the whole way." And maybe there was some genius there, but a lot of it's probably luck like one trade. But, you know, you look at Malone from 80s to 2010, the man can do no wrong. And it's not just cable, right? Because he goes to the he also puts together the cable nets and everything. But then from 2010 on, the man can basically do no right to be honest. I mean, Formula 1's a killer, but I I hate to say 2010 because that misses the Sirius XM bankruptcy grand slam, which you know, you can't take that away. But go to 2013, Liberty Global, Lilac, uh, all the Discovery mergers, and you kind of look and you wonder, was this handled that like what happened? But probably a conversation for another day. all these you know all these every one of his companies was old media and they weren't able to kind of get over the hump right with this you know internet platforming everything so it's a it's I mean you know he was an investor in one theme and that theme unfortunately didn't >> but that's when you wonder was the man a a genius or was he a one theme lucky like it it was all it was all one cyclical bet but we might have to the next time you come on forget sats you and I will we'll talk about I I just love the post so much. I sent it to so many people. I was like this is what I talk about when I talk about maybe not quite as explicitly, but this is what I'm talking about when I'm talking about sucking my thumb value traps. You just put it so perfectly. And uh the contempt that you felt for bagolding is the contempt that I feel for myself when I bagold. So it really >> Oh, that was that was first of all that was written mainly for me to me. Okay. >> Yeah. Yeah. Yeah. I wasn't Yes. Yes. >> the QVC guys of anything. In fact, I wish they make a lot of money. I wish everybody makes a lot of money. It's more me me. They they inspired me to write that for me, not not for >> I look I'll I'll have somebody all the time email me and be like, I've ridden this from 100 to 15, but now's the time XYZ reason. I'm like, dude, this is the reason you were long at 100 and maybe, but I'm seeing a lot of the mistakes that I have made in the past and what you're saying. So, uh, yeah. Anyway, I just love the post. I thought it was great way. Yummy century stocks again, the best subsack of the year. you should go subscribe right now. Uh we'll we'll talk about one other thing once I press record, but thanks so much for coming on for the second time and looking forward to the third time. >> Thank you very much. Enjoyed it. >> A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.