Dish Network 2014 Annual Report Download - page 90

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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Future Capital Requirements
We expect to fund our future working capital, capital expenditures and debt service requirements from cash
generated from operations, existing cash and marketable investment securities balances, and cash generated through
raising additional capital. The amount of capital required to fund our future working capital and capital expenditure
needs varies, depending on, among other things, the rate at which we acquire new subscribers and the cost of
subscriber acquisition and retention, including capitalized costs associated with our new and existing subscriber
equipment lease programs. The majority of our capital expenditures for 2015, with the exception of the purchase
and commercialization of wireless spectrum licenses discussed below, are expected to be driven by the costs
associated with subscriber premises equipment and capital expenditures for our satellite-related obligations. These
expenditures are necessary to operate and maintain our pay-TV service. Consequently, we consider them to be non-
discretionary. The amount of capital required will also depend on the levels of investment necessary to support
potential strategic initiatives, including our plans to expand our national HD offerings and other strategic
opportunities that may arise from time to time. Our capital expenditures vary depending on the number of satellites
leased or under construction at any point in time, and could increase materially as a result of increased competition,
significant satellite failures, or economic weakness and uncertainty. These factors could require that we raise
additional capital in the future.
Volatility in the financial markets has made it more difficult at times for issuers of high-yield indebtedness, such as
us, to access capital markets at acceptable terms. These developments may have a significant effect on our cost of
financing and our liquidity position.
DISH Spectrum. We have invested over $5.0 billion since 2008 to acquire certain wireless spectrum licenses and
related assets. We may also determine that additional wireless spectrum licenses may be required to commercialize
our wireless business and to compete with other wireless service providers. We will need to make significant
additional investments or partner with others to, among other things, commercialize, build-out, and integrate these
licenses and related assets, and any additional acquired licenses and related assets; and comply with regulations
applicable to such licenses. Depending on the nature and scope of such commercialization, build-out, integration
efforts, and regulatory compliance, any such investments or partnerships could vary significantly. In addition, as we
review our options for the commercialization of our wireless spectrum, we may incur significant additional expenses
and may have to make significant investments related to, among other things, research and development, wireless
testing and wireless network infrastructure, as well as the acquisition of additional wireless spectrum. We may need
to raise significant additional capital in the future to fund these efforts, which may not be available on acceptable
terms or at all. There can be no assurance that we will be able to develop and implement a business model that will
realize a return on these wireless spectrum licenses or that we will be able to profitably deploy the assets represented
by these wireless spectrum licenses, which may affect the carrying value of these assets and our future financial
condition or results of operations. See Note 16 “Commitments and Contingencies – Wireless Spectrum” in the Notes
to our Consolidated Financial Statements in this Annual Report on Form 10-K for further discussion.
AWS-3 Auction. On February 13, 2015, Northstar Wireless and SNR Wireless each filed applications with the FCC
to acquire certain AWS-3 Licenses that were made available in the auction designated by the FCC as the AWS-3
Auction for which it was named as winning bidder and had made the required down payments. Issuance of any
AWS-3 licenses to Northstar Wireless or SNR Wireless depends, among other things, upon the FCC’s review and
approval of the applications filed by Northstar Wireless and SNR Wireless. We cannot predict the timing or the
outcome of the FCC’s review of those applications. We own an 85% non-controlling interest in each of Northstar
Spectrum and SNR Holdco, the parent companies of Northstar Wireless and SNR Wireless, respectively. After
Northstar Wireless and SNR Wireless have made the final payments to the FCC for the AWS-3 licenses, our total
non-controlling equity and debt investments in these entities and their parent companies, respectively, will be
approximately $9.778 billion. We have funded and will fund these investments from existing cash and marketable
investment securities. Such funding has included and will include $899 million in total equity and debt investments
in the Northstar Entities and SNR Entities during the fourth quarter 2014, cash and marketable investment securities
as of December 31, 2014, cash generated from operations during 2015, and a $400 million refund from the FCC to
one of our wholly-owned subsidiaries related to the AWS-3 Auction. Under the applicable accounting guidance in
ASC 810, Northstar Spectrum and SNR Holdco are considered variable interest entities and, based on the
characteristics of the structure of these entities and in accordance with the applicable accounting guidance, we have