Dish Network Gains Pay-TV Subscribers While Broadband Ambitions Show Potential

by Trefis Team
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Dish Network
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Dish Network (NASDAQ:DISH) recently reported its Q4 2012 financial results. Besides positive pay-TV subscribers gains, the company showed building momentum in its relatively new broadband service dishNET. Dish Network has stated that almost 100% of its broadband subscribers also have its pay-TV services, implying that the bundling approach is helping. Although the U.S. pay-TV industry is becoming saturated, there seem to be multiple forces that can drive Dish’s future growth. These include potential price increases, the appeal of sling loaded Hopper DVR, Blockbuster’s streaming service and Dish’s effort towards broadband – be it dishNET service or building a nationwide wireless network using the acquired spectrum. All it needs is good execution.

See our complete analysis for Dish Network

Dish Network gained 14,000 net pay-TV subscribers in Q4 2012, taking its full year gain to 89,000 subscribers. [1] That’s a significant improvement over 2011 when the company lost 166,000 net pay-TV subscribers. Dish Network has also started reporting its broadband subscribers in its filings. The company added 44,000 net dishNET (broadband) subscribers in the fourth quarter taking its total broadband subscriber count to 183,000. [2]

Even though the pricing is comparable to that offered by the cable companies, the speeds are relatively lower and hence the target market is mainly confined to rural and remote areas. Broadband still accounts for a very low share of Dish’s revenues but might help it with incremental growth and better customer retention. What matters more is how Dish’s ambitions with its wireless network play out. With its acquired spectrum and a potential partner, Dish intends to enter the wireless market and offer its own data and voice services. This will not only change the landscape of the U.S. wireless industry, but also help Dish in becoming a stronger player in the pay-TV industry as Dish will be able to offer attractive bundling packages.

We currently do not separate out Dish Network’s broadband subscribers as its revenue contribution is immaterial. Our average fee per subscriber forecast is a mix of revenues that Dish Network generates from pay-TV as well as its small broadband business.

However, let’s take a brief look at the revenue opportunity from dishNET services few years down the line. According to Dish Network’s website, the pricing starts at around $40 per month. [3] If we assume that 10% of Dish Network’s subscribers subscribe to this service over the course of next 4-5 years, there could be an opportunity to earn incremental revenues of more than $700 million annually. That’s a reasonable opportunity, and we have priced in a certain proportion of this expectation in our forecast for average revenue per subscriber. You can modify this forecast above to see how it impacts our price estimate for Dish Network.

Our price estimate for Dish Network stands at $38, implying a premium of 5% to the market price.

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Notes:
  1. Dish Network’s SEC Filings []
  2. Dish Network’s Q4 2012 Earnings Transcript []
  3. http://www.dish.com/entertainment/internet-phone/ []
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