Dish Network (NASDAQ:DISH) will report its Q2 2013 results on August 6. We expect the pressure on subscriber additions as well as revenue growth to continue. Given that the cable companies such as Comcast (NASDAQ:CMCSA) are seeing pay-TV subscriber losses, Dish may not have a great quarter. (See – Comcast Posts Solid Results As Broadband And NBCU Lead The Growth) The U.S. pay-TV industry is saturated and a good performance from competitors usually implies the opposite for Dish. However, there is buzz around the company’s aggressive wireless ambitions, and we will look for any updates on the same.
Pay-TV Subscriber Trend
- Why Is Dish Network Venturing Into Smartphone Repair Business?
- Sling TV launches Multi-Stream Service: Is DISH Increasing Focus On Its Streaming Segment?
- Dish Q1 Earnings: ARPU Growth Compensates For Pay-TV Subscriber Decline
- How Are Dish Network’s Revenue & EBITDA Composition Expected To Change By 2020?
- By What Percentage Can Dish Network’s Revenues Grow Over the Next Five Years?
- Why Have Dish Network’s Revenues Increased ~20% While EBITDA Has Decreased ~20% In The Last Five Years?
According to our estimates, pay-TV contributes close to 66% to Dish’s value. In Q1 2013, the company added 36,000 net pay-TV subscribers compared to 104,000 added during the same period in 2012.  The decline was due to a higher churn rate of 1.47% and lower gross new pay-TV subscriber activations.
Last week, DirecTV (NASDAQ:DTV), the largest satellite pay-TV operator, reported a loss of 84,000 subscribers as companies such as Comcast, who after losing thousands of subscribers to satellite providers and telcos in recent years are fighting back more effectively on their ability to offer wired broadband. (See – Challenging Domestic Operations) Dish hasn’t seen much ARPU growth in the past few quarters. An increase in programming package prices in February 2013 pushed ARPU higher by 3% but at the same time increased subscriber-related expenses by 9% on higher pay-TV programming and retention costs.  It will be interesting to see how subscriber growth pans out for Dish this quarter given the higher churn in the industry due to increased penetration of alternative platforms such as Netflix (NASDAQ:NFLX).
Dish’s Wireless Ambitions
Dish is striving to compete better in the saturated U.S. pay-TV market by arming itself with a viable bundling option. Unlike its cable counterparts, Dish has focused purely on pay-TV rather than bundling broadband and telephone services. It hasn’t been able to match the performance of its satellite rival DirecTV which has a stickier subscriber base and offers exclusive services such as NFL Sunday Ticket. Dish expects to see growth in the wireless industry and has therefore been amassing spectrum over the past few years. The company offered $25.5 billion to acquire Sprint (NYSE:S) but lost the carrier to Japanese telco Softbank (See – Dish Folds Its Hand On Sprint But Ups The Ante For Clearwire). Later Dish tried to get hold of a stake in Clearwire, which is key for Sprint’s 4GLTE expansion plans, but lost it to Sprint in a heated bidding war. (Read – Dish Walks Away From Clearwire: Is T-Mobile U.S. Its Next Target?). We will be closely watching for any updates from the management on its next move related to Dish’s amassed pool of spectrum and its wireless ambitions.
Our price estimate for Dish Networks stands at $39, implying a discount of over 10% to the market price.Notes: