Dish Network (NASDAQ:DISH) recently reported its Q2 2013 earnings. The company registered a loss of $11 million compared to a profit of $226 million during the same period in 2012, due to a $438 million impairment charge for two of its three satellites.  Dish has been amassing spectrum over the past few years and made an unsuccessful attempt in acquiring wireless carrier Sprint. (See – Dish Folds Its Hand On Sprint But Ups The Ante For Clearwire) In regards to its wireless plans, the management said it is open to all options such as a partnership with a wireless carrier or a tie-up with DirecTV (NASDAQ:DTV).
Pay-TV Subscriber Trend
- 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?
- How Has Dish Network’s Revenue Composition Changed In The Last Five Years?
According to our estimates, pay-TV contributes more than 75% of Dish Network’s value. The company reported a loss of 78,000 pay-TV subscribers compared to the loss of 10,000 during the same period in 2012 due to lower gross new activations and an increase in its churn rate. Subscriber-related revenue grew 5% to $3.5 billion for the quarter driven by higher ARPU which increased by 4% to $81. ((Dish Network’s SEC Filings)) Given the saturation in the pay-TV market, Dish has been exploring the wireless business in the U.S.
Increased competition from alternative video platforms such as Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) is eating up some market share of traditional pay-TV operators. Separately, Comcast (NASDAQ:CMCSA) has been aggressive in addressing customer churn after having lost thousands of subscribers in recent quarters. It has been able to control the losses by offering additional products and features such as Xfinity and X1 (Read – Comcast Posts Solid Results As Broadband And NBCU Lead The Growth). In such a scenario, Dish’s pool of spectrum and wireless ambitions are key to its future growth.
Partnership With A Wireless Carrier Could Be On The Cards
CEO Charlie Ergen during the earnings call kept investors guessing about his next strategic move. He said he is open to all options – from a possible partnership with Sprint (NYSE:S) to a tie-up with either T-Mobile U.S. or DirecTV. As a potential partner with a wireless carrier, Dish believes that by offering video it can help carriers differentiate their services. 
A merger with DirecTV is another possible option for Dish. Earlier in 2002, the FCC blocked a merger between the two satellite companies on the grounds that it would leave many rural subscribers who don’t have cable with just one pay-TV provider. But Ergen stated that the business is materially different now as players such as Verizon (NYSE:VZ) FiOS and AT&T (NYSE:T) U-verse now serve many markets along with the growing online streaming businesses such as Netflix, Hulu and Amazon Prime.
Given its interest in LightSquared, the company stated that over the long term LightSquared’s spectrum could potentially fit with the existing spectrum the company has amassed (See -Dish Eyes More Spectrum With LightSquared Bid) and (See – What Is Happening With Dish’s Bid For LightSquared?). However, hedge fund Harbinger Capital Partners sued Charlie Ergen and Dish for $4 billion on Tuesday for an alleged loan-trading scheme aimed at stripping Falcone of his control over LightSquared.  It will be interesting to see how things unfold over this dispute as well as Dish’s next move to pursue its wireless ambitions.
We are currently in the process of updating our model for Dish Network in view of the recent earnings.Notes:
- Dish Network’s SEC Filings [↩]
- Dish Network Management Discusses Q2 2013 Results – Earnings Call Transcript, Seeking Alpha, Aug 6, 2013 [↩]
- Falcone’s Harbinger sues Dish Network’s Ergen over LightSquared, Reuters, Aug 7, 2013 [↩]