Dish Network (NASDAQ:DISH) earnings were marked by disappointing subscriber additions. The company lost ~135,000 pay-TV subscribers in a way echoing the woes of cable operators such as Time Warner Cable (NYSE:TWC) and Comcast (NASDAQ:CMCSA). On the other hand its rival DirecTV (NASDAQ:DTV) had reported subscriber gains despite facing similar economic conditions and competition. We take a quick look at how these subscriber trends and the Dish’s outlook.
Our price estimate for Dish Network stands at $29.30 implying a roughly 30% premium to the market price.
Struggling with Competition
Our previous notion revolved around the possibility of negative impact of price rises on subscriber churn and consequently net additions. However Dish Network’s Q2 subscriber churn was in-line with expectations and there were no significant changes from what typically happens in the second quarter. [1]
This implies that price hikes have been accepted by subscribers and Dish actually suffered significantly in terms of gross subscriber additions. The company puts the blame on a weak economy and aggressive upfront programming discounts by its competitors.
The bad news is that competition isn’t going anywhere and economic weakness looks set to continue.
Planning for the Future
Overall we expect Dish to lose some market share in 2011, however the company is also determined to take steps to address the issue. Therefore while things aren’t going its way at the moment, Dish will address the subscriber trends by spending more on marketing in the remaining part of 2011. In addition to this, the company has entered a multi-year partnership with Frontier Communications and will market its service to Frontier’s subscribers. [1]
Even though there is possibility that economic softness will continue, we expect Dish to work harder on subscriber gains in the future, and at the same time, maintain the credit quality of new customers. Dish has certainly worked on the technology part, and now it needs to be a little more creative and effective in marketing its service.
See our complete analysis for Dish Network’s stock.
Notes:- Dish Network’s Q2 2011 Earnings Transcript, SeekingAlpha [↩] [↩]
