What Accelerated Subscriber Loss Means For Dish Network?

by Trefis Team
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Dish Network (NASDAQ:DISH) managed to soundly beat earnings, reporting net income of $410 million or $0.88 for Q2 fiscal 2016, about 14 cents ahead of the consensus estimate. However, the company’s net revenues remained somewhat flat at $3.84 billion, as increases in average revenue per user (ARPU) on higher video service rates were offset by Dish’s biggest ever quarterly decrease in pay-tv subscribers. Dish lost a total of 281,000 subscribers during the quarter, which was much worse than the figure estimated by FactSet (- 91,000).  This loss was in addition to the 230,000 subscribers lost in the first quarter.

With users actively shifting to streaming services such as Netflix, pay-tv companies are losing their subscribers rapidly. In response, Dish had launched its streaming service (called Sling TV) last year, which is somewhat diluting the subscriber loss at the moment. During the second quarter, Dish is estimated to have actually lost close to 330,000 pay-tv subcribers, but 49,000 new subscribers for Sling TV slightly offset the effect. Even though the change in subscriber count at the end of 2015 (-81,000) did not look too bad, subscriber losses are expected to accelerate as the Sling-TV novelty wears off.

Dish has recently completed its payment to participate in the U.S. Federal Communications Commission’ (FCC) ongoing auction involving sales of spectrumformerly held by television broadcasters. Over the years, the company has invested more than $5 billion in acquiring wireless spectrum, and the turmoil in Dish’s core business has highlighted its stance on the acquired spectrum. The company’s participation in the auction suggests that it may be planning to sell a portion of its spectrum for profit. However, in case the FCC spectrum auctions get delayed, the company may be forced to put its spectrum to use in the near future, because the spectrum is subject to FCC’s interim and final build-out requirements. Even if Dish builds a wireless networks just to abide by the regulations, it could cost billions of dollars to the company.

The following table provides an overview of the company’s Q2 Earnings:

Dish Q1 earnings

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Dish Network
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