Dish Earnings Preview: What We Are Watching

by Trefis Team
Dish Network
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Dish Network (NASDAQ:DISH) is set to report its Q2 2017 earnings on August 3. In the previous quarter, revenue declined by 4% to $3.68 billion as Dish lost 143,000 Pay-TV subscribers on a net basis despite the additions of 547,000 gross new Pay-TV subscribers. Users are actively shifting to over the top (OTT) streaming services such as Netflix, and Pay-TV companies such as Dish are losing subscribers rapidly. As a result, we expect that the company’s earnings will be once again marked by an accelerated loss of subscribers in Q2. However, the company continues to offer “skinny bundles” to lure customers back to its Pay TV services through its streaming service Sling TV, which was launched in 2015. Dish also has significant spectrum holdings, and the company plans to use this spectrum to provide IoT (Internet of things) services in regions where it holds this spectrum. In the upcoming earnings announcement, we expect that the company to shed some more light on its spectrum strategy.

See our complete analysis for Dish Network

Cord Cutting Measures Will Continue To Impact Subscriber Numbers, ARPU

In 2016, Dish witnessed marginal growth in revenues, primarily due to higher ARPU.  However, this trend reversed in Q1 as ARPU declined marginally. Moreover, the company lost over 143,000 pay TV subscribers. The loss could have been even higher were it not for Sling TV.  Dish’s management believes that Sling TV is well poised to take advantage of changing video consumption behavior and changes in preferences towards online streaming. We believe that as the company continues to launch new services for its OTT video product, its Sling subscriber base should see growth even though its top line might witness a decline.

Despite stemming the decline in its subscriber base, the increasing contribution of Sling TV to overall revenues will continue to negatively impact the company’s ARPU in Q2, primarily due to the lower price point of Sling TV’s services. Nevertheless, as Dish’s cord cutting countermeasures gain traction, the OTT services can help the company navigate the secular pressures in the pay-TV space.

Monetization of Spectrum In Focus

Dish’s spectrum holdings constitute nearly 65% of its valuation, according to our estimates. The company’s strategy to monetize its spectrum holdings will be a key value driver for the company in the future. For years, Dish has been buying spectrum, but has not disclosed its plans for the use of this spectrum. Recently, the company stated that it plans to use the spectrum for Internet of Things (IoT), but has not ruled out any other possibility, including the sale of spectrum to other players. News has also surfaced that Dish might team up with Amazon to offer services to Amazon’s Prime subscribers on its network by deploying its unused spectrum. In this earnings announcement, we will be looking for the company to more clearly articulate its stance on how it plans to use its spectrum holdings in the future.

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