Dish Network’s Revenues Likely To Fall Marginally As Subscriber Losses Continue

Dish Network (NASDAQ:DISH) is set to report its Q3 2017 earnings on November 9. In the previous quarter, its revenue declined by 6% to $3.64 billion as Dish lost 146,000 Pay-TV subscribers on a net basis, despite the additions of 444,000 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. For Q3, we expect that the company’s earnings will be once again marked by an accelerated loss of subscribers. 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.

See our complete analysis for Dish Network

Cord Cutting Measures Will Continue To Impact ARPU

While Sling TV has helped the company reduce the rate of decline in its pay-TV subscriber base, its average revenue per user (ARPU) has declined in the past few quarters due to the lower price point at which these services are offered. We believe that this trend persisted in Q3, and expect the company to report another quarter of declining ARPU. Nevertheless, as Dish’s cord cutting countermeasures gain traction, over the top (OTT) services should help the company navigate the secular pressures in the pay-TV space. Additionally, 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.

Monetization of Spectrum In Focus

For years, Dish has been buying spectrum but has not monetized it. Nevertheless, Dish’s spectrum holdings constitute nearly 65% of its valuation, according to our estimates. We believe that the company’s strategy to monetize its spectrum holdings will be a key value driver for the company in the future. Recently, the company stated that it plans to use the spectrum for the Internet of Things (IoT), but has not ruled out any other possibility, including the sale of spectrum to other players. The FCC mandates that Dish must build out 70% of its spectrum (Mhz-POP) by March 2020 to meet its requirements. In this earnings announcement, we will be looking for more clarity on the company’s stance on how it plans to use its spectrum holdings in the future.

We currently have a $54 price estimate for the stock, which is around 10% above the current market price.

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