Dish Earnings: Company Sheds Light On Spectrum Deployment Amid Declining Revenues

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Dish Network (NASDAQ:DISH) posted its Q3 results on Thursday, November 9th. For the quarter, revenues declined by 5% year-over-year to $3.58 billion, while diluted earnings per share declined by 15% to $0.57. Despite reporting a decline in revenues and missing earnings estimates, the stock rose slightly after the announcement as the company disclosed plans to monetize its spectrum holdings. Nevertheless, Dish lost 129,000 pay-TV subscribers in the quarter after accounting for the one-time removal of 145,000 subscribers in Puerto Rico and the U.S. Virgin Islands, where services were disrupted due to Hurricane Maria. The company did add 16,000 net new subscribers to Pay-TV services in the 50 states and its Pay-TV subscriber base stood at 13.2 million during the quarter. Below we discuss the key takeaways from the company’s earnings.

See our complete analysis for Dish Network

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Dish’s Pay-TV business witnessed a decline during the quarter even as it activated approximately 638,000 gross new Pay-TV subscribers. While the company does not disclose standalone numbers for Sling TV currently, we believe that the net Sling TV subscriber adds have helped reduce the rate of decline in the pay-TV subscriber base. The company continues to emphasize its over-the-top (OTT) video services to adapt to the changing industry environment and attract cord-cutters.

However, since many of the Pay-TV additions were for Sling TV, which is currently offered at a lower price point, the company’s Pay TV ARPU declined by 2.5% year-over-year to $87.23. As a result, Pay-TV and broadband revenues declined to $3.55 billion for Q3 compared to $3.73 billion in the quarter a year ago.

We expect that Dish will continue to see revenue pressure and subscriber losses for the remainder of 2017, as over the top (OTT) services from companies such as Netflix (NASDAQ:NFLX), Amazon and Hulu promote cord cutting. These losses, coupled with pressure on ARPU, will negatively impact Dish’s revenues in the near term.

Plans To Deploy Spectrum In 2018

Dish’s spectrum holdings constitute nearly 60% of its valuation, according to our estimates. The company has stated that it is planning to use the spectrum for the narrowband Internet of Things (IoT). It has recently finalized contracts with multiple vendors for radio access equipment and other associated equipment for towers. It is also in talks with chipset vendors to supply equipment for towers. As Dish continues to work to monetize its massive spectrum position, we expect its financials to improve over the long run.

We have a $54 price estimate for Dish Network, which is slightly below the current market price.

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