Is time running out for DISH Network?

It doesn’t much matter how the numbers are dressed up, the net result of the USA’s second-largest DTH operator, DISH Network, during its second-quarter reported a decline of 196,000 subscribers in its results announcement on August 3rd.

DISH Network also had to report Q2 net income also fell a thumping 91 per cent (at $3,64 billion, vs $3.72 billion same period last year). The numbers were badly affected by the record $280 million penalty levied on DISH for unwarranted telemarketing calls.

Bad as the subscriber numbers are, they are an ‘improvement’ on the broadcaster’s Q2/2016 falls, of a net 281,000. Then, it was guesstimated that DISH had actually lost between 315,000-330,000 DTH subs. DISH, like other US and European pay-TV broadcasters, bundles its OTT subscribers (Sling TV) in with its DTH numbers.  It is a similar picture at DirecTV, where its DirecTV Now OTT service reported it had 491,000 subs a few weeks ago, but that overall AT&T, its parent company, had lost a total of 199,000 subs during the quarter.

In Q2, DISH activated approximately 444,000 gross new pay-TV subscribers, compared to approximately 527,000 gross new pay-TV subscribers in the prior year’s second quarter.

As of June 30th 2017 DISH enjoyed a total (DTH plus Sling) subscriber base of 13.332 million, down from 13.593 million at the same time last year.

Pay-TV ARPU (per month) for Q2 totaled $87.25, compared to the year-ago period’s pay-TV ARPU of $89.98. Pay-TV subscriber churn rate was 1.59 (per month) percent versus 1.96 per cent for second quarter 2016.

For these slight improvements, the market was no doubt grateful. However, one analyst (Craig Moffett, from Moffett Nathanson, was not impressed. His comments were blunt, saying the satellite TV business is shrinking fast. “It is heavily indebted and its bonds trade above par.”

“By our estimate, DISH’s traditional satellite TV business is shrinking at a 9.1 per cent clip.  (DISH’s overall reported subscriber numbers are inflated by the inclusion of Sling TV OTT subscribers, but those subscribers have almost no economic value, so let’s ignore them for now.)  Its total service revenues are shrinking at 5.5 per cent,” says Moffett.

Moffett reminds investors that DISH’s debt burden is currently some $14.9 billion, and there could be further bad news ahead if DISH is unsuccessful in fighting another batch of illegal telemarketing allegations.  DISH has set aside $296 million for these potential penalties, but the impact could be worse notably including penalties that could forbid DISH from accepting new subscribers from “a particular third-party retailer” as a consequence of the litigation.

Moffett, in his 10-page report on DISH concludes that time could be running out for DISH’s core business.

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