Dish's struggles continue in Q3

Dish Network reported results in the third quarter that were far below most analyst expectations, and the company's CEO joined a large and growing number of executives to jump ship. The news helped send the company's shares tumbling in trading Monday.

Regardless, company officials continued to argue that Dish's future is bright.

"I'm optimistic that the road ahead is much brighter than it might look," said Hamid Akhavan, Dish's incoming CEO, during EchoStar's quarterly earnings call.

"We're failing fast and we're learning," added Dish founder Charlie Ergen during Dish's quarterly earnings call.

But some analysts continue to see Dish as a company headed for disaster. "Even for a long-time Dish skeptic, today's results come as a shock. Dish's Q3 report is astonishingly bad," wrote the financial analysts at MoffettNathanson in a report to investors Monday.

Added the analysts: "A Chapter 11 emergence from bankruptcy – without spectrum sales – might be the only allowable outcome."

Erik Carlson may well share that pessimistic outlook. Carlson, Dish's CEO, is joining some other top Dish executives in leaving the company. He will be replaced by Akhavan next week. Akhavan is currently EchoStar's CEO. 

That's not necessarily a surprise considering that Dish announced a merger with EchoStar in August. Under that agreement, Akhavan was to become CEO of the combined company and Carlson was to leave. But Carlson's surprise early exit doesn't appear to set a good tone.

Related:Charlie Ergen explains why he's merging Dish Network and EchoStar

"Mr. Carlson is not resigning due to any disagreement with the board of directors or management of Dish," Dish wrote in an SEC filing.

The quarter that was

The financial analysts at Raymond James summarized Dish's financial performance in the third quarter with one word: "Weak."

Others agreed. "Subscriber and financial results weaker than expected," wrote the analysts at New Street Research.

Overall, Dish's consolidated revenues in the third quarter clocked in at $3.71 billion, below most analyst expectations.

In its aging satellite TV business, Dish said it lost 64,000 customers in the third quarter, a reversal of the 30,000 customers it gained in the year-ago quarter. The company closed the quarter with 8.84 million pay-TV subscribers. Dish has described its pay-TV business as the cash cow that will finance its entry into the US wireless industry.

In Dish's wireless business though, the company said it lost 225,000 customers in the third quarter. That's far more than analysts had expected. It also stands in contrast to the customer gains reported by the likes of AT&T and T-Mobile in the third quarter.

Dish said it ended the quarter with 7.5 million retail wireless subscribers.

Company officials said Dish's sluggish wireless performance was in part due to a new commission structure the company implemented with its wireless dealers that is designed to attract only profitable customers to the company's services.

But Dish officials acknowledged that the company hasn't managed to make an impact with its Boost Infinite offering and its new iPhone promotion.

"Are we doing a great job in marketing? The answer is no," Ergen said. "There are a ton of issues … that we still have to correct."

For example, he said Dish's services aren't yet sold in Apple's iPhone sales channels. But he said Dish is working to improve its online-only approach to the market. He added that the company hopes to improve its sales through Amazon.

The hunt for cash

Dish must work quickly. It's facing debt expenses early next year that it will need to find a way to pay for.

The company already inked a merger agreement with EchoStar that will help it generate needed cash.

And this week the company said it sold its wireless assets – including 120,000 prepaid customers and spectrum licenses – in Puerto Rico and the US Virgin Islands to Liberty Latin America for $256 million.

Other Dish financing options include a sale of the company's retail wireless business and a merger with DirecTV.

Ergen said Dish's retail wireless business "is a very valuable property" that could represent an investment opportunity. Along those lines, Ergen's CONX special purpose acquisition company has been in talks to acquire Dish's Boost Mobile wireless retail business. But Ergen didn't offer any firm commentary on the potential for that kind of transaction during Dish's quarterly earnings call Monday.

As for a merger between Dish and DirecTV, Ergen said "our focus is elsewhere."

Ergen also said Dish remains interested in purchasing some of T-Mobile's 800MHz spectrum. "We think that 800 has some unique characteristics," he said. "That's certainly going to be a focus for me."

But it's unclear how Dish might finance such a purchase. "We're going to give it our best shot," Ergen said.

As for other Dish expenses, the company disclosed that it has so far incurred $30 million in expenses related to its cybersecurity incident earlier this year.

The future

Ergen said that Dish is building a 5G network for the future. That's why Dish is working to sell its Boost Infinite services in an online format rather than through brick-and-mortar stores.

When questioned about the company's approach, he said sales of most products and services are headed online. "Talk to the bookstores of the world about that," he said.

Further, Dish officials said they're making progress in building a network that can support Boost customers. So far Dish's Voice over New Radio (VoNR) 5G voice calling service is available to 120 million people, but the company said it will expand that number to 240 million people by June of next year. Dish currently covers around 240 million people with its 5G network, but has been struggling to add VoNR calling services on top of that network.

Dish's John Swieringa said that Dish is currently adding about one-third of its new customers onto its own network. The remainder are being put onto AT&T and T-Mobile's networks. But he said that in June of next year that figure would move to two-thirds, which will help Dish reduce its MVNO payments to AT&T and T-Mobile. 

"We have scale in June of next year," Ergen said.

Ergen also said Dish's merger with EchoStar will "jumpstart" Dish's private wireless networking business. "I think you're going to see real progress there" in 2024, Ergen said.

Akhavan, EchoStar's current CEO, agreed. Akhavan, Dish's incoming CEO, discussed his view of Dish during EchoStar's quarterly conference call, which was also held Monday. "That is an opportunity that is ahead of us," he said of private wireless networking. He said the combination of EchoStar's satellite connections with Dish's 5G network would be attractive to enterprise customers.

"That's my intent, to go give it my best shot to make that work," he said.