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Dish Bucks Trend as Pay-TV Numbers Improve in Q2

Jeff Baumgartner
7/30/2019

Signaling that its pay-TV business finally may be reaching the bottom, Dish Network bucked the trend in Q2 2019 and actually saw a big improvement in its video subscriber numbers.

Dish shed about 79,000 satellite TV customers in Q2, vastly undercutting an expected loss of about 250,000, and narrowing a year-ago loss of 192,000. Sling TV, Dish's OTT-TV service, added 48,000 subscribers in Q2 2019, better than an expected gain of about 7,000, and a tick above the 41,000 subs that Sling TV added in the year-ago period.

With satellite TV and OTT combined, Dish lost just 31,000 pay-TV subs in Q2, compared to a loss of 151,000 subs in the year-ago quarter. The company ended Q2 with 12.03 million total pay-TV subs, including 9.56 million satellite TV customers and 2.47 million Sling TV subs.

MoffettNathanson analyst Craig Moffett speculated in an emailed research note that the most likely explanation for the pay-TV improvements at Dish is that price-sensitive DirecTV subscribers hopped over after promotional discounts at DirecTV came to an end.

Speaking on Monday's earnings call, Dish CFO Paul Orban attributed the slower video sub losses to churn improvements aided by a focus on acquiring and retaining high-quality, more profitable customers.

Video still represents Dish's core... but for how long?
Coming quarters will determine if Q2 was a blip or a stronger indication that the worst pay-TV subscriber declines are behind Dish. However, the bigger question to come is how long video will serve as Dish's "core" business as the company prepares to push ahead with a big plan to build out a 5G network and US Department of Justice-approved agreement that would set up Dish to become the nation's fourth wireless provider.

Still, Dish will continue to need its pay-TV cash engine (annual revenues at Dish still total more than $13 billion, after all) to help fund its ambitious mobile and wireless network and service plans. So expect video to remain as Dish's core business, at least for the foreseeable future.

"One might argue that the satellite business will be an important source of cash flow for their wireless network buildout," Moffett explained. "But with decline rates like these, the obvious question is, for how long? Dish has seven years to build a network. Will the satellite business still be here in seven years? How long will the satellite business be able to cover its own debt, much less generate excess cash to help fund their wireless buildout?"

In the nearer term, Moffett wonders if Dish's satellite TV business might provide a cross-marketing opportunity for a new wireless MVNO; Dish is also poised to acquire Sprint's entire prepaid business, including the Boost brand. But even that combination is not a perfect fit. "The income demographics are, after all, somewhat similar. But the geographic demographics are not (Boost is mostly urban, Dish skews rural)," he adds.

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— Jeff Baumgartner, Senior Editor, Light Reading

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