Dish Adds 40,000 Pay-TV Subscribers In The First Quarter
Dish Network (NASDAQ:DISH) recently reported its Q1 2014 earnings. The company reported 7% growth in revenues while net income declined 19% to $171 million. The decline in profits was driven by reductions in other income. If we look at the two important trends, pay-TV subscribers and ARPU (average monthly subscription fee), both were positive for the company. Dish added 40,000 subscribers during the first quarter and ARPU improved 5% as compared to the prior year period. [1]
The satellite company has once again managed to post subscriber gains in an environment where pay-TV industry is losing subscribers. It must be noted that in 2013, the U.S. pay-TV industry saw a decline of over 104,000 subscribers. [2] Dish benefited from its initiatives to retain customers and the first quarter churn rate was down to 1.42%, a 5 basis point improvement compared to last year. Going forward, we expect satellite companies such as Dish to continue adding more subscribers in the near term. The company saw half of the benefit of its price increase during the first quarter ARPU and full benefit will be seen in second quarter, according to Dish’s management. [3]
We currently have a price estimate of $50 for Dish, which we will soon update based on the recent earnings announcement.
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Dish’s pay-tv operations contribute close to 70% to its value, according to our estimates. Dish saw steady growth in the first quarter. ARPU grew 5% to $82.36 and the subscriber base increased to 14.097 million from 14.092 million in the prior year period. Subscriber-related expenses increased by 8% in the first quarter versus the prior period, reflecting higher pay-TV programming expense. [1] While the satellite industry posted solid growth over the past few years, the growing availability of online content as an alternative video platform, along with an expanding market for connected devices, poses a competitive challenge to the entire pay-TV industry in the U.S. Dish has benefited from its promotional offers, AutoHop DVR and the ongoing migration of subscribers from cable to satellite. We believe these factors will continue to drive Dish’s pay-TV operations in the near term.
As far as wireless plans are concerned, Dish had won the bidding for H-Block spectrum in the first quarter. The company now owns 50 megahertz of downlink spectrum. Dish is now looking forward for the AWS-3 auction, which may take place later this year. [3] This spectrum is adjacent to Dish’s existing spectrum and FCC will auction 25 megahertz of downlink spectrum under AWS-3. We’ll be closely monitoring the developments on this front. However, the most important auction for wireless operators will be the 600 megahertz band, and would be the lowest and most valuable frequency sold yet. It is currently used by television stations and will be resold to carriers for wireless use. This auction may take place in mid-2015.
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Notes:- Dish Network’s SEC Filings [↩] [↩]
- Major Multi-Channel Video Providers Lost About 105,000 Subscribers in 2013, Leichtman Research Group, Mar 14, 2014 [↩]
- Dish Network’s (DISH) CEO Joseph Clayton on Q1 2014 Results – Earnings Call Transcript, Seeking Alpha, Dish Network, May 8, 2014 [↩] [↩]