Dish loses another 143K subscribers in Q1, company in ‘breathtakingly rapid secular decline,’ analyst says

(Jackdaw Research)

Dish network continued its free fall in the first quarter, losing 143,000 subscribers. 

The loss follows a 2016 total-year hemorrhage of 1.037 million customers. Dish also saw revenue decline in the first quarter to $3.69 billion. 

Pay-TV ARPU in the period was $86.55, down from $87.94 in the first quarter of 2016. Pay-TV subscriber churn was up to 1.69% from 1.63% in the year-ago period.

Dish closed the first quarter with 13.528 million pay-TV subscribers, down about 2.5% year-over-year. 

Dish notoriously includes subscriber metrics for its virtual pay-TV service, Sling TV, in with data for its traditional satellite platform, but doesn’t bifurcate performance metrics. MoffettNathanson analyst Craig Moffett said that without factoring in Sling TV’s growth in the first quarter, the real loss to the traditional linear platform is probably 320,000 users. That puts the rate of decline to Dish’s satellite business at 9.1% a year. 

In the short term, the “dismantling,” as Moffett put it in a note to investors this morning, of Dish’s core asset is producing improved EBITDA and margins, with Dish spending less to roll out trucks and advertise on satellite TV.

“But stripped of the sugar-high of underspending on customer acquisition, the reality is of a business that is in breathtakingly rapid secular decline,” Moffett added. 

“As you would expect in a high overpaying leverage business like satellite TV, ‘real’ margins—that is, after adjusting for the avoidance of customer acquisition cost that arises from simply not replacing lost customers are shrinking with the subscriber base—are in free fall,” the analyst noted. “After four years of decline, ‘real’ margins have fallen by a third, to just 11.1%.”

This matters, he added, “because it is ultimately the satellite TV business that determines the implied valuation that is being assigned to Dish’s spectrum.”

About that spectrum: Analysts are hoping that Dish Chairman and CEO Charlie Ergen offers an update on the company’s surprise $6 billion acquisition of low-band spectrum when Dish conducts its first-quarter earnings call at 12 p.m. EST today.