Dish Network reported a 5.9% decline in first-quarter revenue to $3.46 billion, with subscriber losses coming in at 94,000.
The attrition marked a deceleration from the first quarter of 2017, when the satellite TV company lost 143,000 pay TV users. And Dish added 91,000 users for its virtual MVPD service, Sling TV.
However, as Dish continues to migrate its pay TV base to the lower margin virtual Sling platform, its average revenue per user keeps shrinking—it was down to $84.50 in the first quarter compared to $86.55 a year ago.
And unlike rival satellite operator DirecTV, which is adding almost as many virtual pay TV subscribers as its losing linear ones, Dish keeps seeing its overall subscriber base shrink. It ended the first quarter with 13.15 million pay TV customers, down from 13.53 million at the end of March 2017.
Dish said it has just over 2.3 million Sling TV subscribers, making the oldest vMVPD the biggest, by far. But AT&T’s DirecTV Now appears to be catching up fast, adding 312,000 users in the first quarter.
With pay TV subscriber attrition better than analysts' forecasts, New Street Research analyst Jonathan Chaplin called today's Dish results "solid."
"We think the primary value of the Pay-TV business is in supporting the balance sheet (with $16BN in gross debt) while the equity value rests with the spectrum," Chaplin wrote in a note to investors. "In this light, these results are fairly solid, with better than expected cashflow generation from pay-TV and lower churn potentially extending the runway of those cashflows. We continue to believe that Dish’s spectrum portfolio is meaningfully undervalued."
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Dish will conduct its quarterly conference call with investment analysts and journalists at 12 p.m. EST Tuesday.
Crunching the numbers after Dish’s fourth-quarter report in February, MoffettNathanson analyst Craig Moffett said Dish’s shares are now down more than 50% compared with the broader market over the last year. In trying to assess the company’s value, also factoring in significant spectrum holdings, Moffett wonders if the asset value of the pay TV side of the business is now “less than zero.”
“It is very likely the case that the warranted multiple for Dish’s satellite business is already less than its leverage ratio,” Moffett said in a note to investors. “With nearly all of Dish’s debt held at its satellite subsidiary, without recourse to Dish’s spectrum holdings as collateral, it can be argued that the enterprise value of Dish’s satellite business can never drop below the value of its debt (since Dish could, in theory, simply separate the two businesses and let the satellite business go bankrupt).”
Would AT&T want to buy Dish, as some have suggested?
"DirecTV is now itself declining rather rapidly," Moffett pointed out. "Would AT&T want more where that came from, even allowing for huge synergies? And, if they did want it, would they, or anyone else, pay more than 5x EBITDA for it?"