The DISH Network, formerly EchoStar Communications, put in a quarter where it only grew its customer base by 85,000 compared to great rival DirecTV which had a record quarter with subscribers up 275,000.
Although revenue was up by 12% to $2.89 billion and net income was up to $175 million from $153 million a year ago, we asked the question a week ago, was the DirecTV success due to people tightening their belt, dropping their cable supplier and getting a cheaper pay TV service – well the answer is no. The churn reduction at DirecTV must now take far more of the credit than any pending recessionary factors, because the performance was not replicated at DISH, in fact quite the opposite. In fact the likely culprit here is HD capability ‘ DirecTV has it, Dish does not.
For the year DISH reported revenues of $11 billion up from $9.8 billion a rise of 13% and net income of $756 million, compared with $608 million, but much of the growth came in the earlier parts of the year and subscribers for the digital satellite TV service were up 675,000 over the year, that’s an average of 196,000 for each of the preceding 3 quarters, which means that sign ups were less than half that average for this quarter. This is especially worrying given that usually this is DISH’s best quarter for subscriber additions and the management report in its 10K form concedes that the company may not be able to actually grow subscribers at all in the coming quarters, and that for the first time they might shrink.
DISH blamed its reduced subscriber additions on not being able to offer a triple or quadruple play, when rivals could and on its churn rate that rose to 1.7% per month during the quarter. DirecTV managed to cut its churn from 1.8% to 1.4%, when it reported last month, attributing the improvement to many HD signups and HD DVR availability, something where DISH is lacking.
It is increasingly looking like DISH spun out its satellite and technology business in the form of EchoStar Holdings, so that it did not suffer from the slide in DISH subscriber rates.
The shares have had no time to react yet to this news, but expect the general movement of DISH’s value to be downwards for a few days, and then some. We would expect rumors of DISH being bought to re-emerge, even if it is wishful thinking. If it falls too far, it will stop being wishful thinking.