What happened
Shares of Dish Networks (DISH +0.00%) were plunging today, down 11.1% on Tuesday.
Dish's main businesses are in not-so-desirable niches, including the DISH satellite TV "bundle," the "skinny" Sling TV streaming service, as well as the retail pre-paid Boost Mobile wireless business purchased back in July 2020. The company also owns a lot of 5G wireless spectrum, having purchased around $30 billion in wireless spectrum assets over the years, with the intention of using that spectrum for wireless broadband; however, highly indebted Dish has to thread a needle by continuing to build that out as its legacy businesses shrink.
Unfortunately, in its first-quarter results reported Monday night, those legacy businesses may be shrinking faster than anticipated.
NASDAQ: DISH
Key Data Points
So what
In the first quarter, DISH lost 552,000 total net pay TV customers, with 318,000 net customer losses in DISH TV and 234,000 net losses in Sling TV. Meanwhile, Dish's prepaid wireless phone subscribers also declined by 81,000. Revenue declined 8.5% to $3.96 billion, and earnings per share were nearly cut in half to $0.35. Both figures missed analysts' expectations.
DISH was also hit by an outage and cyberattack in the first quarter that may have accelerated some of its churn. While the subsequent investigation revealed no customer information was taken, certain employee records were, and the disruption may have also hurt results.
The most concerning part of the report was likely the "core" DISH TV segment, which is DISH's namesake brand and largest segment. While Sling and Boost Mobile subscribers declined, Sling's declines were in line with the year-ago quarter, and Boost Mobile's declines were less than the year-ago quarter. However, DISH's 318,000 losses accelerated over the 228,000 subs lost in the year-ago quarter, and that segment makes up 7.1 million out of DISH's 9.2 million overall customers.
With interest rates having shot up so quickly over the past year, DISH may also have trouble financing its wireless broadband buildout, which will require more capital. CEO Charlie Ergen acknowledged a "narrow path" to build that out in the current capital markets environment, especially with the rest of its businesses declining.
Now what
Ergen also tried to encourage investors by noting on the call that DISH was founded in 1980, when mortgage rates were 15%, and that the company has been through lean times before. Of course, competition in the telecom and media business is very fierce right now. Cable companies are starting to infringe on wireless phone subscriptions, while 5G is now enabling those mobile phone giants to infringe on cable's turf in broadband as well.
DISH is profitable, with a core rural market that may still sign up for satellite TV; however, that customer base is declining. Meanwhile, DISH is a subscale player in wireless when compared with the other large telecom and cable behemoths. With significant investment needed for its wireless broadband buildout, the debt markets essentially closed off, and a tumbling equity price, things remain highly uncertain for DISH, even with its experienced founder at the helm.
