Dish reports better-than-expected subscriber losses of 196K in Q2, but most metrics still headed south

Dish Networks satellites

Dish Network reported slightly better-than-anticipated video subscriber losses of 196,000 in the second quarter, with the continued erosion of its core satellite TV business shrouded once again by the undisclosed growth of its virtual MVPD platform, Sling TV.

Analysts covering Dish had expected losses to the satellite platform to come in as high as 370,000.

While Dish—and the broader pay-TV business, for that matter—seem to have avoided a cataclysmic cord-cutting catastrophe in the second quarter, business is not great in Englewood, Colorado, where the metrics are mostly headed down.

Revenue was down nearly 6% to $3.64 billion, with net income declining over 90% to $40 million, the result of litigation expenses, Dish said. 

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Dish’s pay TV subscriber base has shrunk 2% year over year to 13.332 million, with the lower-margin Sling TV platform driving average revenue per user from $89.98 in the second quarter of 2016 to $87.25 in Q2 2017, a 3% drop. Dish also reported 141,000 fewer net additions in the quarter.

According to MoffettNathanson analyst Craig Moffett, Dish’s core satellite business is shrinking at a 9.1% annual rate when unshielded by Sling TV. And of real concern, earnings before interest, taxes, depreciation and amortization (EBITDA) is declining at a 12% clip.

Moffett’s concern is that the debt Dish has incurred in recent quarters to buy all of its wireless spectrum is leveraged against the declining satellite business.

“Now that they have paid for their newly purchased 600 MHz spectrum (with debt that, again cannot claim that spectrum as collateral), the company carries $14.9 billion of net debt. That’s a debt load of 5.3x Dish’s recurring EBITDA.”

However, in another analyst note sent out by Barclays this morning titled “Dish misses headline numbers but does it matter,” analyst Kannan Venkateshwar noted that SoftBank Group is rumored to be circling Dish as it looks for a U.S. asset to tie up with its struggling U.S. wireless company, Sprint. 

“We believe Dish is likely to be important for most wireless players for different reasons,” Venkateshwar said.

Dish is scheduled to conduct its quarterly earnings call at 12 p.m. EST today, and analysts will be eagerly awaiting Chairman and CEO Charlie Ergen’s possible comments on the SoftBank purchase rumors.