Dish loses 294K subscribers across satellite, Sling TV in Q2

Dish during Q2 earnings made headlines with its announcement of a merger with EchoStar in an all-stock deal. But analysts at MoffettNathanson don’t think it will be a big enough lifeboat for the provider that the firm says isn’t generating enough cash from its core businesses including pay TV and is losing subscribers across all units, while trying to fund the completion of a 5G network buildout.

In a Monday note to investors analyst Craig Moffett said Dish’s EchoStar merger is all about access to the satellite infrastructure player’s $1.7 billion cash on hand and potentially more borrowing capacity for Dish. And while not insignificant, the firm doesn’t see it as the answer to Dish’s woes at a time, as Moffett pointed out, the company doesn’t have access to debt and equity markets.

“Dish’s free cash flow, even with slower capital spending, is now firmly in negative territory,” wrote Moffett in an August 8 note to investors. “The once-core satellite TV business is imploding. The once-savior Sling TV is shrinking. The springboard-to-wireless Boost pre-paid business is unraveling. The transition-to-post-paid Boost Infinite is years delayed and nowhere to be seen. Consolidated EBTIDA cratered by more than 40% YoY.”

The firm noted that Dish’s 5G network is far from being ready and its legacy pay TV businesses that were supposed to fund its move to become a fourth wireless competitor “are collapsing faster than feared.”

On the pay TV front Dish lost 294,000 net subscribers in Q2, better sequentially but worse compared to Q2 2022 when it lost 257,000.  The second quarter losses include 197,000 net satellite Dish TV subs and 97,000 net losses for virtual MVPD Sling TV.  While the satellite losses were roughly on par with the 202,000 Dish lost in the same period a year ago, analysts at MoffettNathanson noted it's against a steep decline in the overall base.

Dish’s satellite TV base now stands at 6.9 million, down by 1.2 million from its tally a year ago.  According to Moffett, the results leave the core satellite TV businesses contracting at an 11.4% annual rate, marking “a new all-time worst rate of decline.”

And vMVPD Sling isn’t making up for the exodus of traditional pay TV subs as the streaming live TV service that competes with the likes of YouTube TV and Hulu + Live TV continued to lose subscribers. The Sling TV base now stands at just 2 million. Sling’s Q2 losses were worse than the 55,000 net customers it shed in the same quarter a year prior.  Similar to the satellite TV side, Moffett cited Sling’s subscriber base as experiencing “the fastest rate of decline ever,” shrinking 8.8% year over year.

While Dish’s net pay TV losses continue to stack, Moffett said it’s a long-term decline in gross additions for the satellite TV business, rather than churn, that’s the main issue as the latter metric remained steady in Q2 at 1.51% compared to a year ago.

Per the firm Dish had 120,00 gross additions in Q2, which is 23.1% lower than the same period of 2022. Looking to a longer timeframe, Moffett noted quarterly net additions were 82% lower than 11 years ago.

“The drop in gross additions, particularly when viewed over a longer period, is breathtaking,” wrote Moffett, adding that gross additions are the clearest measure of the appeal of any subscription service. The analyst went on to say that while there could well have been impacts from a prolonged cybersecurity incident Dish experienced earlier this year, “the longer-term trend here is the real story.”

Alongside subscriber declines Dish saw pay TV revenue decrease 5.6% year over year to $2.97 billion, with blended Sling and Dish TV ARPU of $104.07.

Moffett contends that Dish’s “rural retreat strategy” for pay TV, which the firm said served it well during the pandemic, is no longer insulating the satellite business from accelerating declines.

“As terrestrial fiber builds bring wired networks, and cord-cutting optionality to rural America, it is hard to expect anything other than continued acceleration of Dish’s rate of decline,” wrote the analyst.

Dish’s prepaid Boost Mobile business isn’t helping, as it also recorded declines in revenue alongside subscriber losses and increased churn.  

Essentially, Dish’s legacy businesses aren’t generating enough cash to support Dish’s capital spending needed for the 5G wireless segment, nor is EchoStar, Moffett concluded.

Dish reported consolidated revenue of $3.9 billion, down 7.1% year over year. Adjusted EBITDA of $472 million was down a whopping 45.2%, per Moffett.