Dish Network Earnings: Little New Information as Capital Needs Draw Nearer

Fallout from the system outage that hit Dish Network DISH in February appears to have abated, causing a spike in satellite television customer defections during the first quarter but otherwise not causing much damage. More important, Dish management provided little additional insight into how it intends to raise capital in the coming months. While acknowledging that current market conditions preclude Dish’s ability to issue additional debt (its bonds currently trade at roughly 20% yields), chairman Charlie Ergen commented that the firm has more avenues available to raise capital than people realize. We believe this is correct, but whether Ergen will make the most of these opportunities is an open question. We are maintaining our $19 fair value estimate and believe the stock is significantly undervalued, but the path to realizing value from Dish’s spectrum holdings remains highly uncertain.

Ergen is more interested in demonstrating Dish Network’s wireless capabilities to calm the debt market than undertaking a major financing transaction, such as selling of some of the firm’s spectrum licenses. Dish had 18,000 wireless sites built or under construction at the end of the first quarter, which it believes is more than sufficient to meet the 2023 FCC-imposed construction deadlines. Dish expects to make a big push into the postpaid wireless market later this year, especially once its own billing systems are entirely in place and new iPhone models, capable of fully utilizing the Dish network, are released.

In the meantime, Dish’s wireless business continues to lose ground, shedding 81,000 net customers during the quarter and posting a 3% decline in revenue per customer versus a year ago. Lower costs to use the T-Mobile network lifted the retail wireless business back into the black, but the total wireless effort continues to burn cash, with the EBITDA loss and capital spending totaling nearly $900 million during the quarter.