Dish Network’s stock dives as subscribers fall with loss of HBO, Univision

Shares of Dish Network Corp. took a dive Wednesday, after the pay-TV services provider reported disappointing earnings, with satellite service subscribers falling below the 10 million mark for the first time in 15 years.

On its post-earnings conference call with analysts, the company blamed more than half of the subscriber losses on the HBO and Univision blackouts. And although the increase in Sling TV subscribers might appear to be a bright spot, Dish disclosed in its annual report that it can actually be a bad thing for the bottom line.

The stock DISH, -7.68% slid 8% in afternoon trade, enough to pace the S&P 500 index’s SPX, +0.28% and the communication services XLC, +0.09% sector’s losers.

Don’t miss: HBO and Cinemax go black on Dish Network over distribution spat.

Earlier Wednesday, Dish reported fourth-quarter net income that fell to $337 million, or 64 cents a share, from $1.39 billion, or $2.64 a share, in the same period a year ago, which included a $1.2 billion benefit from tax reform. That missed the average analyst earnings-per-share estimate of 66 cents, according to FactSet.

Revenue fell to $3.31 billion from $3.48 billion, but was slightly above the FactSet consensus of $3.28 billion.

Net pay-TV subscribers decreased by 334,000 in the quarter, much worse than FactSet consensus of a 245,000 decrease. Dish ended the year with 12.32 million pay-TV subscribers, down 6.9% from last year and less than the FactSet consensus of 12.52 million, as Dish satellite subscribers fell 10.2% to 9.91 million and Sling subscribers increased 9.3% to 2.42 million.

As BTIG analyst Walter Piecyk said, that was the first time satellite pay-TV subscribers dropped below the 10 million market since March of 2004.

And while it might seem encouraging to see Sling TV subscribers increase, Dish said in its 10-K filing with the Securities and Exchange Commission that Sling subscribers on average buy lower-priced programming service than satellite subscribers. “Accordingly, an increase in Sling TV subscribers has a negative impact on our Pay-TV ARPU,” the company stated.

Accordingly, ARPU, or average revenue per user, fell to $85.46 in 2018 from $86.43 a year ago.

Chief Financial Officer Paul Orban said on the post-earnings conference call with analysts that subscriber-related expenses decreased 4%, as a result of fewer Dish TV subscribers. MoffettNathanson analyst Craig Moffett said while that should have helped Dish’s results, the company has instead “plowed” the cost savings into its Sling TV business.

“No doubt that helped Sling’s subscriber numbers,” Moffett wrote. “But it’s a bad trade.”

Dish’s stock has lost 10% over the past three months, while the SPDR Communication Services Select Sector exchange-traded fund has gained 3.1% and the S&P 500 has tacked on 1.2%.

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