Dish Network (DISH) recently reported its Q4 2013 earnings. While the company reported 6% growth in revenues, the earnings per share (EPS) jumped 37% to $0.63 as compared to $0.46 in the prior year period.  Dish has once again delivered impressive results driven by pay-TV subscriber gains and higher average monthly revenue per subscriber (ARPU). The promotional schemes, such as a free iPad offer, seem to have attracted more customers for the satellite company. We continue to believe that satellite TV will grow in the near term and Dish will see continued benefit from its AutoHop feature, which will help it gain more customers. The AutoHop allows commercials to automatically be removed from the recordings on DVR.
During the fourth quarter, the company added 8,000 pay-TV subscribers taking the total number of subscribers to 14.057 million. The company also managed to reduce the average monthly subscriber churn rate to 1.53%, as compared to 1.66% in the September quarter.  However, the subscriber addition cost went up by more than 10% to $866 for 2013. The increase was largely due to capital expenses and advertising expenses associated with its Hopper receiver systems.  Dish continued to see growth in ARPU, which amounted to $80.37 in 2013 as compared to $76.98 in 2012.  The company further implemented a price increase on January 17, which became effective with February 2 bills. 
We currently have a price estimate of $50 for Dish, which we will soon update based on the fourth quarter earnings announcement.
As far as wireless plans are concerned, the company is currently focused on the near term spectrum auctions. The H-Block auction is ongoing now, and through 109 rounds of bidding, there had been $1.52 billion worth of provisional winning bids.  Dish is likely to be the winner of these airwaves and it also controls spectrum adjacent to a portion of the H Block, called AWS-4. Later this year, the government will sell rights to higher band frequencies called AWS-3. However, the most important auction for wireless operators will be the 600 megahertz band, and would be the lowest and most valuable frequency sold yet. It is currently used by television stations and will be resold to carriers for wireless use. 
Dish has been amassing spectrum over the past few years and plans to offer wireless services in the U.S. Charles Ergen, co-founder and chairman of Dish Network, stated that there is a whole generation of individuals who are not going to buy into the traditional pay-TV model because they either want to watch only particular shows or they want to watch shows as per their schedule.  This will lead to a decline in the pay-TV industry and Dish wants an engine that continues to fuel growth for the company. For Dish, that engine will be a wireless service offering. Dish with its initiatives in wireless should end up with about a little over $5 billion investment in spectrum and have about 50 megahertz of potentially downlink spectrum.  This is good for Dish as the market value of its existing spectrum could already be as much as $12 billion.  While Dish is bidding for H-Block auction, Time Warner Cable (TWC) has agreed to merge with the mammoth Comcast (CMCSA). There are some weighty activities going around in the industry and we are monitoring them closely to see how events unfold from here (Read More – What Does Time Warner Cable’s Merger With Comcast Mean For The Industry?).
- Dish Network’s SEC Filings
- Dish Network Management Discusses Q4 2013 Results – Earnings Call Transcript, Seeking Alpha, Feb 21, 2014
- H Block auction likely to end within days, with Dish in the lead, Fierce Wireless, Feb 21, 2014
- FCC to Hold Major Auction of Wireless Airwaves, The Wall Street Journal, Jan 21, 2014
- Dish Acts to Boost Value of Spectrum, The Wall Street Journal, Sep 13, 2013
Disclosure: No positions