With Subscribership Up, Dish Eyes 2 GHz Buildout, Verizon AWS Deal
An FCC rulemaking on Dish Network’s effort to build a wireless network and the proceeding on Verizon Wireless’s purchase of AWS spectrum from cable operators will impact Dish’s entrance into the wireless business, Chairman Charlie Ergen said Monday during an earnings call. With comments in the proceeding on flexible use of the 2 GHz satellite band due May 17, Ergen said filings may be similar to those submitted during the proceeding related to Dish’s purchase of DBSD and Terrestar last year (CD Nov 8 p4). Some comments may touch on interference, he predicted. The GPS industry said previously “that we don’t interfere,” Ergen said. “I don’t think there’s surprises there and we've done a lot of homework in the interference issues."
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Dish will be conservative about how it enters the wireless business, “but that doesn’t mean that you don’t go out and do things,” Ergen said. The company could build out a network alone or sell the assets, but those options “are the far-end extremes,” he said. It’s likely to be somewhere in between, he said: “It makes sense to work with people already in the business” who have towers, spectrum and handsets. Building the network from scratch is likely to be a four-year process, Ergen added.
Ergen called Verizon Wireless’s spectrum buy from cable companies “a key variable that will determine our ability to enter the business and whether we can be successful.” The effort is worthy of investigating, he said. Verizon Wireless’s “foray into the cable industry is a potential cause for concern,” he said: It means two competitors who may “passively agree not to compete against each other.” Like the 2 GHz rulemaking notice, the Verizon/cable AWS deal decision also can be made this year, and “it will probably set the landscape for the wireless industry going forward,” he added.
Dish Q1 revenue rose 11 percent to $3.58 billion from the year-ago quarter. Profit dropped from $549 million to $360 million, Dish said. The company gained about 104,000 subscribers on a net basis from the year-ago quarter, compared to about 58,000 net additions then. Dish was over the 14 million mark on March 31 for subscribers, and monthly churn dropped to 1.35 percent from 1.47 percent, it said. That’s due to “not raising prices in the first quarter as competitors did,” said CEO Joseph Clayton. Subscriber-related revenue increased by roughly 1 percent, said Robert Olson, chief financial officer. Pay-per-view and ads were lower in Q1 than in Q4, and the company expects a rebound in Q2, Olson said.
Ergen said he doesn’t think customers were inconvenienced by the decision to stop carrying AMC. Programmers “have devalued programming content by making it available through multiple outlets,” like iTunes and Netflix, he said. Customers have more flexibility in terms of getting the programming, therefore, “it’s not quite the same as if something were exclusive,” he added.
Dish’s narrative remains more about spectrum than satellite TV, said Craig Moffett of Bernstein Research. Ergen’s steady stream of commentary “has reinforced that the risk of a large-scale network construction project is very real,” the analyst said in a research note: Mixed results in the core business “underscore the reasons Ergen appears fixated on adding a wireless component to the video mix.” Dish’s results were below expectations, said Evercore Partners analysts. There were higher-than-expected operating expenses and lower average revenue per user, they said. Key risks include the company “not selling its spectrum,” they said: Ergen controls the voting interest in Dish “and his interests might sometimes be at odds with the public shareholders.” Wells Fargo’s Marci Ryvicker said Dish had a great quarter: Subscribers “were much better than expected due to substantially lower churn, which we view as the most important metric.”