Analyst: Sling TV Sub Growth ‘Hitting a Wall’

MoffettNathanson Craig Moffett also questions Dish’s dwindling spectrum options
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Sling TV, Dish’s OTT-TV service for cord-cutters, has been helping to blunt the  losses coming way of Dish’s core satellite TV business, but its contribution appears to be slowing rapidly, according to MoffettNathanson analyst Craig Moffett.

Dish no longer breaks out Sling TV subs, but reported Thursday that it lost 281,000 net video subs in Q2, the company’s largest quarterly video sub loss ever.

“This time, combining the two businesses likely obscures how quickly Sling TV is hitting a wall.” Moffett wrote, estimating that Dish added just 49,000 Sling TV subs in Q2.  “For a one-year-old OTT service, that may be an even more alarming result than the huge 330K subscriber loss that same Sling TV result implies for the core satellite TV business.”

Moffett also weighed in on Dish’s spectrum position – and the shrinking timeline on what it can or intends to do with it – amid the specter of FCC’s broadcast incentive auctions. Moffett held that it’s “widely accepted” that bidders won’t have anywhere near $88 billion to spend on that spectrum, which could cause the auction to spill into next year.

“Time is not on Dish’s side” when it comes to making a decision on what to do with its spectrum holdings, Moffett said, noting that a delay in the auction means a delay on when Dish can enter serious talks about its spectrum.

“Dish faces build-out requirements as early as next year, or in the event of a now inevitable 2017 miss, in early 2020,” the analyst said. While that might sound like plenty of runway, runway, “to the ears of a network engineer, it sounds perilously close.”

Moffett said Dish’s 700 MHz E-Block licenses, acquired in 2008, require that Dish achieve 40% signal coverage by March 2017, and with no shot at that, moves that buildout requirement to 70% by March 2020. The bulk of Dish’s AWS-4 band faces the same build-out timeline, he said.

“By the time the window opens for negotiations, Dish will already be facing what are potentially unrealistic timelines, reducing its negotiating leverage with counterparts who know better than anyone how long it takes to build a network.”

Unless Dish is willing to sell spectrum at a “distressed” price, he said, the delay might mean Dish’s only alternative is to build out a wireless network.

“The costs of even a sham network would run into the billions…but the cost of not building one would be even greater,” Moffett wrote.