Dish’s shrinking pay-TV subscriber base
In the previous parts of this series, we learned about some of the benefits that Dish (DISH) would get from a merger with T-Mobile (TMUS). We learned that Dish could gain access to the fastest-growing US postpaid subscriber base—and that much of this base is made up of high-value postpaid phone users. The T-Mobile merger would also give Dish the opportunity to use the wireless carrier’s expertise to deploy service on its spectrum holdings. This would be particularly significant for Dish considering its dwindling base of pay-TV subscribers.
As you can see in the above chart, the satellite provider continues to lose pay-TV subscribers each quarter. In 1Q15, Dish’s pay-TV subscriptions declined by ~1.8% year-over-year to reach ~13.8 million. The company reported net losses of 134,000 pay-TV subscribers during the quarter.
Dish’s competitive positioning
Dish continues to face competitive challenges in the pay-TV industry. Satellite TV faces competition from telecom, cable, and OTT (over-the-top) companies. Cable and telecom companies such as Comcast (CMCSA) and AT&T (T) provide video services over their networks. And OTT companies such as Netflix (NFLX) don’t own the network on which their users stream videos.
To participate in the OTT growth story, Dish launched Sling TV in February 2015. According to a report by Re/code, Sling TV’s subscriber base numbers around 250,000. However, the service has faced some significant outages since its launch.
Instead of investing in Dish’s stock, you may get diversified exposure to the company by investing in the PowerShares QQQ Trust, Series 1 (QQQ). The ETF invested ~0.3% of its portfolio in the company as of June 30, 2015.
The iShares Russell 1000 ETF (IWB) offers even greater diversification. The ETF had ~0.1% exposure to the company at the end of June.