Dish Chairman Says Potential Merger With DirecTV Is "Inevitable"

Sling TV - H - 2017

The company's total customer losses were less pronounced in the fourth quarter than in the year-ago period, but it reported a decline at its streaming service in addition to its traditional satellite TV business.

Dish Network on Wednesday said it lost 194,000 net pay TV subscribers in the fourth quarter, compared with a loss of 334,000 in the year-ago period when carriage disputes with Univision, which has since been settled, and HBO hit results.

The company recorded its first-ever subscriber decline at streaming service Sling TV in addition to a drop at its traditional satellite TV business.

In the fourth quarter, Dish, led by chairman Charlie Ergen, lost about 100,000 traditional pay TV subscribers, while in the fourth quarter of 2018, the company had lost 386,000. It also lost about 94,000 Sling TV subscribers in the final quarter of 2019, compared with a year-ago gain of 50,000.

Dish had a total of 11.99 million subscribers at the end of 2019 compared with 12.32 million at the end of 2018. The latest figure includes 9.40 million traditional pay TV customers and 2.59 million subscribers of the Sling TV streaming service, compared with 9.90 million and 2.42 million, respectively, at the end of 2018.

"We lost approximately 336,000 net pay TV subscribers during the year ended December 31," compared to a loss of approximately 920,000 in 2018, Dish said in a regulatory filing, citing "fewer net Dish TV subscriber losses, partially offset by fewer net Sling TV subscriber additions."

It said it lost approximately 511,000 net Dish TV subscribers during the year, compared with the loss of about 1.13 million in 2018. Dish added approximately 175,000 net Sling TV subscribers during the year, down from 205,000 in 2018. "This decrease in net Sling TV subscriber additions is primarily related to increased competition, including competition from other OTT service providers, and to a higher number of customer disconnects on a larger Sling TV subscriber base, including the impact from Univision, AT&T and Fox regional sports networks’ removal of certain of their channels from our programming lineup," the company explained.

In the third quarter, Dish had added 148,000 net TV subscribers as growth at Sling TV outweighed traditional pay TV declines. This marked the first such overall subscriber gain for Dish since it had added 39,000 in the fourth quarter of 2017.

Dish's fourth-quarter earnings of $389 million were up compared with the $337 million recorded in the year-ago period. Revenue fell 2 percent to $3.24 billion.

Dish's Ergen during an afternoon analyst call discussed his company likely tapping strategic partners to help offset the steep cost for its pending wireless phone rollout. Wall Street watchers have speculated Dish will turn to Silicon Valley for a strategic investor as it builds out a cellular network, with Amazon or another tech platform seen as possible long term investors.

In response, Ergen was coy about potential industry partners. "Nothing has really changed in terms of what our strategy is. We look at strategic partnerships in a number of ways ... In terms of anybody that we look at strategically, they have to be aligned on our vision of where wireless can go," Ergen said.

A tie-up with Amazon would possibly see the e-commerce giant ensure connectivity with Dish's eventual cellular network and Amazon Prime subscribers possibly purchasing a phone plan through Dish at a discount. Ergen also on the call said a long-rumored merger of DirecTV and Dish was "inevitable" — despite reticence from AT&T to divest itself of the asset — as neither satellite TV-delivered linear TV service was growing.

"The growth in TV is not coming from linear TV providers, but from huge programmers," Ergen told analysts with a reference to streaming era competition. He conceded regulatory issues stood in the way of a potential DirecTV-Dish merger, but added industry logic made a transaction likely at some point.

"You just can't swim upstream against a real tide of big players," Ergen argued. If AT&T eyes possible buyers for DirecTV, Dish is seen as an obvious suitor, especially after it tried and failed to merge with the satellite TV provider in 2002. Ergen on the afternoon analyst call also made another overture to the Sinclair Broadcast Group to possibly conclude a deal that would see the former Fox Regional Sports Networks return to his distribution platforms.

But he repeated Dish sought a fair price, not a steep one, for the regional sports programming. "It doesn't take real rocket science to know what our customers watch and how much they watch and what the value of the programming is," Ergen argued.

The RSNs have been dark on Dish and Sling since July 2019, and Ergen insisted they are worth even less in value today than last year. "We've had a great relationship with Sinclair for some time. But whether you can put humpty dumpty back together remains an open question," Ergen cautioned.

Feb. 19, 10 a.m. Updated with comments by Dish Network execs on an analyst call.