Dish Loses 23,000 Pay TV Subs in First Quarter, Earnings Exceed Estimates

The satellite TV company, which is led by Charlie Ergen and has been in a carriage showdown with Viacom, didn't break out the number of Sling TV subs.

Dish Network on Wednesday reported higher-than-expected first-quarter earnings as it continued to lose pay TV subscribers.

The satellite TV company, led by Charlie Ergen, posted earnings of $389 million, compared with $351 million in the year-ago quarter. That exceeded Wall Street expectations. Quarterly revenue rose to $3.79 billion from $3.72 billion, coming in slightly below analysts' consensus forecast.

Dish lost 23,000 net pay TV subscribers in the first quarter to end it with more than 13.87 million. In the fourth quarter, the company had lost 12,000 net subscribers, but in the first quarter of 2015, it had added about 35,000. The Dish losses for the latest period come as analysts expect gains for big cable operators, such as Comcast, Time Warner Cable and Charter.

The company in its earnings report once again included subscribers for its Sling TV streaming service, but didn't detail how many of those it added in the quarter or how many it had in total at the end of December.

Dish also said it added approximately 5,000 net broadband subscribers in the first quarter, bringing its total broadband base to approximately 628,000 subscribers.

Viacom on Tuesday began warning Dish customers that its channels, including Comedy Central, MTV, Nickelodeon and TV Land, could go dark in a day or so if the conglomerate and the satellite firm can't agree to a new carriage deal. The threat of losing access to Dish's subscribers sent Viacom's stock lower on Tuesday.

"We believe that an agreement will ultimately be reached," said Jefferies analyst John Janedis in a report on Wednesday. "However, in the interim, we estimate that a blackout could have a $25 million-$30 million per-month month impact on affiliate revenue, in addition to being a near-term overhang for the stock."

He argued that a blackout was "not a game-changer," but added: "Following extensions to carriage negotiations, Viacom is opting to go dark on Dish for its 18 nets. We previously noted the possibility of such a blackout occurring, however, a major [pay TV operator] dropping a major content provider would be an unprecedented move, and thus we see it unlikely that an agreement is not reached."

Dish is holding a noon ET earnings conference call, and the Viacom carriage showdown is expected to be a topic on it, analysts said.

"Resumption of carriage is important for Viacom as affiliate revenue in fiscal year 2016 is already negatively impacted by rate adjustments related to AT&T DirecTV ,and headlines around droppability related to Dish have been in the headlines for 18 months," Janedis said. "Meanwhile, satellite packages are expected to continue losing share to cable."

He added: "With Viacom's decision to go dark, we believe that management is taking a hard line in an attempt to mobilize negotiations. It is unlikely that the negotiations have been hung up solely on price, but rather the inclusion of other components — such as data, Sling TV and TV Everywhere."