DISH Network Corp. (DISH) reported third quarter 2011 financial results, where the bottom line exceeded the Zacks Consensus Estimate but the top line fell short of the same. Higher revenue was mainly attributable to an increase in subscriber related revenue and contribution from Blockbuster.
We remain optimistic about management’s bullish outlook on higher subscriber additions in the upcoming quarters. DISH Network has already started deploying new promotional strategies like distributing the Blockbuster Movie Pass to new DISH customers.
Moreover, we continue to believe that DISH Network has robust future growth prospects as the company plans to layout its two-way hybrid satellite-terrestrial broadband network. The company has already bought huge spectrums, which we believe will be utilized in the upcoming years to launch its first broadband service.
However, continuous loss of subscribers due to lack of proper marketing efforts coupled with stiff competition from major telecom players like AT&T Inc. (T) and Verizon Communication Inc. (VZ), as they continue to launch their fiber-based network in order to provide video services, will remain headwinds going forward. Moreover, with the deployment of 4G/LTE networks by these carriers across the country, the popularity of IPTV service will gain further traction, thus resulting in higher subscriber loss.
Furthermore, higher programming cost charged by the broadcasting companies will be transferred to the customers, which in turn will force them to watch TV shows on Internet at attractive rates.
Currently, U.S. economy is showing signs of deterioration, resulting in a 2% per quarter growth. In the ensuing quarter, the residential housing segment growth in U.S. was pegged at 1.6%, which we believe will continue to effect the growth of pay-TV industry as a whole.
We, thus maintain our long-term Neutral recommendation on DISH Network. Currently, it has a short-term Zacks #3 Rank (Hold) on the stock.
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