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DISH Network Downgraded to Hold on Competitive Woes

Zacks Equity Research
Updated

On May 13, Zacks Investment Research downgraded DISH Network Corp. DISH by a notch to a Zacks Rank #3 (Hold).

DISH Network reported strong financial results in the first quarter of 2016, with the top line meeting the Zacks Consensus Estimate and the bottom line beating the same.

However, the pay-TV business model continues to face stiff competition from the latest over-the-top (OTT) online video streaming service offerings. At the end of the first quarter of 2016, DISH Network had approximately 13.874 million pay-TV subscribers, compared with 14.013 million at the end of the first quarter of 2015. The company lost 23,000 pay-TV subscribers in the reported quarter, compared with the gain of 35,000 in the year-ago quarter.

Moreover, DISH Network is likely to face challenges as the pending merger between Time Warner Cable Inc. TWC and Charter Communications, Inc. CHTR is almost complete. Interestingly, after the completion of the deal, Charter Communications would be elevated to the position of the second-largest cable MSO in the U.S. after Comcast Corp. CMCSA.

The merged entity, with solid subscriber strength of almost 24 million, would attempt to throttle its network on running any third-party based video streaming app. This would be detrimental to Sling TV's prospects, going ahead.

Additionally, DISH Network’s top-line growth may remain under pressure as the company has been failing to strike any deal with wireless operators to deploy a nationwide wireless network. Also, going forward, the company’s margins may face pressure if it is unable to renew its long-term programming contracts on favorable pricing and other economic terms.

Nonetheless, DISH Network’s extensive portfolio of spectrum – arguably, the most important component of wireless networks – is a major long-term positive for the company.

Interestingly, DISH Network is transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider, in a bid to reduce its subscriber churn rate.

Moreover, launch of DISH Network’s Internet TV service, Sling TV, has been a major positive as foraying into the Internet TV sphere has somewhat helped the company in minimizing losses incurred in the legacy pay-TV business.

Additionally, renewal of various multi-year carriage agreements with television companies should spur growth for the company, going ahead. Meanwhile, the company is poised to benefit from increased expenditures by broadcasting companies in the digital advertisement space.

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DISH NETWORK CP (DISH): Free Stock Analysis Report
 
COMCAST CORP A (CMCSA): Free Stock Analysis Report
 
TIME WARNER CAB (TWC): Free Stock Analysis Report
 
CHARTER COMM-A (CHTR): Free Stock Analysis Report
 
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Zacks Investment Research