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Boost lost 81,000 subscribers in Q1, ending the quarter with 7.3 million customers
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Broadband losses were 26,000 and pay TV losses tallied 348,000
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Amid the losses, EchoStar needs to raise capital, stat
Yikes.
EchoStar reported more subscriber losses in each of the main areas of its business — wireless, broadband and pay TV, ending Q1 with a net loss of $107.38 million compared to net income of $253.53 million in the year-ago quarter.
The company desperately needs to raise capital before $2 billion of debt comes due in November, and its Dish Network subsidiary faces another big and costly FCC network buildout requirement to meet in 2025.
On top of that, bondholders filed suit against the company for a series of asset transfers it conducted earlier this year.
While speculation about a potential bankruptcy has been swirling for months, “the bottom line is that we now see bankruptcy in the next four to six months as the most likely outcome,” wrote analyst Craig Moffett of MoffettNathanson Research in a report for investors today.
Analysts at New Street Research (NSR) concluded: “We estimate that the company has enough cash to get through the next two quarters, but barely.”
In other words, EchoStar has roughly five months to raise the requisite capital, according to NSR's Jonathan Chaplin.
EchoStar reiterated the same warning it gave during its last earnings report: “Substantial doubt exists about our ability to continue as a going concern,” the company stated in its latest 10-Q. “We do not currently have the necessary cash on hand and/or projected future cash flows to fund fourth quarter operations or the November 2024 debt maturity.”
During the Q1 earnings conference call — which EchoStar Chairman Charlie Ergen did not attend — EchoStar President and CEO Hamid Akhavan fielded questions from analysts about the financial picture, including one about the strategy where “Dish doesn’t or shouldn’t file for bankruptcy.”
Akhavan replied: “The recipe is very simple. Candidly, can we push the maturities out … We’re very bullish about our prospects for operating the business if we have the capital to execute. While we’re working on that financing, we’re not sitting on our hands and letting those opportunities expire. We continue to develop them.”
Regarding the bondholder lawsuit, Akhavan said they’re confident that the actions they took moving those assets around are fully in compliance and there are no plans to unwind those moves. Asked if bondholders fully appreciate the risk to them in terms of the underlying asset value, he said he could not answer on their behalf but that it’s a good question to pose to them.
Wireless reboot
The company expects to do a reboot of the postpaid wireless product in the second half of 2024.
The initial approach to the postpaid market was rushed, Akhavan said. The company spent considerable time developing the 5G open Radio Access Network (RAN) infrastructure and coverage — which was paramount and required under the terms of its FCC spectrum licenses – but not enough focus was given to the product presented to consumers.
“The product did not meet all of our expectations” in terms of feature sets, activations and support, he said. “We have been working on improving those things.”
For example, global roaming is a requirement for a postpaid product and it wasn’t part of their offer until the first quarter of this year.
Turning it all around
While many of the numbers in EchoStar’s earnings were negative, Akhavan pointed to some promising metrics in the wireless business and said Boost Mobile was net positive in subscriber growth for the month of March. He expects that trend to continue.
The company is also making a bigger effort to maintain the prepaid business; there was an overemphasis on the postpaid business at the expense of prepaid, and “we’re kind of bringing it back now, both of them,” he said.
To improve its owner’s economics, Dish successfully initiated the migrations of “hundreds of thousands” of customers from its MVNO partner networks to its own.
In Q1, five out of 10 devices sold and activated at Boost were compatible with the Dish network and three out of five were activated directly on its network, said John Swieringa, president of Technology and chief operating officer. The company now has network compatible devices available from all of its major OEMs.
Of course, all of the concerns about EchoStar’s ability to remain as a “going concern” raise questions about Dish’s ability to meet a significant FCC milestone in June 2025.
Swieringa said Dish has been in an accelerated deployment mode for a few years now and it has identified sites and back-up sites for the 600 MHz deployment. “The team is ready to roll on this,” he said, adding that they’ve got the time they need to satisfy the 600 MHz build requirements that come due in 2025.