Dish DBS Corporation -- Moody's says Dish Network's (Ba3 CFR) largest quarterly subscriber losses at its DBS sub reduces financial flexibility

New York, July 21, 2016 -- Moody's Investors Service said that Dish Network Corporation's ("DISH" -- Ba3 CFR) largest quarterly subscriber losses at its satellite pay TV subsidiary, Dish DBS Corporation, reduces financial flexibility for the company. DISH announced with its earnings today that it lost 281,000 pay TV subscribers (at Dish DBS), its biggest quarterly subscriber loss ever. The net subscriber loss even includes its SLING TV subscribers which we believe are growing, so in our opinion, the satellite TV subscriber loss is even greater. We note that the company increased subscription rates in the beginning of the year, increasing ARPU, which most certainly played a role in the defections and helped to improve financial results for the company. However, of concern is the company's sub loss trend which is worsening at the satellite pay TV operation. This is evidenced by year-over-year Q2 comparison against 81,000 and 44,000 subscriber losses in Q2 2015 and 2014, respectively, and year-to-date sub loss count of about 304,000 as compared to the 2015 Q2 year-to-date sub loss of 46,000 subs. These figures are also worse in the context of full year losses of 81,000 and 79,000 in 2015 and 2014, respectively, demonstrating a marked rise in secular pressure. SLING TV sub additions are included in the company's subscriber figures. However, this narrow-bundle pay TV business which is still a relatively new operation for DISH Network, is outside of the DISH DBS intermediate holding company which is the issuer of all of the company's debt. Since there is no recourse to the DISH DBS sister companies that hold the significant wireless spectrum assets and the SLING TV operations, and there is no guarantee from the ultimate parent DISH Network Corp., bondholders are relying only on the Satellite pay TV operation. Our subscriber loss concerns center upon our view that the ability to raise subscription prices is limited and may lead to more rapid losses and eventually, losses will result in a decline in revenue and EBITDA. OTT competition is rising, and we believe that without another revenue source serving bondholders, the company now is in a post maturity phase. Further, if the negative trend and intensity in subscriber losses continues, DISH DBS's financial flexibility and debt capacity will decline ratably.

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