3rd UPDATE: Dish Network Profit Down But Customer Growth Up
(Updates with analyst comment, background)
By Roger Cheng
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Dish Network Corp. (DISH) posted a decline in its
third-quarter profit, but the satellite TV provider's subscriber growth
accelerated thanks to aggressive promotions.
Dish, Englewood, Colo., had broken a string of quarterly customer defections
by returning to growth in the prior quarter, and saw a nearly ten-fold increase
in new subscribers in the most recently reported period. The company was helped
by DirecTV Group Inc. (DTV), which let some of its lower end customers leave the
service after cutting back on its retention programs.
Dish was able to pick up some of those customers, as well as cable subscribers
through discounted services and promotional pricing, but the growth came at a
cost: the company's revenue fell shy of Wall Street expectations.
The company also issued a one-time dividend of $2 a share, a surprising sign
of strength since the company tends to avoid shareholder payouts. The move,
however, is seen as a temporary positive signal, according to analysts.
"The net net of this Rorschach test of positives and negatives is more good
than bad, but much more narrowly so than it first appears," said Craig Moffett,
an analyst at Sanford C. Bernstein & Co. LLC.
Dish shares recently rose 5.7% to $20.26, while DirecTV rose 0.4% to $28.70.
Dish had been hit hard over the past year because its lower end base of
customers were more susceptible to the economic downturn. But the company has
since positioned itself as a lower-priced alternative to more expensive service
offered by the cable providers, telephone companies and DirecTV. DirecTV on
Thursday reported a slowdown in new customers and a rise in turnover during the
same period.
Dish posted a profit of $81 million, or 18 cents per basic share, from $92
million, or 20 cents a share, a year earlier. The previous year's results
included a $106 million loss on marketable investment securities. The company
didn't provide details on items in the most recent period.
Revenue decreased 1.5% to $2.89 billion.
A survey of analysts by Thomson Reuters anticipated 43 cents on revenue of $
2.93 billion. Analysts' estimates usually exclude the effects of one-time items.
The company gained 241,000 net subscribers during the third-quarter, its
second consecutive period of growth after a year of declines, bringing its base
to 13.9 million. The staggering growth took Wall Street by surprise; in the
second quarter, Dish added 26,000 customers. The rate of customer defections
also moderated, falling to 1.6% from 2% a year ago.
"Dish proved that the company is capable of adding subs, something investors
had questioned, and that it can do so at a reasonable cost," said Vijay Jiyant,
an analyst at Barclays Capital.
But average revenue per user was $69.51, a slight decline from a year ago.
Investors had been looking for an uptick in the metric.
Sister company EchoStar Corp. (SATS), which spun off from Dish at the start of
2008 and still relies on the company for most of its business, reported a profit
of $293.9 million, or $3.45 per share, compared with a year-earlier loss of $
307.9 million, or $3.43 per share.
The most recent period saw $338.2 million in gains from investments and fair-
value accounting, while the previous year included $261 million in unrealized
losses from the same.
Revenue decreased 22% to $483 million.
EchoStar rose 3% to $20.48.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com
(Joan E. Solsman contributed to this report)
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(END) Dow Jones Newswires
11-09-091153ET
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