Dish Network misses Street and loses subscribers

NEW YORK (Reuters) - Dish Network Corp's quarterly profit fell short of Wall Street estimates as the satellite TV provider's subscribers defected to cheaper plans offered by phone companies.

The company also shed some light on its plans to unite its disparate group of assets. Led by its chairman, billionaire Charlie Ergen, the company has bought video store chain Blockbuster and companies with wireless spectrum such as DBSD and TerreStar in recent months.

On the conference call, Dish Chief Executive Joe Clayton said the company would consider offering broadband services, but provided no specifics.

"We're a video pay TV company, so video is our primary objective as we go forward. But, you know, we're also very interested in wireless broadband," he said.

The executive told analysts the company was keeping its options open and its long-term strategy could include "additional acquisitions, partnerships, alliances, or even parting with assets that might not prove to be strategic going forward."

For now, Dish said it had to deal with a tough environment in pay TV, where Verizon Communications and AT&T are offering aggressive discounts to lure subscribers from Dish and its rival DirecTV, as well as the cable companies.

Plus, some subscribers dropped their pay TV service in favor of cheaper online alternatives such as Netflix, a practice called cord-cutting.

"A resurrection of the cord-cutting thesis seems almost inevitable here," said Bernstein Research's Craig Moffett in a note. "Rising prices for pay TV, coupled with growing availability of lower cost alternatives, add to a toxic mix at a time when disposable income isn't growing."

Dish lost 135,000 net subscribers to end the quarter with 14.1 million subscribers.

Last week, its main rival DirecTV added 26,000 subscribers, less than half the number analyst expected as phone companies such as Verizon gained traction with its TV services.

Dish showed improvement in its monthly churn rate, a measure of customer losses, which fell to 1.67 percent from 1.78 percent for the year-ago period.

Brean Murray analyst Todd Mitchell said that was a sign the company was retaining its subscribers better.

In the past, Dish had cut its prices aggressively to add subscribers, hurting its revenue and profits. In recent quarters, it raised its prices, which is improving its average revenue per customer, but hurting its subscriber additions.

"If we do this smartly, I think we can... force the customer to move up to better packages, and that's our focus with our new advertising and our new commercial offers," CEO Clayton said.

Dish's average revenue per customer rose to $78.06 from $73.05 last year.

The second-largest U.S. satellite TV provider posted net income of $335 million, or 75 cents per share, which missed Wall Street estimates of 79 cents a share according to Thomson Reuters I/B/E/S.

A year earlier, it earned $275 million, or 57 cents a share.

Revenue increased 13 percent to $3.59 billion, topping the average Wall Street estimate of $3.41 billion.

Dish's revenue from equipment and merchandise sales rose sharply. This was driven by Blockbuster, which rents and sells movies and video games.

Despite the revenue boost, Brean Murray's Mitchell sees the Blockbuster acquisition as the long-term drag on Dish.

"I doubt Blockbuster will be as profitable as Dish because it's a retail business," he said.

In July, Dish announced that Blockbuster would keep the majority of its stores open.

On Tuesday, Dish's sister company EchoStar, which makes digital set-top boxes, and posted its second-quarter results. Its net income was $18 million, or 21 cents per share, compared to a loss of $41 million or 49 cents per share a year ago. Revenue fell 3 percent to $584 million.

Dish fell 6 percent to $21.51, and EchoStar rose 2.9 percent to $26.00 on Nasdaq at mid-afternoon.

(Additional reporting by Saqib Iqbal Ahmed; Editing by Derek Caney and Richard Chang)