UPDATE 4-Dish says closer to deal to keep Disney networks on board

Tue Nov 12, 2013 3:41pm EST

(Adds comments from conference call, new analyst comments)

By Liana B. Baker and Sinead Carew

Nov 12 (Reuters) - Dish Network Corp is closer to reaching a large-scale programming deal with Disney that would help the satellite TV provider avoid a possible blackout of popular networks such as ABC and ESPN, Chairman Charlie Ergen said on Tuesday.

He added that he is keeping the company's options open with regards to possible alliances for use of billions of dollars worth of wireless spectrum the company has amassed.

Shares rose more than 5 percent after the No. 2 U.S. satellite TV company reported better-than-expected subscriber numbers and revenue in the third quarter.

Disney and Dish's programming agreement expired at the end of September, but they have been in discussions and have so far averted a blackout of Disney's top networks such as ABC and ESPN for the satellite provider's 14 million customers.

Ergen said that Disney is seeking a long-term contract lasting several years and "both sides are trying to look at where the technology is going...and what the world might look like in several years," echoing comments from Disney CEO Bob Iger last week.

Dish may be trying to get more flexibility out of Disney in a new contract that would include better digital rights and the ability to put channels on different tiers, said ISI analyst Vijay Jayant.

WIRELESS

Ergen also said it was too soon to finalize Dish's strategy regarding the wireless spectrum the company has spent billions amassing. He analysts he would likely know more early next year after upcoming auctions of spectrum controlled by the government and bankrupt communications firm LightSquared.

Ergen noted that anti-collusion rules will force a pause in any negotiations between applicants in the government auction starting from Nov. 15.

The executive, who founded Dish 33 years ago, said he would look for ways to use wireless spectrum to enhance its video offerings rather than on areas such as voice, data and texting services which traditional wireless operators already "do pretty well."

"We have to make our video ubiquitous so that's our focus," he said. "It doesn't mean that we would do other things but ideally it would be video-centric."

Otherwise Ergen said that he is keeping all options open, from the possibility for a purchase of No. 4 U.S. mobile operator T-Mobile US, to forging a partnership, building a wireless network or even selling Dish's spectrum.

Ergen also said that the news today that US Airways and AMR had reached a government antitrust settlement on their merger could bode well for a deal one day with DirecTV because it means the government is willing to "negotiate things." The two satellite companies attempted a merger that was blocked by regulators in 2001.

"There's obviously a business case that makes a lot of sense for consolidation in the satellite industry," Ergen said.

RESULTS

Dish added a surprise 35,000 video customers in the quarter. Wall Street analysts, on average, had looked for Dish to lose 39,000 subscribers, according to market research firm StreetAccount. Revenue also topped analysts' estimates.

The gains underlined how satellite services are gaining customers by undercutting cable rivals on price. DirecTV also added more customers than expected in the quarter, while cable providers Time Warner Cable Inc, Comcast Corp and Charter Communications Inc all lost video subscribers. Dish also got a bit of a boost from Time Warner Cable's protracted fight with CBS Corp.

"Dish's Q3 operating results were surprisingly good, as were DirecTV's, boosted perhaps by the travails at Time Warner Cable, which got smoked in its programming dispute with CBS," said Craig Moffett, a research analyst at MoffettNathanson.

Revenue generated per subscriber rose to $81.05 from $76.99.

Dish reported net income of $315 million, or 68 cents per share, in the quarter, compared with a net loss of $158 million, or 35 cents per share, a year earlier. Revenue rose 2 percent to $3.60 billion, compared with expectations of $3.58 billion, according to Thomson Reuters I/B/E/S. (Additonal reporting by Jennifer Saba in New York and Chandni Doulatramani in Bangalore; Editing by Savio D'Souza, Jeffrey Benkoe and David Gregorio)