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UPDATE 2-DISH posts profit rise, but adds fewer subscribers
May 12, 2008 / 10:11 PM / 9 years ago

UPDATE 2-DISH posts profit rise, but adds fewer subscribers

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By Yinka Adegoke

NEW YORK, May 12 (Reuters) - U.S. satellite television operator DISH Network Corp (DISH.O) posted on Monday a 90 percent drop in subscriber growth in the first quarter, blaming competition and the weak U.S. economy.

While lower expenses following the spin-off of set-top box business EchoStar Corp (SATS.O) helped DISH report a higher quarterly profit, it added just 35,000 net new subscribers during the period compared with 310,000 additions a year ago.

Six analysts polled by Reuters had expected DISH to add 120,000 subscribers.

The weak numbers come after a strong quarter of subscriber growth at other pay-television providers, including the largest U.S. satellite TV provider, DirecTV Group Inc DTV.O, as well as cable and phone companies.

“It answers the burning question of where are all the subscribers coming from -- it’s clearly DISH,” said Craig Moffett, analyst at Sanford Bernstein.

DISH, the second-largest U.S. satellite TV operator with 13.8 million subscribers, said gross subscriber additions dropped to 730,000 from 890,000 a year ago.

The company said it believed gross net additions would likely continue to be negatively impacted by competitive factors including the expansion of fiber-based pay TV providers such as Verizon Communications Inc’s (VZ.N) FiOS TV.

DISH’s average monthly subscriber churn rate, or the rate of customer losses, rose to 1.68 percent in the period from 1.46 percent. It said churn had been negatively impacted by an increase in ‘non-pay disconnects.’

“They’re suffering from the economic woes of their lower-end customer base but they’re also struggling to articulate their competitive advantage in areas like high-definition TV,” Moffett said.

DISH’s focus on price and value has been undermined by the competitively priced ‘triple play’ packages of cable operators analysts have said. Meanwhile DirecTV has focused on the high end of the satellite TV base by tightening credit checks for new subscribers and targeted marketing.

DISH’s net profit was $258.6 million, or 57 cents a share, versus $157 million, or 35 cents a share, a year ago.

Wall Street analysts, according to the average on Reuters Estimates, had forecast 51 cents, but it was not immediately clear from the company’s report if this was comparable.

On Jan. 1, DISH spun-off its satellite and set-top box operations into a separate business called EchoStar Corp. Several of DISH’s expenses were lower as a result.

Revenue rose 7.5 percent to $2.84 billion in the quarter, in line with the average analyst forecast. Average monthly revenue per subscriber rose to $67.93 from $64.17 a year ago.

There has been speculation that DISH’s founder and chief executive, Charlie Ergen, will sell his company to phone company AT&T Inc (T.N), but instead AT&T will start using DISH to exclusively service its customer base in the former BellSouth area starting this quarter. (Editing by Toni Reinhold and Braden Reddall)

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