* Rare $2.00/shr dividend pleases investors
* Dish needs to expand beyond pay TV-Ergen
* Dish lost subscribers to DirecTV - CEO
* Shares rise as much as 7 pct
By Liana B. Baker
Nov 7 Dish Network Corp lost more
subscribers than expected because of a promotion by its main
rival, DirecTV , but the satellite television provider
paid shareholders a rare dividend, which sent its stock up as
much as 7 percent.
The company said on Monday it would pay a one-time dividend
of $2.00 per share, which analysts said placated investors who
may have been worried about the cash strategy of Dish's
billionaire chairman, Charlie Ergen.
"(It) signals Chairman Charlie Ergen isn't going to hoard
cash to build his wireless field of dreams," said Bernstein
analyst Craig Moffett.
Ergen has been buying up a diverse array of assets over the
past year, from bankrupt movie store chain Blockbuster to
companies with wireless spectrum including DBSD and TerreStar.
In May, the 58-year-old Ergen resigned as the company's CEO
but kept his post as chairman. He said the change would give
him more time to focus on the company's long-term strategy.
On the conference call on Tuesday, Ergen told investors his
strategy involves data, video and voice services, and while it
is still in its early stages, it is clear that Dish will not
remain just a pay TV company that long.
"Strategically, we believe we have to be in something other
than a standalone video business as a company and we're in the
transition of being able to do that," he said.
"We hope we're going to get the mobile voice and data and
video business, and we probably are likely to do that in some
kind of partnership or partnerships," he said.
Analysts have speculated that Ergen may want to build a
national wireless network that could be used to deliver video
During the question and answer session on the conference
call on Monday, Ergen addressed everything from mergers and
acquisitions to the regulatory climate and Dish's rivals.
He said that now was the time to implement major changes at
Dish "because the economy is not cranking along too good."
Dish, along with cable competitors including Cablevision
Systems Corp and Time Warner Cable , have been
blaming the weak economy for stunting housing growth and
hurting businesses. If people are not moving into new homes,
they will not sign up for new TV services.
Moffett, the Bernstein analyst, said Ergen's master plan
and its possible cost are still perceived as murky by
investors, who are worried about Dish spending too much on its
Chairman's wireless ambitions.
"Ergen's grand strategy, whatever it is, isn't going to be
cheap, and it's not clear who is going to fund it," Moffett
Dish on Monday said it paid Sprint Nextel Corp $114
million in November as part of a settlement over a dispute
related to Dish's acquisitions of DBSD and TerreStar.
Before Monday's dividend announcement, Dish last paid a
one-time dividend of $2 a share in 2009.
Brean Murray analyst Todd Mitchell said Dish occasionally
rewards stockholders with a payout because its share structure
would not favor ordinary shareholders if the company bought
back stock, since most shares are owned by Ergen.
The No. 2 U.S. satellite TV provider lost 111,000
subscribers in the third quarter, bringing its total base to
about 13.9 million, down 2.4 percent from a year earlier.
Analyst Mitchell was expecting a loss of 25,000
ONLINE MOVIE SERVICE
Last week, DirecTV said it had gained more than 327,000
customers in the United States, its highest in seven years. The
company, Dish's biggest rival, attracted new subscribers by
heavily promoting its NFL Sunday Ticket package of
out-of-market football games as a free service for a year to
new customers who switched from a rival.
"Dish just didn't go to market against the Sunday Ticket
promotion," Mitchell said. "It wasn't a focus."
On the conference call, Dish's CEO Clayton singled out
"heavy free Sunday ticket advertising and aggressive
discounting by DirecTV," as a factor that hurt the company last
Instead of going after DirecTV, Dish put its marketing
dollars into promoting a new online movie service to compete
with Netflix > from its Blockbuster brand, which it
acquired last April, he added.
Dish posted net income of $319 million, or 71 cents per
share, up from $244.9 million or 55 cents per share a year
The results missed Wall Street expectations of 73 cents,
according to Thomson Reuters I/B/E/S.
Revenue rose 12.3 percent to $3.60 billion, slightly below
analysts' expectations of $3.65 billion.
Dish shares were up 5 percent at $24.59 on Monday
afternoon, off an earlier high at $25.15.