Dish Network 4th-quarter profit drops, but tops Wall Street expecations and gains subscribers

Monday, March 1, 2010

Dish Network 4Q profit falls, gains subscribers

Dish Network Corp., the low-cost leader in a subscription-TV industry where growth comes from taking customers away from competitors, lifted fourth-quarter revenue by attracting budget-conscious customers with aggressive promotions.

As a result, the nation’s second-largest satellite TV operator added 249,000 net subscribers during the quarter while several of its cable TV rivals lost ground. The increase in customers overshadowed a 17.5 percent drop in net income to drive shares higher by $1.29, or 6.5 percent, to $21.26 in afternoon trading on Monday.

Dish said Monday that it earned $179 million, or 40 cents per share, in the quarter compared with $217 million, or 48 cents per share, in the prior year’s quarter. The results exceeded the 32 cents per share in earnings that analysts had been expecting on average, according to Thomson Reuters.

Revenue rose by 1.4 percent to $2.96 billion, just slightly ahead of the $2.94 billion expected by analysts.

Investors focused on subscriber growth because it marks a continued turnaround at Dish. Starting in the second quarter of 2008, the company endured four straight quarters of subscriber declines — the first reductions at the company since its founding in 1996. Now, the company has increased its customer count for three quarters in a row.

Last year, Dish mounted an aggressive advertising campaign that targeted fellow satellite TV operator DirecTV Inc., claiming that Dish’s TV plans are cheaper. DirecTV said Dish compared plans that were not similar and sued for false advertising. The case is pending. The fight between the two is unusual; typically they’ve targeted their chief nemesis, cable TV.

Dish’s strategy seems to be working, especially among recession-weary consumers.

Collins Stewart analyst Thomas Eagan was impressed by Dish’s subscriber growth, which was 50,000 higher than Wall Street’s estimate of 199,000.

“While most pay TV providers … reported disappointing basic video subscriber additions, Dish reported numbers that exceeded estimates” without significantly hurting adjusted earnings and overspending to acquire customers, he said in a research note.

Comcast Corp., Time Warner Cable Inc. and Cablevision Systems Corp. had all lost video customers in the fourth quarter. DirecTV Inc. added 119,000 customers.

In the quarter, Dish said customers paid an average monthly bill of $70.04, up from $69.27, mainly due to price increases and more orders for the pricier high-definition TV packages.

In November, Dish CEO Charlie Ergen stepped down as CEO of sister company EchoStar Corp. But he said Monday that he has no plans to do the same at Dish — at least for now.

“I had two CEO roles, and I wasn’t very good at either one of them,” he said in a conference call with analysts. “Now I get to find out if I am a good CEO with Dish or whether somebody else would be better.”

Once the company finds another executive who can do a better job, Ergen said, “I hope I am, you know, unemotional enough to give them the keys.”

For the year, Dish’s earnings fell 30 percent to $636 million, or $1.42 per share, compared with $903 million, or $1.98 per share, in the prior-year period.

Annual revenue edged up slightly to $11.66 billion from $11.62 billion.

Dish, based in Englewood, Colo., had roughly 14.1 million subscribers at year’s end after gaining about 422,000 subscribers during 2009.

Associated Press Writer Michelle Chapman contributed to this report from New York.

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