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11/10/2008

DISH loses subscribers again, profit tumbles

By: Jeff Richgels, The Capital Times

DISH Network Corp. on Monday reported a 54 percent drop in third-quarter net income as its subscriber total fell for only the second quarter in its history.

DISH lost 10,000 net subscribers in July, August and September compared with a gain of 110,000 in the same quarter last year. The loss comes on the heels of a 25,000 subscriber decline in the second quarter.

The nation's second-largest satellite TV provider said the loss was due to the "weak" economy, promotions and heavy marketing of HD service by competitors, among other factors.

DISH typically has done well with lower-income households who are being hit hard in the current economic downturn, while No. 1 satellite provider DirecTV has done better with higher-income households who buy more advanced services like HD and pay per view.

DISH also warned that once it loses its distribution deal with AT&T on Jan. 31, finding another partner that will fully replace the phone company may be "difficult."

If so, DISH said its net subscriber growth "may be impaired, our churn may increase and our results of operations may be adversely affected."

About a million of DISH's current 13.8 million subscribers were acquired through its partnership with AT&T.

Analysts had varying estimates of third quarter subscriber figures for DISH, with Kaufman Bros. analyst Todd Mitchell looking for an additional 50,000 net subscribers, but Barclays Capital Vijay Jayant projecting a decline of 50,000, Reuters reported.

Customer churn - the rate at which customers cancel their service - rose to 2.02 percent from 1.94 percent a year ago.

"What's killing them here is churn," said Kaufman's Mitchell. "The gross additions were strong at 825,000 additions, but over 2 percent churn has never before been seen in the satellite sector."

"DISH's subscriber loss of 10,000 subscribers is yet another indication of the travails at the low end of the market," Craig Moffett, an analyst with Sanford Bernstein, wrote in a research report, Reuters reported. "Things are getting worse at the low end even faster than things are beginning to weaken at the top."

"Subscriber losses, churn rate, earnings and margins were all much worse. In short, there are no signs of a turnaround. DISH is not having success keeping its customers ... and it is not having success getting new ones in the door."

DISH said it earned $92 million, or 20 cents per diluted share, in the third quarter, down from $200 million, or 44 cents per share, a year ago. Revenues rose 5 percent to $2.94 billion.

Analysts polled by Thomson Reuters on average expected a profit of 58 cents per share and sales of $2.9 billion.

DISH said subscriber acquisition costs rose in the quarter, with promotional subsidies more than doubling. To keep customers from canceling, DISH would subsidize the cost of installation, upgrades and replacements of equipment.

"Market demand for more advanced technology equipment and a very competitive environment have caused us to increase our customer acquisition and retention costs," the company said in a regulatory filing.

The Associated Press contributed to this report.

 

Source: http://www.madison.com/tct/news/stories/index.php?ntid=313698


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