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Dish Network 3rd-quarter profit slides 54 percent

Mon, 11/10/2008 - 7:10am
Deborah Yao, AP Business Writer

ENGLEWOOD, CO (AP) – Dish Network Corp., the nation's second-largest satellite TV provider, on Monday reported a 54 percent drop in third-quarter net income as it spent more on promotions to keep customers from canceling and wrote down the value of its investments.

For only the second time in Dish's history, the company saw a decline in net new subscribers — the number of customers who sign up minus those who cancel. It lost 10,000 net subscribers in the quarter compared with a gain of 110,000 in the same quarter last year.

Dish earned $92 million, or 20 cents per diluted share, in the three months ended Sept. 30. That's down from $200 million, or 44 cents per share, last year.

Sales 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. Analysts usually exclude one-time items from their estimates.

Dish recorded operating income of $417.8 million, up from last year's $396.5 million.

Englewood, Colo.-based 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 made Monday.

Upgrades to customer equipment driven by demand for high-definition programming and large-capacity digital video recorders increased costs as Dish tried to retain customers.

Dish said the loss of 10,000 net customers in the quarter was due to the "weak" economy, promotions and heavy marketing of HD service by competitors, among other factors.

The company also warned that once it loses its distribution deal with AT&T Inc. in February 2009, 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 AT&T.

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