Dish Subscribers Dip as Sales Meet Expectations

By Danny King

Dish Network said today that its subscriber base shrunk slightly as the company’s second-quarter sales failed to beat analysts’ estimates.

The No. 2 U.S. satellite television service behind DirecTV said it had about 13.8 million subscribers, down 25,000 from the beginning of the quarter. Dish’s net income rose 50% to $335.9 million, or 73 cents a share, from $224.2 million, or 50 cents, a year earlier. Revenue increased 5.6% to $2.91 billion.

The company was expected to earn 60 cents a share on $2.91 billion in sales, the average analyst estimate in a Thomson Financial survey.

Dish’s loss of customers was caused by a combination of promotions of high-definition services from competing satellite companies, growth of fiber-optic services and U.S. economic conditions, the company said in a regulatory filing today.

Dish’s subscriber turnover rate rose to 1.9% from 1.7% a year earlier, while its average subscriber acquisition cost rose 7.6% to $704.

“The subscriber loss reported by Dish Network was the first ever by a satellite operator in the U.S.,” Sanford C. Bernstein analyst Craig Moffett wrote in a note to clients today. “To be sure, seasonality worked against Dish in Q2, just as it does against the cable companies, and so takes a healthy portion of blame. But while cable held up well to the seasonal headwind, Dish did not.”

Last week, U.S. cable leader Comcast, which has about 25 million subscribers, said it boosted digital cable subscribers by 320,000 while losing 138,000 basic video customers. Verizon’s fiber-optic TV service FiOS gained 176,000 subscribers during the second quarter, while AT&T said its U-verse added 170,000 subscribers, the companies said last month.

DirectTV, which had about 17 million subscribers in the first quarter, will add about 100,000 customers during the second quarter, Moffett wrote in a note last month. He had forecast Dish to gain 19,000 subscribers.

Both DirecTV and No. 2 U.S. cable company Time Warner Cable report earnings later this week.

Last week, Dish added 17 HD channels to bring its total to 114 and said it would have about 150 HD channels by the end of the year. DirecTV said last week that it would have 130 HD channels by mid-August.

Dish shares fell about 3% today.