Bloomberg News

Dish Profit Misses Estimates on Costs of Gaining Customers

February 20, 2013

Dish Network Corp. (DISH:US), the second- largest U.S. satellite-television provider, reported fourth- quarter profit that trailed estimates after the cost of acquiring customers rose.

Net income fell to $209 million from $313 million a year earlier, the Englewood, Colorado-based company said today in a statement. That missed the average analyst estimate of $240.4 million, according to data compiled by Bloomberg. Sales fell 1.1 percent to $3.59 billion, higher than the $3.56 billion average analyst estimate.

In 2012, Dish had “higher subscriber-related expenses driven by programming costs, increased subscriber acquisition costs from higher gross additions, as well as certain one-time items,” including litigation-settlement expenses, the company said in the statement. The outlook for 2013 also is unclear because Dish has said it may begin offering a wireless service, potentially through a partnership, said Todd Mitchell, an analyst at Brean Capital LLC.

“There’s not a lot to get excited about on the operating side,” said Mitchell, who rates the shares a buy. “The financial results are coming in negative year over year due to higher costs and investments in future initiatives, and we don’t really have any clarity as to what the plans are for wireless.”

Dish shares (DISH:US) fell 0.2 percent today to close at $36.03 in New York. The stock has dropped 1 percent this year.

Wireless Plan

The satellite operator is considering moving into the wireless industry so that it can bundle mobile service with its TV product. Dish has offered to buy the outstanding shares of Clearwire Corp. for $3.30 a share and is waiting for the company’s decision on the bid. Clearwire had already agreed to be acquired by Sprint Nextel Corp. when Dish made the counteroffer.

If Dish can complete a deal with Clearwire, the company would still probably make a partnership with Sprint to offer service, Chairman Charlie Ergen said today on a conference call.

Dish wants to pair its wireless spectrum assets with an existing network so that it can offer a new service to its customers. If a deal with Clearwire doesn’t occur, Ergen said he has other options to get into the wireless business that he’d consider before selling his spectrum.

“We don’t think Clearwire is the only alternative for us,” Ergen said. “We just think given the lay of the land today that it’s the best option for us today.”

Dish added about 14,000 net new pay-TV subscribers in the fourth quarter, below the average analyst estimate of 48,000. The company has said it will raise prices in 2013, with most of its TV packages increasing about $5 a month.

After losing subscribers in the second and third quarters of 2012, Dish unveiled the latest version of its Hopper set-top box at the Consumer Electronics Show last month in a bid to lure new customers. The device won the show’s top prize.

Dish had 183,000 satellite broadband subscribers at the end of the quarter, contributing $95 million in revenue in 2012.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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