Dish Drops 10,000 Subscribers in Q3
Marks Second Consecutve Period Of Customer Losses
By Linda Moss -- Multichannel News, 11/10/2008 1:37:00 AM
For the second quarter in a row, Charlie Ergen’s Dish Network has reported subscriber losses, shedding 10,000 customers in the third quarter.
The satellite provider Monday also reported that its net income in the third quarter had tumbled, to $92 million compared with $200 million during the corresponding period last year.
“The $108 million decline in net earnings primarily related to impairments on marketable and non-marketable securities,” Dish Network said in a press release. “Basic earnings per share were 20 cents for the quarter ended Sept. 30, 2008, compared with basic earnings per share of 45 cents during the corresponding period in 2007.
Dish Network reported that it lost about 10,000 net subscribers during the third quarter, compared with its gain of 110,000 subscribers in the year-ago period. The satellite provider now has 13.78 million subscribers. For the second quarter, Dish Network had also reported a subscriber loss, of 25,000 households, the first such loss ever for the satellite company.
The third-quarter loss was a poorer performance that some on Wall Street had anticipated. On Friday, Sanford Bernstein analyst Craig Moffett had projected that Dish Network would gain 87,000 subscribers in the third quarter.
Dish Network’s losses stand in stark contrast to the performance of the nation’s largest satellite provider, DirecTV. Last week, DirecTV reported that it gained 156,000 subscribers in the third quarter.
That was 35% less than a year ago, when it added 240,000 subscribers, but it still represented a gain.
In a 10-Q filed Monday, Dish Network blamed its third-quarter subscriber loss on “an increase in our subscriber churn rate, and churn on a larger subscriber base. Our percentage monthly subscriber churn for the three months ended Sept. 30, 2008 was 2.02%, compared to 1.94% for the same period in 2007.”
In its filing with the Securities and Exchange Commission, Dish Network said, “Given the increasingly competitive nature of our industry, it may not be possible to reduce churn without significantly increasing our spending on customer retention incentives, which would have a negative effect on our earnings and free cash flow.”
Of its customer losses, Dish Network said, “We believe our gross and net subscriber additions as well as our subscriber churn have been negatively impacted by weak economic conditions, aggressive promotional offerings by our competition, the heavy marketing of HD service offerings by our competition, the growth of fiber-based pay TV providers, signal theft and other forms of fraud, and operational inefficiencies at Dish Network. We can not assure you that we will be able to increase our gross and net subscriber additions or reduce our subscriber churn.”
In its securities filing, Dish Network also said that the end of its reselling deal with AT&T, effective Jan. 31, could also hurt the company.
“The loss of our distribution relationship with AT&T on Jan. 31, 2009 may impair our ability to generate gross and net subscriber additions, increase churn and impair our ability to generate revenue growth,” the company said in its 10-Q.
“Our distribution relationship with AT&T has been a substantial contributor to our gross and net subscriber additions over the past several years, accounting for approximately 17% of our gross subscriber additions for the nine months ended Sept. 30,” the 10-Q said. “It may be difficult for us to develop alternative distribution channels that will fully replace AT&T and if we are unable to do so, our gross and net subscriber additions may be impaired, our churn may increase, and our results of operations may be adversely affected.”
Dish Network also warned that, “Approximately 1 million of our current subscribers were acquired through our distribution relationship with AT&T and these subscribers have historically churned at a higher rate than our overall subscriber base. Although AT&T is not permitted to target these subscribers for transition to another pay-TV service and AT&T and we are required to maintain bundled billing and cooperative customer service for these subscribers, we may still experience churn of these subscribers following termination of the AT&T distribution relationship.”
Dish Network reported total revenue of $2.94 billion for the third quarter, a 5.1% increase compared with $2.79 billion for the corresponding period in 2007.
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