Dish Masters Its Domain


After weathering three straight quarters of subscriber losses and puzzling investors with a flurry of seemingly disparate acquisitions, Dish Network chairman and CEO Charlie Ergen likened his sometimes erratic strategy to the popular 1990's sitcom Seinfeld.

Ergen, speaking on a conference call with analysts said that his strategy is a lot like the popular television program in that the first 20 minutes of the show didn't really reveal much of anything.

"It all came together in the last couple of minutes," Ergen said. "You're going to have to wait and see."
Ergen, perhaps realizing he was on the phone with a group of TV analysts that followed the show that was famously about nothing, stressed that his recent moves have a purpose.
"We know where we want to go," Ergen said. "Each of our assets is important and each is going to open a door of opportunity. "
Ergen has kept the investment community guessing as to his strategy in buying up wireless spectrum - he purchased blocks from DBSD North America for $1 billion and is in the running for more - and bankrupt video retailer Blockbuster for $320 million in April. All the while his core satellite TV business has been bleeding subscribers - it lost 156,000 customers in the fourth quarter.
That all was water under the bridge Monday, as Dish beat analysts' estimates on practically every turn.
Dish gained 58,000 net new subscribers in the quarter, soundly beating analysts' consensus estimates, which had predicted a loss of about 75,000 customers. The gain comes after three straight quarters of subscriber losses and in the wake of a hefty monthly rate increase for most customers. Sanford Bernstein cable and satellite analyst Craig Moffett wrote that in February, Dish took what was the equivalent of a three-year price increase in one swoop, a move that helped boost average monthly revenue per customer to $75.39 in the quarter, up almost 6%.
Dish also continued to perform well on the financial front - revenue rose 5.5% to $3,2 billion and net income more than doubled to $549 million in the period from $239 million in the previous year.
Dish stock soared - it was up 15.6% ($3.90 per share) to $28.95 each in early afternoon trading. That was largely due to a $500 million settlement the satellite giant reached with DVR pioneer TiVo, which according to most analysts removed a five year overhang on the stock.
The settlement also helped boost net income and cash flow - Dish had allocated about $517 million for litigation, but because of the lower than expected terms (it will initially pay $290 million in cash to TiVo) $335 million was returned to the company, adding about 47 cents per share to net income and boosting cash flow to $1.225 billion, up 75% year-over-year. Even without the one-time gain, cash flow would have come in at around $884 million still above consensus of $875 million.
The strong fundamentals elicited praise from most analysts.
"The TiVo settlement adds an exclamation point to what would have been a solid quarterly report even without this one-time benefit," Moffett wrote in a report. "Dish Network gained subscribers even in the face of a very large price increase. Subscriber results were strong, and financial results were stronger."