Dish Network Subscriber Growth Skids 89% In First Quarter

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Citing competition from the telcos and the worsening economy, Dish Network reported Monday that its first-quarter subscriber growth nosedived nearly 89% from a year ago, with only a 35,000 net subscriber gain.

Subscriber growth for Dish Network, which now has 13.8 million customers, lagged way behind that of the nation’s biggest satellite provider, DirecTV, which last week reported 275,000 new subscribers in the first quarter. That was a 17% increase for DirecTV.

In a 10-Q filed with the Securities and Exchange Commission after the market closed Monday, Dish Network said it had about 730,000 gross new subscribers in the first quarter, compared to 890,000 gross new subscribers during the same period in 2007. The satellite provider’s 35,000 net subscribers compared to 310,000 in the year-ago period, an 88.7% plummet.

In pure numbers, that’s even fewer new subscribers than Dish Network saw in the fourth quarter, when it gained 85,000 subscribers, a decline of 76% from the year-ago period.

“We believe our gross new subscriber additions have been and are likely to continue to be negatively impacted by competitive factors, including the expansion of fiber-based pay TV providers, the effectiveness of certain competitors’ promotional offers and market perceptions of the availability of attractive programming, particularly the relative quantity of HD programming offered,” Dish Network said in its filing.

“Subscriber growth has also been affected by worsening economic conditions, including the slowdown in new housing starts as well as by operational inefficiencies at Dish Network, signal piracy and other forms of fraud,” the company said.

Analysts had expected Dish Network to see much-slowed subscriber gains in the first quarter, with Sanford C. Bernstein & Co. analyst Craig Moffett last week suggesting that Dish might actually lose subscribers.

Monday night, Moffett issued a report on Dish Network’s first-quarter decline in subscriber growth.

“Dish would appear to be between a rock and a hard place,” he wrote. “At the low end, Dish’s ‘everyday low price’ value proposition suddenly appears vulnerable against cable's economically-advantaged triple play.  At the high end, Dish has been outflanked by DirecTV's ‘best HDTV’ positioning. Churn is eroding the base.”

Moffett noted that analysts had wondered how a number of cable companies, telcos and DirecTV had all managed to tally up bigger-than-expected subscriber gains in the first quarter.

“A week ago, the question was… 'Where are all the subscribers coming from?'"Moffett wrote, “Well, now we know.  They were coming from Dish.”

He even compared Dish Network to Sprint, saying, “The question now is… ‘Is Dish the Next Sprint?’ As recently as a year ago, it would have been unthinkable that Dish might be headed for the kind of sustained secular decline that has plagued Sprint over the past two years. And yet, like Sprint, Dish appears to have lost its mojo—that fundamental reason why a consumer might choose it above all other choices.”

Dish Network has its first-quarter earnings call set for Tuesday. 

In its 10-Q, the satellite provider also said that is monthly subscriber churn for the first quarter had increased, to 1.68%, compared to 1.46% a year ago.

“We believe our subscriber churn rate has been and is likely to continue to be negatively impacted by a number of factors, including…an increase in non-pay disconnects primarily resulting from adverse economic conditions and continuing effects of customer commitment expirations,” Dish Network said.

“We cannot assure you that we will be able to lower our subscriber churn rate, or that our subscriber churn rate will not increase,” the filing said. “We believe we can reduce churn if we are successful in improving customer service and other areas of our operations in which have recently experienced operational inefficiencies. We also believe that the launch of new HD local channels may help to reduce subscriber churn in certain markets.”

Dish Network is behind DirecTV in terms of the number of both national HD networks and local markets where it offers HDTV.

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