Dish Network profit, sales beat estimates

By Reuters
Posted Nov. 5, 2010 at 10:58 a.m.

Dish Network Corp, the second-biggest U.S. TV satellite operator, posted higher-than-expected quarterly profit and sales as its existing customers spent more on its services.

Shares rose 0.5 percent to $20.80 in morning Nasdaq trading.

While Dish lost about 29,000 subscribers in the third quarter, the company generated more revenue from its existing customers.

The average monthly revenue per subscriber rate rose 7 percent, which the company said was because of price increases in February and June 2010 and “changes in the sales mix toward more advanced hardware offerings,” like high definition TV.

Dish has been using deals, like a free HD service it started offering in June, to keep subscribers who had originally signed on for basic packages, as well as attracting customers with higher-end televisions. These customers are then willing to spend more on digital video recorders and on premium TV content, said Barclays Capital analyst James Ratcliffe.

Larger satellite TV rival DirecTV added 174,000 net subscribers in the U.S during the quarter, showing that customers will still pay for premium television even with less spending power and with the competing wide range of free Internet offerings.

Dish shares are fairly valued, Ratcliffe said, and in line with DirecTV shares.

Dish trades at 8.5 times its free-cash forecast for 2011, while DirecTV trades at 9 times that forecast, according to Ratcliffe’s estimates.

But DirecTV shares are more attractive because the company has an aggressive buyback program, he said. DirecTV snapped up $1.37 billion in stock during the quarter while Dish only bought about $93 million.

“I was expecting more (of a buyback) for Dish and one answer is that management might be more pessimistic about their business or there is something else they want to do with the capital, like make a significant investment in wireless or mobile video.”

Net profit in the quarter was $245 million, or 55 cents per share, up from $81 million, or 18 cents per share, a year earlier.

Analysts were looking for 42 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 10 percent to $3.21 billion, compared to analysts’ expectations of $3.15 billion.

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