Dish Beats User Growth Estimates Amid Pay-TV Slump

Photographer: Matthew Staver/Bloomberg

A field service specialist for Dish Network Corp., prepares to install a satellite television system at a residence in Denver. Close

A field service specialist for Dish Network Corp., prepares to install a satellite... Read More

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Photographer: Matthew Staver/Bloomberg

A field service specialist for Dish Network Corp., prepares to install a satellite television system at a residence in Denver.

Dish Network Corp. found a way to hold on to more TV subscribers, while Chairman Charlie Ergen looks for a more dramatic turnaround.

The satellite-TV company’s first-quarter sales rose 6.5 percent from a year earlier to $3.59 billion, according to a statement today. Analysts projected $3.57 billion on average, according to data compiled by Bloomberg. Dish, based in Englewood, Colorado, added about 40,000 subscribers, compared with analysts’ projection of 31,000 new users.

U.S. pay-TV growth has peaked as people spend more time watching online video, leaving Dish and its satellite peer, DirecTV, struggling to find more revenue or make deals that could help them change course. Dish and DirecTV have attracted merger speculation as Comcast Corp.’s offer to buy Time Warner Cable Inc. threatens to set off a wave of deals among TV and telecommunications carriers.

“I am not sure quarterly results will impact M&A thoughts,” Todd Rethemeier, an analyst with Hudson Square Research Inc., said in an interview yesterday. “Both Dish and DTV know that there are a lot of benefits of a merger, either with each other or a carrier.”

AT&T Inc. (T), the second-biggest U.S. mobile-phone carrier, is in talks to buy DirecTV, people with knowledge of the situation said. Separately, Bloomberg News reported in March that Dish Chairman Ergen had contacted DirecTV to discuss a merger of the two satellite-TV companies.

Pressuring Profit

The rush to consolidate is driven by a need to cut costs as most Americans already pay for TV service.

Higher programming costs, as well as expenses such as advertising to draw more customers, put pressure on Dish’s profit in the first quarter.

Earnings from continuing operations were 38 cents a share. Analysts had estimated 44 cents on average, according to data compiled by Bloomberg. Net income fell to $175.9 million, or 38 cents a share, from $215.6 million, or 47 cents.

“As the pay-TV industry has matured, we and our competitors increasingly must seek to attract a greater proportion of new subscribers from each other’s existing subscriber bases rather than from first-time purchasers of pay-TV services,” Dish said today in a regulatory filing. “Some of our competitors have been especially aggressive by offering discounted programming and services for both new and existing subscribers.”

Higher Bills

The average monthly bill for a Dish customer rose to $82.36 a month, up from $81.24 in the fourth quarter and $78.44 a year ago. The company also spent more on marketing and promotional offers to reduce its churn rate to 1.42 percent from 1.47 percent a year ago.

Dish added about 53,000 Internet broadband subscribers in the first quarter, compared with the 57,000 analysts projected.

The company’s shares fell 0.6 percent to $62.30 at 9:46 a.m. in New York. The stock had advanced 8.2 percent this year through yesterday.

After reaching a groundbreaking deal with Walt Disney Co. on program distribution in March, Dish is planning to introduce the first national, cable-like TV service over the Internet, as early as this summer.

Earlier this week, DirecTV (DTV) beat analysts’ profit estimates for the first quarter by adding more Latin American subscribers than projected and by increasing U.S. customer’s monthly bills.

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net James Callan

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