Dish Network Corp., the second-largest U.S. satellite-TV provider, rose 5 percent after awarding a special dividend that allayed investors’ concerns the company will invest billions in a wireless network.
Dish said today it will pay a non-recurring dividend of $2 a share on Dec. 1. The company last paid a special dividend two years ago. The payment suggests that Dish may not invest in or build a wireless network for mobile content, analysts including Sanford C. Bernstein & Co.’s Craig Moffett said.
“The return of cash to shareholders signals that Ergen isn’t going to hoard cash to build his wireless field of dreams,” New York-based Moffett said in a note to clients.
Chairman Charlie Ergen purchased Blockbuster LLC, DSBD North America Inc. and Terrestar Networks Inc. this year, gaining capabilities that may allow him to offer new services including Internet video for mobile devices. Ergen said the dividend “made some sense” after other acquisition talks failed. Dish had pursued a takeover of the online-video company Hulu LLC and other companies, he said.
Dish rose $1.18 to $24.66 at the close in New York. It has advanced 25 percent this year, compared with a 15 percent gain by DirecTV, the largest U.S. satellite-TV provider.
Dish’s long-term strategy is to add a wireless element to its satellite-TV offerings, Ergen said on a conference call. Dish asked the Federal Communications Commission for license waivers to build a network in August. Ergen said he’d prefer partnering with a company in the wireless industry or one not yet in the business “that would have similar motivations to us.”
Dish will “need to be beyond fixed video to the home” to compete, Ergen said. It makes sense to enter the wireless business now that the industry is transitioning to the long-term evolution, or LTE, technology, from the third-generation and WiMax standards, he said. LTE allows for faster data speeds.
Ergen said the outcome of AT&T Inc.’s proposed purchase of T-Mobile USA will affect Dish’s strategic options. The U.S. Justice Department sued to block the deal in August.
“I don’t think there would be any problem with us merging with DirecTV” if the AT&T-T-Mobile deal goes through, Ergen said. If not, partnering with AT&T could be an option, he said.
Dish Chief Executive Officer Joseph Clayton told Bloomberg in May a merger with DirecTV had a better shot at winning regulatory approval than it did five or 10 years ago.
Dish, based in Englewood, Colorado, said today it will pay Sprint Nextel Corp. $114 million as part of a settlement of a dispute that stemmed from the purchases of DBSD North America and TerreStar, which Dish bought out of bankruptcy.
Earnings per share rose to 71 cents from 55 cents a year earlier, as sales increased 12 percent to $3.6 billion, the company said. Analysts projected earnings of 74 cents on sales of $3.63 billion, the average estimates compiled by Bloomberg.
Dish lost 111,000 customers, more than the 81,000 nine analysts projected on average. Ergen is trying to shed Dish’s image as a low-cost television provider and may accept losses if it can attract customers willing to buy more expensive packages and products, said Matthew Harrigan, an analyst at Wunderlich Securities in Denver.
“This is a transitional quarter, and I think Charlie doesn’t particularly care about the stock price,” said Harrigan, who has a “hold” rating on Dish. “The only way he starts caring is if he goes out and starts trying to do more deals. At some point, the stock price does start to matter again because it affects what he can do in the debt markets as well.”
Customer losses bottomed out in June and July and improved in August and September, Clayton said on the conference call.
The decline compares with DirecTV’s 327,000 U.S. customer gains last quarter. DirecTV offered its customers free access to all Sunday NFL games. Dish doesn’t own the same NFL rights.
Net income last quarter increased 30 percent to $319 million from $245 million a year earlier, Dish said.