Dish Network Subscriber Growth Slows in Q4

Former EchoStar Communications Spun Off Technology Assets Jan. 1

By Glen Dickson & John Eggerton -- Broadcasting & Cable, 2/26/2008 5:15:00 PM

Satellite-TV provider Dish Network (formerly EchoStar Communications) reported increased fourth-quarter revenues but showed weakness in subscriber growth, a key financial metric for cable and satellite operators.

Dish reported total revenue of $2.89 billion for the quarter ended Dec. 31, 2007, a 12% increase compared with $2.58 billion for the corresponding period in 2006, and net income of $175 million compared with $153 million during the fourth quarter of 2006. Basic earnings per share were $0.39 for the quarter versus $0.35 last year.

For the year ended Dec. 31, 2007, Dish reported total revenue of $11.09 billion compared with $9.82 billion for 2006, an increase of 13%, and the company posted net income of $756 million compared with $608 million for 2006. Basic earnings per share were $1.69 for the year versus $1.37 for 2006, and Dish had 675,000 more subscribers at year-end 2007 than it did at year-end 2006, giving it a total of 13.78 million.

But Dish added only 85,000 new subscribers during the fourth quarter of 2007. That is a 76% drop in subscriber additions from last year, noted Sanford C. Bernstein analyst Craig Moffett, who previously estimated net additions of 148,000 subscribers for Dish's Q4.

In a research note to investors, Moffett blamed the lower-than-expected subscriber growth mainly on overall weakness in the housing market instead of other factors such as telco competition or cable’s triple-play.

While Moffett noted that housing weakness also weighed somewhat on DirecTV’s impressive Q4 results, he believes the decrease in consumers moving to new homes disproportionately impacted Dish’s results due to its comparatively lower-income subscriber base. The result was that the company posted its lowest number of gross subscriber additions since the first quarter of 2004 in what is usually a seasonally strong quarter for direct-broadcast satellite companies.

“Slower revenue growth for Dish means slower revenue growth,” Moffett wrote. “Indeed, revenue growth dropped from 19% to 11% in 12 months. Dish’s exposure to the low-end market and to housing weakness is likely to continue to weigh on results in the near term.”

Dish shares closed at $29.18 each Tuesday, down $1.48, or 4.83%.

Dish’s numbers will look different next year, since it spun off its technology assets, including set-top boxes and satellites, into a separate company as of Jan. 1.

A Dish spokeswoman said its planned $39.99 DTV-to-analog converter box that caught the fancy of Washington policymakers is on track for wide distribution in June or July.

Because a $40 government-subsidy coupon towards the purchase of a box would cover the entire cost of that box, policymakers are pushing the National Telecommunications and Information Administration to allow applicants for the coupons to reapply for them. The NTIA started accepting applications Jan. 1 and, since there is a 90-day expiration date on the coupons, the early applicants may have to buy more expensive boxes ($50-$70).