DISH Chairman Echoes DirecTV CEO's Interest in Combining Forces

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Noting that the pay TV business is now at a saturation point, DISH Founder and Chairman Charlie Ergen said that both his company and DirecTV will someday probably consider merging with each other.

The executive suggested that possibility Nov. 6 while discussing DISH's third-quarter 2012 financial and operating results with analysts. DISH lost 19,000 subscribers on a net basis during the quarter, although that was less than the 111,000 drop in the same quarter last year.

“You've got basically mature video business that's very competitive, with the power structure being more in the programming side than in the distribution side,” Ergen said in response to a question about a possible merger. “And then there's tremendous distribution coming, almost unlimited distribution power coming, from broadband and the Internet, where neither one of use have a lot of assets. So I think it's something that probably both companies will look at.”

DirecTV Chief Executive Officer Michael White has already voiced enthusiasm for a possible combination with DISH.

Ergen's prediction isn't stopping DISH from pursuing a variety of ways to redefine itself. That includes the Oct. 1 introduction of dishNet satellite broadband services, in partnership with ViaSat and HughesNet. dishNet which will be capable of serving nearly 15 million rural residents and businesses with little or no previous access to broadband connectivity, the company says.

“It is not only our intent to provide an Internet solution to this underserved market, but to give customers faster speeds, greater capacity and the convenience of bundling with video, which is an obvious win for customers but also a win for DISH as the bundled customers have a longer churn rate,” Chief Executive Officer Joseph Clayton said during the earnings call.

And DISH is still waiting for the Federal Communications Commission to clear the way for it to provide mobile broadband services using satellite spectrum it acquired when it purchased bankrupt TerreStar Networks and DBSD North America. DISH can't use that spectrum until the FCC writes rules that will allow radio waves in that frequency for terrestrial voice and data transmission. The company is counting on the rules to be completed by yearend.

For now, DISH executives say they're encouraged by declining net loss in customers, especially since its customers weathered a four-month blackout of AMC channels due to a fee dispute. Plus, gross activations climbed 13 percent year over year to 739,000. The company ended the quarter with slightly more than 14 million total subscribers.

Revenue fell 2.2 percent on an annual basis to $3.52 billion. And per-subscriber acquisition cost was $805, flat sequentially but up $16 year over year. The increase stemmed largely from higher brand advertising associated with the marketing of the company's Hopper set-top box.

Average monthly revenue per customer was $77.57, less than $1 over 3Q11 ARPU.

DISH suffered a net loss of $158 million for the quarter, compared to net income of $319 million in 3Q11. Had it not paid a settlement to AMC and its former parent Cablevision, it would have earned $295 million.

DISH's pay out to settle the legal dispute totaled $700 million. The dispute ended with a settlement in late October. Dish paid $700 million to AMC Networks and Cablevision Systems Corp., a New York-area cable company that is AMC's former parent. The dispute involved not just transmission rights for AMC channels, but a defunct Cablevision programming service called Voom.

Dish, the No. 2 U.S. satellite broadcaster after DirecTV, said it lost $158 million, or 35 cents per share, for the three months ended Sept. 30. In the same quarter last year, it reported net income of $319 million, or 71 cents per share.

Excluding the settlement, Dish would have earned $295 million, or about 65 cents per share, down 8 percent from last year.

Cablevision filed the suit in 2007 after DISH dropped a group of early HD channels called Voom only two years into a 15-year carriage deal. As part of the settlement, announced Oct. 21, DISH will receive 500 MHz of wireless multichannel video distribution and data service spectrum licenses covering 150 points of presence in New York City, Los Angeles, Chicago, San Francisco, Philadelphia and other cities.

By Scott Sleek  

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