Another lousy quarter for Dish Network: While the satellite TV provider met Wall Street's Q2 sales forecast and beat big on EPS, it showed its vulnerability to a weak economy by losing subscribers for the first time. Shares are down 5.8% to $26.98.
Dish Network (DISH) reported a net loss of 25,000 subscribers in Q2, down from 170,000 new additions a year ago, and worse than Goldman analyst Ingrid Chung's expected 75,000 net sub additions. Gross additions -- new customers signed up during the quarter -- were weak too; Dish reported 752,000, down from 850,000 a year ago and worse than Chung's expected 821,000.
Why? In its quarterly report to the SEC, Dish blamed "weak economic conditions"; aggressive promotional offerings by competitors, including the heavy marketing of HD services, where Dish is weak; and the growth of fiber-optic TV services by phone companies like AT&T (T), which have traditionally been Dish Network partners.
AT&T -- responsible for 15% of Dish Network's gross subscriber additions this year -- could be an even bigger thorn in its side. In addition to competing with Dish via its U-Verse TV service, AT&T is ripping up its distribution deal with Dish, which expires at the end of the year. It's possible they'll sign a new one, likely with terms more favorable to AT&T. It's also possible that AT&T will link up with Dish's archrival, DirecTV (DTV), which has a better hi-def service offering.
Meanwhile, Dish also warned that while it's working on improving its customer service and reducing signal piracy, it might not be able to reduce churn -- customers fleeing its service -- "without significantly increasing our spending on customer retention incentives, which would have a negative effect on our earnings and free cash flow."
Dish reported $2.91 billion in Q2 revenue, in line with the Street's expectations, and $0.75 EPS, handily beating the Street's $0.60 consensus.
See Also: AT&T Dumps Dish Network. What's Next?
