Dish Network Warns Of Trouble Ahead If AT&T Deal Ends

satelliteSatellite operator Dish Network indicated Monday that AT&T's intention to stop selling its service in bundled packages by Jan. 1 could lead to significant subscriber losses.


Apparently looking for a more favorable deal with Dish--partly because it may not need the partnership quite as much as it expands its own TV offering--AT&T has said it will terminate its agreement that allows it to sell a four-play (phone, broadband and wireless offerings along with Dish service).

Dish said some 15% of the added subscribers it picked up during the first six months of this year came from AT&T's help. In an SEC filing, it said that growth in customers will be "adversely affected" if it does not find a way to renegotiate with AT&T, or perhaps reach a similar agreement elsewhere.

AT&T did indicate in late July that it will need to have an arrangement to market satellite TV, since its aggressive expansion of its own U-verse TV service will not be available throughout its footprint--which could be up to half of the areas it served.



As a result, it may still attempt to reach a deal with Dish on more favorable terms. Still, Dish said in the SEC filing that even a new agreement could lead to lower results for it if AT&T or another telecom company opts to "de-emphasize or ... increase their promotion of competing services."

AT&T would likely spend more plugging U-verse. Customers who sign up for that service provide all revenues to AT&T, without some sort of a pass-along to Dish. U-verse had some 549,000 customers on July 1--up 170,000 since April 1.

Dish revealed the potential issue while reporting its second-quarter results, where revenue rose 5.6% to $2.91 billion. Net income jumped to $336 million from $224 million a year ago.

Dish lost some 25,000 subscribers after adding 35,000 in the previous quarter this year and 170,000 in the second quarter of 2007. It now has some 13.79 million subscribers. Dish indicated in the SEC filing that the weak economy and heavy marketing by DirecTV, plus Verizon and AT&T for their telco TV offerings, contributed to its declines and will continue to do so.

Investors appeared to be disappointed with its result, and perhaps the AT&T issue, sending the stock down about 6% in midday trading to the $27-per-share range.

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