NEW YORK — Dish Network parent EchoStar Communications reported a 28% increase in revenue as it added 350,000 subscribers in the third quarter.
Strong subscriber growth helped the No. 2 satcaster increase revenue to $1.86 billion from $1.45 billion in the third quarter of last year, while net income nearly tripled to $102 million from $35 million.
The company announced it would pay a $455 million one-time dividend of $1 per share in December.
Topper Charlie Ergen said EchoStar’s ease in winning new subscribers validates the company’s “low-cost” strategy of undercutting cable operators and satellite competitor DirecTV on price.
“Our demand is strong and quite a bit stronger than last year,” Ergen said. “Cable has given it their best shot; they’ve got DVRs, video-on-demand and VOIP and they’re still losing subscribers.”
Dish Network’s numbers were lifted by a reselling relationship with phone company SBC Communications, which added a “material” portion of the new subscribers in the quarter. The company doesn’t break out how much, but Ergen said it was enough to drive down the company’s margins because Dish makes less money from a subscriber sold through SBC than a customer it wins on its own.
But analysts questioned how much longer the SBC relationship would last. SBC Monday announced the hire of HBO veteran Dan York to develop its own Internet-based television service.
“Obviously our relationship with SBC is one we value, but as technology changes and their strategy changes, there may be instances where we work together and instances where we compete,” Ergen said.
Both Dish Network and Rupert Murdoch’s DirecTV have inked bundling deals with phone companies in order to boost subscribers and offer phone, Internet and TV service on one bill.
The strategy has worked well, with satcasters taking hundreds of thousands of subscribers from cable each month.
But the phone companies have announced a variety of plans for video services of their own. Some have speculated that SBC could offer Dish Network service over its own fiber lines. Ergen said some of Dish’s licenses would permit such a reselling arrangement, but others would not.
Ergen said Dish Network’s advantage over potential new competition from phone companies is its size. “Programming contracts are heavily discounted for larger operators,” Ergen said.
The company is close to a tie with Time Warner as the third-largest pay-TV operator behind Comcast and DirecTV. Dish Network ended the quarter with 10.5 million subscribers.