Ergen Says Dish Could Launch Internet TV Subscription Service

Satcaster’s chairman says he’s ‘very comfortable’ with Sprint bid relative to SoftBank proposal

Dish Network chairman Charlie Ergen said the satcaster is well positioned to introduce an over-the-top TV service and he maintained that Dish is “very comfortable” with its bid to acquire Sprint in the face of a competing offer from SoftBank.

Ergen, on the company’s earnings call with analysts, said that “as OTT happens, we think that’s something we can participate in… if it becomes a reality.”

However, he added, over-the-top TV services will be several years from coming to fruition. “OTT looks like it’s on a slower growth path than I would have anticipated,” Ergen said. Down the line, “OTT could be a good and growing business for us.”

Dish added 36,000 net TV subscribers in the first quarter — versus a 104,000 net gain in Q1 2012 — ending the first quarter with 14.092 million. The company also added about 66,000 net broadband subscribers in the first quarter, compared with just 6,000 broadband subscribers in the year-ago period.

“Obviously we recognized several years ago that pay TV as a business, in terms of a big package where customers spend $1,000 a year, that’s a relatively mature business,” Ergen said. “I think there’s some opportunities to continue to grow the business but it obviously gets a little tougher.”

Dish is looking for growth in satellite broadband and via its $25.5 billion bid for Sprint-Clearwire, which would let the company offer not only wireless broadband but also mobile video.

If Dish’s bid for Sprint fails, Ergen said his options could include selling the spectrum Dish has accumulated to date — which he said would be worth more than $10 billion — selling the whole company or partnering with a wireless carrier. “We see a huge preference in Sprint-Clearwire,” Ergen said. But “we have to be prepared to win, and we have to be prepared to lose.”

Japanese telecommunications provider SoftBank, in a regulatory filing Wednesday, said it could achieve more than $3 billion in cost savings if it won Sprint. While SoftBank at this point hasn’t raised its bid for Sprint — it has offered $20 billion for a 70% stake in Sprint — if the telecom does Dish would be willing to up its offer as well, Ergen said.

“There’s only so much debt we’d be willing to take on,” he  said. “To the extent the bidding war got higher, we’d have to look at bringing on a partner to do that in a big way… We’d have to cross that bridge if we get to it.”

Overall, Dish reported revenue of $3.56 billion for Q1 2013, down slightly from $3.58 billion a year ago, which the company attributed to declines in its Blockbuster video-store segment. Subscriber-related revenue for Dish rose 4%, to $3.22 billion.

Dish’s net income of $216 million for the quarter was down 40% year over year, primarily due to higher subscriber-related expenses driven by increased programming and subscriber acquisition costs, including better-than-expected demand for the Hopper DVR. In addition, earnings from Q1 2012 got a lift from a non-cash gain of $99 million related to the conversion of certain debt associated with DBSD North America, the satellite provider Dish acquired in 2011.

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