For the year ended December 31, 2008, DISH Network reported total revenue of $11.62 billion compared with $11.09 billion for the fiscal year ended 2007, an increase of mere 5%. The company’s net income totaled $903 million in 2008, compared with $756 million in 2007. The diluted earnings per share were $1.98 for the year ended Dec. 31, 2008, compared with $1.68 per share during the corresponding period in 2007.
For the fourth quarter of 2008, the total revenue of Dish Network stood at $2.92 billion, with a net income of $217 million (the diluted earnings per share were $0.48). The company lost approximately 102,000 net subscribers during the fourth quarter, giving it approximately 13.678 million subscribers at year-end. The company also lost approximately 102,000 net subscribers for the year ended December 31, 2008, compared to the addition of approximately 675,000 net new subscribers during 2007.
The average monthly subscriber churn (attrition rate of customers) for the year ended December 31, 2008 was 1.86%, a rate that is 9% higher than a year ago and 20% higher than DirecTV's 1.47% in 2008. On top of that, the company couldn’t able to reduce churn without significantly increasing its spending on customer retention incentives, which affected the results of operations and free cash flow for the company.
The company attributed this weak performance to the current weaker economic conditions, especially the downturn in the financial and consumer markets. The company also acknowledged the fact that it is losing its business to its competitors especially fiber-based and Internet-based pay TV providers, who use aggressive promotional and retention offerings. Further, the company did not met its own standards for performing high-quality installations, effectively resolving customers' issues when they arise, answering customers' calls in an acceptable time frame,".
Adding together, the company lost its distribution relationship with AT&T to Direct TV (Nasdaq: DTV) on January 31, 2009. This partnership helped the company to attain substantial subscriber additions over the past several years and accounted for approximately 17% of gross subscriber additions in 2008. As result of the end of this relationship, the company lost approximately one million of its current subscribers, although AT&T is not permitted to target these subscribers for transition to another pay-TV service.
Amidst of all this, the company couldn’t able to struck a deal with Sirius XM Radio, a satellite radio provider with nearly 20 million customers across the US. Sirius faced difficulty in discharging $175 million debt last week; most of this was financed by Charlie Ergen, the CEO of Dish Network. As a result of this, Ergen offered to restructure the debt and inject several hundred million dollars into Sirius in exchange for control over the company.
But, Sirius XM Radio struck an investment deal with Liberty Media (the owner of DirecTV) fending off an aggressive takeover by Dish Network Liberty Media agreed to provide Sirius up to $530 million in loans in exchange for preferred stock that is convertible to 40% of Sirius’s equity, thwarting Mr. Ergens plans to revive growth of his satellite operations.
Where does all this leave Ergen? The hard-charging CEO acknowledged in a conference call that "in 2008, the goal was to stop getting worse". Further, he promised that in 2009, the company is prepared to go forward by getting better, which seems very unlikely. Further, Dish Network, which aims to become the best provider of video services in the United States, may lose its business to the competitive rival companies.
