DISH Grows Slightly, Focuses on M&A


DISH Network investors were likely too preoccupied with the continued M&A battle brewing among the company, Sprint , Clearwire , and SoftBank. Depending on what happens in the next couple of weeks, investors may have even more offers to look over and analyze, as the company's chief shows no shyness in his willingness to partner with major telecoms or even sell the company. There is more, though, going on at DISH than just supporting investment banks, as the company recently announced its first-quarter earnings. Here's the highlights, and advice for investors going forward.

Core business
Though the majority of attention (and funds) goes toward the company's courtship Clearwire and Sprint, DISH Network's core satellite TV business showed decent results. Subscriber additions ticked up 36, 000 -- a bit less than 2012's first-quarter net additions but still growth. Compared to some cable companies, which are battling the trend toward streaming and a la carte services, any gain in subscribers is cause for celebration.

The real growth for the company comes from the broadband segment. DISH had 83,000 gross additions, up from 14,000 in the year-ago quarter and from 57,000 in the fourth quarter of 2012. Subscriber-related revenue ticked up 4% to $128 million. Since net additions weren't too substantial, it was mainly average revenue per user (ARPU) that boosted revenue.

The company's worst-performing asset, dinosaur video rental company Blockbuster, was flat with the prior year's numbers. DISH still holds on to 650 locations, after Blockbuster U.K. was shut down earlier this year. Investors and analysts are likely eager to see the rest of the stores shuttered as soon as possible, though management has continued its rhetoric that stores that hold value will remain open. Ghosts and cats will likely have to find new strip mall dwellings soon, given that life support for Blockbuster stores is running out.

Back on the DISH front, customer churn remained healthy at 1.7%, suggesting that users are quite satisfied with the company's products, especially the newly introduced (and highly controversial) Hopper.

All in all, DISH generated an attractive $375 million in free cash flow for the quarter, and management expects FCF to remain above net income for the remainder of the year.

Deal update and the call
For the multiple offers out, there are varying stories depending on the source. For the Clearwire bid, Clearwire management continues to tout support for Sprint's bid over that of DISH. For the Sprint bid, DISH Chairman Charlie Ergen strongly believes his company's offer is superior to Softbank's, but commends the competitor on its offer and identification of synergies and value in Sprint. He noted that, given the two companies' aggressive courtship of the telecom, Sprint investors should feel very comfortable with their investment.

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