(Reuters) - Dish Network Corp (DISH.O), the second-largest U.S. satellite TV company after DirecTV DTV.O, reported a third-quarter loss due to high litigation costs, but at least one analyst said the results highlighted weaknesses in the company’s core business.
Revenue fell about 2 percent to $3.52 billion. The company also said it lost about 19,000 subscribers on a net basis, although this was less than many analysts had expected.
Analysts on average were expecting a net loss of 38,600 subscribers, according to StreetAccount consensus data.
Dish shares were down about 2.4 percent in premarket trading.
“Third-quarter results continue to point to a company whose core business is still struggling... badly,” Bernstein Research analyst Craig Moffett wrote in a note.
Dish, which bought the failed Blockbuster video rental chain in a bankruptcy auction last year, has been looking to diversify beyond pay TV.
The company, which also wants to enter the wireless business, has spent billions of dollars along with sister company EchoStar Corp (SATS.O) on acquiring wireless spectrum.
But it still needs approval from the U.S. Federal Communications Commission to build a wireless network.
The lackluster core business results would help make a case to regulators for a merger with a much stronger DirecTV, Moffett said.
“Dish and DirecTV are collectively barely growing and without a broadband offering of their own, their ability to offer a competitive counter-balance to cable is becoming more limited,” he said.
DirecTV reported U.S. subscriber additions on Tuesday, but the numbers fell short of analysts’ expectation.
Dish reported a net loss of $158.5 million, or 35 cents per share for the quarter ended September 30, compared with net income of $319.1 million, or 71 cents per share, a year earlier.
The company attributed its loss to litigation expenses of $730 million, higher programming costs and increased advertising costs related to its Hopper set-top box in the quarter.
Dish said its four-year-old lawsuit with Voom HD Holdings reduced net income by $453 million. Except for that one-time cost, third-quarter net income would have been $295 million.
Voom was a unit of Cablevision Systems Corp CVC.N when the lawsuit was filed in 2008, and is now a part of AMC Networks (AMCX.O), which Cablevision spun off last year.
Dish also reached an agreement with Gannett Co Inc (GCI.N) in a dispute over fees and the commercial-skipping Hopper video recorder.
Subscriber acquisition advertising costs rose 35.7 percent to $123.9 million in the quarter.
Average monthly subscriber churn, or the rate of cancellations, fell to 1.8 percent from 1.83 percent a year earlier. Average monthly revenue per subscriber rose slightly to $77.57 in the third quarter from $76.99 a year earlier.
The company’s shares closed at $34.83 on the Nasdaq on Monday.
Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sreejiraj Eluvangal