Dish Network Sinks on Lost AT&T Deal

AT&T (T Quote - Cramer on T - Stock Picks) plans to ditch its partnership with Dish Network (DISH Quote - Cramer on DISH - Stock Picks) in early 2009 and instead market and sell DirecTV (DTV Quote - Cramer on DTV - Stock Picks) as a co-branded satellite television service.

The agreement with DirecTV, announced late Friday, will follow the expiration of AT&T's current satellite deal with Dish Network on Jan. 31, 2009. New AT&T/DirecTV subscribers will receive satellite programming packages with the added benefit of a discount for bundling wireless, home phone and broadband services with AT&T.

"Our focus is on providing customers with a better TV experience than cable," said Jeff Weber, AT&T vice president of video and entertainment, in a company statement.

Shares of AT&T were lately down 1.6% at $29.52, and Dish was tumbling 14.5% to $20.99. DirecTV shares were edging up 0.6% to $26.71.

AT&T's new agreement with DirecTV marks the latest blow to Dish Network, which was already struggling with subscriber losses. In its second-quarter earnings report released last month, Dish Network said it lost about 25,000 net subscribers during the quarter. By comparison, DirecTV reported 129,000 net subscriber additions in the same period.

"The announcement is a clear negative for Dish Network, and a major win for DirecTV," said Craig Moffett, analyst with Sanford Bernstein, in a note. "AT&T's distribution flip flop means that approximately 400,000 subscribers who otherwise would have opted for Dish Network service as part of bundled AT&T offers now will end up with DirecTV instead."

AT&T had been struggling with adding satellite connections under its partnership with Dish. In its second-quarter earnings report, AT&T said it had a paltry 3,000 satellite additions, while its U-verse subscriber count grew by 170,000. "Either AT&T wasn't having success selling the Dish Network brand in its former BellSouth territories, or it wasn't even trying," Moffett said.

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