Dish Network Sinks on Lost AT&T Deal - TheStreet

AT&T

(T) - Get Report

plans to ditch its partnership with

Dish Network

(DISH) - Get Report

in early 2009 and instead market and sell

DirecTV

(DTV)

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.

Moffett added that AT&T's new agreement with DirecTV also likely puts to rest any remaining prospect of an acquisition by AT&T. "By selecting DirecTV, AT&T has expressed its clear preference for the (stronger) DirecTV brand if they are ever interested in buying rather than partnering," he said.

Dish Network Monday also got hit with a downgrade from buy to hold at Deutsche Bank, which said the loss of the AT&T business calls the company's growth outlook into question.

Meanwhile AT&T's board of directors declared a quarterly dividend Friday of 40 cents a share, payable on Nov. 3 to stockholders of record at the close of business on Oct. 10.