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Moffett Throws in Dish Towel

8/22/2008 8:00 PM Eastern

Influential Sanford Bernstein cable and satellite analyst Craig Moffett threw in the towel on Dish Network last week, reducing his rating on the stock to “under perform” from “market perform,” citing continued weak operations and “worsening sector headwinds” as telcos increasingly become competitors rather than distribution partners.

The satellite-TV provider has struggled this year, reporting its first-ever quarter of net new subscriber losses in the second quarter (25,000) and reeling from increased churn and decreased customer satisfaction, according to the analyst.

“Dish Network's business has deteriorated sharply,” Moffett wrote. Although Dish Network stock has performed remarkably well despite the difficulties — shares were down just 6% ($2.09 per share) to $30.01 each between Jan. 2 and Aug. 19 — Moffett added that the second largest satellite TV operator in the country “is already pricing in huge improvements.”

“These improvements will be hard to come by,” the analyst continued.

Moffett was also concerned with pending litigation — it lost a patent infringement suit to digital video recorder pioneer TiVo, but is appealing the verdict — and the possibility that the satellite giant will lose its distribution deal with AT&T by the end of the year.

The telco notified Dish earlier that it would no longer continue reselling Dish service when its contract expires at the end of the year. AT&T is mulling whether to enter into a new deal with Dish or rival DirecTV for 2009.

Dish shares fell 4% ($1.17 each) to $28.84 per share on Aug. 20.

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