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Still Neutral on DISH Network

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DISH Network Corp. (DISH) reported mixed financial results for the first quarter of 2012. However, the company generated huge net subscriber addition in the last quarter buoyed by lower churn rate. The new movies streaming services that DISH Network has started after its acquisition of Blockbuster movie chain, better overall pay-TV services, and increased customer loyalty helped the company to outpace its closest rival DIRECTV Inc. (DTV) and several cable TV operators in terms of net subscriber addition.

DISH Network is continuously improving its technically superior hardware, the latest of which is a HD DVR set. This device will enable subscribers to automatically skip all advertisements for prime time TV programs. At the end of the first quarter of 2012, DISH Network had approximately 14.071 million subscribers. Meanwhile, the company suffered a major blow as FCC delayed its decision to grant the company a waiver to establish wireless broadband network. We reiterate our long-term Neutral recommendation on DISH Network.

We believe management is trying hard to develop DISH Network as storage for spectrums that can be used to grow a viable pay-TV distribution network. The newly acquired spectrums from TerreStar Networks Inc. and DBSD North America Inc. provide most valuable assets to the wireless industry. Using these slots of airwaves, the company can form a formidable video-on-demand service over a wireless network of mobile handsets, such as smartphones and tablets or can monetize these airwaves with significant financial gain.

Recently, Standard & Poor's Ratings Services (S&P) raised the company’s outlook on the company from Stable to Positive. The reason for this upgrade was the proposed wireless network strategy of DISH Network.

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