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UPDATE 3-Dish Network subscriber gain, profit beat street

NEW YORK, May 10 (Reuters) - Satellite TV service Dish Network posted stronger-than-expected quarterly profit and subscriber additions, and brisk demand for premium services overshadowed higher programming and legal costs. Dish, which competes with local cable operators, phone companies and its larger rival DirecTV Group, added 237,000 net new subscribers in the first quarter, bringing its total to 14.3 million. The Englewood, Colorado-based company, which lost 94,000 subscribers in the same period a year earlier, said it benefited from efforts to rein in cancellations . By comparison, DirecTV said last week that it had added 321,000 subscribers in the first quarter, although only 100,000 were in the United States. It also cited a boost in revenue from subscribers who sign up for high-definition service or use digital video recorders. Shares of Dish were up 3 percent at $21.94 in morning trading on Nasdaq. Analyst Craig Moffett from Bernstein Research said he expected Dish to add 185,000 net subscribers, which was about 20,000 more than consensus. He was also impressed at Dish's ability to add 833,000 gross subscribers in the quarter. "Gross additions speak directly to customer choice and suggest that Dish is indeed gaining traction versus DirecTV," he said in a note to clients. Dish, which is controlled by entrepreneur Charlie Ergen, said net income fell to $230.9 million, or 52 cents per share, from $312.7 million, or 70 cents a share, a year earlier. But the profit beat the analysts' average estimate of 50 cents a share, according to Thomson Reuters I/B/E/S. Revenue rose 5.2 percent to $3.06 billion, slightly better than Wall Street estimates of $3.05 billion. Dish's programming costs rose 5.8 percent from a year earlier after it renewed some contracts at higher rates. Legal expenses from a long-running patent dispute with TiVo Inc over digital video recording technology were $30.2 million in the quarter, compared with nil a year earlier. TiVo sued EchoStar Corp, Dish's sister company, in 2004 for patent infringement of its DVR technology. A jury found that EchoStar's DVR technology infringed TiVo patents. The U.S. District Court for Eastern Texas last year imposed contempt sanctions against Dish and EchoStar for violating a permanent injunction to stop making and selling DVRs. In March, a federal appeals court affirmed the contempt finding against the two companies. While the battle continues, analysts speculate it will probably end with a licensing agreement that calls for Dish to pay TiVo for each of its DVR-using subscribers. (Reporting by Franklin Paul; Editing by Lisa Von Ahn and Derek Caney) Keywords: DISHNETWORK/ (Franklin.Paul@thomsonreuters.com; +1 646 223 6195; Reuters Messaging: Franklin.Paul.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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