UPDATE 3-Dish Network loses fewer customers than expected

* Third-quarter revenue $3.52 bln vs last yr $3.60 bln

* Dish said it is considering price increase next year

* Chairman says Dish-DirecTV should consider merger

* Dish lost about 19,000 subscribers

* Dish shares rise, DirecTV shares fall

Nov 6 (Reuters) - Dish Network Corp, the second-largest U.S. satellite TV company after DirecTV, reported a third-quarter loss due to high litigation costs and said it was prepared to raise prices next year after a one-year freeze.

Dish shares rose 2.7 percent on Tuesday.

Chairman Charlie Ergen said on a conference call that the company is on a ``pretty good path to increasing our margins'' next year with a price increase, even if it would cause some customers to quit. He added that ``we have to be prepared for the fact that any time you raise prices, you give customers a reason to look elsewhere.''

Dish reported a net loss of $158.5 million, or 35 cents per share for the quarter ended Sept. 30, compared with net income of $319.1 million, or 71 cents per share, a year earlier. The company attributed its loss to litigation expenses of $730 million, higher programming costs and increased advertising costs related to its Hopper set-top box in the quarter.

Revenue fell about 2 percent to $3.52 billion. The company also said it lost about 19,000 subscribers. Wall Street analysts on average were expecting a net loss of 38,600 subscribers, according to StreetAccount consensus data.

Macquarie analyst Amy Yong said that ``Dish metrics were better than people were thinking.'' Dish fared better with investors on Tuesday than its bigger rival, DirecTV, whose shares fall 1.5 percent after it said it added 67,000 subscribers in the quarter.

Yong said that Wall Street was reacting to DirecTV's slowing growth in Latin America. The region, which is seen as the biggest growth engine of DirecTV's business, added 543,000 subscribers, which missed analysts' estimates of 575,000 subscribers. (For more, see: )

Bernstein analyst Craig Moffett said in a research note on Tuesday that Dish could make a case to regulators for a merger with DirecTV.

``Dish and DirecTV are collectively barely growing and without a broadband offering of their own, their ability to offer a competitive counter-balance to cable is becoming more limited,'' Moffett said.

When asked about a potential merger with its larger rival, Dish's Ergen called it something that ``probably both companies have to consider.'' But he said Dish has not been in discussions with DirecTV, which declined to comment on his remarks.

Dish, which bought the failed Blockbuster video rental chain in a bankruptcy auction last year, has been looking to diversify beyond pay TV.

The company wants to enter the wireless business and has spent billions of dollars along with sister company EchoStar Corp o n acquiring wireless s p ectrum.

But it still needs approval from the U.S. Federal Communications Commission to build a wireless network. Dish executives have said the FCC chairman will make a decision by the end of the year.

Dish said its four-year-old lawsuit with Voom HD Holdings reduced net income by $453 million. Except for that one-time cost, third-quarter net income would have been $295 million.

Voom was a unit of Cablevision Systems Corp when the lawsuit was filed in 2008, and is now a part of AMC Networks , which Cablevision spun off last year.

Subscriber acquisition advertising costs rose 35.7 percent to $123.9 million in the quarter.

Average monthly subscriber churn, or the rate of cancellations, fell to 1.8 percent from 1.83 percent a year earlier. Average monthly revenue per subscriber rose slightly, to $77.57 in the third quarter from $76.99 a year earlier.

Dish shares rose 94 cents, or 2.7 percent to $35.77 while DirecTV shares fell 72 cents, or 1.4 percent to 49.92 on Tuesday.