By Malathi Nayak and Lehar Maan
(Reuters) - Dish Network Corp (O:DISH) is figuring out next steps as it awaits a decision by U.S. regulators on its eligibility for a discount in a recent airwaves auction, executives said on Wednesday, after the company posted a significantly higher-than-expected quarterly profit.
Federal Communications Commission officials told Dish last month that a staff review of the auction, which ended in January, found Dish affiliates SNR and Northstar ineligible for $3.3 billion in small-business discounts.
Following the record-setting $45 billion auction, FCC officials reviewed $13.3 billion of winning bids by SNR and Northstar. A rejection of the discount would mean SNR and Northstar would have to pay $3.3 billion back to the FCC to keep the spectrum licenses they won in the auction.
If the FCC decides against Dish, Chief Executive Charlie Ergen said on a call with analysts, the company and its affiliates will be left with three options: filing a lawsuit, not paying the money and incurring a penalty, or paying back the discount.
"I don't know exactly whether you would pay and then sue or just sue," Ergen said. "I don't think we know until we see the order."
The satellite TV company said on Wednesday in a filing that if the FCC grants spectrum licenses to its affiliates, it might have to give "significant additional loans" to the two companies.
It's "too early to tell" whether Dish needs to raise extra capital, Ergen said.
Dish has been losing pay-TV subscribers as it tackles an industry-wide trend of viewers shifting to online video offerings by such rivals as Netflix Inc (O:NFLX).
It released its Sling TV video streaming service in January to lure viewers who shun pricey pay-TV subscriptions. Sling TV added 169,000 subscribers as of March 31, the company said without disclosing numbers as of June 30.
In its report on results, Dish said net subscriber losses in the business almost doubled to 81,000 in the second quarter from the year earlier. However, its average revenue per pay-TV user rose to $87.91 in the quarter, from $84.15 a year earlier.
Net income attributable to Dish rose to $324.4 million, or 70 cents per share, from $213.3 million, or 46 cents per share, a year earlier.
Total revenue increased 3.8 percent to $3.83 billion.
Analysts estimated a profit of 45 cents per share and revenue of $3.79 billion, according to Thomson Reuters I/B/E/S.
Dish's shares were up 3.9 percent at $67.93 on Wednesday afternoon.