Dish Network Breaks 4 Million Mark
By MONICA HOGAN -- Multichannel News, 4/30/2000 8:00:00 PM
Four years after launching its Dish Network direct-broadcast satellite service, EchoStar Communications Corp. announced last week that it had passed the 4-million-customer mark.
The company also reported first-quarter subscriber growth of about 455,000 net new customers, a 40 percent gain over first-quarter-1999 figures.
Dish ended March 2000 with 3.865 million customers, meaning its strong growth has continued into April.
The quarter was EchoStar's strongest to date, surpassing its acquisitions in the fourth-quarter-1999 holiday selling season.
"It's very unusual to accelerate in the first quarter, but we have been able to do that," EchoStar chairman Charlie Ergen said during an analyst call last Thursday. "We're not prepared to say we'll see 40 percent growth over last year for every quarter this year."
DBS rival DirecTV Inc. signed 405,000 net new high-power subscribers in the first quarter, a 33 percent gain over its first-quarter-1999 acquisitions. In addition, the company transitioned another 275,000 PrimeStar by DirecTV medium-power customers to its high-power service.
All told, the high-power DBS industry gained about 1.135 million subscribers in the first quarter, typically considered among the slowest retail-sales periods in the consumer-electronics industry.
Both EchoStar and DirecTV credited local-to-local broadcast availability for helping to drive first-quarter subscriber growth.
"The cable industry is really asleep at the switch," Lehman Bros. Inc. senior vice president of high-yield research Bob Berzins said. "They expected the worst from the DBS guys, and it didn't happen."
Earlier research reports from cable analysts had predicted that DBS growth would peak by 1998, Berzins said. Instead, there has been a continued acceleration of DBS subscriber growth. "And it's not slowing down-it's speeding up," he added.
To achieve its record growth in the first quarter, EchoStar also increased its operating losses due to heavier hardware, marketing and promotional costs. Much of the cost of subscriber acquisitions was due to free-installation promotions, which were set to end April 30.
EchoStar's operating loss for the first quarter of 2000 was $142 million, compared with $56 million for the same quarter in 1999.
Revenues were also up to $566 million for the quarter ended March 31, compared with $310 million in the first quarter of 1999. Revenue per subscriber increased slightly during the quarter to $43.85.
EchoStar also announced two key promotions last week.
EchoStar Technologies Corp. president Michael Dugan was named EchoStar Communications president and chief operating officer. Dugan reports to Ergen and assumes responsibilities for operating Dish and EchoStar Technologies.
Ergen has gone without an official second-in-command for about a year-and-a-half. Most recent former presidents include John Reardon, who left the company in 1998, and Carl Vogel, who left EchoStar in 1997 and is now senior vice president at Liberty Media Group, following a stint as chairman of PrimeStar Inc.
Dugan's promotion "allows me to focus more on what we should be doing in 2001, 2002 and 2003," Ergen said.
EchoStar senior vice president of sales, customer service and human resources Soraya Hesabi-Cartwright was promoted to executive vice president of Dish. She will oversee customer-service operations, programming, marketing and human resources.
In premarket trading last Thursday, EchoStar's stock was down significantly after reporting its first-quarter results, but it bounced back within an hour after the market opened. EchoStar's subscriber numbers outpaced most analysts' expectations.
The company faces possible risks to continued growth and subscriber retention if it fails to negotiate successful local-to-local retransmission-consent agreements, due this month. Without them, EchoStar could be forced to pull local broadcast signals down in certain markets, Ergen admitted.
"We continue to make good progress; we're cautiously optimistic," he said, adding, "The deals aren't signed until they're signed."
Continued gyrations in the stock market could ultimately affect consumer confidence, and if that happens, it could also effect EchoStar's business, Ergen warned.
He predicted that the company would increase its advertising expenditures throughout the year, adding that such advertising wasn't as necessary in the first quarter, given the heavy consumer demand.
EchoStar also plans to test what Ergen called a "Digital Dynamite" promotion, in which the company rents two-receiver DBS systems to customers and provides in-home service on the hardware.
"We compete very well with digital cable," Ergen said. He admitted that in cable markets where prices are kept low, where plants are upgraded and where Dish doesn't yet have local-to-local, "those are tough markets for us. The good news is that there are not many markets like that."
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