News

Dish Rises Above 7M

5/05/2002 8:00 PM Eastern

EchoStar Communications Corp. added 335,000 net new Dish Network subscribers during the first quarter, elevating its customer base to 7.16 million homes.

In an earnings call with analysts last Thursday, CEO Charlie Ergen projected that Dish would reach 8 million direct-broadcast satellite customers by year-end.

The guidance excludes any subscriber upside from the company's proposed merger with DirecTV Inc. parent Hughes Electronics Corp., which could close late this year if it wins government approval. DirecTV has roughly 11 million subscribers.

EchoStar's net loss for the quarter totaled $39 million. Cash-flow results improved over the year-ago period, but missed Wall Street analysts' expectations, which drove the company's stock price down 5 percent in heavy trading last Thursday.

Ergen admitted he was disappointed with some of the company's financial metrics during the quarter, but said they were a result of strategic decisions EchoStar made to help its long-term economic model.

Promotions geared toward getting new subscribers to place multiple satellite receivers in their homes led to higher costs, but could help EchoStar in the long run by lowering customer churn and boosting revenue per subscriber, Ergen predicted.

And promos that offered free or discounted programming also cut into the company's first-quarter revenue, he said.

Revenue from new subscribers who signed during last year's "I Like Nine" promotion cycle, as well as a more-recent three-month free-programming deal, should rise, the company said.

In a research report last Friday, Deutsche Bank Securities analyst Karim Zia called EchoStar's results "solid," and noted that they highlighted DBS's subscriber-growth momentum.

"I believe we're building value in our company every day," Ergen told analysts last week. "We have a really good feel for the trends and for the industry. We're solid financially."

The proposed merger continues to be top management's primary focus, Ergen said. Industry-wide piracy problems probably played a role in cable's weakened subscriber growth, Ergen said. If consumers can get satellite television for free, he added, they're likely to churn from cable.

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