Dish Growth Dips a Bit


Distracted by its failed play to acquire Loral Space & Communications Ltd.'s satellite business and slow to roll out new products like HDTV, EchoStar Communications Corp. reported disappointing third-quarter results last week and warned that the holiday season won't be much better.

Still, EchoStar reported about 285,000 net new Dish Network direct-broadcast satellite subscribers in the period, above the 270,000 additions in the previous quarter but down from 320,000 in the same period last year.

Most analysts had expected basic growth of about 300,000 customers in the quarter — hence the disappointment.

The slower-than-expected growth hit EchoStar stock hard Nov. 11. Shares fell nearly 13% ($4.75) to close at $32.05. The stock regained some ground on Nov. 12, rising $1.09 to $33.14 on Nov. 12, as investors apparently saw a buying opportunity in the distressed shares.

Chairman and CEO Charlie Ergen blamed himself for the poor results, adding that EchoStar had the opportunity to capitalize on new product sales amid slow growth in cable subscribers, but failed to do so.

"The CEO needs to do a better job and the CEO didn't do a very good job this quarter," Ergen said during a conference call with analysts, acknowledging that its failed attempt to purchase Loral's satellite assets in bankruptcy court for $1 billion added to the distractions.

Intelsat Ltd. won the bidding for Loral with a $1.2 billion offer. That deal is expected to close by year-end.

While some investors took Ergen's contrition as a sign that below-average performance would continue, Banc of America Securities analyst Doug Shapiro said that was not the case.

"Having sat through these conference calls for seven years, we believe it is typical of him [Ergen] not to sugarcoat operational stumbles, and the tone this quarter didn't indicate resignation that operations will remain weak, as some interpreted," Shapiro wrote. "Also, we can't remember a time when the company missed two quarters in a row, and expect Mr. Ergen will be highly motivated not to make this the first time."

Ergen added that EchoStar failed to introduce an HDTV product in September, the start of the holiday shopping season. Although the No. 2 DBS provider plans to offer an HDTV product in time for the Christmas rush, Ergen said EchoStar has lost a key opportunity.

"We will have some limited HDTV, but we clearly missed all of September and for the most part we missed the holiday season," Ergen said. "We're leaving some business on the table."

Revenue was up 19% in the period to $1.45 billion.

Ergen left the door open to possible collaborations with News Corp. after it completes its acquisition of DirecTV Inc. parent Hughes Electronics Corp., expected by the end of the year.

He added that possible joint ventures, including spectrum sharing or combined lobbying efforts, are more of a possibility with News Corp. than they had been with DirecTV's old ownership.

"When and if News Corp. finalizes its merger, I hope we have a chance to talk with them," Ergen said. "I gave up a long time ago with DirecTV."