EchoStar-SBC Partnership on Hold

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EchoStar Communications Corp. chairman Charlie Ergen said the direct-broadcast satellite provider’s relationship with telephone giant SBC Communications Inc. is on hold, adding that the union -- once thought to be another nail in the coffin of cable operators -- hasn’t been working for either party.

SBC and EchoStar announced the partnership in 2003, under which SBC would sell EchoStar’s Dish Network service under its own brand, SBC Dish Network, in a bundle with voice and digital-subscriber-line service.

While the partnership did reap some rewards initially -- SBC accounted for 101,000 net new Dish subscribers in the second quarter of 2004 -- it has fallen off precipitously after SBC announced its own voice, video and data initiative, Project Lightspeed, late last year.

That was evident in the second quarter, as SBC accounted for only 10,000 net new subscribers for EchoStar.

Ergen had said during EchoStar’s first-quarter conference call with analysts in May that he believed the SBC relationship would be de-emphasized. That was no different in the second quarter.

“They’ve indicated that the current structure, where they pay the SAC [subscriber-acquisition costs] for the customer, is not something they are going to be aggressive [with] on a going-forward [basis],” Ergen said during EchoStar’s second-quarter conference call with analysts Tuesday. “We’re OK with that … Any business deal has to work for both parties, and that particular program hasn’t worked for either one of us for the last couple of quarters.”

Ergen added that the two companies continue to work well together and hope to maintain some kind of relationship in the future.

Second-quarter results were strong for the No. 2 DBS provider. EchoStar added a total of 225,000 net new subscribers, revenue was up 17.8% to $2.09 billion and cash flow increased 70% to $524 million.

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