EchoStar Tends to Ailing Bird

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EchoStar Communications Corp. reported last Monday that its
newly launched EchoStar IV satellite had experienced "anomalies" upon deploying
its solar panels.

At press time last Friday, the extent of the damage
remained unclear. EchoStar and satellite manufacturer Lockheed Martin Corp. were working
together to investigate the problem. EchoStar said in a prepared statement that maneuvers
to correct any damage may take several weeks.

Following its launch from Kazakhstan May 8, EchoStar IV was
set to undergo testing, and it was not expected to be operational until August.

However, any attention being paid to EchoStar's sick
bird was quickly overshadowed last week when PanAmSat Corp.'s Galaxy IV satellite,
which was already in operation, malfunctioned completely. That failure caught national
media attention because the satellite had serviced virtually every paging company in the
country.

Mickey Alpert, president of DBS consultants Alpert &
Associates, said that while uncommon, these types of satellite problems underscore the
importance of having backup birds.

"Failures do occur in any business," said Robert
Bednarek, senior vice president and chief technology officer for PanAmSat. "You do
have to be prudent and plan for possible failures."

PanAmSat used other satellites, such as its Galaxy III-R,
to restore service to its Galaxy IV customers. As of Friday morning, PanAmSat did not
expect to recover Galaxy IV for future operation.

Ironically, one of the proposed uses for the EchoStar IV
satellite was to act as a backup for its other three satellites.

EchoStar had planned to use the satellite to broaden
programming from its primary orbital location at 119 degrees west. The company was set to
move one of two satellites already at 119 to 148 degrees west, where it could deliver
niche, ethnic and local programming to subscribers in the Western half of the country.

EchoStar said it may now have to locate EchoStar IV at 148
degrees if its performance is significantly diminished.

"I don't think that this will have a major impact
on EchoStar's business, because it has other satellites," Alpert said. "The
worst case is that it ends up with the status quo."

But status quo is not necessarily a desirable scenario,
Alpert added.

Positioning a new, higher-power satellite at 119 would
allow EchoStar to add more channels, including expanded pay-per-view offerings, from its
single-dish service. It would also allow EchoStar to target customers in Alaska and
Hawaii.

"Those two markets are underserved," said Jivay
Jayant, a DBS analyst with Bear Stearns & Co. Inc. "That's some of the
upside that they might lose."

Jayant said that because Wall Street had not yet worked
plans for the new satellite into its numbers, the reported problems did not effect
EchoStar's stock prices last week.

EchoStar IV is backed by $220 million in insurance, which
would cover replacement, but not lost business opportunity.

If a completely new satellite becomes necessary, it could
take 18 months to build, sources familiar with the matter said.

On a separate note, a DirecTv Inc. spokesman said the
company's plans to move forward with ethnic-broadcast services from Galaxy III-R will
not be impacted by PanAmSat's problems with Galaxy IV.

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