Robust 3Q Boosts EchoStar Stock

Author:
Updated:
Original:

EchoStar Communications stock reached a new 52-week high Tuesday, driven by strong third-quarter results.

Revenue for the period was up 16% to $2.47 billion, and the No. 2 direct-broadcast satellite provider in the country reported 295,000 net new additions, its strongest quarter this year. Gross subscriber additions in the period were 958,000, its highest quarterly gain in at least two years.

Monthly churn was down to 1.76% per month in the period from 1.87% last year but slightly above the 1.7% reported in the second quarter.

The better-than-expected results helped to drive EchoStar shares up more than 5% ($1.97 each) to a new 52-week high of $37.28 per share in early trading Tuesday. The stock fell back to $35.99 (up 68 cents) in late-afternoon trading.

It was the gross-subscriber additions that appeared to encourage investors, who had been concerned in past quarters that new policies to weed out nonpaying customers were affecting subscriber growth.

On a conference call with analysts, EchoStar CEO Charlie Ergen said he has not seen a large amount of subscriber erosion from cable, which has experienced strong basic-subscriber growth from its triple-play package of voice, video and data.

Ergen added that EchoStar did little different in the third quarter than previous periods, although it did step up advertising a bit -- particularly ads that focused on its NFL Network package.

“I don’t think anybody delivers better video than the satellite guys,” Ergen said on the call. “Cable is pretty flat in terms of new subscribers for video. Where they’re getting their growth is in broadband connections, and they’re getting some phone connections, where there may or may not be much money in it.”

Ergen added that offering a satellite-based broadband product to rival that of cable is not as big a priority as preserving and expanding the video customer base. EchoStar announced an agreement to resell WildBlue Communications satellite-based broadband service last month, and it has a deal with AT&T to provide satellite video to the phone company’s package of interactive content, telephony and high-speed data called Homezone.

Homezone, which began testing in several AT&T markets last December, would be made available to about 18 million homes in the phone company’s 36 million-home footprint.

“We don’t want to defocus on our core business. Certainly, our priority has to be to our core video business, which is fairly robust,” Ergen said.

President Carl Vogel said on the call that EchoStar is exploring all of its opportunities, including resale or making its own investment in a broadband service.

“It’s not like we’re breaking our arms patting ourselves on the back for a good quarter and forgetting about the future,” Vogel said. “We’re very aggressive in those areas and we see opportunities in those areas, but we are going to do something that makes sense economically.”

Regarding the impact of the recent federal court decision that will force EchoStar to darken the distant broadcast signals about 900,000 of its more rural customers are receiving by Dec. 1, Ergen said he is hoping that Congress will allow those customers to continue receiving those broadcast channels.

And while he said it could result in higher churn if those customers opted for another video provider, he added that a major portion of those customers can get access to local broadcasts either through rooftop antennas or via broadcast basic cable. However, he said, satisfying all of those customers by the Dec. 1 deadline may be a stretch.

“The majority [of those customers] can get local [broadcasts] and certainly the vast majority of that majority does not need any additional equipment,” Ergen said. “Having said that, we are out there installing new equipment for the customers who need it today. It’s a very tight window: We’ve asked the judge to give us more time. There is no guarantee that the judge will give us more time beyond Dec. 1.”

He continued, “With weather and everything else, I don’t know that we will be able to accomplish all of that, all of the installations necessary. We’re working pretty hard at it to make sure that no customer gets disrupted.”

Related