Dish Network in the News

EchoStar Reports Third Quarter Profit

NEW YORK, Oct 23, 2001, (Reuters) - The satellite television company EchoStar Communications Corp. reported a third-quarter profit against a loss last year, as it added 360,000 new subscribers during the quarter, exceeding expectations.

Chief Executive Charlie Ergen said he expected net subscriber additions to total 1.5 million to 1.75 million in 2001 and expected 2002 additions to fall in the same range, despite a slower overall economy.

"Given the weaker economic environment, there was concern they would either miss the subscriber addition number in the third quarter, or take down guidance going forward," said Ray Schleinkofer, an analyst with Thomas Weisel Partners. "The fact that they beat the third-quarter number and maintained their guidance was very encouraging."

At the same time, the company's subscriber acquisition costs, which are key marketing expenses for satellite and cable companies, rose 2 percent from the second quarter while customer turnover -- often called churn -- was higher than the company's historical average.

Those factors, analysts said, weighed on the stock price, which fell 7 cents to close at $26.07 on Nasdaq, after rising as much as 4.8 percent earlier in the session.

EchoStar, which operates the Dish Network and is aiming to take over larger rival Hughes Electronics Corp., reported a profit of $3.1 million, or 1 cent a share, compared with a loss of $142.3 million, or 30 cents a share.

The Wall Street consensus estimate was a loss of 3 cents a share, with a range of a loss of 6 cents to nil cents a share, as compiled by Thomson Financial/First Call.

Revenues climbed 46 percent to $1.02 billion from $698 million.

"We don't see a lot of change in the company's fundamental course," Ergen told analysts in a conference call. "We would expect 2002 net subscriber growth solidly in the same range as this year.

"We would expect subscriber acquisition costs and churn to trend lower in 2002," he added.

Last week, Hughes Electronics Corp., which owns the DirecTV satellite service sought by both EchoStar and Rupert Murdoch's News Corp., reported a net third-quarter loss of $227.2 million due to charges stemming from a 10 percent reduction in its work force, although it added 475,000 net subscribers in the quarter.

EchoStar added 360,000 net new subscribers, bringing its total subscribers to 6.43 million. Net subscriber adds rose 3 percent from 350,000 in the second quarter, but fell 21 percent from 455,000 in the year-ago period. Analysts on average expected net subscriber additions to total 350,000, with a range of 300,000 to 385,000.

EchoStar attributed the decline from a year ago to increased churn, incentives offered by cable companies for digital service, piracy of competitor products, a maturing market and other factors.

It said that churn was expected to be higher than its historical average for the remainder of 2001, as a result of these factors.

Monthly average revenue per subscriber, a key measurement for satellite and cable companies, was $49.26, down 1.5 percent from the second quarter, but up 8.6 percent from a year ago. The company attributed the sequential decline to one of its promotional programs and warned that if successful, average revenue per subscriber could fall in the current quarter.

Subscriber acquisition costs totaled $392 per subscriber, up 2 percent from the previous quarter and down 10 percent from a year ago. The company reiterated it expects to end the year with subscriber acquisition costs of less than $450 a subscriber.