Dish Network in the News

EchoStar Growth Exceeds Expectations

CHICAGO, May 3, 2001 (Reuters) - Direct broadcast satellite firm EchoStar Communications Corp. (NasdaqNM:DISH - news) on Thursday posted a positive cash flow for the first time as subscriber additions to its DISH Network satellite television service surpassed expectations.

Shares of EchoStar rose $4.90, or 15.17 percent, to $37.20 in late Thursday morning trade on Nasdaq. The stock has outperformed the Nasdaq Telecommunications Index by 52 percent over the past year.

"(EchoStar's results) were incredibly impressive on all fronts,'' William Kidd, analyst with C.E. Unterberg, Towbin, said.

The Littleton, Colorado-based EchoStar said it added 460,000 subscribers to its DISH service, surpassing analysts' expectations that hovered around 380,000. DISH had a total of 5.72 million subscribers at the end of the March 31 quarter, up 48 percent from 3.9 million a year ago.

Kidd said net subscriber growth was helped by marketing promotions and lower turnover.

The company said in its quarterly filing with the U.S. Securities and Exchange Commission that it expects to add 1.5 million to 2 million subscribers in 2001, assuming that the U.S. economy continues to grow at a slow pace.

DISH offers 500 digital video and audio channels to consumers via satellite.

EchoStar reported cash flow, or earnings before interest, taxes, depreciation and amortization (EBITDA), of $51 million compared with negative $88 million a year ago. EBITDA is a key measure of performance for a capital-intensive industry like the satellite business.

"To be able to grow subscribers better than we were projecting plus leverage the cost and get higher EBITDA was a pretty nice performance particularly when you consider that we've been in a little bit of a weaker economic environment,'' Ray Schleinkofer, analyst with Thomas Weisel Partners, said.

EchoStar said its EBITDA, which was more than double analysts' expectations, benefited from a continued increase in DISH subscribers, higher average revenue per subscriber, and the introduction of a new DISH home leasing program.

EchoStar said it expects positive EBITDA through the year.

Robert Peck, analyst with Bear Stearns, said EchoStar's strong results showed that it held on to its customers despite a promotion by Charter Communications Inc. (NasdaqNM:CHTR - news) offering cash if customers trade satellite dishes for Charter's digital cable service.

Charter is the nation's fourth-largest cable company.

EchoStar's revenues for the quarter rose to $861.9 million from $565.7 million a year ago.

Dish service revenues rose to $794 million from $477 million a year ago on an increase in new subscribers and higher average revenue per subscriber.

EchoStar said its monthly average revenue per subscriber in the first quarter rose to $48.23 from about $43.85 last year. It expects that to increase to $50 by the end of the year.

Subscriber acquisition costs in the first-quarter rose slightly to $297 million, or about $432 per new subscriber, compared with $273 million, or about $467 per new subscriber a year ago.

The company said it expects acquisition costs to average about $452, the same level as last year.

First-quarter customer turnover, or churn, was consistent with a year ago, but EchoStar said in its filing that it expects to see a temporary increase in churn in the second-quarter, hurt in part by price increases in certain programming packages.

EchoStar reported a first-quarter operating loss of $15.2 million compared with a loss of $142.1 million a year ago.

Its net loss, including a one-time charge, narrowed to $167.0 million or 35 cents a share from a loss of $185.1 million or 40 cents in the year-earlier period.

The net loss included a $92 million one-time charge to reduce the carrying value of certain strategic investments.

EchoStar reported a net loss of 16 cents a share, excluding the one-time charge, compared with analysts' expectations of a 24 cent loss. Estimates ranged from a loss of 15 cents to a loss of 32 cents, according to Thomson Financial/First Call.

EchoStar's premarketing cash flow rose to $351 million compared with $186 million.

SG Cowen said in a research report earlier this week that EchoStar could be laying the groundwork for a counter bid for its larger archrival DirecTV, a bid that would compete with Rupert Murdoch's News Corp.