EchoStar Reports Third Quarter 2005 Financial Results

[Scott Greczkowski]

EchoStar Reports Third Quarter 2005 Financial Results
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ENGLEWOOD, Colo., Nov. 8, 2005 -- EchoStar Communications Corporation (Nasdaq: DISH) reported that its DISH Network™ satellite television service added approximately 255,000 net new subscribers during the third quarter of 2005.

DISH Network had approximately 11.71 million subscribers as of Sept. 30, 2005.

For the quarter ended Sept. 30, 2005, EchoStar reported total revenue of $2.1 billion, a 14 percent increase compared with $1.9 billion for the corresponding period in 2004.

Net income totaled $209 million for the quarter ended Sept. 30, 2005, compared with net income of $102 million during the corresponding period in 2004. Basic earnings per share was $0.46 for the quarter ended Sept. 30, 2005, compared with basic earnings per share of $0.22 during the corresponding period in 2004.

Detailed financial data and other information are available in EchoStar’s Form 10-Q for the quarterly period ended Sept. 30, 2005, filed with the Securities and Exchange Commission.

About EchoStar Communications

EchoStar Communications Corporation (NASDAQ: DISH) serves more than 11.71 million satellite TV customers through its DISH NetworkÔ, and is a leading U.S. provider of advanced digital television services. DISH Network’s services include hundreds of video and audio channels, Interactive TV, HDTV, sports and international programming, together with professional installation and 24-hour customer service. EchoStar has been a leader for 25 years in satellite TV equipment sales and support worldwide. EchoStar is included in the Nasdaq-100 Index (NDX) and is a Fortune 500 company. Visit EchoStar's Web site at www.echostar.com or call 1-800-333-DISH (3474).

EchoStar will host its third quarter 2005 earnings conference call today at noon ET. The call will be broadcast live from EchoStar's website, www.echostar.com . The dial-in number is (800) 616-6729. To access the webcast of this event, go to www.echostar.com , then select "Investor Relations." A one-time webcast replay of the earnings call will be available on the investor relations page of www.echostar.com on Nov. 9, 2005, at 9 p.m. ET.

Contacts:Investor Relations, Jason Kiser, 303-723-2210, jason.kiser@echostar.com

Media Relations, Marc Lumpkin, 720-514-5351, press@echostar.com

 

[riffjim4069]

I have to give credit to E* for providing an affordable service while earning a profit for their shareholders. They don't do anything unless it has the potential to turn a profit.

 

[navychop]

I'm glad to see them make a profit. They're gonna need it- I'll bet they'll be taking some pretty hefty up front losses on this move to MPEG-4.

 

[riffjim4069]

I'm glad to see them make a profit. They're gonna need it- I'll bet they'll be taking some pretty hefty up front losses on this move to MPEG-4.

I get the feeling E* plans to have subscribers pay as much of the MPEG-4 transition costs as possible and have them sign-up for an addition 12-24 months of programming service. I would purchase a 942 if they would state their MPEG-4/962 transition plans. As it stand now, D* and FiOS are looking better each day E* continues their silence.

 

[HokieEngineer]

Interesting things from the 10K filing:

JohnH reported already that E3 can operate 18 transponders at 61.5, however it currently is only transmitting on 17.

E5, which is at 129 currently, had its remaining useful life reduced to 40 months, which is 3 years 4 months. During August 2005, EchoStar V lost an additional solar array string. Interesting, was that around the time people noticed E5 was on/off?

Interesting E8 events in 2005:
During January 2005, one of the computer components in our EchoStar VIII satellite control electronics experienced an anomaly. The processors were successfully reset, during April 2005, restoring full redundancy in the spacecraft control electronics.

In July 2005, a thruster experienced a “bubble” event in a propellant line which caused improper pointing of the satellite resulting in a loss of service. Service was restored within several hours and the thruster is currently operating normally. An investigation of the anomaly is continuing.

During February 2005, EchoStar VIII lost a solar array string, reducing solar array power to approximately 99% of its original capacity. Until the root cause of these anomalies are determined, there can be no assurance that a repeat of the July 2005 anomaly, or other anomalies, will not cause further losses which could materially impact its commercial operation, or result in a total loss of the satellite.


How much did that smartcard swap cost?
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We own 50% of NagraStar L.L.C. (“NagraStar”), a joint venture that is our exclusive provider of security access devices. During the nine months ended September 30, 2005, we purchased approximately $104.7 million of security access devices from NagraStar. As of September 30, 2005, we were committed to purchase approximately $69.4 million of security access devices from NagraStar.


Info on 8PSK and Mpeg-4 technology
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Several years ago we began deploying satellite receivers capable of exploiting 8PSK modulation technology. Since that technology is now standard in all of our new satellite receivers, our cost to migrate programming channels to that technology in the future will be substantially lower than if it were necessary to replace all existing consumer equipment.

As we implement 8PSK technology, bandwidth efficiency will improve, significantly increasing the number of programming channels we can transmit over our existing satellites as an alternative or supplement to the acquisition of additional spectrum or the construction of additional satellites. New channels we add to our service using only that technology may allow us to further reduce conversion costs and create additional revenue opportunities.

Similarly beginning in late 2005 or early 2006, we intend to make MPEG-4 technology standard in all satellite receivers for new customers who subscribe to our high definition programming packages. This technology will result in further bandwidth efficiencies over time. We have not yet determined the extent to which we will convert the EchoStar DBS System to these new technologies, or the period of time over which the conversions will occur.

Provided EchoStar X launches successfully during 2006 and other planned satellites are successfully deployed, our 8PSK transition will afford us greater flexibility in delaying and reducing the costs to convert our subscriber base to MPEG-4.

Is Charlie going to pay for your mpeg-4 boxes? Maybe help out with the cost a little?
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While we may be able to generate increased revenue from such conversions, the deployment of equipment including new technologies will increase the cost of our consumer equipment, at least in the short term. To the extent we subsidize those costs, SAC and Equivalent SAC will increase as well. However, the increases in these costs would be mitigated by, among other things, our expected migration away from relatively expensive and complex SuperDISH installations (assuming successful launch of our EchoStar X satellite and the continued availability of our other in-orbit satellites). These increases may also be mitigated to the extent we successfully redeploy existing set-top boxes and implement other SAC reduction strategies.


Compliance with the Locals on a Single Dish law:
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We currently offer local broadcast channels in 164 markets across the United States. In 38 of those markets, a second dish is necessary to receive some local channels in the market. SHVERA now requires, among other things, that all local broadcast channels delivered by satellite to any particular market be available from a single dish within 18 months of the law’s December 8, 2004 effective date.

Satellite capacity limitations could force us to move the local channels in all 38 markets to different satellites, requiring subscribers in those markets to install a second or a different dish to continue receiving their local network channels. We may be forced to stop offering local channels in some of those markets altogether.

The transition of all local channels to the same dish could result in disruptions of service for a substantial number of our customers. Further, our ability to timely comply with this requirement without incurring significant additional costs is dependent on, among other things, the successful launch and commencement of commercial operation of our EchoStar X satellite during the first half of 2006 and continued operation of our EchoStar V satellite at the 129 degree orbital location until that time.

In addition, we depend on our EchoStar VIII satellite to provide local channels to over 40 markets at least until such time as our EchoStar X satellite has successfully launched and commenced commercial operations.

 

[rocatman]

The discussion on 8PSK was interesting. I believe Dish could put 15 or 16 SD channels on a single TP using 8PSK as opposed to the 12 channels/TP using QPSK.

The paragraph titled "Compliance with the Locals on a Single Dish law:" appears to be for the most part a repeat of previous quarterly statements except for the mention of E-5 at 129 W. I say that because previous quarterly reports that talked about this issue also failed to have any discussion on E-7 at 119 W providing local channels which is an interesting omission.

 

[Scott Greczkowski]

SkyReport had a good article on this today. SkyReports writing has been picking up lately!

http://www.skyreport.com

DISH Prepares For New Technology


The nation's No. 2 satellite TV company is preparing new technologies intended to wow its customers and close the gap between itself and its competitor.

In a Securities and Exchange Commission filing released Tuesday, EchoStar said that beginning later this year or early 2006 it intends to make MPEG-4 technology standard in all satellite TV receivers for new customers who subscribe to high-def programming packages. The technology will result in bandwidth efficiencies over time, the company said.

EchoStar also revealed that it's implementing 8PSK technology, which also will help improve bandwidth efficiency and significantly increase the number of channels the DISH Network DBS service can transmit over existing satellites. The company said new channels added to its service using only that technology may allow for a further reduction of conversion costs and create additional revenue opportunities.

"We have not yet determined the extent to which we will convert the EchoStar DBS System to these new technologies, or the period of time over which the conversions will occur," the company said in the SEC filing. If a new satellite, EchoStar X, launches during 2006 and other planned satellites are successfully deployed, the 8PSK transition "will afford us greater flexibility in delaying and reducing the costs to convert our subscriber base to MPEG-4," the company said. EchoStar also reported that during the third quarter it added about 255,000 net new subscribers to DISH Network during the third quarter, taking the customer total to 11.71 million customers.

 

[Sean Mota]

SkyReport had a good article on this today. SkyReports writing has been picking up lately!

http://www.skyreport.com

DISH Prepares For New Technology


In a Securities and Exchange Commission filing released Tuesday, EchoStar said that beginning later this year or early 2006 it intends to make MPEG-4 technology standard in all satellite TV receivers for new customers who subscribe to high-def programming packages. The technology will result in bandwidth efficiencies over time, the company said.
.

and where is the statement for current HD customers... Are we going to be left out of the mix?

 

[David_Levin]

Thanks for the summary Hokie, that's good stuff.

8psk Usage
I'll assume that the 50x series and below do not support 8PSK. That's still a huge number of boxes in the field. I think we're still looking at years before all the SD boxes are swapped out (but they are on the right track).

In addition, we depend on our EchoStar VIII satellite to provide local channels to over 40 markets at least until such time as our EchoStar X satellite has successfully launched and commenced commercial operations.

I'm not sure how to interpret this. Are they specifically worried about the integrity of E8? Or, is this just the normal concern for any Sat that doesn't have an on-orbit backup.

Similarly beginning in late 2005 or early 2006, we intend to make MPEG-4 technology standard in all satellite receivers for new customers who subscribe to our high definition programming packages.

I'll believe it when I see it. But unless they show us an MPEG-4 HD PVR at the next Tech-Forum my guess would be mid-2006.

 

[Tom Bombadil]

Current HD customers will also benefit from both the implementations of 8PSK and MPEG-4, as they will enable E* to give more bandwidth to HD and thus offer more HD channels.

At some point, current HD customers may need to upgrade their receivers to access these new channels. However this shouldn't be a big deal to a lot of HD customers given that so many of them are using leased receivers. Those who paid $1000 or $700 for a 921 or 942 will be screaming for E* subsidized deals on replacements. At this point no one knows if those deals will be offered. As it may well be until 2007 or 2008 before one would need to have MPEG-4 support to receive all HD channels, E* may decide that the old receivers have served their purpose and the consumer will be left to buy new gear, much like they would be buying new computers by 2008 to replace computers purchased in 2004.

 

[Scott Greczkowski]

Thanks for the summary Hokie, that's good stuff.

8psk Usage
I'll assume that the 50x series and below do not support 8PSK. That's still a huge number of boxes in the field. I think we're still looking at years before all the SD boxes are swapped out (but they are on the right track).

I may be wrong, but I believe that all receivers from the 301 on up have 8PSK built in.

 

[NightRyder]

8PSK capable receivers are:

111 - 311 - 322 - 522/625 - 6000u - 811 - 921 - 942


NightRyder

 

[navychop]

Are you saying the 721 is not 8PSK capable? The 111 and 6000 are, but the 301 and 50x aren't?

Hokieengineer-
"We have not yet determined the extent to which we will convert the EchoStar DBS System to these new technologies, or the period of time over which the conversions will occur."
Thanks. I find the above most interesting. So much for prior word on 3 years. But I can't see why they would leave some channels on MPEG-2. Maybe they'll leave the Top 60 folks there for an extended number of years, reducing their numbers as they replace their receivers "naturally." I guess that would reduce E* costs- but only if they don't need the bandwidth for additional programming. Since programming is their product, surely they won't put off complete conversion for too many years.

 

[NightRyder]

Are you saying the 721 is not 8PSK capable? The 111 and 6000 are, but the 301 and 50x aren't?

Yep. Out of the newer model receivers the 301, 501, 508, 510 and 721 are not listed as having 8PSK tuning capability.

NightRyder

 

[navychop]

And what programming is currently used with 8PSK?

 

[NightRyder]

And what programming is currently used with 8PSK?

Just HD for now.

NightRyder