EchoStar; Revenue, Subscribers Up

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9 Aug 2004 18:51 ET EchoStar; Revenue, Subscribers Up

NEW YORK (Dow Jones)--EchoStar Communications Corp.'s (DISH) second-quarter net income fell 34% amid higher expenses, but revenue climbed 26% as subscribership grew at the company's DISH Network satellite-television service.

EchoStar, based in Englewood, Colo., posted net income of $85.3 million, or 18 cents a share, compared with $128.8 million, or 26 cents a share, a year earlier, according to the company's quarterly filing late Monday with the Securities and Exchange Commission.

Total revenue rose to $1.78 billion from $1.41 billion, with subscriber-related revenue up 24% at $1.66 billion.

Total costs and expenses climbed 34% to $1.59 billion amid a 28% jump in subscriber-acquisition costs.

EchoStar's DISH Network added about 340,000 net new subscribers in the quarter, bringing its total to roughly 10.1 million at June 30, up 15% from a year earlier. Turnover of subscribers, a measure referred to as the monthly churn rate, edged up to 1.71% from 1.67% in the 2003 quarter.

EchoStar also said in its filing that effective Monday, its board has authorized the repurchase of up to $1 billion of its Class A shares.

 

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EchoStar 2nd-Qtr Profit Falls 34% as Costs Increase (Update3)
Aug. 9 (Bloomberg) -- EchoStar Communications Corp., the second-largest U.S. satellite-television service, said second- quarter profit fell 34 percent as the company spent more on programming and customer-support systems. Sales rose 26 percent.

Net income fell to $85.3 million, or 18 cents a share, from $128.8 million, or 26 cents, a year earlier, Englewood, Colorado- based EchoStar said in a filing with the U.S. Securities and Exchange Commission. Sales rose to $1.78 billion.

EchoStar's revenue rose as it added 340,000 new subscribers during the quarter. The company and larger rival DirecTV Group Inc. are taking customers from cable operators. Satellite-TV service is generally less expensive than cable and offers more channels in regions where cable companies haven't upgraded to digital systems, analyst William Jacobs said.

``It's a cheaper package, and half the cable business is still analog,'' said Jacobs, an analyst with Harris Associates LP in Chicago. ``Analog cable does not compare well with the satellite guys.'' Harris held 2.62 million EchoStar shares at the end of the first quarter.

Sales Top Estimates

The company's second-quarter revenue topped the average estimate of $1.67 billion from 18 analysts surveyed by Thomson Financial.

In the year-earlier quarter, sales were $1.41 billion.

EchoStar shares today rose $1.29, or 4.7 percent, to $28.55 in extended trading at 5:54 p.m. New York time, after the company's filing was released by the SEC. Earlier the shares fell 63 cents to $27.26 in Nasdaq Stock Market composite trading. They've fallen 20 percent this year through the Nasdaq close.

The company said it ended the quarter with 10.1 million subscribers. DirecTV has about 13 million customers after adding 455,000 in the second-quarter.

Comcast Corp., the world's largest cable operator, lost 96,000 subscribers during the same period, ending the quarter with 21.5 million. Time Warner Inc.'s cable unit lost 21,000 customers to finish the period at 10.9 million.

EchoStar's subscriber-related expenses rose 38 percent to $900.8 million as the company signed up new customers. Those costs include programming and customer support, EchoStar said in its filing.

The expenses rose partly because EchoStar is installing larger satellite dishes that allow customers to receive local broadcast stations, the company said. EchoStar said its costs also rose because it provided equipment to customers who received service through its partnership with telephone company SBC Communications Inc.

Phone Company Alliance

SBC, the second-largest U.S. local phone company, is marketing satellite-TV service to compete with cable companies that are selling phone service.

EchoStar said its profit margins narrowed in the recent quarter and margins may continue to decline because of its partnership with San Antonio-based SBC. That's because EchoStar generates less revenue from customers it gets through the partnership than from those it signs up on its own.

EchoStar's profit fell short of the average estimate of 23 cents a share from 19 analysts polled by Thomson.

Rising Costs

The company said it may have to spend more than $100 million to comply with a bill that Congress may pass.

EchoStar customers in 38 markets need two satellite dishes to receive local channels. The bill that Congress is considering would mandate that satellite-TV subscribers be able to receive local channels with only one dish.

EchoStar said that to comply with the bill, it would have to broadcast local channels serving as many as 30 markets from different satellites. Customers in those markets would have to get new satellite dishes, EchoStar said.

EchoStar said it spent an average of $431 to acquire each new subscriber in the quarter. That was 5.7 percent less than it spent a year earlier, excluding a benefit that EchoStar recorded last year for the settlement of a lawsuit.

Subscriber acquisition costs fell as EchoStar spent less on advertising, gained more customers through its partnership with SBC and as more customers leased equipment instead of buying it.

EchoStar's average monthly revenue per subscriber rose 7.5 percent to $55.59. The company raised prices by $2 a month for some programming packages in February.

The average percentage of EchoStar customers who canceled service each month, known as churn, rose to 1.71 percent from 1.67 percent.