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EchoStar Boosts Annual Dish Sub Additions 10.4%

3/15/2006 09:40:00 AM Eastern

Englewood, Colo. — EchoStar Communications reported the addition of 330,000 net new subscribers during the fourth quarter, which gave the digital TV services provider just over 12 million subscribers as of last Dec. 31.

The increase from 10.9 million subscribers at the end of 2004 was 10.4 percent.

However, the year’s net subscriber additions of 1.12 million dropped 23.3 percent from the 1.5 million added the previous 12 months, mainly due to an increase in monthly churn percentage, to 1.65 percent in 2005, from 1.62 percent the previous year.

Subscriber churn was negatively impacted by an increase in competition from other multichannel video providers and new technology entrants, signal theft and increasingly complex products, said EchoStar.

EchoStar reported in a 10-K filing with the U.S. Securities and Exchange Commission that its strategy for 2006 will continue to focus on improving operating results and free cash flow by attempting to increase its subscriber base, reduce churn, control rising subscriber acquisition costs and maintain or improve operating margins.

The company said in the filing it will continue also to focus on improving its competitive position by leveraging its increased satellite capacity to pursue strategic initiatives and new technology. In addition, it said it might make investments in or partner with others to expand its business into mobile and portable video, data and voice services.

Fourth-quarter revenue at EchoStar jumped 12.8 percent, hitting $2.2 billion, compared with a year-on-year $1.9 billion.

Net income for the three months nearly doubled, reaching $133 million, up from $70 million in the fourth quarter the prior year.

Total yearly revenue climbed 17.8 percent to $8.4 billion, from $7.2 billion in 2004.

Net income for the 12 months totaled $1.5 billion, up from a year-ago $214.8 million. Net income for the most recent 12 months includes a non-recurring, non-cash tax benefit of $593 million and a $134 million gain related to an insurance settlement.

For the 12 months, average revenue per subscriber rose to $57.81, compared with a year-earlier $54.87, primarily due to price increases on popular packages and higher equipment rental fees.

Average subscriber acquisition costs for the 12 months decreased to $439 from a year-on-year $444, primarily due to a greater number of Dish Network subscribers participating in the company’s equipment lease program.

However, equivalent subscriber acquisition costs during the year climbed 12.6 percent, reaching $668, up from $593 in 2004, primarily attributable to a greater number of Dish subscribers activating higher-priced advanced products, such as receivers with multiple tuners, DVRs and HD reception. Activation of these more advanced and complex products also resulted in higher installation costs during 2005, compared with the prior year, said the company.

Equipment sales for the 12 months totaled $377.9 million, an increase of 1.3 percent over the $373.3 million reported in 2004. This increase mainly resulted from a rise in sales of non-Dish digital receivers and related components to an international DBS service provider, partially offset by declines on sales of DBS accessories in the United States.