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EchoStar Q3 Subs Hurt By Churn

11/12/2007 01:34:00 PM Eastern

Englewood, Colo. — EchoStar CEO Charlie Ergen said a combination of economic pressures, increased competition and operational miscues resulted in the a 63 percent decrease in subscriber growth during the third quarter

Ergen said during a conference call with investment analysts Monday that his company’s Dish Network netted 110,000 new subscribers in the third quarter, down 63 percent from the 295,000 reported during the same period last year.

At the same time the satellite service’s monthly churn rate for the period was up 1.94 percent, compared with 1.76 percent for the same period in 2006.

Ergen said because DirecTV recently reported its churn numbers were in the ballpark of where they wanted them to be, “That tells me we’ve got to do a better job operationally,” he said.

He added, DirecTV’s better subscriber numbers in the period may also have resulted, in part, from its NFL Sunday Ticket offering, which draws around 10 percent of the services subscribers in the fall, and that “they do a much better job from a branding perspective than we do in terms of people associating a greater value with DirecTV than with us.”

As a result, Ergen said he has gotten more directly involved in the day-to-day fundamentals to improve such things as telephone support, installations brand marketing and product delivery.

He added that a down turn in the economy and housing markets may also have contributed to the results, and looms as continuing challenge on the horizon.

However, he said he hopes that none of Dish Network’s subs are at-risk sub-prime customers, except for those who take prepaid subscriptions. He said Dish Network continues to get higher quality subscribers than cable and may be just a little below the quality of DirecTV’s customers.

“But I like the fact it is a little bit choppy out there. Good companies can perform better than their competition,” he said.

Next year, EchoStar will launch three new satellites offering expanded capacity to provide additional high-def local-to-local programming, Ergen said, adding that the company expects to benefit from the country’s approaching transition to digital television broadcasting.

EchoStar’s subscriber total was 13.7 million at the end third quarter, the company said. Total revenue increased 12.9 percent to reach $2.79 billion for the quarter, compared with $2.48 billion for third quarter of 2006.

Net income totaled $200 million for the third quarter, compared with $140 million during the corresponding period in 2006.

Meanwhile, Ergen said the company is moving forward with plans to spin off its technology assets from its Dish Network satellite service, as it first announced in September. The company filed its plan with the Security and Exchange Commission last week.

The technology company will carry the EchoStar name, while the satellite TV service will be known as Dish Network Corp.

The technology company will venture into the development of set-top box equipment, some of which may target markets outside of satellite services, such as digital TV converter boxes and CableCARD-enabled digital cable TV boxes. It will also include Sling Media, which it is acquiring, and a fixed satellite services business using nine owned or leased in-orbit satellites, seven full digital broadcast centers and leased fiber capacity in 150 cities.

During the investor call, Ergen said the spin-off does not require a favorable ruling from the Internal Revenue Service approving the tax-free status of the move, but “it would be a big negative if we didn’t get that.”

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