Englewood, Colo. — Dish Network satellite-services provider EchoStar Communications reported the addition of about 340,000 net new subscribers in the fourth quarter, ended Dec. 31. This increase brought the company’s total subscriber base to 9.4 million at the end of 2003, about 15 percent higher than the 8.2 million subscribers onboard at the end of the year-ago period.
EchoStar, which had been scheduled to announce fourth-quarter and year-end sales and earnings today, postponed the event, as well as the filing of its 10-K, because of dealings with the Securities and Exchange Commission.
EchoStar said the SEC has informed the company it over-accrued $17 million in 2001 and $9 million in 2002 for the replacement of smart cards. The cards – which provide customer security from piracy, allowing only those who pay to receive EchoStar programming – are said to have become obsolete due to piracy.
From 1996, through 2002, EchoStar said it gradually established a reserve to accrue for the estimated cost to replace those cards, which are included in EchoStar satellite receivers. The SEC concluded that EchoStar’s accrual to replace the cards in receivers sold to and owned by consumers was appropriate; however, the SEC has determined the company should not have accrued a liability for smart cards in satellite receivers owned by EchoStar and leased to consumers.
If the SEC does not reverse its position on the reserve for 2001, EchoStar would be required to restate that year’s financial results, possibly affecting the earnings for those 12 months. Even with a re-audit, the company is hoping to file its fourth quarter and year-end 2003 results by March 30.
EchoStar said reversal of the accrual would not affect previously reported free cash flow, but would increase earnings.
Late yesterday, EchoStar settled a contract dispute with Viacom, when the two companies reached a long-term agreement, whereby Viacom networks were returned to EchoStar’s Dish Network satellite service. EchoStar had removed certain channels from its network earlier in the week while it negotiated a new transmission agreement with Viacom.
