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EchoStar Up, But at a Cost

Echostar's subscriber growth slowed a bit during the second quarter, but the company still swiped plenty of business from its cable and DBS rivals.

For the three months ended June, Echostar posted strong 21% growth in revenue to $1.4 billion. Operating cash flow increased 22% to $289 million (excluding a $34 million gain from the settlement of litigation).

But there were a couple of blips. The topline-cost of acquiring new customers totaled $492 per subscriber, down 4% from last year. But adjusting capitalized equipment expenses, Merrill Lynch analyst Marc Nabi said subscriber acquisition costs actually rose 18% from last year.

EchoStar added 270,000 subscribers during the quarter, down 7% from the 295,000 net additions during the year-earlier period.

Still, EchoStar Chairman Charlie Ergen expressed enthusiasm. "There's not any cable operator who's immune to an attack from Dish Network," he said. Weaker systems, particularly in markets where EchoStar's Dish Network delivers "local-into-local" broadcast stations, are prime targets.

Ergen said that EchoStar is still working through the details of how telco SBC will retail the DBS service in its 13-state market following a recent joint venture deal. He said that EchoStar will lose some subscribers to SBC's bundled DBS and DSL Internet packages. But he believes the reduction of customer churn will benefit EchoStar in the long run.