Earnings News Launches EchoStar

Investors bid up shares of the satellite-TV outfit Thursday after its quarterly profit topped expectations

EchoStar Communications (DISH), the operator of DISH Network, has managed to keep adding subscribers in spite of bruising competition. The Englewood, (Colo) satellite-TV service said Mar. 1 that its profits rose more than expected during recent months.

Net income totaled $153 million for the quarter ended Dec. 31, 2006, compared with $133 million during the corresponding period in 2005. EchoStar's profits came even as the whole satellite TV industry has dashed headlong into a future where cable companies offer phone, TV and broadband service combinations (see BusinessWeek.com, 12/6/06, "A Malone and Murdoch Pas de Deux").

Investors had expected worse. The company's basic earnings per share were 35 cents during the December quarter, while the mean analyst estimate had been for 32 cents, according to the San Francisco research firm StarMine, which aggregates data from Thomson Financial.

Market players had focused in recent months on challenges like a U.S. district court in Miami's decision to ban EchoStar from offering "distant" networks, which are local channels that you can watch even if you don't live in the area targeted for the broadcast. EchoStar said Oct. 23 that it would "continue to do everything possible to prevent consumers from losing their distant network channels," taking steps such as asking the courts to re-consider their decision and asking Congress to clarify the language in it.

In the end EchoStar added around 350,000 net new subscribers during the December quarter, bringing the total to 13.105 million subscribers -- that's up from 1.065 million subscribers during the same period of 2005. In spite of its challenges, EchoStar managed to win more customers than its rival DirecTV Group (DTV), which had 275,000 net subscriber additions during the December quarter.

EchoStar has been pushing ahead with moves like increased marketing during recent months. The company's revenue rose 17% year over year to a total $2.58 billion for the December quarter.

Investors bid up the stock 6.2% to $43.10 per share in early afternoon trading on the Nasdaq.

EchoStar still faces more battles ahead. For example, the Alviso (Calif.)-based TiVo is in a feud with EchoStar over DVR patents. Standard & Poor's equity analyst Tuna Amobi is expecting uncertainty related to the lawsuit, which is in appeal (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

Meanwhile more cable companies are finding ways to provide video, Internet and phone services bundled together -- the so-called "triple-play" packages. Even telecoms like AT&T (T) are scrambling to get a piece of the action with plans to offer TV services in the coming years (see BusinessWeek.com, 7/31/06, "The Phone Companies Still Don't Get It").)

"We expect competition from cable triple-play to ratchet up in '07," S&P's Amobi said in a research note.

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