EchoStar Reports Positive Results

EchoStar Communications reported a second quarter profit despite a trifecta of obstacles that include a slumping economy, piracy problems for its largest competitor and an increasingly aggressive cable industry.

“It’s a tough environment out there in telecommunications in general,” admitted Charlie Ergen, EchoStar’s CEO.

Nevertheless, the company achieved net income of $2 million, versus a loss of $133 million in the second quarter a year ago. EchoStar had been expected to lose 10 cents per share, but instead posted operating and net income for the first time.

The company also gained 350,000 subscribers to climb to 6.07 million subs as of June 30.

These gains came in the face of an increasingly hostile market environment that led to some deceleration in subscriber growth and churn that was “higher than we would have liked,” said Ergen

A contributing factor, he added, was a price increase the company initiated in its lower end programming packages, although Ergen predicted “we’ll get some of those folks back.”

Other subscribers left because “if somebody loses their job, they may not be able to afford $60 a month for programming,” he said.

In addition, piracy of competitive offerings—even though its not the company’s DISH Network programming that’s being pirated—affects the company, he said.

“Once we have a customer paying $50 a month, then he … sees … where he can get satellite TV for free, we’re occasionally losing customers to piracy on the other guy’s platform,” Ergen conceded.

Finally, he said, cable television bounties being offered to satellite subscribers took a chunk of business, but “those can’t continue forever. They’re not very economical for the cable company, but they do have a short-term impact.”

Overall, Ergen said, “we certainly think that the churn is not a fundamental problem for us. Obviously the economy over time will improve. Obviously digital cable (bounties) can’t go on forever.”

He also addressed the failed attempt by EchoStar to merge with leading DBS provider, Hughes Electronics DirecTV.

“We did have discussions with DirecTV and Hughes Electronics. We believed there were tremendous synergies between the two companies and a combination made sense for our shareholders and theirs,” Ergen confirmed. “They did not share our enthusiasm for that combination.”