EchoStar in black but Street fears sub snub
NEW YORK — Charlie Ergen’s satcaster EchoStar turned in underwhelming fourth quarter results Friday, sending shares of the company down 3% as investors fretted about the rising costs of acquiring subscribers in the face of mounting competition from rival DirecTV and cable.Company produced a slim net profit of $3 million for the quarter, reversing a hefty loss of $716 million in the year-earlier period, which had included a $690 million charge related to its failed merger with DirecTV. Net income for the quarter ended Dec. 31 included a $51 million charge associated with bonds redeemed during the last three months of the year, as well as a $56 million cost reduction associated with a change in estimated royalty obligations. Total revenues of $1.51 billion for the quarter represented a 14% gain over the same period in 2002 but were still under many analysts’ expectations. For the year, EchoStar posted a profit of $225 million off total revenues up 19% over 2002 to $5.7 billion. That compares to a net loss of $852 million the previous year. The second-ranked satcaster said it finished the year with more than 9.4 million subscribers, an increase of 1.3 million over 2002. Earlier this month, EchoStar said it would delay filing its end-of-year 10K financial report until it had restated results for 2002 to account for an overaccrual of $30 million related to the expense of certain smart cards. Restatement reduces pre-tax losses for that year from its reported $809 million to $779 million. Company said it would spend more to offset churn (estimated at around 1.5% per month) and to compete with cable and DirecTV. In a conference call with analysts Friday, chairman-CEO Charlie Ergen promised the company would generate more revenue per subscriber even if churn rates remain constant. Analyst Thomas Eagan of Oppenheimer forecasts EchoStar will add around 950,000 subs this year, nearly 300,000 fewer than in 2003. Separately, DirecTV on Friday cashed out of its 20% stake in satellite radio broadcaster XM, raising $230 million. DirecTV, until recently owned by General Motors, was an early stage investor in the radiocaster, which saw its shares grow tenfold in the last year.