No. 2 satcaster EchoStar Communications cut its losses and swelled its subscriber rolls in the first quarter, but lower-than-expected revenue and cash-flow growth prompted investors to bid the company’s stock downward Thursday.
EchoStar ended the quarter $97 million in the red, down from a $170 million loss in the same period a year ago. And $58 million of the loss came from a noncash charge related to Vivendi Universal’s recent $1.5 billion investment in the satellite-TV provider.
First-quarter revenues rose 28% to more than $1.1 billion, while cash flow — considered an important yardstick of ongoing operations at media companies because it excludes many one-time items — nearly quadrupled to $178.5 million.
But the growth was not enough to satisfy Wall Street.
Investors fretted over per-subscriber revenues, which declined due to a combination of promotional pricing plans, fewer pay-per-view orders and an increasing number of customers opting for lower tiers of service, said Ladenburg Thalmann media analyst John Stone.
At the same time, EchoStar said it expects costs associated with adding each new customer to increase from $395 to $430. The two factors in conjunction, analysts warned, will make future cash-flow growth more difficult.
Reflecting that concern, EchoStar shares sank nearly 5% to $26.26 on Thursday. The stock price has fallen more than 30% since its 52-week high last May.
Nevertheless, EchoStar managed to beat expectations on subscriber growth for the most recent quarter, coming in at 335,000, or about 20,000 higher than forecast. Satcaster said it ended the quarter with nearly 7.2 million total subscribers, up 25% from the year before, and reiterated its prediction of 8 million by the end of this year.
EchoStar is hoping to more than double that number through the planned $26 billion merger with larger rival Hughes Electronics, which runs the 11 million-subscriber DirecTV satcasting network.
Deal is still far from a sure thing: A broad coalition of rival congloms, interest groups and lawmakers have voiced their opposition. But EchoStar topper Charlie Ergen said at a recent industry conference that he remains confident it will go through by this fall.