Ergen Confirms DirecTV Defeat as EchoStar Posts Healthy Results

20 July 2001

Charlie Ergen, chief executive of America’s second biggest satellite TV group EchoStar, yesterday confirmed earlier reports [WAMN: 16-Jul-01] that his bid to buy market leader DirecTV, and scupper NewsCorp’s rival offer, had failed.

Ergen revealed he had been unable to persuade Hughes Electronics, the General Motors unit which owns DirecTV, that a merger between the two leading satellite TV firms was a good idea.

“We did have discussions with DirecTV and Hughes Electronics, and we believe tremendous synergies exist between the two companies,” said Ergen. “A combination made sense for our shareholders and theirs, but they did not share our enthusiasm for that combination.”

However, it was not all bad news for EchoStar, whose operating and net income in Q2 re-entered the black for the first time since launching the DISH satellite network. Beating analysts’ expectations by some distance, the company posted EBITDA (earnings before interest, taxes, depreciation and amortization) of $134 million, with revenues of $966m, 49% up on last year.

Underpinning the healthy performance was a 10% year-on-year rise in revenue per subscriber to $50, while costs associated with attracting new customers dropped. Subscriber numbers rose 350,000 over the quarter to 6.07m, 40% more than last year. Although slightly lower than some estimates, the quarterly rise in customers is considered strong in a weak market, and stands in stark contrast to the recent reduction by DirecTV of forecast yearly subscriber growth from 1.3m to 1.1m.

News source: Financial Times