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EchoStar Cites Marketing Costs in Growing Loss

August 02, 2000|From Bloomberg News

LITTLETON, Colo. — EchoStar Communications Corp., the No. 2 satellite-television broadcaster, said its second-quarter loss widened on increased marketing expenses to attract new customers.

The loss widened to $132.9 million, or 28 cents a share, from $76.1 million, or 20 cents, a year ago. Sales surged 84% to $646.1 million from $350.2 million. The company had been expected to lose 34 cents a share, the average estimate of nine analysts polled by First Call/Thomson Financial.

Costs rose 83% to $732.4 million as the company spent more to sign up 445,000 new subscribers in the quarter. That was 34% more than in the second quarter of 1999, and about 10,000 fewer than it added in the first quarter. EchoStar's TV service, with hundreds of channels, competes with cable television and Hughes Electronics Corp.'s DirecTV.

"This will be a peak year [for EchoStar], but they could have a tougher time in the next five to seven years attracting subscribers as cable continues its build-out," said Robert Peck, an analyst with Lehman Bros. Inc. who rates EchoStar "buy."

EchoStar and DirecTV face competition from cable companies, such as AT&T Corp., which also are introducing digital TV service with hundreds of channels and improved picture and sound quality. These services make it harder for satellite-TV broadcasters to win customers.

EchoStar had a total of 4.3 million subscribers at the end of the quarter. The company is on target to have about 5.2 million customers by year's end, Peck said.

The company's cash flow loss widened to $31.5 million from $23.3 million on higher expenses for new customers. Cash flow--or earnings before interest, taxes, depreciation and amortization--is often used by investors and analysts to measure the performance of indebted media companies because it excludes interest payments and noncash charges.

Shares of Littleton, Colo.-based EchoStar rose $1.69 to close at $41.13 Tuesday on Nasdaq.

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