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EchoStar announces price freeze

The satellite TV provider faces sharper competition. Its shares decline 5% on the news.

January 08, 2008|From Reuters

EchoStar Communications Corp. said Monday it would freeze the prices of its most popular satellite television packages until next year as competition sharpens in the slowing U.S. economy. The news sent its shares down more than 5%.

The owner of the Dish Network said it also was offering three months of free programming to new customers and was waiving activation fees.

The move comes as stronger concerns over a recession prompt investors to question where consumers will cut their home spending on goods and services.

The concerns have intensified competition for pay-TV customers among satellite television operators, cable TV companies and telephone companies that have launched video services.

"I personally don't like the discounting side of the business," EchoStar Chief Executive Charlie Ergen said during the Consumer Electronics Show in Las Vegas.

Separately, EchoStar Holding Corp., the technology and set-top box maker spun off Jan. 1 from EchoStar Communications, said Monday that it would sell a digital-analog TV converter to U.S. consumers essentially for free so they can operate older televisions after the country moves to all-digital broadcasting in February 2009.

The box, called the TR-40, will cost $39.99 but it qualifies for a $40 coupon that the government made available beginning Jan. 1 to the millions of households without digital televisions. The National Telecommunications and Information Administration has begun accepting requests for two $40 coupons per household.

"That means that every home in America, for two TV sets absolutely free of charge, can convert to digital," said Ergen, who is also the holding company's chief executive. "There's no reason the digital transition can't take place in February 2009, and there's no reason it'll cost the consumer a dime to do it."

EchoStar will lose money selling the boxes so cheaply, but will benefit from the interaction with new customers, Ergen said. The converter boxes were expected to cost $50 to $70.

Dish operator EchoStar Communications has usually marketed its services to both lower-income households and the higher end while larger satellite rival DirecTV Group Inc. has more recently focused on higher-income families by tightening credit rules for new customers.

Some analysts say this is one of the reasons that EchoStar has seen a sharper slowdown in subscriber growth as economic pressures began to be felt at the lower end of the market.

EchoStar said it would freeze the starting price of DishDVR Advantage packages at $39.99 a month until February 2009.

The move comes after Ergen told analysts in November that the weaker housing market had made the pay-TV market more competitive for all players.

A spokesman for DirecTV said: "We are in the latter stages of evaluating price structure for 2008, but don't currently have any plans to freeze prices."

The largest U.S. cable operator, Comcast Corp., said it would increase its video costs this year by about 5% on average, though its average customer bill -- including Internet and telephone -- would rise by about 3.1%.

New York-based Cablevision Systems Corp. said in October it would raise the price of its average video package by 4.7%.

Verizon Communications Inc. said in November it would raise the price of its advanced video service by nearly 12%.

EchoStar shares lost $1.50 to close at $31.98. DirecTV shares gained 2 cents to $21.60.

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