Updated from 11:47 a.m. EDT

EchoStar Communications ( DISH) just broke its subscription losing streak.

In the first quarter ended March 31, the direct broadcast satellite provider added 350,000 net new subscribers, EchoStar said Tuesday. That's up from 335,000 additions in the first quarter of 2002.

Meanwhile, EchoStar CEO Charlie Ergen told analysts he had plenty of concerns about the proposed deal in which the Australia-based News Corporation ( NWS), led by Rupert Murdoch, would take control of Hughes Electronics ( GMH), the parent company of DBS operator DirecTV.

Given Murdoch's control of numerous media properties, said Ergen Tuesday, "you've got a lot of potential for mischief."

The uptick in EchoStar's subscriber additions, which came in well ahead of analysts' sub-300,000 estimates, marks the first quarter in two years in which EchoStar has shown increased subscriber gains on a year-over-year basis.

The first-quarter performance calls into question -- at least temporarily -- the perception that direct broadcast satellite service growth rates are on an irreversible decline. In recent years, both EchoStar's Dish Network and DirecTV have shown much stronger subscriber growth than cable operators. But the number of net new subscribers has continued to decline on a year-over-year basis.

Operators' ability to stave off those declines -- especially as News Corp. prepares to take control of DirecTV, and as cable giant Comcast ( CMCSA) labors to revive systems previously owned by AT&T ( T) -- looms large in investors' assessment of satellite TV value.

Star Power
EchoStar subscriber additions rising
Source:EchoStar press releases, Detox
After setting a 52-week high of $32.58 Tuesday morning, EchoStar's shares traded at $32.21, up $1.58, or 5%. Shares in the operator have climbed steadily from last summer's 52-week low of $13.41.

Good News

The subscriber count, which now totals 8.53 million, wasn't the only good news in the first-quarter results EchoStar released Tuesday.

The Littleton, Colo., satellite broadcaster earned $58 million, or 12 cents a share, on sales of $1.36 billion in the latest quarter, compared with a loss of $35 million, or 20 cents a share, on sales of $1.10 billion last year. Analysts had been forecasting a 10-cent profit; last year's results were depressed by noncash charges related to Vivendi Universal's ( V) investment in EchoStar.

The company earned $277 million before interest, taxes, depreciation and amortization in the first quarter, up from $177 million a year ago. Deutsche Bank analyst Karim Zia, for one, had forecast EBITDA of $233 million.

EchoStar's free cash flow from operations totaled $125 million for the quarter, up from $89 million last year, and ahead of Zia's $49.6 million estimate.

That growth in EBITDA and free cash flow is especially positive, pointed out Zia, given that subscriber additions initially tend to reduce cash flow, not increase it. (Deutsche Bank or an affiliate is a shareholder in EchoStar, and it has received banking or advisory fees from the company within the past year.)

Speaking to analysts Tuesday, Ergen raised a number of issues related to the News Corp.-Hughes deal hat he suggested merit investigation by federal regulators. For example, he said that feds might question whether they want an Australian-based company such as News Corp. owning the content it does "and influencing the hearts and minds of your country."

Ergen complained that News Corp., the parent of Fox Entertainment ( FOX) might be free to wildly overcharge EchoStar and other distributors for Fox programming.

Ergen also expressed his unhappiness with ongoing litigation between EchoStar on the one hand and the Fox and CBS TV networks on the other. In that suit, EchoStar reports in an SEC filing Tuesday, the networks are seeking to prevent the DBS firm from not only importing distant network signals, but also retransmitting network programming broadcast by local affiliates. Sixty percent of EchoStar's customers sign up to receive those network signals, says EchoStar. "If we had to turn off local signals, that would be a material impact," said Ergen.

Despite his problems with Murdoch, Ergen indicated that Murdoch would be a better steward of DirecTV than Hughes management has been. With Murdoch, said Ergen, "at least you can have a conversation about things that are good for our industry," such as piracy issues and legislation that would be helpful for the satellite business.