Updated from 11:52 a.m. EST
dropped nearly 8% Thursday as the company's outspoken chief executive said the feds were goading him into raising rates.
Though the company swung to a loss after a pair of noncash charges, what seemed most worrisome to investors was the prospect of rising subscriber acquisition costs. Latest-quarter numbers benefited from what EchoStar acknowledged was a nonrecurring item stemming from litigation. Without that benefit, Wall Street fears, an already anemic set of figures could have looked far worse.
Indeed, while EchoStar reiterated revenue guidance for the full year, the company cut its 2002 cash flow forecast.
For the quarter ended Sept. 30, the operator of the Dish Network direct broadcast satellite service reported revenue of $1.22 billion, up 20% from the third quarter of 2001 and matching the five-analyst consensus reported by Thomson Financial/First Call. On the bottom line, the company reported a loss of $167.9 million, or 35 cents per share, reversing the year-ago penny profit. Analysts had forecast a 5-cent profit in the latest period.
The third-quarter loss included a noncash charge of $134 million related to an increase in the estimated value of contingent value rights held by major shareholder
-- rights, EchoStar points out, that can't be exercised for 30 months and may not necessarily be exercised at all. The loss also includes a noncash charge of $40 million in unrealized losses on marketable securities.
But a bigger concern for investors likely arose from the one-time savings of $36 million in the cost of set-top box equipment that EchoStar enjoyed in the quarter. Without that one-time benefit, the bulk of which was related to Dish Network operations, EchoStar would have reported an unexpected and significant 10% sequential jump in subscriber acquisition costs, according to a Thursday morning note published by Banc of America analyst Doug Shapiro.
With DBS operators EchoStar and
locked in competition for subscribers with cable TV system operators, investors have been keeping a close eye on DBS subscriber acquisition costs, weighing whether the amount of money spent to add each new subscriber is worth the payoff from that customer. EchoStar and Hughes had sought to merge in an effort to improve their standing against cable, but regulators have effectively killed the proposed deal.
On a conference call with analysts Thursday, EchoStar CEO Charlie Ergen griped that some federal agencies have approved a hookup between
, even as they fight the EchoStar-Hughes merger. "AT&T Comcast can raise rates like crazy," Ergen said, adding that when that happens, EchoStar will raise its rates, too. "It's not a bad thing for us," he said. "It's a bad thing for consumers."
EchoStar's earnings before interest, taxes, depreciation and amortization for the quarter came in at $197.4 million, well below Shapiro's $229.1 million estimate. Again, without the one-time benefit, results would have been even worse. Shapiro has a strong buy on EchoStar; his firm hasn't done recent banking for the firm.
The company reiterated guidance for revenue growth of 20% for full-year 2002, but cut back EBITDA guidance. In place of the prior forecast of 80% to 100% growth, the company is forecasting an EBITDA range of $750 million to $800 million, or 47% to 57% growth. The company attributes the change to higher-than-expected subscriber additions combined with lower-than-expected acceptance of programming packages in which subscribers lease satellite receivers from EchoStar rather than buy them.
EchoStar slid $1.55 to $18.55.