CNET también está disponible en español.

Ir a español

Don't show this again

HolidayBuyer's Guide
Culture

Following split, EchoStar continues heavenly climb

The company is one of a handful of direct broadcast satellite operators that have slowly taken market share away from the nation's major cable television companies such as AT&T, Time Warner, and Comcast.

EchoStar Communications' subscriber gains and stock price, just like the company's fleet of satellites, have soared to the heavens this year.

The company is one of a handful of direct broadcast satellite operators, including DirecTV, that have slowly taken market share away from the nation's major cable television companies such as AT&T, Time Warner, and Comcast. EchoStar broadcasts hundreds of television channels over its satellite networks, beaming the signals to pizza-size dishes often seen attached to homes.

Although satellite TV services have gained acceptance among mass-market consumers in recent years, 1999 has been particularly good to the company and its shareholders. In less than a year, EchoStar has boosted its subscriber base by 50 percent and its stock price by about 400 percent.

Although EchoStar has no immediate plans to offer its own two-way Internet access service--the company currently offers dial-up access through WebTV Networks--investors are eagerly anticipating a series of advanced services coming soon that could bring in new revenue for the satellite broadcasting firm.

"Friends don't let friends sell their EchoStar stock," said industry analyst Sean Badding, of satellite research firm The Carmel Group.

Stock in EchoStar gained more than 7 percent today after completing its second stock split this year. The 2-for-1 split,announced earlier this month, comes only three months after its first split in mid-July.

But today's gains are only EchoStar
stock chartthe latest boost for the company that's enjoyed a yearlong climb. Analysts say EchoStar's stock has been supported all year by its strong subscriber growth, a product of low-cost equipment promotions.

"Subscriber growth has exceeded all expectations," said Armand Musey, an equity analyst at Banc of America Securities.

EchoStar had 2 million customers in January and quickly went on a tear, peaking close to 3 million earlier this month, according to the company. EchoStar is the nation's second-largest direct broadcast satellite operator behind DirecTV, which recently bought smaller competitors USSB and Primestar.

"It's hit the critical mass that enough subscribers are out there selling it by word of mouth," Musey said. Musey, who has a "buy" rating on the stock, expects the company to have 3.4 million subscribers by the end of the year.

Ironically, analysts say the cable industry's strong push toward digital TV has put a lot of cable subscribers in a "shopping mode," getting them to also consider direct broadcast satellite services as an entertainment option.

EchoStar has successfully gained new customers by offering set-top box and satellite dish equipment for free, provided a customer signs up for one year of service at $49 per month, according to a company spokesman.

"They've been able to take advantage of their promotions on the equipment," The Carmel Group's Badding said.

Microsoft also is subsidizing EchoStar's premium Dish Player equipment, which includes a built-in WebTV Internet system and a hard drive that allows users to "pause" live TV shows and play video games.

In addition, new satellites will give EchoStar the capacity to deliver up to 500 channels. The company also plans to launch new television services--such as the ability to record and store up to 8 hours of programming--later this year. EchoStar also is planning information services for news and weather, and an interactive TV offering as part of a partnership with interactive television firm OpenTV.

Legislative boost
Analysts also believe EchoStar has benefited from proposed legislation that would allow direct broadcast satellite operators to deliver local TV station signals to homes in those stations' regional territory--something they can do only on a limited basis today.

The inability to offer local news, for example, puts the satellite companies at a real disadvantage when compared with cable, executives say. Legislation that would relax rules surrounding the issue is expected to pass Congress this year, according to analysts.

"I'm optimistic that it'll happen this year," Badding said.

Analysts expect EchoStar, and competitor DirecTV, to continue to siphon customers from cable operators, especially if legislation over local stations passes. A recent study showed more consumers will subscribe to a digital TV service delivered by satellite than via cable by 2003.

"Obviously [local service] will be a big boon next year," Musey said. "[But] if it doesn't happen this year it'll have a negative impact on the stock."