SBC Disses the Dish

SBC sales of EchoStar's DISH Network service fell by 86% in just three months as the RBOC preps for IPTV

July 21, 2005

3 Min Read
SBC Disses the Dish

SBC Communications Inc.'s (NYSE: SBC) sales of EchoStar Communications Corp.'s DISH Network satellite service fell by 86 percent in just three months, but the RBOC insists it is not abandoning DISH as a video option for its customers (see SBC: IPTV's Day Has Come).

Figures released Thursday show SBC sold only 10,000 new subscriptions to the satellite service in the second quarter, compared with 73,000 subs in the first quarter and 97,000 in the quarter before that.

SBC CFO Rick Lindner says the decline is due to his company's preparations to roll out its own video service under Project Lightspeed next year (see SBC, Microsoft Defend Lightspeed). “We said last quarter that we were pulling back our marketing efforts on DISH after our announcement of our plans on Project Lightspeed,” Lindner said during a conference call with analysts. “That has changed our distribution strategy on DISH.”

“This trend is consistent with SBC's stated de-emphasis on the partnership, though more extreme than expected at this stage,” says analyst Aryeh Bourkoff, who covers EchoStar for UBS Investment Research, in a research brief.

But other SBC spokespeople say the scaled-down EchoStar relationship is caused by SBC’s desire to get more out of its reseller agreement. “We’re talking to EchoStar about ways we could have a greater incentive to market their service more aggressively,” says SBC spokeswoman Anne Vincent.

Vincent explains that SBC has been using DISH as a defensive strategy in areas where cable companies have been most aggressively competing for telephony customers (see VOIP Keeps Fueling Cable Growth and SBC Boosted by Broadband).

SBC insists it is not abandoning its EchoStar relationship, but it may be leveraging its coming IPTV service in a power-play to sweeten the terms of its DISH reseller arrangement.

An EchoStar spokesman told Light Reading his company didn’t want to talk much about it, saying only that his company is “happy with the partnership.” (See EchoStar Ends Qwest Partnership.)

SBC isn’t likely to discontinue the reseller agreement altogether, because competition from cable will require SBC to bring some flavor of video service in the lower income markets not earmarked for Project Lightspeed.

Indeed, reselling satellite service also provides the RBOCs cover against allegations of “redlining,” or rolling out video service to only the wealthiest neighborhoods, a charge frequently hurled by cable industry executives (see SBC on TV Franchise Regs: We're Immune and Cable MSOs Call for 'Fair' Franchising).

SBC's DISH Network resale numbers came out with the RBOC's second-quarter earnings Thursday. SBC reported a drop in second-quarter profits, which it attributed to charges it incurred from the acquisition of AT&T Wireless by its Cingular Wireless LLCjoint venture last year.

SBC reported a profit of $1 billion, or 30 cents a share, on revenues of $10.33 billion for the quarter, compared to a profit of $1.17 billion, or 35 cents a share, on revenues of $10.2 billion from the year-ago quarter.

Analysts polled by Thomson First Callhad expected SBC to report a profit of 37 cents a share on revenues of $15.48 billion.

SBC closed $0.09 (0.38%) to $23.71, and shares of Echostar fell $1.05 (3.50%) to $28.95 on Thursday.

— Mark Sullivan, Reporter, Light Reading

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