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Technology Stocks : Echostar Comm. -- Ignore unavailable to you. Want to Upgrade?

To: Noel who wrote (615)	2/13/1998 3:08:00 AM
From: John J. Thrall	Respond to of 1394

Regarding your profitability projections, Taking numbers from the most recent tax filings (3 months ending Sept, 1997), DISH was realizing about $40 a month per subscriber. Costs related to DISH operations (sat up-link station, call center, and subscription costs) were about 69% of this, leaving $12.4 per month in operating profits on a per subscriber basis. Now looking at marketing costs in the last period, advertising ran about $17m. The big thing is that it cost DISH $300 a subscriber in a additional cost due to selling equipment below costs! It takes 2 years for DISH to recoup the cost of each customer. In reality what determines when DISH will make money (on DISH operations) is when the subscriber growth will slow down. If growth continues at the same rate and customer cut-rate prices (say 200,000 a quarter new subs), and say the add budget remains about constant (as it has for more than a year now), we would need to see a DISH with 2m subs to break even just on its core DISHNETWORK operations. Of course this neglects the advantages of scale you point out with the new box order, IF they can get supply problems worked out. We can also see faster revenue growth stemming from greater rev per sub (new channels like encore,sports package, local channels) which would dramatically change the numbers. An increase of $5 per sub profit brings the above estimates down to 1.5m! Likewise, an increase in new subs or cost per acquisition drives the needed subs up. My point is this, given the uncertainty in: 1. Saturation level of new product (channel) offerings. 2. Number of new subs. 3. Cost per sub acquisition It is impossible for anybody (analyst or not) to know what the break-even point is. We can only make our own assumptions and crunch the numbers. My own feeling is that increasing per sub add revenue will be offset by increase in marketing costs (new subs up, cost down a little). My number: more than 2million. and then there is all that debt.... Still long, John Thrall