Street Reacts to DISH Price Increase

[Gregg Lengling]

Wall Street reacted Wednesday to the rate increase EchoStar plans to pass onto DISH Network subscribers on Feb. 1, saying the company move will help ARPU (average revenue per unit - or subscriber) and margins.

And they said the DISH Network rate increase also will have an indirect impact on cable operators and DirecTV.

An EchoStar spokesperson said rate increases average out to about 4.3 percent, based on average revenue per subscriber. The company decided to go with the rate increase after incurring an estimated 7 percent increase in programming costs during the past 12 months. Also, EchoStar had to address inflation and the anticipated $100 million it will have to pay for switching some DISH Network customers to a single dish solution for local TV channels, the spokesperson said.

For the DISH Network "America?s Top 60 with Locals" package, the price increase will be $2, or 6.7 percent, from $29.99 to $31.99. "America?s Top 120 with Locals" will rise from $39.99 to $42.99, "America?s Top 180 with Locals? will rise 6 percent from $49.99 to $52.99, and "America?s Everything Pack" will rise 4.8 percent from $82.99 to $86.99.

Craig Moffett of Bernstein Research said despite the increase, "EchoStar remains the low-cost option for consumers, so we do not expect a dramatic increase in churn as a result of the price hikes. Nevertheless, the fact that they no longer have a promotional package rate in the $20's could show up in the form of slower new subscriber growth."

EchoStar remains the least expensive video option for consumers, "which we believe is the crucial driver of subscriber growth at the company," said Jeff Wlodarczak of Wachovia Capital Markets. He added, "DISH is raising pricing slightly more aggressively than we anticipated, as they take advantage of the umbrella created by aggressive cable price increases and the fact that they are already materially cheaper than their competitors."

As for the rest of the pay-TV industry, Moffett said, "The increase should serve as a reminder that price pressure on basic video remains less intense than is generally perceived. Price increases of 5 percent plus for 2005 for all players are considerably higher than the 3.8 percent we had anticipated for 2005 12 months ago, despite our view that competitive intensity would prove lower than consensus."