DENVER—Shares of EchoStar Communications plunged Monday after the nation’s No. 2 satellite television provider said the sluggish economy and operational problems had cut into subscriber growth.
Shares fell 15.8 percent, or $7.68, to $40.83 Monday.
“If you go down some subdivisions in America today, every other house has a for sale sign, and that particular house may have a dish on the roof or may have cable running into the house, and there is nobody living there,” Chief Executive Officer Charlie Ergen told analysts. “You have that kind of backdrop where it is much more competitive environment because of the economy.”
Echostar released third-quarter results after the market closed Friday, saying that while profits rose 43 percent, it was having a harder time keeping customers because of the economy.
Citi Investment Research analyst Jason Bazinet downgraded the stock and lowered his price target to $59 from $62.
“While the financial metrics were largely in line with our expectations, the churn rate was remarkably high, at 1.94 percent per month,” Bazinet said in a client note. The churn rate refers to customers who cancel service.
Ergen told analysts during a conference call that he took responsibility, saying the company needs to do a better job with basic tasks such as ensuring installations are done correctly and answering calls promptly.
“We haven’t really executed very well operationally during the last six months,” he said. “I am looking forward to spending more time in the operations side so I understand it better.”
Ergen said the company has begun terminating service quickly when customers fall behind on payments, tightening credit standards and halting free programming promotional offers.
He declined to discuss talks EchoStar Communications Corp. may have had with AT&T Corp. about becoming the sole satellite provider for bundled services in areas once served by BellSouth Corp. AT&T is expected to make a decision by year end.
“If they don’t choose us, obviously we’ll have to compete in the current AT&T territories against them, so we’ll be prepared as a company either way,” he said.
EchoStar said Friday it added 110,000 net new subscribers to put the total at 13.7 million as of Sept. 30. That compared with 295,000 net new subscribers in the third quarter of 2006. Its churn rate was 1.94 percent per month, up from 1.76 percent in the 2006 third quarter.
DirecTV, the nation’s largest satellite TV provider, added 240,000 net subscribers at its core U.S. unit during the same period, up 45 percent, to put the total at 16.6 million as of Sept. 30. Its average monthly churn rate fell to 1.6 percent from 1.8 percent last year.
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