SBC’s EchoStar Sales Crumble - Broadcasting & Cable

SBC’s EchoStar Sales Crumble

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After bragging mightily about its partnership to bundle EchoStar’s DBS service with its telephone products, SBC has dramatically scaled back efforts to sell the satellite service. SBC had cut an intricate partnership with EchoStar’s Dish Network, carefully integrating the sales and customer service functions into its own operation. The goal aimed to counter cable operators’ bundling of new phone services with their existing video products.

But for the second quarter ended June, SBC added just 10,000 new Dish customers. That’s far less than the 65,000 analysts had expected, and the 70,000-100,000 SBC had been adding in recent quarters. The plunge prompted UBS media analyst Aryeh Bourkoff to issue a note on EchoStar to clients titled: “Is The Partnership Over?”Rick Linder, CFO of the telco, said the company has scaled back in advance of its planned Lightspeed video service. Lightspeed aims to offer cable-like video services over SBC’s existing phone lines.SBC had said earlier that it was refocusing marketing efforts on cities where cable phone service was particularly strong. But executives gave no hint that they were scaling back to the point where their sales would drop 85% in three months. “We pulled back in marketing areas that have Lightspeed products coming and we are trying to
target Dish in some areas really more from a defensive standpoint,” Linder said during Thursday’s earnings call. SBC had accounted for as much as 12% of EchoStar’s growth, so the slowdown will hurt the satellite company.

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