In good news for cable operators, EchoStar Chairman Charlie Ergen said his DBS service was underpriced and he would have to raise rates if it were not allowed to merge with DirecTV.
Prefacing many of his remarks with "without a merger," Ergen said in a conference call to discuss earnings that rates will rise more steeply than in the past. Cable prices will rise under a combined Comcast AT&T, he suggested, so a stand-alone EchoStar, unable to go after all customers in the U.S., will have to raise prices, too. "It won't be bad for us, just for consumers."
Ergen attributed much of the third-quarter churn to customers' bailing after a three-months'-free promotion expired. The rest he attributed to piracy and to cable's advantage of offering modem service.
Ergen said he will continue the "uphill fight" for a merger with DirecTV. When pressed, he wouldn't speculate on the effect a failed merger would have on stock price , including having to pay $2.7 billion for DirecTV parent Hughes' 81% stake in PanAmSat and/or a $600 million break-up fee.
He called the third quarter mixed, citing slightly higher than expected churn and subscriber-acquisition costs and lower than expected EBITDA of $197.4 million. On the positive side, sub growth was higher than expected at 320,000 vs. a projected 306,000. Total revenue was up 19.6%, to 1.2 billion.