EchoStar Feels The Subprime (and FTTH) Pressures Too (DISH, T, DTV)

This morning’s post-earnings downgrade of EchoStar Communications Corp. (NASDAQ:DISH) from a "Buy" to a "Hold" at Citigroup, is having a much broader impact than it originally seemed.  Shares were not indicated this much lower at 7:15 AM EST, but shares are now down almost 13% at $42.28 in mid-morning trading.

It seems that the subprime mortgage mess is increasing the churn rates in the customer base, at least that is what the company indicated on Friday with its earnings filing.   If AT&T (NYSE:T) is really looking to acquire the satellite television operations, it sure looks like the price of playing poker just got a lot cheaper.  What will this mean to Echostar’s review for a restructuring?  The woes at cable companies and the fiber-to-the-home initiatives from the Bells has created a perfect storm where maybe they all lose, at least on pricing power and on margins from the old triple-play packages.

For some reason, DirecTV (NYSE:DTV) is not down as much with only a 3% drop.  That doesn’t make much sense, although a 13% drop at EchoStar seems exaggerated as well if it is really a potential buyout candidate.  This drop won’t assure that EchoStar gets covered in the Special Situation Investing Newsletter from 24/7 Wall St., but it is definitely worth a more in-depth review on this pullback.

EchoStar’s 52-week trading range is $35.16 to $52.54.

Jon C. Ogg
November 12, 2007