EchoStar Turns to Latin America for New Growth

Monday December 8, 2008 – Antonette Goroch

EchoStar’s recent announcement that it is forming a joint venture with MVS Comunicaciones, one of the largest media/telecom companies in Mexico, reflects both a maturing of the U.S. market for digital TV and the prospect of renewed growth in the Latin America market. The move, which involves the use of EchoStar’s 77° W orbital slot to offer a digital TV package into Mexico, DISH Mexico, is telling on several levels.

DISH Network (EchoStar’s DTH programming arm) has seen subscriber growth slow dramatically in the last year, driven by both saturation in the U.S. market overall and heated competition from both digital cable and IPTV. While EchoStar has been able to maintain revenues, through growth in ARPU for both subscription services and equipment from HD, its set-top box (STB) shipments and subscribers declined in 2008.

To combat these cyclical turns, DISH Network has sought to diversify its revenue base, seeking to increase STB sales through other channels, through new technology (all AVC STB, Sling Media acquisition), and new markets–even reaching out to U.S. cable operators, their one staunch rivals—to supply next generation STBs.

The MVS deal is driven by this same impulse to expand markets, and, interestingly, makes use of an orbital slot which EchoStar had originally petitioned the FCC to use for U.S. local-into-local and HD broadcasts. The alliance will give EchoStar a firm foothold in an area where the incumbent DTH provider, Sky Mexico (controlled by DirecTV after a merger with the News Corp entity four years ago), has operated with little competition from cable providers and has seen a recent uptick in subscription growth during the last year. MVS, which currently serves some 570,000 analog cable subscribers (which will be targeted for marketing the new service), will be a strong partner to EchoStar and will likely give DirecTV a run for its money.

For EchoStar, the benefits are clear. It will certainly gain a new foothold for its STB shipments and subscriber revenues in a far less competitive market. This will no doubt buffer the heavier competition and market saturation in the U.S. market, and help reinvigorate its bottom line.