Dish Network 2005 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2005 Dish Network annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
39
EXECUTIVE SUMMARY
Overview
During 2006, we continued to position the DISH Network as the low price leader in the U.S. pay TV industry, while
at the same time offering the highest quality programming, customer service and customer choice possible. We
subsidize the cost of equipment and installation, and offer other promotions, to increase our subscriber base. We
also focused on increasing distribution of our highly rated DVR and HD equipment, as value ads to drive subscriber
growth and retention.
As a result, our subscriber base continued to grow. That growth, together with increased average monthly revenue
per subscriber, resulted in continued revenue growth. Net income and free cash flow also continued to increase.
We believe opportunity exists to continue growing our subscriber base. One of our biggest challenges, and
opportunities, is to further improve operating results through better cost control and operating efficiency.
Operational Results and Goals
Adding new subscribers. During 2006, we added approximately 3.516 million new subscribers, an increase of 3.4%
from 2005. We intend to continue adding new subscribers by offering compelling value-based consumer
promotions. These promotions include offers of free or low cost advanced consumer electronics products, such as
receivers with multiple tuners, HD receivers, DVRs, and HD DVRs, as well as programming packages which we
believe generally have a better “price-to-value” relationship than packages currently offered by most other
subscription television providers.
However, there are many reasons we may not be able to maintain our current rate of new subscriber growth. For
example, many of our competitors are better equipped than we are to offer video services bundled with broadband
and other telecommunications services. Our subscriber growth would also be negatively impacted to the extent our
competitors offer more attractive consumer promotions.
Minimize existing customer churn. In order to continue to increase our subscriber base we must minimize our rate
of customer turnover, or “churn.” Our average monthly subscriber churn rate for the year ended December 31, 2006
was approximately 1.64%. We attempt to contain churn by offering high quality customer service, low prices, and
advanced products and services not available from competitors. We also require service commitments from
subscribers and tailor our promotions toward subscribers desiring multiple receivers and advanced products such as
receivers with multiple tuners, DVRs and HD receivers, who tend to remain our customers for longer periods. In
addition, we maintain disciplined credit requirements, such as requiring most new subscribers to provide a valid
major credit card and to have an acceptable credit score. We also plan to continue to offer advanced products to
existing customers through our lease promotions and to initiate other programs to improve our overall subscriber
retention. However, there can be no assurance that these and other actions we may take to control churn will be
successful.
Reduce costs. We believe that our low cost structure is one of our key competitive advantages and we continue to
work aggressively to retain this position. We are attempting to control costs by improving the quality of the initial
installation of subscriber equipment, improving the reliability of our equipment, providing better subscriber
education in the use of our products and services, and enhancing our training and quality assurance programs for our
in-home service and call center representatives. We believe that further standardization of EchoStar receiver
systems, introduction of new installation technology and the migration away from relatively expensive and complex
subscriber equipment installations may reduce in-home service and customer service calls. In addition, we hope to
further reduce our customer service calls by simplifying processes such as billing and non-technical equipment
issues. However, these initiatives may not be sufficient to maintain or increase our operational efficiencies and we
may not be able to continue to grow our operations cost effectively.
We also attempt to reduce subscriber acquisition and retention costs by lowering the overall cost of subsidized
equipment we provide to new and existing customers and improving the cost effectiveness of our sales efforts. Our
principal method for reducing the cost of subscriber equipment is to lease our receiver systems to new and existing