DISH Network Corp (DISH) 2004 Q1 法說會逐字稿

Good afternoon. My name is Christy and I will be your conference facilitator today. At this time I would like to welcome everyone to the EchoStar first quarter 2004 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. If you would like to ask a question during that time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question press the pound key. I would now like to turn today's conference over to Mr. Michael McDonnell. Sir, please begin.

Thank you operator. Hello everyone and thanks for joining us. This is Michael McDonnell, I'm the CFO here at Echostar. I'm joined today by Charlie Ergen, our Chairman and CEO; David Moskowitz, our Senior Vice President and General Counsel; and Jason Kiser, our Treasurer. I'm going to give you a quick recap of financial performance, and then I'll turn it over to Charlie for his comments before we go to Q and A at the end, but before we get started we need to do our Safe Harbor -- (stand by ) (audio difficulties) (Stand by )

Ladies and gentlemen, please hold on line, we are experiencing technical difficulties. Please hold. Mr. McDonnell please proceed.

I'm sorry operator what did you say?

She said proceed.

Do we have everybody back, operator? Hello, operator?

Yes, sir.

Do we have everyone back on the call?

We do.

Thank you. Try it again? Take it from the top or?

Just take from the where you were.

Okay. We're sorry about the inconvenience, folks. We'll just take it from where we were. I'd asked you take a look at the front of our 10-Q for a list of our cautionary statements. All cautionary statements that we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements that we make. We assume no responsibility for updating our forward-looking statements.

Please also note that during this call we will refer to the non-GAAP liquidity measure free cash flow. Please refer to our 10-Q for a reconciliation of free cash flow to net cash flow from operating activities. I'd also note for those of you who may be interested in EBITDA that our 10-Q contains a reconciliation of EBITDA to net income. With that out of the way, I'll turn it back over to Michael.

Thanks, David. Let's take a look at the quarter, total revenue for the quarter was 1.58 billion, which is an increase of 4% over last quarter and 16% higher than the same period last year. Subscriber growth was the driver of these revenue increases. Net loss for the quarter was 43 million, basic EPS was a loss of 9 cents per share these figures include 78 million of charges which are associated with the redemption of senior notes, which occurred during the quarter. Free cash flow was 181 million during the quarter, which represents a $337 million improvement over last quarter and a $55 million improvement over the same period last year. Free cash flow for the quarter includes 67 million of charges associated with the senior note redemption, which occurred during the quarter.

It's important to remember the quarterly free cash flow from operations is subject to fluctuations in working capital and Capex, all of which is detailed in our 10-Q. During the first quarter 2004, we added approximately 360,000 net new subscribers. This is 20,000 more new -- more net adds than last quarter, and 10,000 more net adds than the same period a year ago. Puts us at approximately 9.785 million DISH Network subs at of March 31, 2004. This subscriber growth was due to success of our marking promotion as well as increased areas where we offer local content and we currently offer local stations in 121 markets. Turn for the quarter was 1.48% compared to 1.53% for last quarter and 1.36% for the same period a year ago.

Average revin (sic) for subscriber or ARPU was approximately 51.76 per month during the quarter. This represents an increase from last quarter of $1.11an improvement of 16 cents over the same period last year. Our cost of acquiring subscribers are SAC during the quarter averaged approximately $530 for gross addition. Including capitalized lease equipment net of recoveries that figure becomes $604, which is an increase of $106 from last quarter, it's important to remember that SAC for last quarter included the effect of a cost reduction associated with estimated royalty obligations and absence this reduction, this $106 increase would have been $49.

Let's take a look at the balance sheet, at the end of the quarter we had cash and marketable securities of approximately 2.9 billion, which includes 113 million of cash reserved for satellite insurance. These figures do not include the effect of the Gemstar-TV Guide transaction, which closed during April of 2004, although these figures do include the effect of 19 million of common stock repurchases that we made during first quarter. We also had 5.5 billion of debt as of March 31, 2004, which includes 1.5 billion of convertible securities. As we mentioned on last quarter's call, we retired 1.4 billion of our senior notes on February 2, 2004, which was their first call date.

On a straight debt per sub basis, we ended the quarter at roughly $563 per sub and on a net debt basis that drops to 280 per sub. These figures were reduced from 736 per sub and 315 per sub as of 12/31/03, respectively as a result of the subscriber growth, debt retirement, and free cash flow, which was generated during the quarter. Cash Capex during the quarter was 116 million with 72 million of that amount going for capitalized leased equipment and the remainder for satellites and general corporate purposes. And with that, I'm going to turn it over to Charlie.

Thank you, Mike. I don't really have -- I'll take questions mostly, I want to say that, you know, the quarter and all -- and as a whole was pretty solid for us. We made a number of improvements in our business; primarily, in having alleviating most of our shortages and our product. Although we still have some spot shortages on some specialized product. We still have operational improvements that we need to make as a company but we have, you know, made significant progress since the last half of last year where we weren't reaching our full potential and we're getting closer to that, reaching that full potential now.

The industry appears to be -- have momentum the DIRECTV number this week was a phenomenal number that shows there is, at least in my opinion, shows there's really good momentum in the satellite TV industry that's not acting like a mature industry. The downside to that, is that you have to maintain discipline in those periods of time and obviously, SAC becomes a key factor. You can always buy business, and you've got to be careful, that you're buying economic business. And I feel very comfortable that -- that at least here, we were very focused on that and continued to make a long-term investment in, what we think is, a good quality customer.

It has to be, you know -- obviously those metrics have to be reviewed, you know, each and every month and, you know, you have to make changes when you -- you usually make some mistakes in terms of the kind of customers you get and you have to make those changes over time, but we remain focused on that. I think we're doing a pretty good job of that. So, with that, we take some questions.

At this time I would like to remind everyone in order to ask a question please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the q-and-a roster . Your first question is from Robert Peck of Bear Stearns.

Hi, guys, I just wanted to get a couple of clarification on some things. First of all, on SBC could you break out the number of subs you currently have from SBC and, sort of, where you see that trending for the end of the year and maybe even more specifically, how the economics of that deal works?

I guess in general the SBC customer, and, again, these things can always change, but typically SBC takes on the SAC for the customer and we get less economics for the customer. That has the effect of -- over time, since they're successful, would tend to lower our SAC but lower our margins and ARPU. I would leave the numbers up to them to report.

We find that as an SBC sub is, at least at this early date appears to be equivalent in economics to our sub when all things are considered, churn, SAC, ARPU, so we don't break those out. I believe that SBC made an announcement on April 20th or 21st, in that range, they had 40,000 subs as of that date. So, obviously they would have -- would have had less subs than that at the end of our quarter but obviously they are, I think, off to a solid start, given that they didn't start until February with us.

So, you know, going forward I think they've -- it'd be really up to them to disclose what their expectations are in terms of subscribers. I do think that they, because they've made a commitment to EchoStar and because we value this relationship very highly, I think that they will make -- will have -- they'll be more than an asterisk on our balance sheet. They'll have probably over time a material impact in terms of number of subs and how they affect our business; but it's a little bit early to tell, and while they're off to a solid start, we have great room for improvement on both sides in terms of how we operationally execute; and, you know, we look forward to working with them and we'll leave the reporting really up to them unless something were to change, you know, in terms of the economics of the customers.

Obviously, Charlie, DBS has had a really strong quarter or year so far. Could you talk a little bit about some of the different competition you're seeing? Is DIRECTV encroaching within your market? And what is EchoStar's official position, I guess, relative to DIRECTV using the telesat orbital slots?

I guess in terms of general competition it -- if you had to boil it down to one simple sense would it still be cable, although obviously DIRECTV is now, I think, the third largest cable operator, so, you know, they're certainly a factor in competition towards us. But it's, you know, there's no question we primarily are getting our customers from the cable. We probably skew a little bit more rural. DIRECTV probably skews a bit more urban, if you had to make a generalization.

They probably skew a bit more toward the sports fan, we probably skew a bit more towards the movie and customer. We both see opportunities, I think similarly in HDTV and digital video recorders. I think our industry is, from a competitive point of view, as we have said for many years, that ultimate cable will abandon to some degree their server concept and good to DVR's. And really put those in the homes, their customer (directly) has that server concept. And, you know, I think we have some advantages there. And I think it's one of the things that's fueling satellite's growth. I think we're -- in our industry, I think we're pleasantly surprised that the growth is -- the demand is there.

From a, you know, as an observer I think that, you know, DIRECTV will do even better because, I think, you know, the News Corp really hasn't had a time to get in there and get their arms around it and make the kind of changes they're capable of doing; so you're looking at a company that probably has up side to help drive our industry as News Corp gets in with their marking and programming and things, interactivity and things that they've done around the world, you can look for that, you know, how look for our industry to get stronger.

We hope that we, you know, can draft in behind them and pick up some of that momentum that they'll help create. I mean, I think that for a long time, really it was -- it was really EchoStar that had to drive the market. I think now that DIRECTV is picking up some of that leadership and we expect they'll pick up more of that. You know, that can be helpful to us. That's not necessarily a negative by any means. The book -- second part of the question?

If you had a view on the DIRECTV telesat slot?

Telesat slot, I think we have filed just for -- we have said that before we go off and license international slots, which we're not necessarily opposed to, we also ought to be looking at some of the things that EchoStar has talked about, such as four and a half degree spacing where we don't have -- where, you know -- those are American slots, or slots that we can use for America without having to go into international arena, so we think that as an industry we need more capacity.

International slots are certainly one opportunity there. That the (FTC) needs to look at, but there's other things that we've suggested. That we would hope that the (FTC) is not going to just be looking at perhaps -- we will get our ideas, with equal speed, and equal consistency as they do with something that we think is more -- needs more work, which is the international side of it, so.

But we're not -- we're not necessarily opposed to it, as long as it's done in a fair and consistent manner.

Last question and I'll let somebody else go. Could you just disclose what percent of your subs this quarter came through the capitalized program, and maybe where you, sort of, see that going over the year?

I don't know that we have -- I don't think we disclosed -- one of the problems we file our 10-Q, so we don't -- we have to be consist with what we've said there. I don't think we've disclosed the exact percentage. I think that the trend is -- was up from last year and I would expect that trend to continue.

Thanks, Charlie.

Your next question is from (Tom Egan) with Oppenheimer.

Thanks. First question on ARPU, what would the ARPU have been, Charlie, if you exclude the credit that you gave customers; and then, any sense of what the ARPU lift -- that the lift was, that you may have gotten from the 25 -- approximately 25 local markets you added in Q4? Thanks.

The ARPU would have been a little bit higher because we really -- we had a price increase, there was a modest price increase this year. It was about half the quarter because it rolled out in a linear fashion over the month of February.

So not everybody's price -- some people's price went up the first of February, depending on when their bill got, some people the last day of February, depending on when they got the bill, and then we gave a fair portion of that back during the Viacom dispute, so, we really have, I would say we probably haven't seen the effect -- or we haven't seen most of the price increase effect on ARPU. And it would have been modestly higher. Second part of the question was?

Was any sense of what the ARPU lift that you got in Q1 from the 25 markets you added local in Q4?

We got some modest lift there but our local markets are smaller markets and they also required the use of SUPER DISH which we did have one of our -- that's one of the things that we had spot shortages in was the SUPER DISH so, we probably -- that probably -- we probably have more benefit from that for the next quarter or so.

I think that -- I think that will -- that benefit will not last a long time because DIRECTV has now launched, of course, their [inaudible] satellite a couple days ago and they'll be in those markets as well. So, you know, we'll -- it will help us on churn and help us retain our customers; but, you know, it'll be pretty level playing field there, you know, going forward. We probably missed an opportunity there by being product limited the last four or five months.

Right. We estimate that satellite grew by about 780,000 net subscribers in the quarter, a pretty big number versus cable. What do you -- what sense do you have of the TV household formation growth in the quarter versus Q4 of '03?

Well, I'm not sure quite the question but I think -- I think -- I think it should not be underestimated that satellite appears to be on a path for maybe, you know, 3 million net adds as an industry is not unrealistic at this point. I think, we might have thought that was unrealistic when we started the year and again we would expect, you know, new innovations from DIRECTV that we haven't seen before. So, you know, that's -- and then on a gross basis, you know, there'll be -- I don't know the exact number but it's probably over 6 million new households that are trying satellite for the first time, so you're looking at over 5% of the American population, one in every 20 houses, you know, trying satellite for the first time. That, to me, tells you -- tells a couple things.

One is digital cable is, perhaps digital cable is perhaps reaching maturity long before digital satellite reaches maturity; and second, the second trend that's out there is that, I think, the DSL is now taking market share lead in the last quarter from cable-modem, so, you know, our one big disadvantage has somewhat been neutralized by the phone company and other people's efforts on the broadband side. So, we're in a situation where broadband's gotten extremely competitive and the margins are lowered and cable has lost the leadership role there, at least in the last quarter, to get that back they're going to have to cut their price.

And they -- digital cable seems to have matured or seems to be maturing faster, which makes it difficult to get a return on the $80 billion upgrade. The risk return ratio of building a billion dollars of satellites or 80 billion of plant upgrades, and then I saw where Comcast, has to do another $2 billion of upgrades on top of what they've done. The risk return ratio, I think, is probably going to skew -- probably has sawed, but probably will become more evident just skewing back more towards satellite.

Right. In terms of looking at the number of new, you know, TV households we had estimated about 1.2 million in '04, do you think that it could be a higher number than that?

You mean, new formations of household?

Yeah.

I don't know. I really don't know.

Okay. Thank you.

Your next question is from Mark Knobby of Merrill Lynch.

Hello, Mark, you there?

That question has been withdrawn. Your next question is from Miraj Gupta of Smith Barney.

Thank you good afternoon -- or good morning to you. I guess, two questions. One, you know, obviously that the net adds and gross adds were very large this quarter for the industry. Just wondering if you think we're seeing any benefit in the current quarter -- or this quarter from decrease in DBS piracy? So, if Charles, if I could get your comments there.

And then second, could you guys just give us an update on how you guys think you did in terms of, you know, HDR -- I'm sorry HD and DVR product mixture in the quarter and maybe your near-term outlook for that given the new product introductions? Thanks.

We really haven't started our -- we really haven't rolled out our card swap anti-piracy. We've been waiting for DIRECTV to, kind of, get there's done, it appears that they're pretty close to getting their's done. You'd have to ask them. I didn't listen to their call, so they may have gotten some lift from -- or may be getting some lift from anti-piracy campaign, I expect that they would.

Obviously, you have customers who aren't paying, who suddenly cann't get the product but my experience in the C-band business is when we were able to eliminate piracy that the vast majority of those customers became legal paying customers, and so, I think the card swap-out is a good investment to make and we're going to be rolling that out this year as our generation of cards come in to do that, and I think that will help stabilize our industry and it appears that DIRECTV's done a pretty good job of doing that. And because their relationship with News Corp who owns N B S. I think that, that will only get better for our industry and that's been a big bottleneck, so that could help, you know, may help them in the future months and could help us later in the year.

In terms of DVR/HD, you know, we continue to roll out digital video recorders. We don't release specific numbers on that but we strategically see that as the competitive edge vis-a-vis cable. We see it as a good -- while it increases SAC we see a better customer, a, you know, a customer less prone to churn, so we think that investment makes sense. We haven't done as much on the retention marketing side with current customers but we'll start doing that now that we have our latest generations of DVR's; and HD, has been one of the problems that we continued to have spot shortages on throughout the quarter so we've probably not in a leadership role there at this point just because we've had some shortages but we hope -- we think that's a -- we know that's high demand product from our customers and again we'll be interesting to see how HD plays out.

You know, satellite has the national advantage of economics and cable has the local advantage for the networks, you know, local bases, and, you know, that's probably a draw, kind of, in the marketplace today and, you know, one side will get stronger or weaker as time goes by and one side of the fence or the other and that will, you know -- I think it's too early to tell how it's going to play out.

And Chuck, I just want to follow-up on piracy I think in the past you've thrown out an estimate on how many DBS subs do you think are pirating a service, I think 1.5 million, is that about right?

I think that's probably, you know -- nobody knows for sure, but I think that some of those customers that number would be in Canada or Mexico or places where we couldn't legitimately sell to them, so, you're probably, you know, more in the million range in the United States that are engaged in some form of piracy and, you know, that takes many different forms. People may subscribe to your basic package and then pirate everything else.

So you don't get a new sub but you get ARPU. Increase when you close down piracy. Some people may account pack and put multiple receivers at the same address. And that's a different kind of piracy. You know, again, I think our -- the bottom line is our industry has an upside on attacking piracy and, you know, News Corp is very experienced at it and, you know, we intend to follow in their footsteps to make sure that our system is secure.

Thank you.

Your next question is from (Mark Knobby) of Merrill Lynch.

Thanks. I'm back now. Guys, just a couple of questions. One related to churn. Churn was up, you know, 1.48%, it was up sequentially. Normally the first quarter is one of the lowest periods where you exhibit churn.

Could you talk a little about it, Charlie, with respect to Viacom, and the dispute that happened there, maybe if you did some analysis in your organization what that would have been without it, number one. Number two, related to the subscriber acquisition cost of $604, if you strip out SBC's subscribers, because I take it that's in your subscriber number that you've reported, obviously SAC would be higher.

And I'm trying to understand, you know, the cost of the new equipment, maybe you can just, if you can help us break down what percent of that bump, that substantial bump you experience in SAC, is really coming from promotion as opposed to the cost, the actual cost of the new devices you have in the marketplace today?

Okay. Yeah, churn was up sequentially over, you know -- compared to the quarter. Any number of factors there. I think our cable pig campaign has focused the cable guys more directly on us and a lot of the direct mail and buy backs are specific to DISH network, so, I think that, that we probably have a bit more direct competition with certain cable operators in that regard. Viacom certainly wasn't a positive from a churn perspective.

It's pretty hard to get, you know, a direct handle on that but it's typically is in the same -- typically those kind of things are the same kind of level that the price increase would be, which we also had, of course, in the quarter. And SBC will -- oh, not SBC, but the other thing that's going to affect churn that we -- that should be aware of is, that our Digital Home Advantage program, there is no commitment. So, we have -- you're going to see that you have people who used to be on a one-year -- when you sign up for a one or two-year commitment, of course, you have very little churn during the commitment period but in month 13, then you get a whole year's worth of churn, you, kind of, at one time, and so we're going to have a phenomenon this year where our one-year commitment people roll off and we get one year of churn in a certain month.

At the same time we're signing up new customers with a very linear churn because they don't have a commitment. So, we think that's the right thing for us to do because we have a chance to attack churn when it -- customers' problems when they happen instead of waiting until a year later when they've made another decision, but it has the effect of -- when you do commitments it understates your churn, and when you roll -- when you go to no commitment, it more properly reflect your churn but while you make the transition it overstates your churn. So, I don't know if that's clear or not, but those are the phenomenons that are happening there.

The second thing is that, not all churns created equal, so we have a bit more discipline in retention marketing than maybe some in the industry. And we're not as apt to throw a lot of money and time and effort at a customer who is late on his bill, calls a lot of questions, and is a low ARPU customer. And so, we segment our customers and when you're really (dialing) in the churn you've got to look at, you know, is that, kind of, an A customer, B customer, or C customer. Well you can have a lot of churn in C customers and economically be better off than if you have low churn in A customers, so. I mean, in high churn, in A customers, so you've got to really balance that out.

And again, you guys just are never going to have visibility to -- you'll have visibility to the big picture but you'll never be able -- all I can say is we segment it, look at it, slice it, dice it, and we're comfortable where our churn is but realize that our transition period will probably, you know, have a little higher churn than you guys might expect, but fundamentally we're -- we think we're in solid position there with churn; and we think we're making a good investment in current customers today. When it comes to SAC and SBC, SBC didn't really have material impact on SAC, you know, this quarter. I would expect that maybe that'll change, but the biggest difference in SAC, and again, because of the one-time charges, it was about 50 bucks a customer. That's really two things. One is, people are getting more boxes. And our Digital Home Advantage you can get up to, you know, four TV sets. That's somewhat competitive driven.

And second, we're giving customers HD or DVR boxes, so they're getting a higher tech box, which has higher cost, and so those two things are driving the industry up. The flip side of that is you're getting the higher ARPU customer, again, a lower churn customer. In our case we're getting some of that equipment back, which lowers our SAC in the future, so we're positioning ourselves that while we know SAC is probably up in that $600 range, which is about a little higher than we'd like to see it, we know we're positioning ourselves that we can stabilize that in a way that we don't necessarily see, you know, others able to do.

Cable's got a problem because they're still putting analog boxes out there, they're putting first generation digital boxes out there, and we're, you know, we're probably on third or fourth generation. They're putting first generation DVR boxes out there. We' probably on second or third generation, so. You know, we have some fundamental advantages over others in the industry when it comes to SAC going forward. They probably will become evident to people over time.

But Charlie, just a question related to the churn again, just to help think it through. In 2003, if EchoStar is an organization did 1.56% churn, what would you anticipate how you think about it of a churn level in 2004 based upon the new way of doing with it your promotions?

Well, I think -- I hesitate to predict because I don't know but I think we have some trends that would skew reported churn higher, you know, primarily as people roll off, we're going to a non-commitment, kind of, model; but we have trends that are lower in churn as well. Multiple boxes, DVR's, higher-end equipment, and so forth. So, how all those things, kind of, interplay is -- remains to be seen; and then third dynamic is that we will -- are willing to accept some churn, you know.

If you have a customer who's worth net present value to you $300, we're not going to spend $60 [inaudible] and keep them. We don't think that makes sense. So, we think that to some degree you have to make a decision that a customer, who you have now have experience with, is not worthy of a big future investment. So, we're not trying to please people with churn numbers, we're trying to please ourselves with cash flow number. And when you, and that means that we make strategic decision on SAC, churn, ARPU, margin, strategic relationships, and a lot of factors that ultimately boil down to a cash flow number at the bottom and you really can't take any particular number, any particular quarter and draw too many inferences from it.

I -- I only think in a general way, that I think we've had a solid quarter and I think we have made positive progress in really strengthening areas that we were weak last half of last year. So, you know, the CEO gets to keep his job for another quarter. That's about all. That's all it means.

Charlie, there's also one very quick thing. On the Gemstar subscribers, has that -- that's not occurred -- has not occurred yet, right? You're not going to get those subscribers until the second quarter?

Right. Mike, you might answer answer that one.

We closed on that transaction during April of 2004. And we would -- we would count those subscribers most likely when we actually transition them on to our platform, if and when that occurs.

Okay.

So they're not in our subcount, and won't be in our subcount as long as they're in a big DISH.

Okay. Thanks very much.

Your next question is from (Rob Senderson of American Tech Research).

Hey, good morning. Thank you. A few questions. First of all, on just the balance sheet question, on the inventories, you know, given the strong subscriber results you had this quarter, can you sort of, you know, help me reconcile why the material increase in finished goods and raw materials?

Well, I think the way I'd answer that is that inventory really increased on all levels. As we mentioned, we had some products shortages that lasted through the end of '03, which were resolved during the quarter. And so, really, what you've got is inventory being on all levels, or a lot of different levels, being artificially low. As of the end of the year due to shortages, which were rectified during the quarter and thus the increase, really, on all levels, be it raw materials, finished goods, whatever.

The only other thing I'd add is lead times, as economy has improved worldwide and in the United States, lead times are longer so, we would expect that we would maintain a little higher level than normal on inventory.

Right. So, I don't have the comparison [inaudible] from last year but it's -- I'm assuming it's substantially higher from year-ago levels also.

Substantially higher from what?

From year-ago levels.

Yes.

And that you would say, is more a functioning of tightening lead times is where everything was pretty loose last year?

Two factors. One, we were artificially low last year; and two, lead times were longer. So, if lead times are longer, you have -- we try to carry -- and lead times are significantly longer, I would. We try to add safety stock. So we might be carrying, you know, three or four more weeks of inventory than normal if lead times were where they were last year.

On the raw materials --.

Of course, that affects our cash flow, right? So, that's why cash flow is a good measurement because,you know, we have to invest more in inventory today.

Yeah. With the raw materials, what's the mechanics are, I mean -- aren't your components and whatnot normally procured by your manufacturing partners?

Well, that's -- I mean, yeah, the problem with that is your manufacturing partner forgets to order something or takes your parts and put them in computers. You're not going to have product, so we have to supplement what our manufacturers do. Or we can get in real trouble, so.

I gotcha. So, you'll keep a bumper stock of things you think might be tighter than others?

Particularly sole-sourced parts.

Okay. That makes sense. Now -- .

Or sole vendor parts. We try not to have -- we're not trying to have a lot of sole vendor parts, but where you do you've got to keep a buffer.

And that's, you know, I would just add to that -- that, you know -- as you've obviously seen the demand is very, very strong and the last thing you want to do is be in a position where you've got strong demand and, you know, you don't have product in all different levels to fulfill that demand.

Well, especially coming off the last half of the year, the problems you had then.

This is an interesting year for demand. I think it's really, you know, we saw the economy improve -- start improving last August, and of course, weren't able to take advantage of it, but the DIRECTV numbers is a phenomenal number, and as an industry, you know, that's -- that's -- for the first quarter of the year, which is not typically the strongest quarter, it's phenomenal growth, and whether that continues or not, is anybody's guess, but, you know, we're cautiously optimistic on, you know, on where satellite is headed.

Mike, I mean, one way to read it, just, you know, is that it's a pretty bullish signal that you're putting, you know more of your cash down in terms of procuring parts.

Well, that would be one way to look at it. I think -- I think -- we're also, you know, disappointed that we didn't execute last year and missed opportunity for subscribers because we didn't have product. And you know, so we lost momentum at a time when we could have, you know, been gaining in it and, you know, we've made significant progress in getting back on a more solid footing this quarter.

Gotcha. A couple questions back to SBC. I mean, you know, we're all trying to reconcile, sort of, their statements made and, sort of, the limited amount of color you're able to provide us here but one question for you, I mean, you had a relationship with him that, sort of, pre-dates this February launch and they just said they have 40,000 subs but can you give us any sense of, you know, what they have prior to, you know, their relaunch in February?

Yeah, I'd rather let -- I mean, believe that when they talked about 40,000 subs that the vast majority of that would have been what they've done under the -- since February. It wouldn't have been the previous year.

The previous year, you know, we tried a few things together that were too confusing and too complicated for customers and I think that, you know, SBC is -- they're still working the kinks (sic) out, but they've got a formula that appears to be a lot more productive going forward, and we have things to help -- to do -- still to do to help support them; so, you know, again, I think it's going to be a good relationship with SBC.

You've got two companies that have worked extremely hard at it, continue to work extremely hard at it at all levels of the management teams, and is strategically, you know, a different direction for us, and, you know, we'll see how it plays out. But, you know, they are a good partner for us today.

And, I guess the other side of that question, then, if they did a February or early March soft launch you assume that there's a pretty deep trajectory, most of that would fall outside the quarter. Is that an incorrect way to think about it?

Well, again, I'd really let -- we're not really -- we don't know how that relationship, we don't -- we're not giving guidance and we don't know, you know, how -- what the numbers will be, but, I mean, I think everybody feels like on both sides we're off to a solid start, and they've talked about the kind of expectations they have, which are in the hundreds of thousands this year, and, you know, we're just going to make sure that we do everything on our part to make sure we can fulfill the demand that they can create.

I think that it's probably, you know, a second or third or fourth quarter kind of discussion when we start seeing some trends develop. I'm not sure how much we'll know next quarter but I certainly think by the end of the year, that as we talk about it on conference calls we'll have a lot more direction to give you on it, but today would be really premature to try to forecast where that's headed.

I mean, I'm -- really, where I'm coming from is that, you know, forecasting, that's part of it, but we're trying to reconcile, kind of, you know, the comments they made and why we didn't see, you know, SAC come down or any impact on SAC and I think that, you know, what I'm assuming is that a lot of that is that you're going to see in the upcoming quarters and, you know, there wasn't 40,000 subscribers added which should have put a dent in your SAC number. That's, kind of, what we're trying --

Yeah, that's not -- we would have had -- we would have significantly less than 40,000 as of March 31st, I mean, that they, I think they were April 21st or 22nd and 40,000, and I don't know how much rounding was in that and I don't know exactly the number, but --.

that's --.

SBC -- SBC, I -- I'm going to -- I want to say it's immaterial in the first quarter but I'm looking at my CFO. I don't know if that's true.

Yeah, no, I don't think SBC was particularly material in the first quarter. It would be our hope that it would become a much bigger part of the base going forward, obviously.

But the, you know, the -- we think the customers are equivalent from an economic point of view and you should be aware that does it -- to the extent that SBC is successful that it will tend to lower our SAC, it probably, we hope it will lower our churn, it will lower ARPU, and we'll put some pressure on our margins. So -- but when you wrap all that up and divide it all out, it's an equivalent kind of customer, the one that we go out and spend $600 for to get.

The language in the 10-Q, I mean, overall economic return is pretty subjective, I mean. Can we assume that you're thinking the M P V will be equal or economic return being, you know -- how do we measure that? Or how are you measuring that?

Well, a number of factors. One of those being -- a very significant of those being M P V.

Okay, perfect. Thank you, very much.

Your next question is from Jeff Wlodarczak of Wachovia Securities

Hey, guys I'm going to refrain from asking what place you bought back your stock this quarter, if that's okay?

No, you can ask that question actually, because I got a really nice letter from Mr. Cooperman, who actually asked that question last time, and I made a mistake by not giving that number out, and, you know, we bought back -- I think we've disclosed it this time, and, you know, I made a mistake, and he asked a very legitimate question, and he was also kind enough to take the time to articulate that to me, you know, by letter, and I appreciated that.

Okay, SAC. Ignoring the effects of SBC, do we think it's going to stabilize these levels? You said it was a little bit of ahead of what you, you know, sort of, expected. But, is this what we should, sort of, expect for the rest of the year?

Again, you know, we don't live in a vacuum, and, you know, we'll have to see what the marketplace does. I think that we -- I think that we have a bit more discipline than many, and I think that -- the real question about SAC is you could probably ask the cable guys because they're having to pay $400 or $500 to get customers back that they used to have but they keep for a year and then lose them after their credit runs out, so.

I think, one of the things that both DIRECTV and EchoStar experienced and is the one-year phenomenon, when the guy doesn't like cable that much, we switch -- you know, he's ready to switch, at which time the cable guy gives him $400 to stay and when that runs out, he switches. So, all they did was pay retention marketing. They're the classic example of paying retention marketing that I don't think is very economical in many cases, and so, I think that -- I think that we exhibit the best discipline in the industry.

I think that we'll be responsive to (comprived depressures) and I think that we have positioned ourselves strategically to be the most disciplined and be the most stable in SAC, and we believe we're getting a good economic return on the $600 we spent this quarter, and we could spend more and we'd still be comfortable. We'd prefer to spend less. If it was up to us, SAC would come down. But, you know, we're economic animals.

And then, in regards to retention marketing, did you say earlier that you're potentially ramping retention marking?

I think that we will spend more on retention marketing throughout the year, certainly than with more than we spent last year, and again it'll be targeted, it won't be for everybody. It won't be the same for everybody but it'll be target. But, nowhere near -- nowhere near where the equivalent cable companies or other satellite companies spent.

So when we think about the increase in sub related expenses, the vast majority that increases programming or is there some retention marketing?

I'll let Mike McDonnell, maybe address that because that's a good question.

Yeah, it's both. I mean, you have to remember as Charlie mentioned before, you really don't have -- you have virtually no impact of price increase in the first quarter and you've got, you know, programming increases, which are more linear through the years, so certainly programming as a percent of revenue is a component. And then in addition to that, you know, you do have customer retention spending going up and you have that, you know, targeted toward your higher-end customers where it makes the most sense, and really, those are the two big pieces of that increase.

Okay, I'll limit myself to those questions. Thanks.

Your next question is from (Vince Lindbergh) of Morgan Stanley.

Hi, how you guys doing?

Vin, we can't hear you.

Can you hear me?

That's better.

All right, I'll just ask two questions. First, back to that retention marketing comment, DIRECTV had a decent DVR quarter and interestingly, I think about 70% of their net adds were to the existing base, which flows through retention marketing. Can you talk a little bit about your DVR business last six months, I think you had a little of some inventory issues, was that affected in the DVR numbers, and are you, basically, skewing the same way or are you trending more towards net additions on new customers getting DVR's?

We have been the opposite of DIRECTV, I think our DVR customers have skewed towards newer customers. And but, primarily not because we think what DIRECTV is doing is a bad idea, it's because we had inventory issues. And we may have -- it may have contributed to some degree in some of our churn as well, because we weren't able to supply somebody who wanted a DVR, that was a current customer. So, you know, we'll do more.

We have a program today for current customers to upgrade to DVR, that still is subsidized but still requires out of pocket on this customer's part, and, you know, we'll do more of that, we'll do more of that the next couple of quarters and, you know, experiment with that and see how that plays out; but I guess, we have skewed more towards new customers as opposed to current customers.

I think DIRECTV said they had about 850,000 or so DVR's. I think Time Warner is at 750. Are you guys still number one in the industry?

You know, I don't know, because I don't know everybody's numbers.

Everyone's below them.

I think that we're -- from the numbers you gave me, I would say we're probably ahead of those folks.

And then, the last question on, I wanted to just touch on (SHVIA), a lot of stuff going on in Washington right now. McCain said he supports distant HD networks, which, I think, you guys obviously also support. What do you think the odds are for you getting that included in the extension act and what should we expect from that front over the next couple of months?

You know, obviously legislation in Washington will have an impact on our industry and our company.

It, it's -- I think that it's very difficult getting anything passed in Washington today, it's an election year, you got a war going on, I think that the legislation could be anywhere from an extension of the current act to perhaps modest changes to the current law of some maybe favorable, some may be unfavorable; the one, I guess the one that you should be -- and we'll -- I think we disclosed something on this in 10Q, but the two-DISH solution we utilize in 38 markets today would have a potentially material impact on up if we were required to go to a single-DISH in a short period of time. And that's one that could affect us and maybe not affect others. So, the distant HD would be a very positive impact for our industry.

It has not been supported by News Corp/DIRECTV because they're also a broadcaster, so they've been neutral on that issue or actually may be against that issue. So, that's one that we're fighting, you know, more alone. We think it --it has a positive impact on the industry. We -- if you want to calculate odds, I don't think we have ever prevailed on an issue with broadcasters in Washington, as a company. So, I don't know that 2004, from an odds perspective, as a betting man, I would bet on us versus broadcasters.

Just one quick follow-up on the two dishes. Is the solution, if you had to go ahead and swap those out to go to SUPER DISH in those markets or is it essentially can you -- or can you move the local channels which are on the second dish to a different satellite or is it, really, you have to go out and visit every home that has two-DISH's and --.

The solution would be probably all the above, I mean, it would depend on what the legislation actually said but we -- there may be some markets that we would take -- it would be more economical to take the market down. There would be some markets where you would -- people who are on a one-DISH solution today would become a two-DISH solution so you'd disrupt those customers, and you may have some customers who are a two-DISH solution today who would become a SUPER DISH solution, so it would be one-DISH but it would disrupt them. So, you know, we -- we internally, we want to be one-DISH.

We have some competitive disadvantages where we are two-DISH; and it cost us, you know, a fair amount of money to be two DISH; so we -- internally, you know, we have plans to be on a single-DISH, you know, within four years, by 2008. I should say. By end of 2008, and, you know, we hope we're allowed to have the time to get there, you know. I mean, I'll go my rant and rave in Washington, but we're the good guys, right? Every congressman and senator asks to us put their local city up, and, you know, Senator Burns begged for a city in Montana. We put Missoula, Montana up there and the only way we could do that was the two-DISH -- because we had two-DISH solution.

And then at a hearing, he came out again to two-DISH solution. Well, if he wants us to take down local-to-local in Montana, and at the same time, you know, Mr. Senator Burns said he was for consumers and he was for satellite companies. Well, he can't have it both ways, and we're going to point out to the citizens of Montana that Senator Burns is not for citizens in Montana, because we did what he asked. We did what his staff asked. And now he wants to change the law retroactively on us and that's not fair. In my experience in Capitol Hill, is that, ultimately, they're pretty evenhanded about things and they do have a sense of fair play; and, you know, I think that we have a chance to figure out a way with broadcasters and the Congress that, a way that works.

Great, thanks a lot.

Your next question is from (Matthew Harrigan of Yanco Partners).

Two questions. I understand your points on the stickiness in ARPU and the increased retention market in the timing of the programming cost increases but nonetheless if you look at this quarter, your subscriber expenses increased 640 basis point faster than the DISH Network revenues last year, it was the inverse the DISH Network revenues were up 300 base points more, can we infer that year-over-year the programming cost increase was actually higher than last year; and then secondly, you volunteered that the AT 60 customer, or an individual customer not, sort of, the ever green, replenishment stream was worth about 300.

And so you couldn't -- you wouldn't expend a lot of retention to keep that customer. What would -- using the same, sort of, assumptions what would you think a very high-end absolute primo customer would be worth? I mean, how was it a [inaudible] is there in the per sub valuations?

Let me turn the first part of the question over to CFO, before I do that, I want to correct, I didn't say that the top 60 customer was worth 300, I said by way of example that we may have a customer who doesn't pay his bill on time, calls up, complaining many times per month, and when we run the analysis on that customer, we may believe he is worth $300, right, and that customer could be any kind of customer for us, and in that particular case we would not spend $600 in retention marketing for that customer.

So, that was just trying to give a way of example that not all customers are created equal. And you've got to be careful as an analyst, that not all churn is equal. So, I could make the case that we could suffer 2% churn per month, and have 0% churn in our high-end -- our very little churn in our high-end customers, we'd be better off. So, we could make more money with 7 million subscribers than with 9 million subscribers if they were the right kind of customers. So, those are things we analyze on a day-to-day basis and make decisions on then change the model as we find things going forward. Your question on margins, I thought was well taken and we kind of addressed it earlier, but maybe you want to.

Yeah, I guess I'll just add to what I said before, Matthew, that the, you know, obviously, you know, the programming cost is an on-going ballot that we fight.

We obviously intend to protect consumers as best we can, and that's why you see certain situations like did you with Viacom, as an example. I think that what you see in the first quarter is a bit magnified because as we mentioned, you know, you've got only a partial price increase in effect and then you end up giving, you know, a significant portion of that back to the Viacom credit, so you've got very little in the way of price increases, you've got programming coming through in a more linear fashion and you've got some pressure on that margin.

What I would add to that is that on a go-forward basis, you know, as we look at customer retention and spending that in the right spot, as well as SBC, you will see some continued pressure on that margin, but most importantly we're operating a level that we feel very comfortable with and at the end of the day, you know, it really is more about free cash flow and I think that where we're operating today and where I expect we'll go in the future, you know, I continue to be very comfortable with the level that we're at.

By the way, I should have pointed this out, earlier, but the quarter over quarter SAC, from my perspective, this is me speaking as what limited Tennessee finance I have, is actually probably from -- actually probably reduction in SAC because we're not giving away -- we ended the three months free programming package which was -- which had a cost to us of more than $50.

So, when you look at -- that didn't show up in SAC, that showed up in ARPU. So, I think that today we are actually spending on a number of fronts, we're actually spending less to get a customer and we think we're getting -- we're giving more receivers and better equipment than, say we were, the last half of last year, so we've made significant improvements there and we just don't -- you know, I don't like the free programming model because it really, kind of, distorts how much it really costs you to get a customer.

So -- and even discounted programming, as many people, industry are doing today, kind of, hides the ball a little bit; so, we've actually made pretty steady progress on economics it's just not showing up, it's not really showing up in the numbers for a variety of reasons and you've correctly pointed out, kind of, what the numbers say; but in terms of what I look at it is, the customer we get today, and the money we spend on the customer today, that customer is going to show up over time in the numbers two, three years from now and the question we have to ask is, are we comfortable with that, and I would say in general, you know, in general, the economics are pretty close to historic average of where they've been, and maybe are trending to be a little better.

So, you know, we'll have to wait and see and competitive pressures can always change that, but I think the discipline -- the discipline that we have internally is pretty good.

Thank you.

Your next question is from (Shylame Yedid) of Lehman Brothers.

Hi, it's actually Vijay Jayant -- question, Charlie, on the convert. Are you planning to call that?

Well, I don't -- you know, we'll always evaluate, you know, those things, I mean, we look at, you know, bond buy backs, convert buy backs, and stock buy backs, and then investments and acquisitions and, you know, those are always moving targets, and you know, what we might be thinking about today could change tomorrow depending on what interest rates do, or capital markets do, or something, so, you know, if we decide to buy those back, you know, you'll be first to know. But, I guess at this point we haven't made any decisions, that we're ready to announce, is that fair?

That is fair.

This is for following up on the (SHVIA) acquisition costs, I mean, for example, DIRECTV breaks down what they allocate, basically, retentive marketing and what's growth marketing. Can you, sort of, give us some perspective on how that, sort of, mix breaks down?

You know, really what we focus on is cash flow, and in all, there's a number of moving pieces and it's -- we don't break that out specifically. (It's against) bit of a moving target and it's a little bit different how we do it in terms of how we allocate towards customers and, you know, I think what we try to do is be responsive to you guys and give you enough information to evaluate our company but we also don't want to give out information for our competition to evaluate our company. So, that number is in our --.

subscriber related costs.

-- subscriber related costs, as it should be, and it's all part of that and you get visibility through that number. And of course, it's not specifically broken out. But, you know, that at least for the moment is how we're going to do it for this year. If we decide to make a change on that, and feel like, to get better picture of our company, there's more detail required then that's something we'd probably change next year. You know, we wouldn't change it quarter-to-quarter, we'd probably change it on an annual basis.

Great. Thank you.

Your next question is from (William Kidd of Vintage Research).

[inaudible], Charlie. I think that first question relates to ARPU. Clearly there are a number of factors this quarter causing some [inaudible] there, but generally speaking, you know, we've seen a lot of progress in some of your competitors with more set tops, local to local, potentially even DVR [inaudible] fees and, I guess, as my perspective that EchoStar hasn't really shown the same type of comparable ARPU growth, and I guess, on a go-forward basis, I guess, what's your impressions of whether EchoStar will be able to, kind of, match the industry on an ARPU basis; and secondly, some of the reason why that your ARPU growth hasn't been as substantive on a big picture basis because more customers are opting for A.T.- 60 proportionally than in prior years?

Very good question. I don't think we have maximized our ARPU, let's put it that way, and I think that if there's -- if there's a video customer in America today who has opportunity in ARPU, it would be us. But again, I think we've done a few things differently. We don't have a lot of, you know, we don't have thinks like NFL season ticket, which costs $400 or $500 million a year, which obviously increases your ARPU but not necessarily your profit.

And so, we don't have those, some of those factors that maybe others, you know, may have. On an apples-to-apples comparison and you look at it, you know, we're much closer than you might think to others, but we have up side there. We've generally priced our product a little bit lower than industry. We typically charge less for DVR fees, and we typically charge less for second set top boxes, in some cases; in some of our newer models, there isn't a second set of top box fee, we think those are strategic advantages we can take advantage of going forward.

We're also a high fixed-cost business, so we have to factor in the fact that we've got billions of dollars of satellites, whether we've got a subscriber or not. We've got to factor that in on a variable-cost basis, and you put all that in the mix and you say, you know, where do you want to be and I think that we have room for improvement on ARPU for the foreseeable future and, you know, it's -- I don't want to be the company who's -- who -- I think we have up side in ARPU without significant increase in churn, and I don't think that everybody else in the video business is in that same position.

So, you know, we're patient and we're, you know, that we have to evaluate our decisions every day as to whether we're making the right calls. We have very modest price increase this year for a number of factors and, you know, have to wait and see. I'll say this. I'm disappoint where our ARPU is today.

Okay, fair enough.

Does that helps.

Does it. And, with respect to the retention expenditures, besides, you know, I guess hopefully or besides DVR's, can you comment a little about what other element, at least on the incremental dollar, where your retention money seems spent? Or is it just DVR's?

No, I mean, retention marketing would be spent in, boy, three or four, five ways. One is, we upgrade people to SUPER DISHES.

Okay.

It's a big cost because that's the only way we can do local in those cities. Two, we put second-DISHES in for customers as required by the law. At our expense.

Three, we put in -- we upgrade people, we subsidize DVR or HDTV. Four, we add receivers or subsidize the addition of receivers, which then can also involve some switches, which are expensive. If some has -- some guy has two receivers and one's got a three receivers, there's an incremental cost beyond just the receiver, there's some wiring charges and we've subsidized that. People move. Does that show up in retention marking?

Yeah and you'll also have upgrades, too, people with older equipment and we may choose somebody's been a good customer for a number of years and has older equipment, we may choose to upgrade that customer. At the end of the day it's largely hardware of one form or another.

And what's unique about us and retention market and one of the things that, it is the SUPER DISH or the two-DISH solution upgrade, which again, we don't want two-DISHES, that's an economic -- it's not an economic success for us, but that strategically the only way we can get the extra markets, initially.

And my last question goes back to SBC relationship and, I guess, really the disclosure on a go forward basis. Given that there is such a difference in economics and distortion on margins and SAC and so forth, are you going to start to report those subs on a consistent, kind of, quarterly manner?

Yes, and they're going to be involved in our telesubscriber accounts, I would only -- and the reason is, we think the economics to EchoStar is pretty equivalent, and in our sub count is broken down into the three categories. The vast, vast majority of it, of course, is the single family homes that we bill direct.

SBC, or partners like SBC, will be a growing segment that will be ones where the SAC and churn and ARPU and margins may be different but the total economics, we think, are somewhere, and if that's the case they'll be in the total number and the third is, kind of, equivalent subscribers, which we may have apartments, hotels, motels, business TV, customers that we may not even bill directly but bill in bulk and we've got to -- we actually have more -- we have more CNN subscribers than the number we reported, but we have to take those customers and because they're buying, kind of, on a bulk basis we take those customers and divide by our most widely distributed package, which is AT - 60 today, and put all that in a sub -- because those subscribers are about equivalent to a regular subscriber for us because of SAC and churn and all the metrics, so.

When you look at our 9.7 million -- whatever it is, subscribers, no matter which buck they're in, they're pretty equivalent for us, and to the extent that that's, you know, materially changes, I mean, we take a look at breaking out some details, some segments, but I think SBC will be breaking it out for you and while your timing may be a little different I think you're going to be able to get an idea of the trends from SBC. It's really their place to do it. It doesn't -- what you have to worry about is, on the subscribers that we have, all paying subscribers. We don't count a subscriber unless there're paying us. So if a guy goes on vacation and goes into hibernation for six months, he doesn't count as a subscriber, he counts as a churn, and you know, unless he's paying us; so, that's something we do different than other --

I think our sub count is probably a bit more conservative than perhaps others in the video business and, you know, we don't count the C-band subscribers today, yet, so. That's kind of how we're doing it. We're disclosing how we're doing it. I don't think that we're going -- as a company we're -- we've got to manage the business. We're not going to change our business so that -- to the way somebody wants it reported. We want to report it where we think reflect it most accurately and also helps us manage our business. Maybe everybody else should report like us. I don't know.

I guess my comments [inaudible] value is clearly one big element of it, but you know, you even acknowledged in your own call and filings that it's going to change the direction potentially of how your SAC looks like, what your margins look like, and it seems to me that, you know, the value of your reported metric is going to decline unless you disclose what the SBC number is.

Well, then people won't buy our stock, and if that's -- if they're going to analyze it that way, which I think that's an inaccurate way to analyze it, then maybe our stock will become a bigger value for those who buy it.

Fair enough.

You know, really, analysts ought to be asking cable guys to disclose SAC. I mean, the fact of the matter is that all the video providers, and some cable companies I read in the paper now counted fake subscribers, you know, so. You know, I think you really -- I think if you want to go searching for people to report things, things accurately and where you can understand them, you got a long way to go, long list ahead of you.

And we're just disclosing how we think it makes sense to do it, we probably will re-evaluate that at the end of the year, and if we don't think it's helping you or properly valuing things, and obviously, we'll make changes. I mean, we're not set in concrete on this, we just think this is the, kind of, best way to do it 'til we get a feel for how it all shakes out.

Fair enough.

I think the subscribers we report today are accurate, they're all paying, they're all pretty equivalent in terms of valuation, people can argue about whether subscribers worth a dollar or $10,000, what they're all -- you should feel pretty comfortable with the number you're seeing.

Thanks.

Operator I think we'll take one more question.

Your final question comes from Richard Rosenstein of Goldman Sachs.

Thank you. Just a question on DVR's. DIRECTV had mentioned on their call that DVR churn for them is about half a percent or less. Was wondering if yours is consist with that? And also, given that you've had probably the most extensive experience in the largest subscriber base of DVR subscribers can you talk a bit about what DVR churn looks like among those that have had the service for the longest, is it materially different or any different from those that have had it more recently? Thanks.

Good question. We're not disclosing what our DVR churn is, other than it is less than our customers who don't have DVR.

One of the phenomenon, I think a half percent is low, because I think, you have the phenomena of a new customers who signs up for a year contract to get the DVR, you're not going to have a lot of churn until the 13th month; and so, I think, that DVR churn as a generalization is lower and maybe significant lower than normal customer churn but that is probably understated today by people in the industry because the long-term phenomenon, you know, hasn't taken effect, right; just like our first year in operation, our churn was, you know -- I think first couple of years was less than 1% because we didn't have people aging off, and so, I think that it probably is -- it doesn't change the economic answer, which is DVR's, at least for the satellite industry has been a good investment, I think, for us it is, and I think it has been for DIRECTV as well.

And I don't see that changing. But I would say the discrepancy between normal customers and DVR customers is not as big a gap as maybe other people think. Although it's still a big gap.

Thank you.

ll right, is that the last one?

I think that's it. We'll be back next quarter somewhere between now and about the 10th of August. And we'd like to thank everybody for joining us today.

Thank you again for your participation in today's conference call. You may now disconnect.