Fitch Affirms Dish Network's IDR at 'BB-'; Stable Outlook

Business Wire, Feb 1, 2008

CHICAGO -- Fitch Ratings affirms the 'BB-' Issuer Default Rating (IDR) assigned to DISH Network Corporation (DISH) (Nasdaq: DISH) and its wholly owned subsidiary Echostar DBS Corporation (EDBS). Fitch has also affirmed the 'BB-' rating assigned to the senior unsecured notes issued by EDBS Corporation. Approximately $6.1 billion of debt as of the end of the third quarter of 2007 is affected by Fitch's action. The Rating Outlook is Stable.

Given the company's operating profile and credit-protection metrics, Fitch believes that DISH's overall credit profile is strong within the rating category, providing the company substantial financial flexibility. Incorporated into the ratings affirmation is Fitch's expectation that the spin off of EchoStar Holding Corporation (EHC) effective Jan. 1, 2008 will not have a material impact on EchoStar's financial, operational or credit profile. Fitch believes that the revenues and EBITDA generated by the businesses and assets included in the spin off are not material in relation to DISH's consolidated financial profile.

DISH's capital structure remains largely in tact as total debt is reduced by approximately $388 million due to the transfer of capital leases to EHC that support three leased satellites. While the transfer of $1.0 billion of cash to EHC constrains DISH's financial flexibility somewhat over the near term, Fitch believes that the company is well positioned to generate meaningful amounts of free cash flow which, during the course of 2008 will strengthen DISH's liquidity position. Fitch does note however that the company does not maintain a revolver and that EchoStar has $1.0 billion of debt scheduled to mature during 2008. Fitch acknowledges that the transfer of cash increases DISH's reliance on capital market access to refinance the maturity, elevating the refinancing risk within the company's credit profile.

DISH's ratings reflect Fitch's opinion that the effects of growing competition and a slowing economy will weigh on DISH's operating results during 2008 and 2009 likely leading to lower gross additions, sluggish ARPU growth rates, higher subscriber churn rates, increasing customer retention spending and compressing margins. The evolving competitive landscape coupled with DISH's limited ability to respond will, in Fitch's opinion, increase the business risks related to DISH's credit profile. Fitch believes DISH will find it increasingly difficult to protect and grow its market share in the face of the bundled service offerings by the cable MSOs and telephone companies in residential markets. Fitch believes that demand for DISH's video service will remain strong within certain segments of the multi channel video distribution market, and Fitch expects that the company will continue to aggressively compete for subscriber market share primarily by positioning its video offer around the strength of the company's high definition programming content.

Key to DISH's continued EBITDA and free cash flow growth is its ability to control subscriber churn. DISH reported subscriber churn increased to 1.94% (monthly) for the quarter ended September 30, 2007 reflecting an increase of 18 basis points relative to the same period last year and 26 basis points sequentially. Fitch notes that historically the company typically experiences its highest churn rate during the third quarter. In addition to increased competition, the higher churn level is also attributable to higher non pay disconnects due to economic factors, decreased customer satisfaction resulting from operational inefficiencies, expiration of promotional discounts and theft. In Fitch's opinion, some of these factors such as higher non pay disconnects and decreased customer satisfaction, appear to be longer term fixed and churn may remain elevated for an extended period of time. Fitch is concerned that DISH will have to significantly increase its customer retention spending to regain control over subscriber churn, which will have a negative effect on DISH's EBITDA and free cash flow generation.

The company's leverage metric, calculated on a latest 12 month (LTM) basis, as of Sept. 30, 2007 was 2.18 times (x) on a consolidated basis. The company has approximately $1.9 billion of senior unsecured debt and capital lease payments scheduled to be repaid during the next three years including a $1.0 billion maturity during 2008. Historically, DISH has enjoyed strong access to capital markets and Fitch assumes that the company will successfully refinance the $1.0 billion 2008 maturity.

Fitch's Stable Rating Outlook reflects the consistent subscriber economic trends, as well as the positive EBITDA and free cash flow prospects, expected over the near term, balanced by the very competitive operating environment. Additionally, the Stable Rating Outlook incorporates Fitch's belief that the proposed spinoff of DISH's technology and infrastructure assets to its shareholders will not have a material impact on DISH's core video business or liquidity position. Outside of the announced share repurchase authorization, Fitch views the use of cash for shareholder-friendly actions as an erosion of financial flexibility that could result in pressure on the ratings or an outlook revision. Additionally, Fitch has concerns related to the uncertainty surrounding the company's broadband strategy and the potential cash requirements to launch a wireless broadband service.