Fitch Rates EchoStar DBS Corp.'s Notes 'BB-'; Stable Outlook

Business Wire, May 21, 2008

CHICAGO -- Fitch has assigned a 'BB-' rating to EchoStar DBS Corporation's (EDBS) $750 million offering of 7.75% senior unsecured notes due 2015. The notes were placed under the SEC rule 144A. EDBS is a wholly owned subsidiary of DISH Network Corporation (DISH, Issuer Default Rating of 'BB-'). Proceeds from the offering are expected to be used for general corporate purposes. The Rating Outlook is Stable.

Given the DISH's operating profile and credit-protection metrics, Fitch believes that the company's overall credit profile is strong within the rating category, providing the company substantial financial flexibility. Fitch believes that DISH's leverage can increase to a range between 3.5x to 3.75x and maintain its current ratings. DISH's leverage metric, calculated on a latest 12 month (LTM) basis, as of March 31, 2008 was 1.87 times (x) on a consolidated basis. Pro forma for the new debt issuance the company's leverage metric was 2.12x. 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 in October 2008. In addition the company's 3% Convertible Senior Subordinated Notes due 2010 ($500 million principal value) contains a provision that provides DISH the option to redeem the notes or may require the company to repurchase the notes at principal value during July 2008. Historically, EchoStar has enjoyed strong access to capital markets and Fitch assumes that the company will successfully refinance the 2008 maturities.

EchoStar's ratings reflect Fitch's opinion that the effects of growing competition and a slowing economy will weigh on EchoStar's operating results during 2008 and 2009 likely leading to lower gross additions, sluggish ARPU growth rates, higher subscriber churn rates, and higher subscriber acquisition costs.

Key to EchoStar's continued EBITDA and free cash flow growth is its ability to control subscriber churn. EchoStar reported subscriber churn increased to 1.68% (monthly) for the quarter ended March 31, 2008 reflecting an increase of 22 basis points relative to the same period last year. and 26 basis points sequentially. 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 fixes and churn may remain elevated for an extended period of time. Fitch is concerned that EchoStar will have to significantly increase its customer retention spending to regain control over subscriber churn, which will have a negative effect on EchoStar's EBITDA and free cash flow generation.

DISH, through wholly - owned subsidiary Frontier Wireless, LLC won 168 E Block licenses totaling nearly $712 million. While DISH has yet to articulate its wireless strategy, Fitch believes that the capital costs and execution risk associated with adding a wireless product to DISH's overall service offering will elevate the near term business risk attributable to DISH's credit profile. In Fitch's opinion the acquisition of wireless spectrum can position DISH to eventually offer a variety of wireless solutions including mobile video and possibly video on demand. Both of these potential solutions will serve to differentiate DISH's service offering and will strengthen DISH's competitive position among other multichannel video distributors.

The Stable Rating Outlook reflects Fitch's belief that subscriber metrics will improve as the company's high definition (HD) offering matches competitive offerings, as well as the positive EBITDA and free cash flow prospects, expected over the near term, balanced by the very competitive operating environment. Outside of the existing 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 wireless strategy and the potential cash requirements to launch a wireless service.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.