It took me years to make the switch from traditional cable service to satellite TV. To be honest, I was a bit skeptical at first, but my fears were quickly calmed by what I saw and heard. My EchoStar (NASDAQ:DISH) DISH Network system has never failed to provide me with the ultimate digital TV experience, and I've never thought of switching back to cable.
I guess I'm not the only person who replaced a cable box in favor of a satellite dish. One look at EchoStar's second-quarter earnings underscores the company's ability to add new customers. With 340,000 new subscribers jumping aboard the satellite spaceship in the quarter (10,000 more additions than expected), EchoStar now has more than 10 million total subscribers to its crystal-clear video and audio service.
It seems that investors are banking heavily on the company's ability to add customers; the EchoStar shares were up more than 8% on early trading despite the company missing its earnings target by $0.05 per share. Both EchoStar and satellite rival DirecTV (NYSE:DTV), which has about 11.6 million subscribers, are starting to build the kind of momentum that could make cable companies like Comcast (NASDAQ:CMCSA) and Cablevision (NYSE:CVC) a little nervous. Cablevision has even started to dabble in satellite service of its own to catch some of the wave.
Don't think for a moment that the cable service providers are going to sit still and watch the benefits of all of their digital-line upgrades float away like a loose balloon in the sky. Many cable customers have been willing to wait for the digital upgrades instead of scrapping the age-old boxes. Companies such as Comcast have slowly made the transition and are now reaping the rewards of enhanced results (even though the industry's market share is slipping).
In an era when it appears in vogue to buck the establishment, many 1960s throwbacks have been turning their backs on the tradition and giving the new guy a chance. Even many of the Baby Bells, including BellSouth (NYSE:BLS), are offering satellite service (DirecTV) to customers. This telecom-bundling strategy is sure to be duplicated by other providers looking to enhance revenue and combat potential competition for phone service from cable companies. Investors should ride the wave of new satellite customer additions, yet be wary that one big, bad quarter could produce a wipeout. Growth always has a price, so I would recommend the EchoStar shares for risk-tolerant investors with cast-iron stomachs.
Have you switched to satellite service from cable? Tell others about your experience on the EchoStar discussion board.
Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
