EchoStar Facing Probes in 10 States

EchoStar Communications Corp. is the subject of civil investigations by attorneys general in 10 states for allegedly violating consumer protection laws in its satellite TV business, according to a regulatory filing.

Two states initiated civil probes of the Littleton, Colo.-based satellite TV company in April, and eight others followed suit during the last three months. According to Echo- Star’s filing with the Securities and Exchange Commission, the states are accusing the firm of violations based on its call response times, advertising and customer agreement disclosures, its policies for handling consumer complaints, issuing rebates and refunds and charging cancellation fees to consumers.

EchoStar said that it has cooperated in the probes, but that “it is too early to make an assessment of the probable outcome, or to determine the extent of any damages or injunctive relief which could result.”

The state investigations come as EchoStar is fending off accusations that retailers of its Dish Network satellite TV service may have made false statements in telemarketing campaigns aimed at luring away current Los Angeles customers of troubled cable TV operator Adelphia Communications Corp.

Analysts said fallout from the state probes also could undermine EchoStar’s ability to push through its proposed satellite TV merger with DirecTV’s parent, Hughes Electronics Corp. But EchoStar executives said they remain optimistic about closing the transaction before the end of the year.

Regulatory analysts, however, say that even before word of the state probes, prospects for approval of the deal appeared dim. The merger would combine the No. 1 and No. 2 satellite providers and provide the new company with 90% of the national satellite TV market, including a monopoly in many rural areas.

The civil probe is another drawback to the EchoStar-DirecTV deal, said Andrew Jay Schwartzmann, president of the Washington-based Media Access Project. “This kind of stuff has a cumulative effect. The conventional wisdom in Washington is that this deal is in deep trouble. The likelihood of this thing making it all the way through is under 50%.”

“Obviously, one of the dangers of an unregulated monopoly is that consumers are going to have less choice when things go wrong,” said Scott Holste, a spokesman for Missouri Atty. Gen. Jay Nixon, one of several state officials reviewing the merger. “Responsiveness to consumers, that would be a concern.”

Holste declined to say if Nixon’s office initiated one of the consumer probes. Florida and Connecticut reportedly are among the states examining EchoStar. A spokeswoman for California Atty. Gen. Bill Lockyer said he was not involved in the probe.

In a conference call Thursday, EchoStar Chief Executive Charles Ergen surprised some analysts by striking a conciliatory tone in discussing the investigations, rather than denying any improprieties.

“We’re not perfect, and we’re still learning,” Ergen said. “We can certainly do a better job, and there’s certainly some helpful suggestions in our discussions with state attorneys general.”

EchoStar also released its quarterly results Thursday, posting a profit of $37 million, or 8 cents a share, contrasted with a loss of $6 million, or 1 cent, a year earlier. Revenue in the latest quarter rose 21% to $1.17 billion, compared with $966 million a year earelier.

On Thursday, EchoStar’s shares rose $1.64 to $17 on Nasdaq.