DISH Network Corp. (DISH)

Transcription

1 Americas/United States Equity Research Satellite Services Rating OUTPERFORM* Price (09 Aug 11, US$) Target price (US$) 34.00¹ 52-week price range Market cap. (US$ m) 10, Enterprise value (US$ m) 15, *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. Share price performance Daily Aug 10, Aug 09, 2011, 8/10/10 = US$18.37 Aug-10 Nov-10 Feb-11 May-11 Price Research Analysts Stefan Anninger stefan.anninger@credit-suisse.com Ashton Ngwena ashton.ngwena@credit-suisse.com Indexed S&P 500 INDEX On 08/09/11 the S&P 500 INDEX closed at Quarterly EPS Q1 Q2 Q3 Q4 2010A E E DISH Network Corp. (DISH) EARNINGS Gross Adds Light, But Good Churn Result, and Financials Solid: 2Q11 Review Another Victim of Pay TV Weakness: Like its pay TV peers, DISH reported weaker than expected video net adds in 2Q (-135k net adds vs. our -48k est and consensus (-33k), with lower than hoped gross adds, offsetting a solid churn result of 1.67%. It s Tough Out There: Every major public MCV operator has now reported its 2Q results, and it isn t pretty. We est the MCV category lost over 400k subs in 2Q11, and yielding what we believe is the largest qrtrly contraction of the pay TV universe ever. We suspect a collection of forces is hobbling sub growth slow occupied housing growth, unemployment, MCV maturity, and yes, pay TV alternatives, like Netflix. Gross Adds Light... : DISH s weaker than expected net adds of -135k, was driven by lower than expected gross adds (572k vs. our 676k net adds est), and partly the result of the co s strategy to spend less on mktng & promotions in 2Q. We suspect that other forces, like weak housing growth, unemployment, and aggressive retention policies by other cable/sat co. s also made it harder for DISH to drive connects.... But Churn Was Solid... : However, churn of 1.67% beat our 1.70% est. We believe that investments in core ops, incl customer svc, conditional access, and more stringent credit checks, are yielding favorable churn results for DISH. In our view, churn is perhaps the single most important metric by which DISH s core operational performance must be judged. And from this perspective, 2Q11 was a solid qrtr.... And Financials Were Strong: Financials were in line to better than expected. Sub-related rev of $3.311b was in line with our $3.307b est and growing by 5.4%, with strong ARPU growth of 6.9% (vs. our 6.5% est). Sub-related EBITDA of $959mm (Y/Y growth of 19.2%) was above our $950mm est. Changes to Est s: Given the lower than expected net adds results in 2Q11, we have trimmed our FY11 net adds est from 22k to -135k. In turn, our sub-related rev (excl Blockbuster) est has dropped modestly, but our new FY sub-related EBITDA est ($3.541b, excl Blockbuster) remains in line with our prior est given our lower est for expensed SAC; the result of our lower gross adds est. However, the higher interest associated with the May debt offering has trimmed our FY11 EPS by $0.01 to $3.46. Valuation: Trading at just 3.5x EV/2012E EBITDA (lowest among peers), & offering an FCF yield of ~14%, we view DISH shares as cheap. Our $34 TP implies that DISH can trade at a ~4.5x EV/EBITDA mult. on our 2012 EBITDA est. We maintain OP. Financial and valuation metrics Year 12/10A 12/11E 12/12E 12/13E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) 12, , , ,368.5 EBITDA (US$ m) 3, , , ,761.0 OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) 6,657 5,598 3,724 1,530 ROIC (%) Number of shares (m) IC (current, US$ m) 5, BV/share (Next Qtr., US$) EV/IC (x) Net debt (Next Qtr., US$ m) Dividend (Next Qtr., US$) Net debt/tot. cap. (Next Qtr., -2,988.4 Dividend yield (%) Source: Company data, Credit Suisse estimates. DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

2 2Q11 Review It s Rough Out There Like its pay TV peers, DISH reported weaker than expected 2Q11 video net adds (-135k net adds vs. our -48k est and consensus (-33k), with lower than estimated gross adds of 572k vs. our 676k estimate, offsetting a solid churn result of 1.67% (vs. our 1.70% est). Core Economics & Profitability Remain Intact... Financial results were solid, however with subscriber-related revenue (x-blockbuster) landing inline (growth of 5.4%) and core profitability intact. Subscriber-related expenses remain very much under control. On a year/year basis, subscriber-related EBITDA grew by nearly 17%, and 2Q11 pre-sac margins only compressed by 30bps--landing at 38%. We Remain Positive On DISH We continue to like DISH shares for several reasons: (1) Churn Should Continue to Stabilize: After two quarters of solid churn results, we look forward to continued stabilization of DISH churn, especially as a number of 1x events/issues that took place in 2010 (e.g., an equipment price increase in Feb 2010, which produced significant sticker shock for some subscribers, high pre-paid product churn, a major carriage dispute with fox) fade away. Additionally, as Investments in, and a focus on, core operations (e.g., customer service, installations, stricter credit policies, putting more sub on auto-pay, conversion to Nagravision 3, etc) should lead to more moderate churn, resulting in a sustainable subscriber turnaround. Finally, DISH will not take a price increase in While this will make it harder to grow revenue, it will have the benefit of keeping churn at more moderate levels. (2) Margins Should Stabilize: Sub-related expense growth will remain muted, as (i) reinvestment spending in core operations continues to taper off, and (ii) upgrade and retention spending remains targeted allowing for pre-sac margins to stabilize. We have already seen some of this come into view with the pre-sac margin expansion seen in 2010, and stability in (3) Spectrum Optionality & Value: We like Ergen s spectrum investments strategy as we believe it gives him optionality. Ergen could (a) re-sell the spectrum to an interested party on his own or through an incentive auction with the FCC, (b) trade the spectrum (e.g., for access to an LTE/WiMax network), (c) find his DBS & spectrum assets the target of an acquisition bid by another company (e.g., AT&T or CenturyTel), or (d) he could launch his own wireless broadband service. We are not that concerned about a wireless network buildout. We think it unlikely that Ergen would put his core video business (DISH) at risk to build out a multi-billion dollar network using DISH s balance sheet. We would not expect a clearer picture of what strategy DISH will pursue with its spectrum until (4) A Better 2H11: Comments from today s call give us confidence that DISH can grow subscribers in the back half. Management highlighted that they plan to step up advertising campaigns starting in 3Q and by 4Q. A new advertising agency will help rebrand the product an idea that we support wholeheartedly. We believe this should help attract new subscribers to DISH and help to fend off increasing promotional competition amongst pay TV providers. (5) New CEO Should Bring More Communication w/ Wall St: Today s conference call gave us hope that DISH may be more communicative and open with Wall St going forward. We view today s call as a positive sign, as investors will get a clear and more transparent picture of where the company is heading. DISH Network Corp. (DISH) 2

3 (6) Valuation Too Cheap To Ignore: DISH has clearly been a victim of the recent blood bath in the equity markets and is by far the cheapest stock in our universe. Trading at an EV/2012E EBITDA multiple of just 3.5x (without stripping out the value of any spectrum assets), and offering a FCF yield of nearly 14% on our 2011 FCF estimate (excluding the impact of the tax stimulus packages and the Tivo litigation payment), DISH is significantly undervalued in our view. Near Term Risks for DISH The Pay TV Universe Is Struggling: Every major public MCV operator has now reported its 2Q11 results, and it isn t pretty. By our estimates, the MCV category lost over ~400k+ subs in 2Q11 (see Exhibit 1), outpacing our previously lowered est of - 327k net adds, and yielding what we believe is the largest quarterly contraction of the pay TV universe ever. We suspect that a collection of forces is hobbling pay TV sub growth occupied housing growth, unemployment, MCV maturity.. and yes... pay TV alternatives, like Netflix. We expect DISH to be able to improve its subscriber performance, given stabilizing churn, better marketing, and a more focused approach to subscriber acquisition and retention, but it will not be easy and the ride could be bumpy. Exhibit 1: The Multichannel Video Universe (By Operator/Platform), Q11 A / E Q10 2Q10 3Q10 4Q Q11 2Q11E Comcast 23,559 23,477 23,212 22,937 22,802 22,802 22,763 22,525 Time Warner 12,859 12,817 12,706 12,551 12,422 12,422 12,357 12,235 Charter 4,824 4,801 4,717 4,653 4,520 4,520 4,497 4,413 Cablevision 3,063 3,064 3,067 3,043 3,314 3,314 3,306 3,283 Mediacom 1,238 1,234 1,216 1,203 1,193 1,193 1,185 1,158 Insight Cable One Other cable 15,151 15,019 14,809 14,614 14,244 14,244 14,184 14,020 Total Cable 62,079 61,801 61,091 60,350 59,836 59,836 59,632 58,944 DirecTV 18,560 18,660 18,760 18,934 19,223 19,223 19,407 19,433 DISH 14,100 14,337 14,318 14,289 14,133 14,133 14,191 14,056 Total DBS 32,660 32,997 33,078 33,223 33,356 33,356 33,598 33,489 FiOS 2,861 3,029 3,203 3,290 3,472 3,472 3,664 3,848 U-Verse 2,064 2,295 2,504 2,739 2,985 2,985 3,205 3,407 Other Telco Total Telco 5,137 5,559 5,973 6,450 6,908 6,908 7,336 7,732 Other MCV Total MCV Subs 100, , , , , , , ,849 Y/Y % Growth 1.8% 1.5% 0.9% 0.4% 0.2% 0.1% 0.1% 0.0% Cable Net Adds (1,589) (278) (710) (741) (526) (2,255) (204) (688) DBS Net Adds 1, (109) Telco Net Adds 2, , Other Net Adds (69) (19) (19) (19) (19) (77) (19) (14) Total MCV Net Adds 1, (234) (139) (415) Total US HHs 119, ,378 MCV Penetration of HHs 84.2% 83.7% Source: Company data, Credit Suisse estimates, SNL Kagan, Company data, and Credit Suisse estimates. Data does not account for overlap between DBS and cable subs. HH data include occasional Use, URE (usual residence elsewhere), and seasonal housing units. Other MCV HH includes C-band, MMDS and other forms of multichannel video delivery. Data is PF for acquisitions/dispositions. ARPU Growth in 2012 Will Be Harder: Price increases are the easiest way to juice ARPU and in turn revenue growth. Without a price increase coming in 2012 (part of DISH s commitment to its sub base when it took a price increase in 2011), healthy revenue growth will be harder to achieve. DISH Network Corp. (DISH) 3

4 Investments Remain A Question Mark: In general, we like DISH s pursuit of relatively low-priced assets (e.g., DBSD, Blockbuster) that have the potential to offer its business strategic options. We especially like the fact that DISH appears to be aware of the risks that its core video business faces, and is actively trying to reduce those risks. However there is always the concern that DISH might divert attention from the core business and wind up investing large sums of money in losing businesses. Gross Adds Light, But Churn Continues to Surprises to the Upside Gross Adds Were Lighter Than Our Expectations (572k actual vs. 676k est)... Gross adds of 572k were lower than our 676k estimate and consensus of 677k. (1) A Difficult Economic Environment The current state of the economy has made it difficult for all pay TV providers, including DISH, to generate new sub growth. Slow growth in occupied homes, unemployment, and general consumer cautiousness is bringing fewer gross to the pay TV category. We also believe that some level of pay TV substitution is going on it is not clear to us that many subs are deliberately leaving for alternatives, but we suspect that cord nevers (young adults moving into new homes that simply never become pay TV customers in the first place) are an increasing problem for all Pay TV players. (2) Intense Competitive Environment DISH faced increased competition in the space as MSOs were battling to attract the fewer subscribers wanting to get TV service. Aggressive promotional offers from competitors like DTV, continued to weigh on gross additions. (3) Very little marketing DISH intentionally withdrew advertising dollars in a seasonally weak 2Q and only spending $68mm on acquisition marketing (the lowest quarterly spend on advertising in 24 months), with the plan to reinvest these dollars in the back half of 2011 where there is more potential for sub growth.... but churn was better than our expectations Monthly churn amounted to 1.67% vs. 1.78% in 2Q10, better than our estimate for churn of 1.70% and right on with consensus of 1.67%. The reduced churn was likely the result of increased retention spend and a focus on core operations, incl customer service, conditional access/piracy, more stringent credit checks which have led to a higher quality subscriber base, and auto-pay. Net Adds Below Our Estimate... however, net adds were lighter than we expected (-135k actual vs. -48k est) primarily because of the lower than expected gross additions. 2Q11 Financials Are Solid Total Revenue: Total Revenue of $3.590b up (13.3% year over year) landed ahead of our $3.330b estimate, but included ~$255 million of Blockbuster revenue (approximately 2 months of Blockbuster revenue). DISH did not provide PF results for 2Q10, so we were unable to compare 2Q11 total revenue on an apples to apples basis versus 2Q10 total revenue. Subscriber-related Revenue & ARPU: Subscriber-related revenue, which does exclude Blockbuster, and some other small revenue sources, was inline with our estimate, and landed at $3.311b vs our $3.307b estimate, and was driven by strong Y/Y ARPU growth of 6.9% (ARPU=$78.06) vs. our estimate of 6.5% (ARPU =$77.80). This sizable price increase taken by DISH in February, as well as last year s programming price increase in June, both helped to push boost ARPU growth. DISH Network Corp. (DISH) 4

5 Subscriber-Related Expense Growth Not Worrisome Sub-related expenses grew 6.4% on a per sub basis, and ahead of our estimate for growth of 4.1% on a per sub basis. We had expected sub-related expenses to land at $1,697mm; actual subscriber-related expenses landed right in line at $1,729. The increase was driven by two factors: (1) The difficult 2Q10 comp, when retention spending was kept at an intentionally and abnormally low in favor of spending on the company s HD Free for Life promotion. (2) Contractual programming cost increases Over time we continue to believe that sub-related expense growth will remain moderate as (1) investments in core operations made in prior periods continue to glean costs efficiencies and (2) as targeted retention programs, prevents sub-related expense growth from ballooning. Subscriber-Related Expenses Soften pre-sac Results Pre-SAC income missed our $1,310 million expectation by ~3.9%, and totaled $1,258 million vs. $1,204 million in 2Q10, and was driven by the higher than expected sub-related expense growth. Despite this, pre-sac margin of ~38.0% (vs. 38.3% in 2Q10), was 1.6% lower than our 2Q11 estimate of 39.6%, as higher than expected subscriber-related expenses and retention capex compressed pre-sac margins. SAC In Line With Our Estimate Total expensed acquisition costs were slightly lower than our estimates, but 2Q11 cash SAC per gross add landed in line as capitalized equipment per gross add landed below expectations (capitalized equipment per gross add of $196/gross add vs. our $224/gross add est) offset by higher than expected expensed SAC per gross add of $599 mm vs our $572 million estimate. Total, cash SAC per gross add of $795 mm rose by 7.0% year over year and landed in line with our $796 mm forecast (growth of 7.1%). Subscriber-related EBITDA In Line Total EBITDA of $979 (Y/Y growth of 16.8%) came in higher than our $950mm expectation (growth of 15.9%) but included an estimated $26mm of Blockbuster EBITDA. DISH did not provide PF results for 2Q10, so we were unable to compare 2Q11 EBITDA on an apples to apples basis versus 2Q10 EBITDA. However, subscriber-related EBITDA (which excludes Blockbuster EBITDA) landed at an estimated $959mm in 2Q11, and just above our previous $950mm estimate. DISH Network Corp. (DISH) 5

6 Exhibit 2: DISH 2Q11 Results 2Q11A 2Q11E 2Q10A 1Q11A Financial Estimates Total Revenue $3,590* $3,330 $3,169* $3,224 % Growth (Y-O-Y) 13.3% 5.1% 9.1% 5.5% Total EBITDA $979** $951 $821** $872 % Growth (Y-O-Y) 19.2% 15.9% 26.3% 20.0% EBITDA Margin 27.3% 28.6% 25.9% 27.1% Subscriber-related Revenue $3,311 $3,307 $3,141 $3,199 % Growth (Y-O-Y) 5.4% 5.3% 9.1% 5.4% Subscriber-related EBITDA $959*** $950 $825 $880 % Growth (Y-O-Y) 16.2% 29% 26.3% 28% EBITDA Margin DBS Business Pre-SAC Income $1,258 $1,310 $1,204 $1,141 Pre-SAC Margin 38.0% 39.6% 38.3% 35.7% Total Subscribers 14,056 14,143 14,318 14,191 Gross Additions Net Additions Churn 1.67% 1.70% 1.78% 1.47% ARPU $78.06 $77.80 $73.05 $75.39 % Growth 6.9% 6.5% 3.3% 5.91% SAC ($) $795 $796 $743 $725 % Growth (Y-O-Y) 7.0% 7.1% 4.9% -2.1% CAPEX $170 $247 $320 $233 EPS ($) $0.75 $0.84 $0.57 $1.24 Source: Company data, Credit Suisse estimates. EBITDA figures exclude impact of litigation accruals. *2Q11 total revenue includes Blockbuster revenue. Note that 2Q10 total revenue is NOT PF for the Blockbuster acquisition and therefore the total revenue growth rate for the 2Q11 is not an accurate indicator of recurring revenue growth. **Total EBITDA includes the results of Blockbuster. However, 2Q10 EBITDA is NOT PF for the Blockbuster acquisition and therefore the total EBITDA agrowth rate for the quarter is not an accurate indicator of recurring EBITDA growth. *** Subscriber-related EBITDA for 2Q11 is estimated. The Balance Sheet, Leverage & Paying for Terrestar DISH finished 2Q11 with $4.6b of cash (and marketable securities) on its books, and a leverage ratio of just 1.1x net debt to LTM EBITDA. During the quarter, DISH issued $2b worth of 6 ¾% notes and we have updated our debt schedule to include the offering. DISH finished 2Q11, with nearly ~$4.6 in cash/marketable securities, and we expect DISH to fund the purchase of the Terrestar asset, which should cost $1.4, using cash. Although the timing of the closing of the Terrestar deal depends on FCC approval, DISH expects to pay ~$1.4b for the Terrestar assets in 3Q11, and the asset will be reflected on DISH s balance sheet at that point Estimates Changes We are reducing our FY 2011 subscriber estimates for DISH. We have also made changes to our full year financial estimates. We note that our new model includes the impact of the Blockbuster acquisition. For the sake of better comparability, our discussion below only refers to subscriber-related revenue and EBITDA, which exclude the impact of the Blockbuster acquisition. For DISH Network Corp. (DISH) 6

7 greater detail on the inclusion of Blockbuster in our new estimates, please the footnotes below Exhibit 3. Gross Adds, Churn & Net Adds: We have reduced our subscriber forecast for the full year to reflect the lower than expected gross adds result seen in 2Q11. We have trimmed our FY gross adds estimate to 2.659mm (down from 2.862mm), but have also trimmed our FY churn estimate from 1.67% to 1.66%. We now anticipate 2011 FY net adds of -138k vs. +22k previously. ARPU & Revenue: We have left our FY 2011 ARPU growth estimate almost unchanged at 6.0%. Our lower net adds estimate results in a new full year subscriber-related revenue estimate that is slightly lower than our previous estimate (new est. of $13.123billion vs. $13.165b previously. We now anticipate FY 2011 subscriber-related revenue growth of 4.6% (vs. 5.0% previously). EBITDA: Despite the lower revenue estimate, our full year subscriber-related EBITDA estimate for 2011 remains virtually unchanged at $3.541 billion (growth of 13.1%), given our lower expensed SAC estimate driven by our lower gross adds estimate. Our subscriber-related EBITDA estimate implies a FY2011E EBITDA margin of 27.0%, virtually unchanged vs. our previous forecast. Our pre-sac margin estimate now lands at 36.7%, lower than our previous estimate given the slightly higher than expected subscriber-related expenses in 2Q. Capex: Our capital expenditures forecast for 2011 has decreased from $1.148b to $929b, as our lower FY gross adds estimate has reduced our capitalized equipment estimate. We have also reduced our FY other capex est, given the modest year to date spending in the this line item. Free Cash Flow: With our slightly higher EBITDA estimate, and our lower capex estimate, we have raised our FY 2011E FCF of est. from $1,278mm to $1,426mm, excluding the impact of the Tivo litigation payment of $290mm, and excluding our estimate for the full year impact of the tax stimulus packages. See Exhibit 3 for a summary of our full year estimate changes. DISH Network Corp. (DISH) 7

8 Exhibit 3: New vs. Old DISH FY 2011 Estimates US$ in millions, and subscriber data in 000s, unless otherwise stated. New FY 2011 Old FY 2011 CS Est. CS Est. Total Revenue $14,203 $13,262 % Growth (Y-O-Y) 12.4% 4.9% Total EBITDA $3,617 $3,533 % Growth (Y-O-Y) 14.8% 12.2% EBITDA Margin (%) 25.5% 26.6% Subscriber-related Revenue $13,123 $13,165 % Growth (Y-O-Y) 4.6% 5.0% Subscriber-related EBITDA $3,541 $3,538 % Growth (Y-O-Y) 13.1% 13.0% EBITDA Margin (%) 27.0% 26.9% DBS Business Pre-SAC Income $4,812 $4,911 Pre-SAC Margin 36.7% 37.3% Total Subscribers 13,995 14,155 Gross Additions 2,659 2,862 Net Additions Churn 1.66% 1.67% ARPU $77.76 $77.57 % Growth (Y-O-Y) 6.1% 5.8% SAC $780 $794 % Growth (Y-O-Y) 0.5% 2.3% Capex $873 $1,148 FCF $1,737 $988 % Growth (Y-O-Y) 88.1% 6.9% - Tax benefit from Stim Packages $545 $0 + Est. Tivo Litigation Payment $290 $290 FCF Excluding Tivo litigation $1,482 $1,278 % Growth (Y-O-Y) EPS $3.46 $3.47 Source: Company data, Credit Suisse estimates. EBITDA figures exclude impact of litigation accruals. *Our new Total Revenue includes Blockbuster Revenue, while previous revenue estimate did not. Note that the 2011 total revenue growth associated with our new estimate is not an accurate indicator of recurring revenue growth as the 2010 base is not PF for Blockbuster. **Our new total 2011 EBITDA estimate includes the results of Blockbuster. Note that the 2010 total EBITDA growth rate associated with our new estimate is not an accurate indicator of recurring EBITDA growth as the 2010 base is not PF for Blockbuster. DISH Network Corp. (DISH) 8

9 Companies Mentioned (Price as of 09 Aug 11) AT&T (T, $28.85, RESTRICTED) CableOne (CableOne) Cablevision Systems Corp. (CVC, $17.02) Charter Communications (CHTR, $45.19) Comcast (CMCSA, $20.71, NEUTRAL, TP $28.00) DISH Network Corp. (DISH, $22.58, OUTPERFORM, TP $34.00) Insight Communications (Insight) Mediacomm Communications (Mediacom) The Directv Group Inc (DTV, $43.44, NEUTRAL, TP $53.00) Time Warner Cable (TWC, $65.44, OUTPERFORM, TP $92.00) Verizon (VZ, $34.29, NEUTRAL, TP $33.00) Disclosure Appendix Important Global Disclosures I, Stefan Anninger, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for DISH DISH Closing Target Price Price Initiation/ 33 Date (US$) (US$) Rating Assumption 10/27/ N X 28 8/4/ O 3/1/ /19/10 X 2/25/ /3/ N 13 US$ 27-Oct O Oct-10 8/9/08 10/9/08 12/9/08 2/9/09 4/9/09 6/9/09 8/9/09 10/9/09 12/9/0 9 2/9/10 4/9/10 6/9/10 8/9/10 10/9/10 12/9/10 2/9/11 4/9/11 6/9/11 Closing Price Target Price Initiation/Assumption Rating O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts stock ratings are defined as follows: Outperform (O): The stock s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29 th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock s absolute total return potential to its current share price and (2) the relative attractiveness of a stock s total return potential within an analyst s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-japan Asia stocks, ratings are based on a stock s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the % and % levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances DISH Network Corp. (DISH) 9

10 Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts coverage universe weightings are distinct from analysts stock ratings and are based on the expected performance of an analyst s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 48% (61% banking clients) Neutral/Hold* 40% (57% banking clients) Underperform/Sell* 10% (51% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors. Credit Suisse s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (DISH) Method: We used the discounted cash flow (DCF) method to calculate our $34 target price for DISH. Our 5-year DCF uses a 1.5% terminal growth rate and a 9-10%WACC, or weighted average cost of capital. Risks: Risks to our $34 target price for DISH are (1) a lack of a turnaround in business fundamentals (caused by competiition from direct competitors or substitute products, and internal operational problems), including continued high churn and slowing ARPU (average revenue per user) growth; (2) faster-than-expected expense growth (e.g., marketing, programming), which would lower margin expansion potential; (3) investments in new businesses (e.g., Blockbuster and a wireless HSD data network) that destroy value, (4) competition from Internet-based video delivery services Please refer to the firm's disclosure website at for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names. The subject company (DISH) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided non-investment banking services, which may include Sales and Trading services, to the subject company (DISH) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (DISH) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (DISH) within the past 12 months. As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company (DISH). Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (DISH) within the past 12 months. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. DISH Network Corp. (DISH) 10

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