Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx [X] Noo [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yesx [X] Noo [ ]

As of ~~August 8, 2003,~~July 30, 2004, the Registrant’s outstanding common stock consisted of ~~245,815,642~~215,857,912 shares of Class A Common Stock and 238,435,208 Shares of Class B Common Stock.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 throughout this document. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we “believe,” “intend,” “plan,” “estimate,” “expect” or “anticipate” will occur and other similar statements), you must remember that our expectations may not be correct, even though we believe they are reasonable. We do not guarantee that ~~the~~any future transactions ~~and~~or events described ~~in this document~~herein will happen as described or that they will happen at all. You should read this document completely and with the understanding that actual future results may be materially different from what we expect. Whether actual events or results will conform with our expectations and predictions is subject to a number of risks and uncertainties. ~~These~~The risks and uncertainties include, but are not limited to, the following:

• we face intense and increasing competition from the satellite and cable television industry; new competitors may enter the subscription television business, and new technologies may increase competition;

• DISH Network subscriber growth may decrease, subscriber turnover may increase and subscriber acquisition costs may increase;

• satellite programming signals have been pirated and ~~could~~will continue to be pirated in the future; pirating could cause us to lose subscribers and revenue, orand result in higher costs to us;

• programming costs may increase beyond our current expectations; we may be unable to obtain or renew programming agreements on acceptable terms or at all; existing programming agreements could be subject to cancellation;

• weakness in the global or U.S. economy may harm our business generally, and adverse local political or economic developments may occur in some of our markets;

• the regulations governing our industry may change;
• new provisions of the Satellite Home Viewer Improvement Act may force us to stop offering local channels in certain markets or incur additional costs to continue offering local channels in certain markets;
• our satellite launches may be delayed or fail, or our satellites may fail in orbit prior to the end of their scheduled lives, which could result in extended interruptions of some of the channels we offer;
• we currently do not have traditional commercial insurance covering losses incurred from the failure of satellite launches and/or ~~in orbit~~in-orbit satellites and we may be unable to settle outstanding claims with insurers;

• ~~the regulations governing our industry may change;~~
• ~~our satellite launches may be delayed or fail and our satellites may fail prematurely in orbit;~~
• service interruptions arising from technical anomalies on satellites or ~~on ground~~on-ground components of our DBS system, or caused by war, terrorist activities or natural disasters, may cause customer cancellations or otherwise harm our business;

• we may be unable to obtain needed retransmission consents, ~~FCC~~Federal Communications Commission (“FCC”) authorizations or export ~~licenses;~~licenses, and we may lose our current or future authorizations;

• we are party to various lawsuits which, if adversely decided, could have a significant adverse impact on our business;

• we may be unable to obtain patent licenses from holders of intellectual property or redesign our products to avoid patent infringement;

• sales of digital equipment and related services to international direct-to-home service providers may decrease;

• we are highly leveraged and subject to numerous constraints on our ability to raise additional debt;

• ~~future~~ acquisitions, business combinations, strategic partnerships, divestitures and ~~divestitures~~other significant transactions may involve additional uncertainties;

• ~~the September 11, 2001~~ terrorist attacks, ~~consequences of the war in Iraq, and~~ the possibility of war or ~~hostilities relating to~~ other ~~countries,~~hostilities, and changes in ~~international~~ political and economic conditions as a result of these events may continue to affect the U.S. and the global economy and may increase other risks; and

• we may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange ~~Commission.~~Commission (“SEC”).

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

As of

December 31, June 30,
2002 2003

Assets

Current Assets:
Cash and cash equivalents $ 1,483,078 $ 1,151,967
Marketable investment securities 1,203,917 1,521,280
Trade accounts receivable, net of allowance for uncollectible accounts of $27,649 and $24,262, respectively 329,020 325,133
Insurance receivable 106,000 106,000
Inventories 150,290 151,816
Other current assets 47,212 59,661

Total current assets 3,319,517 3,315,857
Restricted cash 9,972 9,982
Cash reserved for satellite insurance 151,372 135,222
Property and equipment, net 1,974,516 1,924,352
FCC authorizations, net 696,409 696,409
Other noncurrent assets 108,799 151,171

Total assets $ 6,260,585 $ 6,232,993

Liabilities and Stockholders’ Deficit

Current Liabilities:
Trade accounts payable $ 264,813 $ 321,503
Deferred revenue 443,757 477,313
Accrued expenses 923,217 894,456
Current portion of long-term obligations 13,432 13,501

Total current liabilities 1,645,219 1,706,773

Long-term obligations, net of current portion:
9 1/4% Seven Year Notes (Note 7) 375,000 —
9 3/8% Ten Year Notes 1,625,000 1,625,000
10 3/8% Seven Year Notes 1,000,000 1,000,000
9 1/8% Seven Year Notes 700,000 700,000
4 7/8% Convertible Notes 1,000,000 1,000,000
5 3/4% Convertible Notes 1,000,000 1,000,000
Mortgages and other notes payable, net of current portion 33,621 33,964
Long-term deferred distribution and carriage payments and other long-term liabilities 87,383 96,728

Total long-term obligations, net of current portion 5,821,004 5,455,692

Total liabilities 7,466,223 7,162,465
Commitments and Contingencies (Note 8)
Stockholders’ Deficit:
Class A Common Stock, $.01 par value, 1,600,000,000 shares authorized, 242,539,709 and 245,743,730 shares issued and outstanding, respectively 2,425 2,458
Class B Common Stock, $.01 par value, 800,000,000 shares authorized, 238,435,208 shares issued and outstanding 2,384 2,384
Class C Common Stock, $.01 par value, 800,000,000 shares authorized, none outstanding — —
Additional paid-in capital 1,706,731 1,732,831
Non-cash, stock-based compensation (8,657 ) (4,662 )
Accumulated other comprehensive income 6,197 65,525
Accumulated deficit (2,914,718 ) (2,728,008 )

Total stockholders’ deficit (1,205,638 ) (929,472 )

Total liabilities and stockholders’ deficit $ 6,260,585 $ 6,232,993


	As of
	June 30,			December 31,
	2004			2003
Assets
Current Assets:
Cash and cash equivalents	$	688,857		$	1,290,859
Marketable investment securities		1,029,383			2,682,115
Trade accounts receivable, net of allowance for uncollectible accounts of $9,095 and $12,185, respectively		451,610			345,673
Inventories		333,885			155,147
Other current assets		144,351			99,321

Total current assets		2,648,086			4,573,115
Restricted cash and marketable investment securities		30,520			19,974
Cash reserved for satellite insurance		107,143			176,843
Property and equipment, net		1,957,956			1,876,459
FCC authorizations		696,409			696,409
Insurance receivable		106,000			106,000
Other noncurrent assets (Note 6)		491,162			136,218

Total assets	$	6,037,276		$	7,585,018

Liabilities and Stockholders’ Deficit
Current Liabilities:
Trade accounts payable	$	248,572		$	173,637
Deferred revenue and other		699,103			514,831
Accrued programming		610,440			366,497
Other accrued expenses		437,045			478,973
Current portion of long-term obligations		14,230			14,995
9 3/8% Senior Notes due 2009 (Note 7)		—			1,423,351

Total current liabilities		2,009,390			2,972,284

Long-term obligations, net of current portion:
10 3/8% Senior Notes due 2007		1,000,000			1,000,000
5 3/4% Convertible Subordinated Notes due 2008		1,000,000			1,000,000
9 1/8% Senior Notes due 2009 (Note 7)		446,153			455,000
3% Convertible Subordinated Notes due 2010		500,000			500,000
Floating Rate Senior Notes due 2008		500,000			500,000
5 3/4% Senior Notes due 2008		1,000,000			1,000,000
6 3/8% Senior Notes due 2011		1,000,000			1,000,000
Mortgages and other notes payable, net of current portion		42,165			44,327
Long-term deferred revenue, distribution and carriage payments and other long-term liabilities (Note 6)		279,400			145,931

Total long-term obligations, net of current portion		5,767,718			5,645,258

Total liabilities		7,777,108			8,617,542

Commitments and Contingencies (Note 8)
Stockholders’ Deficit:
Class A Common Stock, $.01 par value, 1,600,000,000 shares authorized, 247,553,887 and 246,285,633 shares issued, 218,692,729 and 240,370,533 shares outstanding, respectively		2,476			2,463
Class B Common Stock, $.01 par value, 800,000,000 shares authorized, 238,435,208 shares issued and outstanding		2,384			2,384
Class C Common Stock, $.01 par value, 800,000,000 shares authorized, none issued and outstanding		—			—
Additional paid-in capital		1,755,961			1,733,805
Non-cash, stock-based compensation		—			(1,180	)
Accumulated other comprehensive income		30,369			80,991
Accumulated deficit		(2,618,166	)		(2,660,596	)
Treasury stock, at cost		(912,856	)		(190,391	)

Total stockholders’ deficit		(1,739,832	)		(1,032,524	)

Total liabilities and stockholders’ deficit	$	6,037,276		$	7,585,018

The accompanying notes are an integral part of the condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

Revenue:

Subscription television services $ 1,071,845 $ 1,340,601 $ 2,087,902 $ 2,630,712
Other subscriber-related revenue 7,843 2,440 10,670 5,474
DTH equipment sales 68,140 50,761 125,190 91,542
Other 20,856 20,765 49,390 45,887

Total revenue 1,168,684 1,414,567 2,273,152 2,773,615
Costs and Expenses:

Subscriber-related expenses (exclusive of depreciation shown below — Note 9) 542,454 654,699 1,052,355 1,287,525
Satellite and transmission expenses (exclusive of depreciation shown below — Note 9) 15,150 16,315 28,637 32,341
Cost of sales — DTH equipment 44,103 33,484 83,479 61,355
Cost of sales — other 9,969 12,204 26,170 25,059
Cost of sales — subscriber promotion subsidies (exclusive of depreciation shown below — Note 9) 80,767 96,884 181,702 220,882
Other subscriber promotion subsidies 138,002 148,892 271,372 299,529
Subscriber acquisition advertising 31,407 39,925 65,128 73,477
General and administrative 70,254 89,089 149,249 171,469
Non-cash, stock-based compensation 2,169 (217 ) 3,835 1,772
Depreciation and amortization (Note 9) 87,981 100,299 169,518 198,465

Total costs and expenses 1,022,256 1,191,574 2,031,445 2,371,874

Operating income 146,428 222,993 241,707 401,741
Other Income (Expense):
Interest income 29,336 14,959 59,139 30,475
Interest expense, net of amounts capitalized (116,272 ) (107,715 ) (245,515 ) (238,216 )
Change in valuation of contingent value rights (8,839 ) — (5,378 ) —
Other (3,358 ) 1,713 (37,580 ) 1,099

Total other income (expense) (99,133 ) (91,043 ) (229,334 ) (206,642 )

Income before income taxes 47,295 131,950 12,373 195,099
Income tax provision, net (10,294 ) (3,157 ) (10,519 ) (8,389 )

Net income 37,001 128,793 1,854 186,710
Accretion of Series D Convertible Preferred Stock — — (61,860 ) —

Numerator for basic and diluted income (loss) per share — income (loss) available (attributable) to common shareholders $ 37,001 $ 128,793 $ (60,006 ) $ 186,710

Denominator for basic income (loss) per share — weighted-average common shares outstanding 480,405 483,372 480,070 482,241

Denominator for diluted income (loss) per share — weighted-average common shares outstanding 544,130 488,385 480,070 487,557

Net income (loss) per common share:
Basic net income (loss) $ 0.08 $ 0.27 $ (0.12 ) $ 0.39

Diluted net income (loss) $ 0.07 $ 0.26 $ (0.12 ) $ 0.38

The accompanying notes are an integral part of the condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

For the Six Months
Ended June 30,

2002 2003

Cash Flows From Operating Activities:

Net income $ 1,854 $ 186,710
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 169,518 198,465
Equity in losses (earnings) of affiliates 8,012 (111 )
Change in valuation of contingent value rights 5,378 —
Realized and unrealized loss on investments 26,408 38
Non-cash, stock-based compensation recognized 3,835 1,772
Deferred tax expense (benefit) 5,454 (2,371 )
Recognition of bridge commitment fees from reduction of bridge financing commitments 14,864 —
Amortization of debt discount and deferred financing costs 5,883 8,036
Change in long-term assets — (51,333 )
Change in long-term deferred distribution and carriage payments and other long-term liabilities 16,656 (2,872 )
Other, net (783 ) 4,863
Changes in current assets and current liabilities, net 109,780 90,065

Net cash flows from operating activities 366,859 433,262
Cash Flows From Investing Activities:

Purchases of marketable investment securities (2,775,555 ) (2,121,902 )
Sales of marketable investment securities 2,556,074 1,858,783
Purchases of property and equipment (244,585 ) (157,289 )
Cash reserved for satellite insurance (59,680 ) —
Change in cash reserved for satellite insurance due to depreciation on related satellites 14,226 16,140
Capitalized merger-related costs (10,645 ) —
Other (892 ) 780

Net cash flows from investing activities (521,057 ) (403,488 )
Cash Flows From Financing Activities:

Net proceeds from issuance of Series D Convertible Preferred Stock 1,483,477 —
Redemption of 9 1/4% Senior Notes (Note 7) — (375,000 )
Repayments of mortgage indebtedness and notes payable (447 ) (1,089 )
Net proceeds from Class A Common Stock options exercised and Class A Common Stock issued to Employee Stock Purchase Plan 6,711 15,204
Other (221 ) —

Net cash flows from financing activities 1,489,520 (360,885 )

Net increase (decrease) in cash and cash equivalents 1,335,322 (331,111 )
Cash and cash equivalents, beginning of period 1,677,889 1,483,078

Cash and cash equivalents, end of period $ 3,013,211 $ 1,151,967

Supplemental Disclosure of Cash Flow Information:

Forfeitures of deferred non-cash, stock-based compensation $ 5,520 $ 2,394

Capitalized interest $ 14,838 $ 4,591

Satellite vendor financing $ 15,000 $ —


	For the Six Months
	Ended June 30,
	2004			2003
Cash Flows From Operating Activities:
Net income (loss)	$	42,430		$	186,710
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization		224,539			198,465
Equity in losses (earnings) of affiliates		(631	)		(111	)
Realized and unrealized losses (gains) on investments		8,452			38
Non-cash, stock-based compensation recognized		1,180			1,772
Deferred tax expense (benefit)		3,822			(2,371	)
Amortization of debt discount and deferred financing costs		14,759			8,036
Change in long-term assets		(44,525	)		(51,333	)
Change in long-term deferred revenue, distribution and carriage payments and other long-term liabilities		68,311			(2,872	)
Other, net		7,165			4,863
Changes in current assets and current liabilities, net		145,759			90,065

Net cash flows from operating activities		471,261			433,262

Cash Flows From Investing Activities:
Purchases of marketable investment securities		(1,527,095	)		(2,121,902	)
Sales of marketable investment securities		3,103,974			1,858,783
Purchases of property and equipment		(322,022	)		(157,289	)
Change in restricted cash and marketable investment securities and cash reserved for satellite insurance (Note 5)		69,680			16,140
Asset acquisition (Note 6)		(236,610	)		—
FCC auction deposits (Note 6)		(26,684	)		—
Other		(2,589	)		780

Net cash flows from investing activities		1,058,654			(403,488	)

Cash Flows From Financing Activities:
Redemption of 9 1/4% Senior Notes due 2006		—			(375,000	)
Redemption of 9 3/8% Senior Notes due 2009 (Note 7)		(1,423,351	)		—
Repurchase of 9 1/8% Senior Notes due 2009 (Note 7)		(8,847	)		—
Class A Common Stock repurchases		(702,977	)		—
Repayment of mortgages and other notes payable		(2,926	)		(1,089	)
Net proceeds from Class A Common Stock options exercised and Class A Common Stock issued to Employee Stock Purchase Plan		6,184			15,204

Net cash flows from financing activities		(2,131,917	)		(360,885	)

Net increase (decrease) in cash and cash equivalents		(602,002	)		(331,111	)
Cash and cash equivalents, beginning of period		1,290,859			1,483,078

Cash and cash equivalents, end of period	$	688,857		$	1,151,967

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	248,483		$	233,812

Capitalized interest	$	1,006		$	4,591

Cash received for interest	$	36,343		$	32,800

Cash paid for income taxes	$	4,423		$	5,717

Assumption of net operating liabilities in asset acquisition (Note 6)	$	27,685		$	—

Assumption of liabilities and long-term deferred revenue (Note 6)	$	72,357		$	—

Liability assumed in Class A Common Stock repurchases	$	19,488		$	—

Forfeitures of deferred non-cash, stock-based compensation	$	—		$	2,394

The accompanying notes are an integral part of the condensed consolidated financial statements.

~~The operations of~~

EchoStar Communications Corporation (“~~ECC,” and~~ECC”) is a holding company. Its subsidiaries (which together with ~~its subsidiaries, “EchoStar,”~~ECC are referred to as “EchoStar”, the ~~“Company,” “we,” “us,”~~“Company” “we”, “us”, and/or “our”) ~~include~~operate two interrelated business units:

	•		The DISH ~~Network~~Networ —k – which provides a direct broadcast satellite subscription television service in the United States, which we refer to as “DBS” ~~in the United States;~~; and

	•		EchoStar Technologies Corporation(“ETC”) —– which designs and develops DBS set-top boxes, antennae and other digital equipment for the DISH Network. We refer to this equipment collectively as “EchoStar receiver systems.” ETC also designs, develops and distributes similar equipment for international satellite service providers.

Since 1994, we have deployed substantial resources to develop the “EchoStar DBS System.” The EchoStar DBS System consists of our FCC-allocated DBS spectrum, ~~nine in-orbit~~our owned and leased satellites, ~~(“EchoStar I” through “EchoStar IX”),~~ EchoStar receiver systems, digital broadcast operations centers, customer service facilities, and certain other assets utilized in our operations. Our principal business strategy is to continue developing our subscription television service in the United States to provide consumers with a fully competitive alternative to cable television service.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted ~~accounting principles~~in the United States (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and ~~disclosures~~notes required ~~by generally accepted accounting principles~~ for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. ~~All significant intercompany accounts and transactions have been eliminated in consolidation.~~ Operating results for the six months ended June 30, ~~2003~~2004 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2003.~~2004. For further information, refer to the consolidated financial statements and ~~disclosures~~notes thereto included in ~~EchoStar’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2002. Certain~~2003 (“2003 10-K”). The results of operations for the three and six months ended June 2004 include a charge of approximately $13.0 million to establish a reserve for estimated “Subscriber-related expenses” relating to prior ~~year~~periods. This reserve may increase or decrease in future periods.

Effective January 1, 2004, we combined “Subscription television service” revenue and “Other subscriber-related revenue” into “Subscriber-related revenue.” Additionally, “Equipment sales” and “Cost of sales – equipment” now include non-DISH Network receivers and other accessories sold by our EchoStar International Corporation subsidiary to international customers which were previously included in “Other” revenue and “Cost of sales – other,” respectively. All prior period amounts ~~have been~~were reclassified to conform ~~with~~to the current ~~year~~period presentation.

We consolidate all majority owned subsidiaries and investments in entities in which we have controlling influence. Non-majority owned investments are accounted for using the equity method when we have the ability to significantly influence the operating decisions of the investee. When we do not have the ability to significantly influence the operating decisions of an investee, the cost method is used. For entities that are considered variable interest entities we apply the provisions of FASB Interpretation No. (FIN) 46-R, “Consolidation of Variable Interest Entities, and Interpretation of ARB No. 51” (“FIN 46-R”). All significant intercompany accounts and transactions have been eliminated in consolidation.

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

Use of Estimates

The preparation of financial statements in conformity with ~~generally accepted accounting principles~~GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for each reporting period. Estimates are used in accounting for, among other things, allowances for uncollectible accounts, inventory allowances, self insurance obligations, deferred tax asset valuation allowances, loss contingencies, fair values of financial instruments, asset impairments, useful lives of property and equipment, royalty obligations and smart card replacement obligations. Actual results ~~could~~may differ from ~~those estimates.~~previously estimated amounts. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.

During the three months ended June 30, 2003, we recorded a reduction to Cost of sales — subscriber promotion subsidies of approximately $34.4 million primarily related to the receipt of a reimbursement payment for previously sold set-top box equipment pursuant to a litigation settlement.

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
~~(Unaudited)~~

Comprehensive Income (Loss)

The components of comprehensive income (loss), net of tax, are as follows:

For the Six Months
Ended June 30,

2002 2003

(In thousands)
Net Income $ 1,854 $ 186,710
Foreign currency translation adjustments — 211
Unrealized holding gains (losses) on available-for-sale securities arising during period (41,344 ) 57,151
Reclassification adjustment for impairment losses on available-for-sale securities included in net income 9,765 1,966

Comprehensive income (loss) $ (29,725 ) $ 246,038


	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004			2003		2004			2003
	(In thousands)					(In thousands)
Net income (loss)	$	85,316		$	128,793	$	42,430		$	186,710
Foreign currency translation adjustments		(24	)		211		(181	)		211
Unrealized holding gains (losses) on available-for-sale securities arising during period		(45,912	)		35,126		(17,636	)		57,151
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income		(32,805	)		195		(32,805	)		1,966

Comprehensive income (loss)	$	6,575		$	164,325	$	(8,192	)	$	246,038

“Accumulated other comprehensive ~~income (loss)~~income” presented on the accompanying condensed consolidated balance sheets consists of the accumulated net unrealized gains (losses) on available-for-sale securities and foreign currency translation adjustments, net of deferred taxes.

Basic and Diluted ~~Earnings~~Income (Loss) Per Share

Statement of Financial Accounting ~~Standards~~Standard No. 128, “Earnings Per Share” (“~~FAS~~SFAS 128”) requires entities to present both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes dilution and is computed by dividing income (loss) ~~available~~ to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if dilutive stock options were exercised and convertible securities were converted to common stock.

~~We recorded a net loss attributable to common shareholders~~The following table reflects the basic and diluted weighted-average shares:


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2004		2003		2004		2003
			(In thousands)
Denominator for basic income (loss) per share — weighted-average common shares outstanding		467,933		483,372		473,389		482,241
Dilutive impact of options outstanding		3,576		5,013		3,913		5,316

Denominator for diluted income (loss) per share — weighted-average diluted common shares outstanding		471,509		488,385		477,302		487,557

As of June 30, 2004 and 2003, we had approximately 18.9 million and 18.5 million options for the ~~six month period ending June 30, 2002. Therefore,~~purchase of shares of class A common stock equivalents and convertible securities are excluded from the computation of diluted earnings (loss) per share for that period since the effect of including them is anti-dilutive. Since we reported net income attributable to common shareholders for the three month periods ending June 30, 2003 and 2002 and for the six month period ending June 30, 2003, theoutstanding, respectively. The potential dilution from stock options exercisable into approximately

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

3.6 million and 5.0 million shares of common stock ~~for these periods was~~ computed using the treasury stock method based on the average fair market value of the ~~Class~~class A common stock for the ~~period. The following table reflects the basic and~~period, were included in our weighted-average diluted ~~weighted-average~~common shares outstanding ~~used to calculate basic and diluted earnings per share.~~

For the Three Months For the Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

(In thousands) (In thousands)
Denominator for basic income (loss) per share — weighted-average common shares outstanding 480,405 483,372 480,070 482,241
Dilutive impact of options outstanding 6,120 5,013 — 5,316
Dilutive impact of Series D Convertible Preferred Stock 57,605 — — —

Denominator for diluted income (loss) per share — weighted-average diluted common shares outstanding 544,130 488,385 480,070 487,557

~~As of~~for the three months ended June 30, ~~2002~~2004 and 2003, respectively. The potential dilution from stock options exercisable into approximately 3.9 million and 5.3 million shares of common stock, calculated as previously described, were included for the six months ended June 30, 2004 and 2003, respectively.

Of the options to purchase a total of approximately ~~21.0~~18.9 million ~~and 18.4 million~~ shares of Class A common stock were outstanding, respectively. The 4 7/8% Convertible Subordinated Notes and the 5 3/4% Convertible Subordinated Notes were convertible into approximately 22.0 million shares and 23.1 million shares of Class A common stock, respectively, for both the periods ended June 30, 2002 and 2003. The convertible notes are

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
~~(Unaudited)~~

~~not included in the diluted EPS calculation as the effect of the conversion of the notes would be anti-dilutive. Of the options~~ outstanding as of June 30, ~~2003,~~2004, options to purchase approximately ~~8.3~~7.4 million shares were outstanding under a ~~long term~~long-term incentive plan. Vesting of these options is contingent upon meeting certain longer-term goals which have not yet been achieved. ~~As such,~~Accordingly, the long-term incentive options are not included in the diluted EPS calculation.

As of June 30, 2004 and 2003, our 5 3/4% Convertible Subordinated Notes due 2008 were convertible into approximately 23.1 million shares of Class A Common stock. As of June 30, 2004, our 3% Convertible Subordinated Note due 2010 was convertible into approximately 6.9 million shares of Class A Common stock. As of June 30, 2003, our 4 7/8% Convertible Subordinated Notes due 2007 (our “4 7/8% Notes”) were convertible into approximately 22.0 million shares of Class A Common stock. We redeemed the $1.0 billion outstanding principal amount of our 4 7/8% Notes during October 2003. Our convertible notes are not included in the diluted EPS calculation for all periods presented as their conversion would be antidilutive.

Accounting for Stock-Based Compensation

We have elected to follow the intrinsic value method of accounting under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) and related interpretations in accounting for our stock-based compensation plans. Under APB 25, we generally do not recognize compensation expense on the ~~issuance~~grant of ~~stock~~options under our ~~Stock Incentive Plan~~stock incentive plans because typically the option terms are ~~typically~~ fixed and ~~typically~~ the exercise price equals or exceeds the market price of the underlying stock on the date of grant. ~~In October 1995,~~We apply the ~~Financial Accounting Standards Board issued~~“disclosure only” provisions of Statement of Financial Accounting Standard No. 123, “Accounting and Disclosure of Stock-Based Compensation,” (“~~FAS No.~~SFAS 123”) which established an alternative method of expense recognition for stock-based compensation awards to employees based on fair values. We elected to not adopt FAS No. 123 for expense recognition purposes..

Pro forma information regarding net income and earnings per share is required by ~~FAS No.~~SFAS 123 and ~~Financial Accounting Standard No. 148, “Accounting and Disclosure of Stock-Based Compensation — Transition and Disclosure,” (“FAS No. 148”). Pro forma information~~ has been determined as if we had accounted for our stock-based compensation plans using the fair market value method prescribed by ~~FAS No. 123.~~that statement. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period on a straight-line basis. All options are initially assumed to vest. Compensation previously recognized is reversed to the extent unvested options are forfeited upon termination of ~~the options. A value is not attributed to options that employees forfeit because they fail to satisfy specified service or performance related conditions.~~employment. The following table ~~as required by FAS No. 148,~~ illustrates the effect on net ~~income (loss) and~~ income (loss) per share if we had accounted for our stock-based compensation plans using the fair value ~~method prescribed by FAS No. 123 (in thousands, except per share amounts):~~

For the Three Months For the Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

(In thousands) (In thousands)
Net income (loss) available (attributable) to common shareholders, as reported $ 37,001 $ 128,793 $ (60,006 ) $ 186,710
Add: Stock-based employee compensation expense included in reported net income (loss), net of related tax effects 2,169 (217 ) 3,835 1,772
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (6,834 ) (6,972 ) (13,210 ) (13,207 )

Pro forma net income (loss) available (attributable) to common shareholders, as reported $ 32,336 $ 121,604 $ (69,381 ) $ 175,275

Basic income (loss) per share, as reported $ 0.08 $ 0.27 $ (0.12 ) $ 0.39

Diluted income (loss) per share, as reported $ 0.07 $ 0.26 $ (0.12 ) $ 0.38

Pro forma basic income (loss) per share $ 0.07 $ 0.25 $ (0.14 ) $ 0.36

Pro forma diluted income (loss) per share $ 0.06 $ 0.25 $ (0.14 ) $ 0.36

method:

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
	(In thousands)
Net income (loss), as reported	$	85,316		$	128,793		$	42,430		$	186,710
Add: Stock-based employee compensation expense included in reported net income (loss), net of related tax effects		—			(209	)		1,139			1,710
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(5,606	)		(6,972	)		(10,908	)		(13,207	)

Pro forma net income (loss), as reported	$	79,710		$	121,612		$	32,661		$	175,213

Basic income (loss) per share, as reported	$	0.18		$	0.27		$	0.09		$	0.39

Diluted income (loss) per share, as reported	$	0.18		$	0.26		$	0.09		$	0.38

Pro forma basic income (loss) per share	$	0.17		$	0.25		$	0.07		$	0.36

Pro forma diluted income (loss) per share	$	0.17		$	0.25		$	0.07		$	0.36

For purposes of this pro forma presentation, the fair value of each option ~~grant~~ was estimated at the date of the grant using a Black-Scholes option pricing ~~model with the following weighted-average assumptions for grants during the three and six months ended June 30, 2002 and 2003.~~

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
~~(Unaudited)~~

For the Three Months For the Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

Risk-free interest rate 4.40 % 2.56 % 4.93 % 3.03 %
Volatility factor 47.16 % 38.16 % 44.91 % 39.09 %
Dividend yield 0.00 % 0.00 % 0.00 % 0.00 %
Expected term of options 6 years 6 years 6 years 6 years
Weighted-average fair value of options granted $ 12.68 $ 14.16 $ 13.55 $ 12.34

model. The Black-Scholes option valuation model was developed for use in estimating the fair value of exchange traded options which have no vesting restrictions and are fully transferable. ~~In addition, option~~Consequently, our estimate of fair value may differ from other valuation ~~models require~~models. Further, the Black-Scholes model requires the input of highly subjective assumptions ~~including expected stock price characteristics which are significantly different from those of traded options,~~ and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing ~~models do~~model does not necessarily provide a reliable single measure of the fair value of stock-based compensation awards.

Non-cash, stock-based compensation

During 1999, we adopted ~~an incentive~~a plan under our 1995 Stock Incentive Plan, ~~that~~which provided certain key employees with incentives including stock options. The table below shows the amount of compensation expense recognized under this performance-based plan for the three and six months ended June 30, ~~2002~~2004 and 2003. ~~The expense decrease from prior year for both the three and six months~~There is ~~primarily attributable to stock option forfeitures resulting from employee terminations. The~~no remaining deferred compensation ~~of $4.7 million as of June 30, 2003, which will be reduced by future forfeitures, if any, will~~to be recognized ~~over the remaining vesting period, ending on~~under this plan subsequent to March 31, 2004.

We report all non-cash compensation based on stock option appreciation as a single expense category in our ~~accompanying~~condensed consolidated statements of operations. The following table ~~indicates~~shows the other expense categories in our condensed consolidated statements of operations that would be affected if non-cash, stock-based compensation was allocated to the same expense categories as the base compensation for key employees who participate in the 1999 incentive ~~plan.~~

For the Three Months For the Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

(In thousands) (In thousands)
Subscriber related $ 183 $ (201 ) $ 365 $ (111 )
Satellite and transmission 182 90 (372 ) 179
General and administrative 1,804 (106 ) 3,842 1,704

$ 2,169 $ (217 ) $ 3,835 $ 1,772

plan:


	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2004		2003			2004		2003
	(In thousands)
Subscriber-related	$	—	$	(201	)	$	51	$	(111	)
Satellite and transmission		—		90			69		179
General and administrative		—		(106	)		1,060		1,704

Total non-cash, stock-based compensation	$	—	$	(217	)	$	1,180	$	1,772

~~In addition, options~~Options to purchase ~~8.3~~7.4 million shares were outstanding pursuant to a long-term incentive plan under our 1995 Stock Incentive plan as of June 30, ~~2003 and~~2004. These options were granted with exercise prices at least equal to the market value of the underlying shares on the dates they were issued during 1999, 2000 and ~~2001 pursuant to a separate long term incentive plan under our 1995 Stock Incentive Plan.~~2001. The weighted-average exercise price of these options is ~~$8.85.~~$9.21. Vesting of these options is contingent upon meeting certain ~~longer-term~~longer-

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

term goals which have not yet been achieved. Consequently, no compensation was recorded during the six months ended June 30, ~~2003~~2004 related to these long-term options. We will record the related compensation atupon the achievement ~~if ever,~~ of the performance ~~goals. Such~~goals, if ever. This compensation, if recorded, ~~would likely~~could result in material non-cash, stock-based compensation expense in our condensed consolidated statements of operations.

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~3.
~~(Unaudited)~~

~~New Accounting Pronouncements~~

In November 2002, the EITF reached a consensus on Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 governs arrangements involving multiple deliverables and how the related revenue should be measured and allocated to each deliverable. EITF Issue No. 00-21 will apply to revenue arrangements entered into after June 30, 2003; however, upon adoption, the EITF allows the guidance to be applied on a retroactive basis, with the change, if any, reported as a cumulative effect of accounting change in the consolidated statements of operations. The implementation of this new EITF issue is not expected to have a material impact on our financial position or results of operations.

In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which addresses the consolidation of variable interest entities as defined in the Interpretation. FIN 46 requires an assessment of certain investments to determine if they are variable interest entities. FIN 46 is immediately effective for all variable interest entities created after January 31, 2003. For variable interest entities created before February 1, 2003, the provisions of FIN 46 must be applied no later than the beginning of the first interim period or annual reporting period beginning after June 15, 2003. In addition, if it is reasonably possible that an enterprise will consolidate or disclose information about a variable interest entity, the enterprise shall discuss the following information in all financial statements issued after January 31, 2003: (i) the nature, purpose, size or activities of the variable interest entity and (ii) the enterprise’s maximum exposure to loss as a result of its involvement with the variable interest entity. We implemented FIN 46 effective January 1, 2003. Implementation of FIN 46 did not have a material impact on our financial position or results of operations.

3. Marketable and Non-Marketable Investment Securities

We currently classify all marketable investment securities as available-for-sale. ~~In accordance with generally accepted accounting principles, we~~We adjust the carrying value of our available-for-sale ~~marketable investment~~ securities to fair market value and report the related temporary unrealized gains and losses as a ~~separate~~ component of ~~stockholders’ deficit,~~“Accumulated other comprehensive income”, net of related deferred income ~~tax, if applicable.~~tax. Declines in the fair market value of a marketable investment security which are estimated to be “other than temporary” ~~must be~~are recognized in the ~~statement~~condensed consolidated statements of operations, ~~thus~~thereby establishing a new cost basis for ~~such~~the investment. We evaluate our marketable investment securities portfolio on a quarterly basis to determine whether declines in the fair market value of these securities are other than temporary. This quarterly evaluation consists of reviewing, among other things, the fair market value of our marketable investment securities compared to the carrying ~~value of these securities,~~amount, the historical volatility of the price of each security and any market and company specific factors related to each security. Generally, absent specific factors to the contrary, declines in the fair market value of investments below cost basis for a period of less than six months are considered to be temporary. Declines in the fair market value of investments for a period of six to nine months are evaluated on a case by case basis to determine whether any company or market-specific factors exist which would indicate that ~~such~~these declines are other than temporary. Declines in the fair market value of investments below cost basis for greater than nine months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the contrary.

As of June 30, 2004 and December 31, 2003, we ~~recorded~~had unrealized gains of approximately ~~$65.3~~$29.2 million and $79.6 million, respectively, as a ~~separate component~~part of “Accumulated other comprehensive income” within “Total stockholders’ ~~deficit.~~deficit”. During the six months ended June 30, ~~2003,~~2004, we ~~also recorded an aggregate charge~~did not record any charges to earnings for other than temporary declines in the fair market value of ~~certain of~~ our marketable investment securities, and we realized net losses of approximately ~~$2.0 million, and established a new cost basis for these securities. This amount does not include realized gains of approximately $2.0~~$8.5 million on ~~sales of~~ marketable and non-marketable investment securities. Our approximately ~~$2.82~~$1.856 billion of restricted and unrestricted cash, cash equivalents and marketable investment securities includes debt and equity securities which we own for strategic and financial purposes. The fair market value of these strategic marketable investment securities aggregated approximately ~~$168.9~~$153.2 million as of June 30, ~~2003.~~2004. During the six months ended June 30, ~~2003,~~2004, our portfolio generally, and our strategic investments particularly, experienced ~~and continue to experience~~ volatility. If the fair market value of our marketable securities portfolio does not remain above cost basis or if we become aware of any market or company specific factors that indicate that the carrying value of certain of our securities

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
~~(Unaudited)~~

is impaired, we may be required to record charges to earnings in future periods equal to the amount of the decline in fair value.

We also have made, and may continue in the future to make, strategic equity investments in ~~certain non-marketable investment securities. These~~ securities that are not publicly ~~traded.~~traded, including equity interests we received in exchange for cash and non-cash consideration (Note 6). Our ability to realize value from our strategic investments in companies that are not ~~public~~publicly traded is dependent on the success of their business and their ability to obtain sufficient capital to execute their business plans. Since private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain full value for them. We evaluate our non-marketable investment securities on a quarterly basis to determine whether the carrying value of each investment is impaired. This quarterly evaluation consists of reviewing, among other things, company business plans and current financial statements, if available, for factors which may indicate an impairment in our investment. ~~Such~~These factors may include, but are not limited to, cash flow concerns, material litigation, violations of debt covenants and changes in business strategy. During the six months ended June 30, ~~2003,~~2004, we did not record any impairment charges with respect to these instruments.

~~4. Inventories~~8

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

4.Inventories

Inventories consist of the following:

As of

December 31, June 30,
2002 2003

(In thousands)
Finished goods — DBS $ 104,769 $ 96,443
Raw materials 25,873 36,366
Finished goods — remanufactured and other 16,490 14,595
Work-in-process 7,964 7,558
Consignment 5,161 3,518
Reserve for excess and obsolete inventory (9,967 ) (6,664 )

Inventories, net $ 150,290 $ 151,816


	As of
	June 30,			December 31,
	2004			2003
	(In thousands)
Finished goods — DBS	$	210,370		$	103,274
Raw materials		89,168			32,693
Finished goods — remanufactured and other		23,894			15,000
Work-in-process		15,704			9,577
Consignment		2,356			1,373
Inventory allowance		(7,607	)		(6,770	)

Inventories, net	$	333,885		$	155,147

5. ~~Property~~Satellites

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with the provision of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), We consider the relevant cash flows, estimated operating results and ~~Equipment~~other information in evaluating the performance of our satellites in accordance with SFAS 144 and have determined the carrying value of our satellites are fully recoverable. We will continue to evaluate the performance of our satellites as new events or changes in circumstances become known.

EchoStar III

During ~~June 2003,~~January 2004, a ~~transponder~~Traveling Wave Tube Amplifier (“TWTA”) pair on our EchoStar III satellite failed, resulting in a ~~temporary interruption~~loss of ~~service. Operation~~service on one of ~~the satellite was quickly restored.~~our licensed transponders. An additional TWTA pair failed in March 2004. Including the ~~six transponder~~seven TWTA pairs that malfunctioned in prior years, these anomalies have resulted in the failure of a total of ~~fourteen transponders~~18 TWTAs on the satellite to date. While originally designed to operate a maximum of 32 transponders at any given time, the satellite was equipped with a total of 44 ~~transponders~~TWTAs to provide ~~redundancy, and~~redundancy. EchoStar III can now operate a maximum of ~~30 transponders. We are~~26 transponders but due to redundancy switching limitations and specific channel authorizations, currently it can only ~~licensed by~~operate on 18 of the 19 FCC ~~to operate 11 transponders~~authorized frequencies we own or lease at the 61.5 degree west orbital ~~location (together with an~~location. While we don't expect a large number of TWTAs to fail in any year, it is likely that additional ~~six leased transponders), where~~TWTA failures will occur from time to time in the future, and that those failures will further impact commercial operation of the satellite. We will continue to evaluate the performance of EchoStar III ~~is located.~~as new events or changes in circumstances become known.

EchoStar V

~~During 2000, 2001 and 2002,~~Our EchoStar V satellite is equipped with a total of 96 solar array strings, 92 of which are required to assure full power availability for the 12-year design life of the satellite. Prior to 2004, EchoStar V experienced anomalies resulting in the loss of ~~three~~4 solar array ~~strings,~~strings. During March 2004, EchoStar V lost an additional solar array string, reducing solar array power to approximately 95% of its original capacity. While originally designed to operate a maximum of 32 transponders at any given time, the solar array anomalies may prevent the use of all 32 transponders for the full 12-year design life of the satellite. In addition, momentum wheel anomalies previously experienced resulted in more rapid use of fuel and ~~during January 2003,~~a corresponding minor reduction of spacecraft life. An investigation of the anomalies is continuing. Until the root causes are finally determined, there can be no assurance that future anomalies will not cause further losses which could impact commercial operation of the satellite. EchoStar V is not currently carrying any traffic and is being utilized as an in-orbit spare. We will continue to evaluate the performance of EchoStar V and may be required to reduce the remaining depreciable life as new events or circumstances develop.

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

EchoStar VI

Prior to 2004, EchoStar VI had lost a total of 3 solar array strings. In April 2004 and again in July 2004, EchoStar VI experienced anomalies resulting in the loss of antwo additional solar array ~~string.~~strings, bringing the total number of string losses to five. The satellite has a total of approximately 96112 solar array strings and approximately 92106 are required to assure full power availability for the estimated 12-year design life of the satellite. In addition, during January 2003, EchoStar V experienced an anomaly in a spacecraft electronic component which affects the ability to receive telemetry from certain on-board equipment. Other methods of communication have been established to alleviate the effects of the failed

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
~~(Unaudited)~~

~~component.~~ An investigation of the solar array ~~and electronic component~~ anomalies, none of which have impacted commercial operation of the satellite, is continuing. Until the root cause of these anomalies is finally determined, there can be no assurance future anomalies will not cause further losses which could impact commercial operation of the satellite.

EchoStar VII

During March 2004, our EchoStar VII satellite lost a solar array circuit. EchoStar VII was designed with 24 solar array circuits and needs 23 for the spacecraft to be fully operational at end of life. While this anomaly is not expected to reduce the estimated design life of the satellite to less than 12 years and has not impacted commercial operation of the satellite to date, an investigation of the anomaly is continuing. Until the root causes are finally determined, there can be no assurance future anomalies will not cause further losses which could impact commercial operation of the satellite.

EchoStar VIII

During ~~2002, two of the thrusters on EchoStar VIII experienced anomalous events and are not currently in use. During March 2003, an additional thruster on~~June 2004, EchoStar VIII experienced an ~~anomalous event~~anomaly which affected operation of one of the primary gyroscopes on the satellite. A spare gyroscope has been switched in and is ~~not currently~~performing nominally. EchoStar VIII was originally configured with three primary, and one spare gyroscope. Further, an anomaly previously experienced has resulted in use. The satellite is equipped with a total of 12 thrusters that help control spacecraft location, attitude, and pointing and is currently operating using a combination of the other nine thrusters. This workaround requires more frequent maneuvers to maintain the satellite at its specified orbital location, which are less efficient and therefore result in accelerated fuel use. In addition, the workaround will require certain gyroscopes ~~to be~~being utilized for aggregate periods of time substantially in excess of their originally qualified ~~limits. However, neither of these workarounds are expected~~limits in order to ~~reduce~~maintain nominal spacecraft operations and pointing. An investigation is underway to determine the ~~estimated design life~~root cause of the ~~satellite~~anomaly and to ~~less than 12 years. An investigation~~develop procedures for continued spacecraft operation in the event of ~~the thruster anomalies including the development of additional workarounds for long term operations is continuing. None of these events has impacted commercial operation of the satellite to date.~~future gyroscope anomalies. Until the root cause of ~~these anomalies has been finally determined, there can be no assurance that these or future anomalies will not cause further losses which could impact commercial operation of~~ the ~~satellite.~~

~~EchoStar VIII~~anomaly is equipped with two solar arrays which convert solar energy into power for the satellite. Those arrays rotate continuously to maintain optimal exposure to the sun. During June and July 2003, EchoStar VIII experienced anomalies that temporarily halted rotation of one of the solar arrays. The array is currently fully functional but rotating in a mode recommended by the satellite manufacturer which allows full rotation, but which is different than the originally prescribed mode. An investigation of the solar array anomalies, none of which have impacted commercial operation of the satellite, is continuing. Unless the root cause of these anomalies is finally determined, there can be no assurance future anomalies will not cause losses which could impact commercial operation of the satellite. We depend on EchoStar VIII to provide local channels to over 40 markets. In the event that EchoStar VIII experienced a total or substantial failure, we could transfer many, but not all of those channels to other in-orbit satellites.

Satellite Insurance

As a result of the failure of EchoStar IV solar arrays to fully deploy and the failure of 38 transponders to date, a maximum of 6 of the 44 transponders (including spares) on EchoStar IV are available for use at this time. In addition to transponder and solar array failures, EchoStar IV experienced anomalies affecting its thermal systems and propulsion system. There can be no assurance that further material degradation, or total loss of use, of EchoStar IV will not occur in the immediate future. EchoStar IV is currently located at the 157 degree orbital location.

In September 1998, we filed a $219.3 million insurance claim for a total loss under the launch insurance policies covering our EchoStar ~~IV.~~IV satellite. The satellite insurance consists of separate substantially identical policies with different carriers for varying amounts that, in combination, create a total insured amount of $219.3 million. The insurance carriers include La Reunion Spatiale; AXA Reinsurance Company (n/k/a AXA Corporate Solutions Reinsurance Company), United States Aviation Underwriters, Inc., United States Aircraft Insurance Group; Assurances Generales De France I.A.R.T. (AGF); Certain Underwriters at Lloyd’s, London; Great Lakes Reinsurance (U.K.) PLC; British Aviation Insurance Group; If Skaadeforsikring (previously Storebrand); Hannover Re (a/k/a International Hannover); The Tokio Marine & Fire Insurance Company, Ltd.; Marham Space Consortium (a/k/a Marham Consortium Management); Ace Global Markets (a/k/a Ace London); M.C. Watkins Syndicate; Goshawk Syndicate Management Ltd.; D.E. Hope Syndicate 10009 (Formerly Busbridge); Amlin Aviation; K.J. Coles & Others; H.R. Dumas & Others; Hiscox Syndicates, Ltd.; Cox Syndicate; Hayward Syndicate; D.J. Marshall & Others; TF Hart; Kiln; Assitalia Le Assicurazioni D’Italia S.P.A. Roma; La Fondiaria Assicurazione S.P.A., Firenze; Vittoria Assicurazioni S.P.A., Milano; Ras — Riunione Adriatica Di Sicurta S.P.A., Milano; Societa Cattolica Di Assicurazioni, Verano; Siat Assicurazione E Riassicurazione S.P.A, Genova; E. Patrick; ZC Specialty Insurance; Lloyds of London Syndicates 588

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
~~(Unaudited)~~

NJM, 1209 Meb AND 861 Meb; Generali France Assurances; Assurance France Aviation; and Ace Bermuda Insurance Ltd.

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

The insurance carriers offered us a total of approximately $88.0 million, or ~~40.0%~~40% of the total policy amount, in settlement of the EchoStar IV insurance claim. The insurers assert, among other things, that EchoStar IV was not a total loss, as that term is defined in the policy, and that we did not abide by the exact terms of the insurance policies. We strongly disagree and filed arbitration claims against the insurers for breach of contract, failure to pay a valid insurance claim and bad faith denial of a valid claim, among other things. Due to ~~individual~~ forum selection clauses in certain of the policies, we are pursuing our arbitration claims against Ace Bermuda Insurance Ltd. in London, England, and our arbitration claims against all of the other insurance carriers in New York, New York. The New York arbitration commenced on April 28, 2003, and ~~hearings were held for two weeks.~~the Arbitration Panel has conducted approximately thirty-five days of hearings. The insurers have requested additional proceedings in the New York arbitration ~~will resume on September 16, 2003.~~before any final arbitration award is made by the Panel. The parties to the London arbitration have agreed to stay that proceeding pending a ruling in the New York arbitration. There can be no assurance ~~that~~as to when an arbitration award may be made and what amount, if any, we will receive ~~the amount claimed~~ in either the New York or the London arbitrations or, if we do, that we will retain title to EchoStar IV with its reduced capacity.

At the time we filed our claim in 1998, we recognized an initial impairment loss of $106.0 million to write-down the carrying value of the satellite and related costs, and simultaneously recorded an insurance claim receivable for the same amount. WeAs of December 31, 2003, EchoStar IV was fully depreciated. While there can be no assurance that we will ~~have to reduce~~receive the amount ~~of this receivable if a final settlement is reached for less than this amount. In addition, during 1999,~~claimed in either the New York or the London arbitrations, we ~~recorded an impairment loss of approximately $16.0 million as a charge to earnings to further write-down the carrying value of the satellite.~~

~~As a result of the thermal and propulsion system anomalies, we reduced the estimated remaining useful life of EchoStar IV to approximately four years during January 2000. We will~~ continue to ~~evaluate~~believe the ~~performance of EchoStar IV~~insurance claim amount is fully recoverable and ~~may modify our loss assessment as new events or circumstances develop.~~expect to receive a favorable decision prior to December 31, 2004.

The indentures related to certain of ~~EchoStar DBS Corporation’s (“EDBS”)~~EDBS’s senior notes contain restrictive covenants that require us to maintain satellite insurance with respect to at least ~~half~~three of the ten satellites itEDBS owns or leases. ~~Eight~~We currently do not carry traditional insurance for any of our nine in-orbit satellites are currently owned by a direct subsidiary of EDBS. Insurance coverage is therefore required for at least four of EDBS’ eight satellites. The launch and/or in-orbit insurance policies for EchoStar I through EchoStar VIII have expired. We have been unable to obtain insurance on any of these satellites on terms acceptable to us. As a result, we are currently self-insuring these satellites. To satisfy insurance covenants related to EDBS’ senior notes, we ~~have reclassified~~classify an amount equal to the depreciated cost of ~~four~~three of our satellites ~~from cash and cash equivalents to cash~~as “Cash reserved for satellite ~~insurance~~insurance” on our balance sheet. As of June 30, ~~2003,~~2004, this amount totaled approximately $107.1 million. We will continue to reserve cash ~~reserved~~ for satellite insurance ~~totaled approximately $135.2 million. The reclassifications will continue~~on our balance sheet until such time, if ever, as we ~~can~~ again insure our satellites on acceptable terms and for acceptable amounts, or until the covenants requiring ~~the~~that insurance are no longer applicable. The amount reserved is not adequate to fund the construction, launch and insurance of a replacement satellite, and it typically takes several years to design, construct and launch a satellite.

6. ~~Goodwill~~Other Noncurrent Assets

South.com LLC

In December 2003, we made an investment in South.com LLC (“South.com”), a variable interest entity we consolidate in our condensed consolidated financial statements in accordance with FIN 46-R. South.com was formed to, among other things, bid on and ~~Intangible Assets~~

Ashold FCC licenses. During December 2003, South.com paid a $7.1 million deposit to participate in the January 2004 FCC license auction. During January 2004, South.com paid an additional deposit to the FCC of $20.6 million as the high-bidder on several licenses. These deposits are included in “Other current assets” in our condensed consolidated balance sheets as of June 30, 2004 and December 31, ~~2002~~2003.

Gemstar-TV Guide International Transaction

During March 2004, we entered into an agreement with Gemstar-TV Guide International, Inc. (“Gemstar”) for use of certain Gemstar intellectual property and ~~June 30, 2003, we had approximately $53.8 million of gross identifiable intangibles with related accumulated amortization of approximately $33.6 million and $38.7 million as~~technology, use of the ~~end of each period, respectively. These identifiable intangibles primarily include acquired contracts~~TV Guide brand on our interactive program guides, and ~~technology-based intangibles. Amortization of these intangible assets~~for distribution arrangements with ~~an average finite useful life of approximately five years was about $2.6 million and $5.1 million~~Gemstar to provide for the ~~three~~launch and ~~six months ended June 30, 2003, respectively.~~carriage of the TV Guide Channel as well as the extension of an existing distribution agreement for carriage of the TVG Network, and acquired Gemstar’s Superstar/Netlink Group LLC (“SNG”), UVTV distribution, and SpaceCom businesses and related assets, for an aggregate cash payment of $238.0 million, plus transaction costs. We ~~estimate that such amortization expense will aggregate approximately $10.0 million annually~~further agreed to resolve all of our outstanding litigation with Gemstar. These transactions, which were substantially completed on April 4, 2004, were entered into contemporaneously and accounted for ~~the remaining useful life~~as a purchase business combination in accordance with Statement of ~~these intangible assets of approximately 1.5 years. In addition, our business unit DISH Network had approximately $3.4 million of goodwill as of December 31, 2002 and June 30, 2003.~~Financial Accounting Standard No. 141, “Business Combinations” (“SFAS 141”).

ECHOSTAR COMMUNICATIONS CORPORATION
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~~7. Long-Term Debt~~Based on an independent third-party valuation, the purchase consideration was allocated to identifiable tangible and intangible assets and liabilities as follows (in thousands):


Current assets	$	1,184
Property and equipment		3,749
Intangible assets		260,546

Total assets acquired	$	265,479

Current liabilities		(26,269	)
Long-term liabilities		(600	)

Total liabilities assumed		(26,869	)
Net assets acquired	$	238,610

~~Effective February~~The total $260.5 million of acquired intangible assets resulting from the Gemstar transactions is comprised of contract-based intangibles totaling approximately $187.2 million with estimated weighted-average useful lives of twelve years, and customer relationships totaling approximately $73.3 million with estimated weighted-average useful lives of five years.

The business combination did not have a material impact on our results of operations for the three and six months ended June 30, 2004 and would not have materially impacted our results of operations for these periods had the business combination occurred on January 1, 2004. Further, the business combination would not have had a material impact on our results of operations for the comparable periods in 2003 ~~EDBS redeemed~~had the business combination occurred on January 1, 2003.

Goodwill and Intangible Assets

As of June 30, 2004 and December 31, 2003, we had approximately $313.2 million and $52.7 million of gross identifiable intangibles, respectively, with related accumulated amortization of approximately $54.8 million and $42.9 million, respectively. These identifiable intangibles consist of the following:


	As of
	June 30, 2004					December 31, 2003
	Intangible		Accumulated			Intangible		Accumulated
	Assets		Amortization			Assets		Amortization
	(In thousands)
Contract based	$	222,733	$	(34,258	)	$	35,528	$	(26,715	)
Customer relationships		73,298		(3,470	)		—		—
Technology based		17,181		(17,069	)		17,181		(16,221	)

Total	$	313,212	$	(54,797	)	$	52,709	$	(42,936	)

Amortization of these intangible assets with an average finite useful life primarily ranging from approximately five to twelve years was $9.6 million and $11.9 million for the three and six months ended June 30, 2004, respectively. For all of ~~its outstanding~~~~9 1/4~~~~% Senior Notes due 2006. In accordance with~~2004, the ~~terms of the indenture governing the notes, the $375.0 million principal amount of the notes was repurchased at 104.625%, for a total of approximately $392.3~~aggregate amortization expense related to these identifiable intangible assets is estimated to be $33.7 million. The ~~premium paid of approximately $17.3 million, along with unamortized debt issuance costs of approximately $3.3 million, were recorded as charges to earnings as of February 1, 2003.~~

~~8. Commitments and Contingencies~~

~~Commitments~~

~~SES Americom~~

During March 2003, one of our wholly-owned subsidiaries, EchoStar Satellite Corporation (“ESC”), entered into a satellite service agreement with SES Americom for all of the capacity on a Fixed Satellite Service (“FSS”) satellite to be located at the 105 degree west orbital location. This satelliteaggregate amortization expense is scheduled to be launched during the second half of 2004. ESC also agreed to lease all of the capacity on an existing in-orbit FSS satellite at the 105 degree orbital location beginning August 1, 2003 and continuing in most circumstances until the new satellite is launched.

ESC intends to use the capacity on the satellites to offer a combination of satellite TV programming including local network channels in additional markets and expanded high definition programming, together with satellite-delivered, high-speed internet services. In connection with the SES agreement, ESC paid $50.0 million to SES Americom to partially fund construction of the new satellite. The ten-year satellite service agreement is renewable by ESC on a year to year basis following the initial term, and provides ESC with certain rights to replacement satellites at the 105 degree west orbital location. We are required to make monthly payments to SES Americom for both the existing in-orbit FSS satellite and also for the new satellite for the ten-year period following its launch.

~~EchoStar X~~

During July 2003, we entered into a contract for the construction of EchoStar X, a high-powered DBS satellite. Construction is expected to be completed during 2005. With spot-beam capacity, EchoStar X will provide back up protection for our existing local channel offerings, and could allow DISH Network to offer other value added services.

~~Satellite-Related Obligations~~

As a result of our recent agreements with SES Americom, and for the construction of EchoStar X, our obligations for payments related to satellites have increased substantially. While in certain circumstances the dates on which we are obligated to make these payments could be delayed, the aggregate amount due under all of our existing satellite-related contracts including satellite construction and launch, satellite leases, in-orbit payments to satellite manufacturers and tracking, telemetry and control payments is expectedestimated to be approximately ~~$48.0~~$33.6 million for ~~the remainder of 2003, $79.0~~2005, $31.7 million ~~during 2004, $87.0~~for 2006, $29.1 million ~~during 2005, $72.0 million during 2006, $57.0 million during~~for 2007, and ~~similar amounts~~$27.1 million for 2008. In addition, we had approximately $3.4 million of goodwill as of June 30, 2004 and December 31, 2003 which arose from a 2002 acquisition.

Other

During the six months ended June 30, 2004, we made cash payments, assumed certain liabilities and entered into agreements in ~~subsequent years. These amounts will increase further when we procure and commence payments~~exchange for equity interests in certain entities. We accounted for the ~~launch of EchoStar X,~~equity interests received in accordance with Emerging Issues Task Force Issue No. 00-8, “Accounting by a Grantee for an Equity Instrument to be Received in Conjunction with Providing Goods or Services” (“EITF 00-8”) and ~~would further increase to the extent we procure insurance for our satellites or contract for the construction, launch or lease of additional satellites.~~recorded

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approximately $77.3 million related to the fair value of these equity interests in “Other noncurrent assets” as of June 30, 2004. We account for these unconsolidated investments under either the equity method or cost method of accounting. Approximately $56.5 million in value of these equity interests has been recorded as a deferred credit and will be recognized as reductions to “Subscriber-related expenses” ratably as our actual costs are incurred under the related agreements in accordance with the guidance under EITF Issue No. 02-16, “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor” (“EITF 02-16”). These deferred credits have been recorded as a component of “Long-term deferred revenue, distribution and carriage payments and other long-term liabilities” in our condensed consolidated balance sheet.

7.Long-Term Debt

~~Legal Proceedings~~9 3/8% Senior Note Redemption

Effective February 2, 2004, EDBS redeemed the remaining $1.423 billion principal amount of its outstanding 9 3/8% Senior Notes due 2009 at 104.688%, for a total of approximately $1.490 billion. The premium paid of approximately $66.7 million, along with unamortized debt issuance costs of approximately $10.8 million, were recorded as charges to interest expense in February 2004.

~~WIC Premium Television Ltd.~~9 1/8% Senior Note Repurchases

During ~~July 1998, a lawsuit was filed by WIC Premium Television Ltd. (“WIC”), an Alberta corporation,~~the second quarter of 2004, EDBS repurchased in open market transactions approximately $8.8 million principal amount of its 9 1/8% Senior Notes due 2009. The approximate $1.1 million difference between the ~~Federal Court of Canada Trial Division, against General Instrument Corporation, HBO, Warner Communications, Inc., John Doe, Showtime, United States Satellite Broadcasting Company, Inc., EchoStar,~~market price paid and ~~certain EchoStar subsidiaries.~~

~~During September 1998, WIC filed another lawsuit in~~ the Court of Queen’s Bench of Alberta Judicial District of Edmonton against certain defendants, including us. WIC is a company authorized to broadcast certain copyrighted work, such as movies and concerts, to residents of Canada. WIC alleges that the defendants engaged in, promoted, and/or allowed satellite dish equipment from the United States to be sold in Canada and to Canadian residents and that someprincipal amount of the defendants allowed and profited from Canadian residents purchasing and viewing subscription television programming that is only authorized for viewing in the United States. The lawsuit seeks, among other things, interim and permanent injunctions prohibiting the defendants from importing satellite receivers into Canada and from activating satellite receivers located in Canada to receive programming,notes, together with ~~damages in excess~~approximately $0.1 million of ~~$175.0 million.~~unamortized debt issuance costs related to the repurchased notes, were recorded as charges to interest expense during the second quarter of 2004 .

~~The Court in the Alberta action denied our motion to dismiss,~~8.Commitments and our appeal of that decision. The Federal action has been dismissed by the federal court. The Alberta action is pending. We intend to continue to vigorously defend the suit. During 2002, the Supreme Court of Canada ruled that the receipt in Canada of programming from United States pay television providers is prohibited. While we were not a party to that case, the ruling could adversely affect our defense. It is too early to make an assessment of the probable outcome of the litigation or to determine the extent of any potential liability or damages.Contingencies

Contingencies

Distant Network Litigation

Until July 1998, we obtained feeds of distant broadcast network channels (ABC, NBC, CBS and FOX) for distribution to our customers through PrimeTime ~~24, an independent third party programming provider.~~24. In December 1998, the United States District Court for the Southern District of Florida entered a nationwide permanent injunction requiring ~~that provider~~PrimeTime 24 to shut off distant network channels to many of its customers, and henceforth to sell those channels to consumers in accordance with the injunction.

In October 1998, we filed a declaratory judgment action against ABC, NBC, CBS and FOX in the United States District Court for the District of Colorado. We asked the Court to find that our method of providing distant network programming did not violate the Satellite Home Viewer Act and hence did not infringe the networks’ copyrights. In November 1998, the networks and their affiliate association groups filed a complaint against us in Miami Federal Court alleging, among other things, copyright infringement. The Court combined the case that we filed in Colorado with the case in Miami and transferred it to the Miami Federal Court. While the networks did not claim monetary damages and none were awarded, they are seeking attorney fees in excess of $6.0 million. It is too early to make an assessment of the probable outcome of the plaintiff’s fee petition or to determine the extent of any potential liability.

In February 1999, the networks filed a Motion for Temporary Restraining Order, Preliminary Injunction and Contempt Finding against DirecTV, Inc. in Miami related to the delivery of distant network channels to DirecTV customers by satellite. DirecTV settled that lawsuit with the networks. Under the terms of the settlement between DirecTV and the networks, some DirecTV customers were scheduled to lose access to their satellite-provided distant network channels by July 31, 1999, while other DirecTV customers were to be disconnected by December 31, 1999. Subsequently, substantially all providers of satellite-delivered network programming other than us agreed to this cut-off schedule, although we do not know if they adhered to this schedule.

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~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
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the litigation, and jointly filed a stipulation of dismissal. On March 10, 2004, we reached a private settlement with CBS, another of the plaintiffs in the litigation, and jointly filed a stipulation of dismissal. We have also reached private settlements with ~~a small number of~~many independent stations and station groups. We were unable to reach a settlement with ~~six~~five of the original eight plaintiffs ~~— CBS,~~– Fox orand the ~~associations affiliated~~independent affiliate groups associated with each of the four networks.

~~The~~A trial ~~commenced on~~took place during April ~~11,~~ 2003 and ~~concluded on April 25, 2003. On June 10, 2003,~~ the Court issued ~~its~~a final ~~judgment.~~judgment in June 2003. The ~~District~~ Court found that with one exception our current distant network qualification procedures comply with the law. We have revised our procedures to comply with the District Court’s Order. Although the plaintiffs asked the District Court to enter an injunction precluding us from selling any local or distant network programming, the District Court refused. While the plaintiffs did not claim monetary damages and none were awarded, the plaintiffs were awarded approximately $4.8 million in attorneys’ fees. This amount is substantially less than the amount the plaintiffs sought. We appealed the fee award and the Court recently vacated the fee award. The District Court also allowed us an opportunity to conduct discovery concerning the amount of plaintiffs’ requested fees. The parties have agreed to postpone discovery and an evidentiary hearing regarding attorney fees until after the Court of Appeals rules on the pending appeal of the Court’s June 2003 final judgment. It is not possible to make a firm assessment of the probable outcome of plaintiffs’ outstanding request for fees.

~~However, the~~The District Court’s injunction ~~does require~~requires us to use a computer model to ~~requalify,~~re-qualify, as of June 2003, all of our subscribers who receive ABC, NBC, CBS or Fox programming by satellite from a market other than the city in which the subscriber lives. The Court also invalidated all waivers historically provided by network stations. These waivers, which have been provided by stations for the past several years through a third party automated system, allow subscribers who believe the computer model improperly disqualified them for distant network channels to none-the-less receive those channels by satellite. Further, even though the ~~SHVIA~~Satellite Home Viewer Improvement Act provides that certain subscribers who received distant network channels prior to October 1999 can continue to receive those channels through December 2004, the District Court terminated the right of our grandfathered subscribers to continue to receive distant network channels.

~~While we are pleased the District Court did not provide the relief sought by the plaintiffs, we~~We believe the District Court made a number of errors and ~~have filed a notice of appeal of~~appealed the ~~District Court’s~~ decision. ~~We have also asked the~~Plaintiffs cross-appealed. The Court of Appeals granted our request to stay the injunction until our appeal is decided, the current September 22, 2003 date by which EchoStar has been ordered to terminate distant network channels to all subscribers impacted by the District Court’s decision. The Court of Appeals has indicated it will ruledecided. Oral argument occurred on ~~our request for a stay on or before August 15, 2003.~~February 26, 2004. It is not possible to predict ~~how the Court of Appeals will rule on our stay, or~~ how or when the Court of Appeals will rule on the merits of our appeal.

In the event the Court of Appeals ~~does not stay~~upholds the ~~lower court’s ruling,~~injunction, and if we do not reach private settlement agreements with additional stations, we will attempt to assist subscribers in arranging alternative means to receive network channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we ~~can not~~cannot predict with any degree of certainty how many subscribers will cancel their primary DISH Network programming as a result of termination of their distant network channels. We could be required to terminate distant network programming to all subscribers in the event the plaintiffs prevail on their cross-appeal and we are permanently enjoined from delivering all distant network channels. Termination of distant network programming to subscribers would result, among other things, in a reduction in ~~ARPU of no more than $0.30~~average monthly revenue per subscriber ~~per month. While there can be no assurance, we do not expect that those terminations would result in any more than~~and a ~~one percentage point~~temporary increase in ~~our otherwise anticipated churn over the course of the next 12 months.~~subscriber churn.

Gemstar

During October 2000, Starsight Telecast, Inc., a subsidiary of Gemstar-TV Guide International, Inc. (“Gemstar”), filed a suit for patent infringement against us and certain of our subsidiaries in the United States District Court for the Western District of North Carolina, Asheville Division. The suit alleges infringement of United States Patent No. 4,706,121 (“the `121 Patent”) which relates to certain electronic program guide functions. We examined this patent and believe that it is not infringed by any of our products or services. This conclusion is supported by findings of the International Trade Commission (“ITC”) which are discussed below. The North Carolina case is stayed pending the appeal of the ITC action to the United States Court of Appeals for the Federal Circuit.

ECHOSTAR COMMUNICATIONS CORPORATION
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~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~
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August 2001, the Federal Multi-District Litigation panel combined this suit, for pre-trial purposes, with other lawsuits asserting antitrust claims against Gemstar, which had previously been filed by other parties. In January 2002, Gemstar dropped the counterclaims of patent infringement. During March 2002, the Court denied Gemstar’s motion to dismiss our antitrust claims. In January 2003, the Court denied a more recently filed Gemstar motion for summary judgment based generally on lack of standing. In its answer, Gemstar asserted new patent infringement counterclaims regarding United States Patent Nos. 4,908,713 (“the ‘713 patent”) and 5,915,068 (“the ‘068 patent”, which is expired). These patents relate to on-screen programming of VCRs. We have examined these patents and believe that they are not infringed by any of our products or services. The Court recently granted our motion to dismiss the ‘713 patent for lack of standing.counterclaims.

In February 2001, Gemstar filed additional patent infringement actions against us in the District Court in Atlanta, Georgia and with the ITC. ~~These suits allege infringement of United States Patent Nos. 5,252,066, 5,479,268 and 5,809,204,~~We settled all of ~~which relate to certain electronic program guide functions. In addition,~~ the ~~ITC action alleged infringement of the `121 Patent which was also asserted in the North Carolina case previously discussed. In the Georgia district court case,~~litigation with Gemstar seeks damages and an injunction. The Georgia case was stayed pending resolution of the ITC action and remains stayed at this time. In December 2001, the ITC held a 15-day hearing before an administrative law judge. Prior to the hearing, Gemstar dropped its infringement allegations regarding United States Patent No. 5,252,066 with respect to which we had asserted substantial allegations of inequitable conduct. The hearing addressed, among other things, Gemstar’s allegations of patent infringement and respondents’ (SCI, Scientific Atlanta, Pioneer and us) allegations of patent misuse. During June 2002, the judge issued a Final Initial Determination finding that none of the patents asserted by Gemstar had been infringed. In addition, the judge found that Gemstar was guilty of patent misuse with respect to the `121 Patent and that the `121 Patent was unenforceable because it failed to name an inventor. The parties then filed petitions for the full ITC to review the judge’s Final Initial Determination. During August 2002, the full ITC adopted the judge’s findings regarding non-infringement and the unenforceability of the `121 Patent. The ITC did not adopt, but did not overturn, the judge’s findings of patent misuse. Gemstar is appealing the decision of the ITC to the United States Court of Appeals for the Federal Circuit. If the Federal Circuit were to overturn the judge’s decision, such an adverse decision in this case could temporarily halt the import of our receivers and could require us to materially modify certain user-friendly electronic programming guides and related features we currently offer to consumers. Based upon our review of these patents, and based upon the ITC’s decision, we continue to believe that these patents are not infringed by any of our products or services. We intend to continue to vigorously contest the ITC, North Carolina and Georgia suits and will, among other things, continue to challenge both the validity and enforceability of the asserted patents.during 2004 (Note 6).

Superguide

During 2000, Superguide Corp. (“Superguide”) ~~also~~ filed suit against us, DirecTV and others in the United States District Court for the Western District of North Carolina, Asheville Division, alleging infringement of United States Patent Nos. 5,038,211, 5,293,357 and 4,751,578 which relate to certain electronic program guide functions, including the use of electronic program guides to control VCRs. Superguide sought injunctive and declaratory relief and damages in an unspecified amount. We examined these patents and believe that they are not infringed by any of our products or services.

It is our understanding that these patents may be licensed by Superguide to Gemstar. Gemstar was added as a party to this case and asserted these patents against us. ~~We examined these patents and believe that they are not infringed by any~~Gemstar’s claim against us was resolved as a part of ~~our products or services.~~ the settlement discussed above.

A Markman ruling interpreting the patent claims was issued by the Court and in response to that ~~ruling,~~ruling; we filed motions for summary judgment of non-infringement for each of the asserted patents. Gemstar filed a motion for summary judgment of infringement with respect to one of the patents. During July 2002, ~~the Court issued a Memorandum of Opinion on the summary judgment motions. In its Opinion,~~ the Court ruled that none of our products infringe the 5,038,211 and 5,293,357 patents. With respect to the 4,751,578 patent, the Court ruled that none of our current products infringed that patent and asked for additional information before it could rule on certain low-volume products that are no longer in production. During July 2002, the Court summarily ruled that the ~~aforementioned~~ low-volume products did not infringe any of the asserted patents. Accordingly, the Court dismissed the case and awarded us our court ~~costs. Superguide~~costs and ~~Gemstar are appealing this~~the case was appealed to the United States Court of Appeals for the Federal Circuit.

On February 12, 2004, the Federal Circuit affirmed in part and reversed in part the District Court’s findings and remanded the case back to the District Court for further proceedings. A petition for reconsideration of the Federal Circuit Decision was denied. Based upon the settlement with Gemstar, we now have an additional defense in this case based upon a license from Gemstar. We will continue to vigorously defend this case. In the event ~~the Federal Circuit~~that a Court ultimately determines that we infringe on any of the ~~aforementioned~~ patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
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require us to materially modify certain user-friendly electronic programming guide and related features that we currently offer to consumers. It is ~~too early~~not possible to make ana firm assessment of the probable outcome of the ~~suits.~~suit or to determine the extent of any potential liability or damages.

~~California Actions~~Broadcast Innovation, LLC

~~A purported class action was~~In November of 2001, Broadcast Innovation, LLC filed a lawsuit against us, DirecTV, Thomson Consumer Electronics and others in Federal District Court in Denver, Colorado. The suit alleges infringement of United States Patent Nos. 6,076,094 (“the ‘094 patent”) and 4,992,066 (“the ‘066 patent”). The ‘094 patent relates to certain methods and devices for transmitting and receiving data along with specific formatting information for the data. The ‘066 patent relates to certain methods and devices for providing the scrambling circuitry for a pay television system on removable cards. We examined these patents and believe that they are not infringed by any of our products or services. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leaving us as the only defendant.

ECHOSTAR COMMUNICATIONS CORPORATION
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defend this case. In the event that a Court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. It is not possible to make a firm assessment of the probable outcome of the suit or to determine the extent of any potential liability or damages.

TiVo Inc.

In January of 2004, TiVo Inc. filed a lawsuit against us in the ~~California State Superior~~United States District Court for ~~Alameda County during May 2001~~the Eastern District of Texas. The suit alleges infringement of United States Patent No. 6,233,389 (“the ‘389 patent”). The ‘389 patent relates to certain methods and devices for providing what the patent calls “time-warping”. We have examined this patent and do not believe that it is infringed by ~~Andrew A. Werby. The complaint, relating~~any of our products or services. We intend to ~~late fees, alleges unlawful, unfair~~vigorously defend this case and ~~fraudulent business practices in violation~~we have moved to have it transferred to the United States District Court for the Northern District of ~~California Business and Professions Code Section 17200 et seq., false and misleading advertising in violation of California Business and Professions Code Section 17500, and violation~~California. In the event that a Court ultimately determines that we infringe this patent, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. It is not possible to make a firm assessment of the ~~California Consumer Legal Remedies Act. A settlement was subsequently reached with plaintiff’s counsel. The Court issued its preliminary approval~~probable outcome of the ~~settlement during October 2002 and issued its final approval~~suit or to determine the extent of ~~the settlement on March 7, 2003. As a result, this matter was concluded with no material impact on our business.~~any potential liability or damages.

California Action

A purported class action relating to the use of terms such as “crystal clear digital video,” “CD-quality audio,” and “on-screen program guide,” and with respect to the number of channels available in various programming packages was ~~also~~ filed against us in the California State Superior Court for Los Angeles County in 1999 by David Pritikin and by Consumer Advocates, a nonprofit unincorporated association. The complaint alleges breach of express warranty and violation of the California Consumer Legal Remedies Act, Civil Code Sections 1750, et seq., and the California Business & Professions Code Sections 17500 & 17200. A hearing on the plaintiffs’ motion for class certification and our motion for summary judgment was held during ~~June~~ 2002. At the hearing, the Court issued a preliminary ruling denying the plaintiffs’ motion for class certification. However, before issuing a final ruling on class certification, the Court granted our motion for summary judgment with respect to all of the plaintiffs’ claims. Subsequently, we filed a motion for ~~attorney’s~~attorneys’ fees which was denied by the Court. The plaintiffs filed a notice of appeal of the court’s granting of our motion for summary judgment and we cross-appealed the Court’s ruling on our motion for ~~attorney’s~~attorneys’ fees. During December 2003, the Court of Appeals affirmed in part; and reversed in part, the lower court’s decision granting summary judgment in our favor. Specifically, the Court found there were triable issues of fact as to whether we may have violated the alleged consumer statutes “with representations concerning the number of channels and the program schedule.” However, the Court found no triable issue of fact as to whether the representations “crystal clear digital video” or “CD quality” audio constituted a cause of action. Moreover, the Court affirmed that the “reasonable consumer” standard was applicable to each of the alleged consumer statutes. Plaintiff argued the standard should be the “least sophisticated” consumer. The Court also affirmed the dismissal of Plaintiffs’ breach of warranty claim. Plaintiff filed a Petition for Review with the California Supreme Court and we responded. During March 2004, the California Supreme Court denied Plaintiff’s Petition for Review. Therefore, the action has been remanded to the trial court pursuant to the instructions of the Court of Appeals. It is not possible to make ~~a firm~~an assessment of the probable outcome of the ~~appeal~~litigation or to determine the extent of any potential ~~liability or damages.~~liability.

~~State Investigation~~

During April 2002, two state attorneys general commenced a civil investigation concerning certain of our business practices. Over the course of the next six months, 11 additional states ultimately joined the investigation. The states alleged failure to comply with consumer protection laws based on our call response times and policies, advertising and customer agreement disclosures, policies for handling consumer complaints, issuing rebates and refunds and charging cancellation fees to consumers, and other matters. We cooperated fully in the investigation. During May 2003, we entered into an Assurance of Voluntary Compliance with the states which ended their investigation. The states have released all claims related to the matters investigated. We made a settlement payment of approximately $5.0 million during the second quarter of 2003 pursuant to the Assurance.

Retailer Class Actions

ECHOSTAR COMMUNICATIONS CORPORATION
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Federal Court action to allow the parties to pursue a comprehensive adjudication of their dispute in the Arapahoe County State Court. John DeJong, d/b/a Nexwave, and Joseph Kelley, d/b/a Keltronics, subsequently intervened in the Arapahoe County Court action as plaintiffs and proposed class representatives. We have filed a motion for summary judgment on all counts and against all plaintiffs. The plaintiffs have filed a motion for additional time to conduct

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
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discovery to enable them to respond to our motion. The Court has not ruled on either of the two motions. It is ~~too early~~not possible to make an assessment of the probable outcome of the litigation or to determine the extent of any potential liability or damages.

Satellite Dealers Supply, Inc. (“SDS”) filed a lawsuit against us in the United States District Court for the Eastern District of Texas during September 2000, on behalf of itself and a class of persons similarly situated. The plaintiff was attempting to certify a nationwide class on behalf of sellers, installers, and servicers of satellite equipment who contract with us and who allege that we: (1) charged back certain fees paid by members of the class to professional installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class members; and (3) misrepresented, to class members, the ownership of certain equipment related to the provision of our satellite television service. During September 2001, the Court granted our motion to ~~dismiss for lack of personal jurisdiction.~~dismiss. The plaintiff moved for reconsideration of the Court’s order dismissing the case. The Court denied the plaintiff’s motion for reconsideration. The trial court denied our motions for sanctions against SDS. Both parties ~~have now~~ perfected appeals before the Fifth Circuit Court of Appeals. On appeal, the Fifth Circuit upheld the dismissal for lack of personal jurisdiction. The ~~parties’~~Fifth Circuit vacated and remanded the District Court’s denial of our motion for sanctions. The District Court subsequently issued a written ~~briefs have been filed and oral argument was heard~~opinion containing the same findings. The only issue remaining is our collection of costs, which were previously granted by the ~~Court on August 4, 2003. It is not possible to make a firm assessment of the probable outcome of the appeals or to determine the extent of any potential liability or damages.~~Court.

StarBand Shareholder Lawsuit

OnDuring August ~~20,~~ 2002, a limited group of shareholders in StarBand filed an action in the Delaware Court of Chancery against ~~EchoStar~~us and EchoBand Corporation, together with four EchoStar executives who sat on the Board of Directors for StarBand, for alleged breach of the fiduciary duties of due care, good faith and loyalty, and also against ~~EchoStar~~us and EchoBand Corporation for aiding and abetting such alleged breaches. Two of the individual defendants, Charles W. Ergen and David K. Moskowitz, are members of our Board of Directors. The action stems from the defendants’ involvement as directors, and ~~EchoBand’s~~our position as a shareholder, in StarBand, a broadband Internet satellite venture in which we invested. OnDuring July ~~28,~~ 2003, the Court granted the defendants’ motion to dismiss on all counts. ~~We do~~The Plaintiffs appealed. On April 15, 2004, the Delaware Supreme Court remanded the case instructing the Chancery Court to re-evaluate its decision in light of a recent opinion of the Delaware Supreme Court, Tooley v. Donaldson, No. 84,2004 (Del. Supr. April 2, 2004). It is not ~~know if Plaintiffs will appeal~~possible to make a firm assessment of the ~~Court’s decision.~~probable outcome of the litigation or to determine the extent of any potential liability or damages.

~~Shareholder Derivative Action~~Enron Commercial Paper Investment Complaint

During ~~October 2002, a purported shareholder filed a derivative~~November 2003, an action ~~against members of our Board of Directors~~was commenced in the United States Bankruptcy Court for the Southern District ~~Court~~ of ~~Clark County, Nevada and naming~~New York, against approximately 100 defendants, including us, ~~as a nominal defendant.~~who invested in Enron’s commercial paper. The complaint alleges ~~breach~~that Enron’s October 2001 prepayment of ~~fiduciary duties, corporate waste~~its commercial paper is a voidable preference under the bankruptcy laws and ~~other unlawful acts relating~~constitutes a fraudulent conveyance. The complaint alleges that we received voidable or fraudulent prepayments of approximately $40.0 million. We typically invest in commercial paper and notes which are rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations. At the time of our investment in Enron commercial paper, it was considered to ~~our agreement~~be high quality and considered to ~~(1) pay Hughes Electronics Corporation~~be a $600.0 million termination fee in certain circumstances and (2) acquire Hughes’ shareholder interest in PanAmSat. The agreements to pay the termination fee and acquire PanAmSat were required in the event that the merger with DirecTV was not completed by January 21, 2003. During July 2003, the individual Board of Director defendants were dismissed from the suit. The plaintiff has filed a motion for attorney’s fees.very low risk. It is ~~not possible~~too early to make an assessment of the probable outcome of the ~~outstanding motions~~litigation or to determine the extent of any potential liability or damages.

Acacia

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

cable companies as defendants. Acacia is an intellectual property holding company which seeks to license the patent portfolio that it has acquired. The suit alleges infringement of United States Patent Nos. 5,132,992, 5,253,275, 5,550,863, 6,002,720 and 6,144,702 (herein after the ‘992, ‘275, ‘863, ‘720 and ‘702 patents, respectively). The ‘992, ‘863, ‘720 and ‘702 patents have been asserted against us although Acacia’s complaint does not identify any products or services that it believes are infringing these patents. These patents relate to various systems and methods related to the transmission of digital data. The ‘992 and ‘702 patents have also been asserted against several internet adult content providers in the United States District Court for the Central District of California. On July 12, 2004, that Court issued a Markman ruling which found that the ‘992 and ‘702 patents were not as broad as Acacia had contended. We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. It is not possible to make a firm assessment of the probable outcome of the suit or to determine the extent of any potential liability or damages.

Fox Sports Direct

On June 14, 2004, Fox Sports Direct (“Fox”) sued us in the United States District Court Central District of California for alleged breach of contract. Fox claims, among other things, that we underpaid license fees for the period from January 2000 through December 2001 and has requested an accounting for the period from January 2000 through June 2003. Fox has claimed damages of $25.0 million, plus interest. An answer has not yet been filed and no discovery has commenced. It is too early to determine whether or not we will have liability for license fees in excess of our paid and accrued programming costs, or for interest.

In addition to the above actions, we are subject to various other legal proceedings and claims which arise in the ordinary course of business. In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial position, results of operations or liquidity.

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~9.
~~(Unaudited)~~

9. Depreciation and Amortization Expense

Depreciation and amortization expense consists of the following:

For the Three Months For the Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

(In thousands) (In thousands)
Satellites $ 31,946 $ 36,003 $ 60,204 $ 72,012
Digital Home Plan equipment 30,524 37,635 58,784 72,819
Furniture, fixtures and equipment 21,355 22,808 42,034 45,971
Other amortizable intangibles 2,667 2,638 5,659 5,070
Buildings and improvements 830 910 1,634 1,824
Tooling and other 659 305 1,203 769

Depreciation and amortization expense $ 87,981 $ 100,299 $ 169,518 $ 198,465


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2004		2003		2004		2003
	(In thousands)
Satellites	$	33,640	$	36,003	$	67,281	$	72,012
Equipment leased to customers		48,057		37,635		85,335		72,819
Furniture, fixtures and equipment		25,681		22,808		53,611		45,971
Amortizable intangibles		9,576		2,638		11,865		5,070
Buildings and improvements		1,132		910		2,271		1,824
Tooling and other		5,848		305		4,176		769

Total depreciation and amortization expense	$	123,934	$	100,299	$	224,539	$	198,465

Cost of sales and operating expense categories included in our accompanying condensed consolidated statements of operations do not include depreciation expense related to satellites or ~~digital home plan equipment.~~equipment leased to customers.

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

10.Segment Reporting

Financial Data by Business Unit

Statement of Financial Accounting Standard No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“~~FAS No.~~SFAS 131”) establishes standards for reporting information about operating segments in annual financial statements of public business enterprises and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker(s) of an enterprise. Under this definition, we currently operate as two business ~~units, DISH Network and ETC.~~units. The ~~All other~~“All other” category consists of revenue and expenses from other operating segments for which the disclosure requirements of ~~FAS No.~~SFAS 131 do not apply.

For the Three Months For the Six Months
Ended June 30, Ended June 30,

2002 2003 2002 2003

(In thousands) (In thousands)
Revenue

DISH Network $ 1,111,200 $ 1,366,490 $ 2,157,297 $ 2,680,807
ETC 35,336 25,742 64,625 44,700
All other 23,588 24,787 54,173 52,584
Eliminations (1,440 ) (2,452 ) (2,943 ) (4,476 )

Total revenue $ 1,168,684 $ 1,414,567 $ 2,273,152 $ 2,773,615

Net income

DISH Network $ 25,882 $ 122,683 $ (18,686 ) $ 177,893
ETC 6,052 (381 ) 8,069 (5,915 )
All other 5,067 6,491 12,471 14,732
Eliminations — — — —

Total net income $ 37,001 $ 128,793 $ 1,854 $ 186,710


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2003			2004			2003
				(In thousands)
Revenue
DISH Network	$	1,732,662		$	1,366,490		$	3,271,550		$	2,680,807
ETC		25,247			25,742			42,737			44,700
All other		22,142			24,787			47,125			52,584
Eliminations		(2,338	)		(2,452	)		(3,903	)		(4,476	)

Total revenue	$	1,777,713		$	1,414,567		$	3,357,509		$	2,773,615

Net income (loss)
DISH Network	$	90,964		$	122,683		$	45,350		$	177,893
ETC		(8,629	)		(381	)		(13,339	)		(5,915	)
All other		2,981			6,491			10,419			14,732

Total net income (loss)	$	85,316		$	128,793		$	42,430		$	186,710

1811.Related Party

As previously disclosed, we own 50% of NagraStar LLC (“NagraStar”), a joint venture that provides us with smart cards. As of June 30, 2004, we were committed to purchase approximately $101.3 million of smart cards from NagraStar. Approximately $44.4 million of these commitments had been accrued for as of June 30, 2004 on our condensed consolidated balance sheet.

~~ECHOSTAR COMMUNICATIONS CORPORATION~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued~~12.
~~(Unaudited)~~

~~11.~~ Subsequent Events

~~SBC Agreement~~Common Stock Repurchase Programs

As previously disclosed, during the fourth quarter of 2003, our Board of Directors authorized the repurchase of an aggregate of up to $1.0 billion of our Class A common stock. During ~~July 2003,~~the six months ended June 30, 2004, we announced an agreement with SBC Communications, Inc. to co-brand our DISH Network service with SBC Communications’ telephony, high-speed data and other communications services. SBC Communications will market the bundled service, including integrated order-entry, customer service and billing, which is expected to be available to consumers in early 2004.

Pursuant to the agreement, SBC Communications will purchase set-top box equipment from us to sell to bundled service customers. SBC Communications also may choose to outsource installation and certain customer service functions to us for a fee. As part of the agreement, SBC Communications will pay us development and implementation fees for, among other things, product development and integration.

~~SBC Convertible Subordinated Note~~

On July 21, 2003, we issued and sold a $500.0 million 3.0% convertible subordinated note due 2010 to SBC Communications in a privately negotiated transaction. The note is an unsecured obligation convertible intopurchased approximately ~~6.87~~22.9 million shares of our Class A ~~Common Stock at~~common stock for approximately $722.5 million. During the ~~option~~period between July 1 and July 15, 2004, we repurchased approximately 2.9 million additional shares of ~~SBC at $72.82 per~~our Class A common stock for approximately $87.1 million. As of July 15, 2004, we had completed the share ~~subject to adjustment in certain circumstances. Commencing July 21, 2008, we may redeem, and SBC may require us to purchase, all or~~repurchase plan, having purchased a ~~portion~~total of ~~the note without premium.~~

~~Partial Redemption~~31.8 million shares of ~~9 1/8% Senior Notes~~

On August 4, 2003, EDBS elected to redeem $245.0 million principal amount of its 9 1/8% Senior Notes due 2009, fully exercising its optional partial redemption right. The outstanding principal amount of the notes after the redemption will be $455.0 million. In accordance with the terms of the indenture governing the notes, the $245.0 million principal amount of the notes will be redeemed effective September 3, 2003, at 109.125% of the principal amount,our Class A common stock for a total of ~~approximately $267.4 million. Interest on~~$1.0 billion.

Effective August 9, 2004, our Board of Directors authorized the ~~notes will~~repurchase of an aggregate of up to an additional $1.0 billion of our Class A Common stock. We may make repurchases of our Class A Common stock through open market purchases or privately negotiated transactions subject to market conditions and other factors. Our repurchase programs do not require us to acquire any specific number or amount of securities and any of those programs may be ~~paid through the September 3, 2003 redemption date.~~

~~EchoStar IX~~

~~EchoStar IX was successfully launched on August 7, 2003. Assuming successful completion~~terminated at any time. We may enter into Rule 10b5-1 plans from time to time to facilitate repurchases of on orbit check out, EchoStar IX will be located at the 121 degree orbital location. Its 32 Ku-band transponders are expected to provide additional video service choices for DISH Network subscribers utilizing a new specially-designed dish. EchoStar IX is also equipped with two Ka-band transponders which we intend to utilize to confirm the commercial viability of direct-to-home Ka-band video and data services.our securities.

~~Principal Business~~Subscriber-related revenue.“Subscriber-related revenue” consists principally of revenue from basic, movie, local, international and pay-per-view subscription television services, as well as rental and additional outlet fees from subscribers with multiple set-top boxes. Contemporaneous with the commencement of sales of co-branded services pursuant to our agreement with SBC Communications, Inc. (“SBC”) during the first quarter of 2004, “Subscriber-related revenue” also includes revenue from equipment sales, installation and other services related to that agreement. Revenue from equipment sales to SBC is deferred and recognized over the estimated average co-branded subscriber life. Revenue from installation and certain other services performed at the request of SBC is recognized upon completion of the services.

Development and implementation fees received from SBC are being recognized in “Subscriber-related revenue” over the next several years. In order to estimate the amount recognized monthly, we first divide the number of co-branded subscribers activated during the month under the SBC agreement by total estimated co-branded subscriber activations during the life of the contract. We then multiply this percentage by the total development and implementation fees received from SBC. The resulting estimated monthly amount is recognized as revenue ratably over an estimated average subscriber life.

Effective January 1, 2004, we combined “Subscription television service” revenue and “Other subscriber-related revenue” into “Subscriber-related revenue.” All prior period amounts were reclassified to conform to the current period presentation.

Equipment sales.“Equipment sales” consist of sales of digital set-top boxes by our ETC subsidiary to an international DBS service provider. “Equipment sales” also include unsubsidized sales of DBS accessories to DISH Network subscribers and to retailers and other distributors of our equipment domestically. “Equipment sales” does not include revenue from sales of equipment to SBC. Effective January 1, 2004, “Equipment sales” includes non-DISH Network receivers and other accessories sold by our EchoStar International Corporation subsidiary to international customers which were previously included in “Other” revenue. All prior period amounts were reclassified to conform to the current period presentation.

Subscriber-related expenses.“Subscriber-related expenses” include costs incurred in connection with our installation, in-home service and call center operations, programming expenses, copyright royalties, residual commissions, billing, lockbox, subscriber retention and other variable subscriber expenses. Contemporaneous with the commencement of sales of co-branded services pursuant to our agreement with SBC during the first quarter of 2004, “Subscriber-related expenses” also include the cost of sales and expenses from equipment sales, installation and other services related to that relationship. Cost of sales from equipment sales to SBC are deferred and recognized over the estimated average co-branded subscriber life. Expenses from installation and certain other services performed at the request of SBC are recognized as the services are performed.

Satellite and transmission expenses.“Satellite and transmission expenses” include costs associated with the operation of our digital broadcast centers, the transmission of local channels, contracted satellite telemetry, tracking and control services and transponder leases.

Cost of sales – equipment.“Cost of sales – equipment” principally includes costs associated with digital set-top boxes and related components sold to an international DBS service provider and unsubsidized sales of DBS accessories to DISH Network subscribers and to retailers and other distributors of our equipment domestically. “Cost of sales – equipment” does not include the costs from sales of equipment to SBC. Effective January 1, 2004, “Cost of sales – equipment” includes non-DISH Network receivers and other accessories sold by our EchoStar International Corporation subsidiary to international customers which were previously included in “Cost of sales – other.” All prior period amounts conform to the current period presentation.

Subscriber acquisition costs.Under most promotions, we subsidize the installation and all or a portion of the cost of EchoStar ~~Communications Corporation (“ECC”,~~receiver systems in order to attract new DISH Network subscribers. Our “Subscriber acquisition costs” include the cost of EchoStar receiver systems sold to retailers and ~~together with its subsidiaries or referring to particular subsidiaries in certain circumstances, “EchoStar”,~~other distributors of our equipment, the ~~“Company”, “we”, “us”, and/or “our”) include two interrelated business units:~~cost of

	•		~~The DISH Network~~ ~~— which provides a direct broadcast satellite subscription television service we refer to as “DBS” in the United States; and~~

	• Item 2.		~~EchoStar Technologies Corporation~~~~(“ETC”)~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — which designs and develops DBS set-top boxes, antennae and other digital equipment for the DISH Network. We refer to this equipment collectively as “EchoStar receiver systems.” ETC also designs, develops and distributes similar equipment for international satellite service providers.Continued

receiver systems sold directly by us to subscribers, net costs related to our free installation promotions and other promotional incentives, and costs related to acquisition advertising. We exclude the value of equipment capitalized under our equipment lease program from our calculation of “Subscriber acquisition costs.” We also exclude payments and the value of returned equipment relating to disconnecting lease program subscribers from our calculation of “Subscriber acquisition costs”.

~~Since 1994, we have deployed substantial resources to develop~~SAC.We are not aware of any uniform standards for calculating SAC and believe presentations of SAC may not be calculated consistently by different companies in the ~~“EchoStar DBS System.”~~ same or similar businesses. We calculate SAC by dividing total subscriber acquisition costs for a period by the number of gross new DISH Network subscribers during the period. We include all new DISH Network subscribers in our calculation, including DISH Network subscribers added with little or no subscriber acquisition costs.

General and administrative expenses.“General and administrative expenses” primarily include employee-related costs associated with administrative services such as legal, information systems, accounting and finance. It also includes outside professional fees (i.e. legal and accounting services) and building maintenance expense and other items associated with administration.

Interest expense.“Interest expense” primarily includes interest expense, prepayment premiums and amortization of debt issuance costs associated with our high yield and convertible debt securities, net of capitalized interest.

Other.The ~~EchoStar DBS System consists~~main components of “Other” income and expense are equity in earnings and losses of our ~~FCC-allocated DBS spectrum, nine in-orbit satellites~~affiliates, gains and losses on the sale of investments, or impairment of marketable and non-marketable investment securities.

Earnings before interest, taxes, depreciation and amortization (“~~EchoStar I”~~EBITDA”). EBITDA is defined as “Net income (loss)” plus “Interest expense” net of “Interest income”, “Taxes” and “Depreciation and amortization”. Effective April 1, 2003, we include “Other income and expense” items in our definition of EBITDA. All prior period amounts conform to the current period presentation.

DISH Network subscribers.We include customers obtained through ~~“EchoStar IX”), EchoStar receiver systems, digital broadcast operations centers, customer service facilities,~~direct sales, and through our retail networks, including our co-branding relationship with SBC and other ~~assets utilized~~similar marketing arrangements, in our ~~operations. Our principal business strategy~~DISH Network subscriber count. We believe our overall economic return for co-branded and traditional subscribers will be comparable. We also provide DISH Network service to hotels, motels and other commercial accounts. For certain of these commercial accounts, we divide our total revenue for these commercial accounts by an amount approximately equal to the retail price of our most widely distributed programming package, AT60 (but taking into account, periodically, price changes and other factors), and include the resulting number, which is ~~to continue developing~~substantially smaller than the actual number of commercial units served, in our DISH Network subscriber count.

During April 2004, we acquired the C-band subscription television service business of Superstar/Netlink Group LLC (“SNG”), the assets of which primarily consist of acquired customer relationships. Although we expect to convert some of these customer relationships from C-band subscription television services to our DISH Network DBS subscription television service, acquired C-band subscribers are not included in ~~the United States~~our DISH network subscriber count unless they have also subscribed to ~~provide consumers with a fully competitive alternative to cable~~our DISH Network DBS television service.

~~Results~~Monthly average revenue per subscriber (“ARPU”).We are not aware of ~~Operations~~any uniform standards for calculating ARPU and believe presentations of ARPU may not be calculated consistently by other companies in the same or similar businesses. We calculate average monthly revenue per subscriber, or ARPU, by dividing average monthly “Subscriber-related revenues” for the period (total “Subscriber-related revenues” during the period divided by the number of months in the period) by our average DISH Network subscribers for the period. Average DISH Network subscribers are calculated for the period by adding the average DISH Network subscribers for each month and dividing by the number of months in the period. Average DISH Network subscribers for each month are calculated by adding the beginning and ending DISH Network subscribers for the month and dividing by two. As discussed in “Subscriber-related revenue” above, effective January 1, 2004 we include amounts previously reported as “Other subscriber-related revenue” in our ARPU calculation. All prior period amounts conform to the current period presentation.


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

RESULTS OF OPERATIONS

Three Months Ended June 30, ~~2003~~2004 Compared to the Three Months Ended June 30, ~~2002.~~2003.


	For the Three Months
	Ended June 30,						Variance
	2004			2003			Fav/(Unfav)			%
Statements of Operations Data	(In thousands)
Revenue:
Subscriber-related revenue	$	1,660,502		$	1,343,041		$	317,461			23.6	%
Equipment sales		85,700			63,272			22,428			35.4	%
Other		31,511			8,254			23,257			281.8	%

Total revenue		1,777,713			1,414,567			363,146			25.7	%

Costs and Expenses:
Subscriber-related expenses		900,808			654,699			(246,109	)		(37.6	%)
% of Subscriber-related revenue		54.2	%		48.7	%
Satellite and transmission expenses		27,550			16,315			(11,235	)		(68.9	%)
% of Subscriber-related revenue		1.7	%		1.2	%
Cost of sales — equipment		67,642			44,715			(22,927	)		(51.3	%)
% of Equipment sales		78.9	%		70.7	%
Cost of sales — other		11,260			973			(10,287	)		N/A
Subscriber acquisition costs		365,344			285,701			(79,643	)		(27.9	%)
General and administrative		97,158			89,089			(8,069	)		(9.1	%)
% of Total revenue		5.5	%		6.3	%
Non-cash, stock-based compensation		—			(217	)		(217	)		(100.0	%)
Depreciation and amortization		123,934			100,299			(23,635	)		(23.6	%)

Total costs and expenses		1,593,696			1,191,574			(402,122	)		(33.7	%)

Operating income		184,017			222,993			(38,976	)		(17.5	%)

Other income (expense):
Interest income		11,370			14,959			(3,589	)		(24.0	%)
Interest expense, net of amounts capitalized		(93,388	)		(107,715	)		14,327			13.3	%
Other		(11,874	)		1,713			(13,587	)		N/A

Total other income (expense)		(93,892	)		(91,043	)		(2,849	)		(3.1	%)

Income (loss) before income taxes		90,125			131,950			(41,825	)		(31.7	%)
Income tax benefit (provision), net		(4,809	)		(3,157	)		(1,652	)		(52.3	%)

Net income (loss)	$	85,316		$	128,793		$	(43,477	)		(33.8	%)

Subscribers (in millions), as of period end		10.125			8.800			1.325			15.1	%

Subscriber additions, net		340,000			270,000			70,000			25.9	%

Monthly churn percentage		1.71	%		1.67	%		(0.04	%)		(2.4	%)

Average subscriber acquisition costs per subscriber (“SAC”)	$	431		$	408		$	(23	)		(5.6	%)

Average revenue per subscriber (“ARPU”)	$	55.59		$	51.69		$	3.90			7.5	%

EBITDA	$	296,077		$	325,005		$	(28,928	)		(8.9	%)


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

~~Total revenue~~DISH Network subscribers.As of June 30, 2004, we had approximately 10.125 million DISH Network subscribers compared to approximately 8.800 million DISH Network subscribers at June 30, 2003, an increase of approximately 15.1%. ~~Total revenue~~DISH Network added approximately 340,000 net new DISH Network subscribers for the quarter ended June 30, 2004 compared to approximately 270,000 net new DISH Network subscribers during the same period in 2003. As the size of our subscriber base continues to increase, even if percentage subscriber churn remains constant, increasing numbers of gross new subscribers are required to sustain net subscriber growth.

Subscriber-related revenue.DISH Network “Subscriber-related revenue” totaled $1.661 billion for the three months ended June 30, ~~2003 was $1.41 billion,~~2004, an increase of ~~$245.9~~$317.5 million or ~~21.0%~~23.6% compared to the ~~three months ended June 30, 2002.~~same period in 2003. This increase was directly attributable to continued DISH Network subscriber growth and ~~increased monthly average revenue per subscriber. The increase was partially offset by a decrease in DTH equipment sales, discussed below.~~

~~Subscription television services~~. Subscription television services revenue consists principally of revenue from basic, premium, local, international and pay-per-view subscription television services. Subscription television services revenue totaled $1.34 billion for the ~~three months ended June 30, 2003, an increase of $268.8 million or 25.1% compared to the same period in 2002. This increase was attributable to continued DISH Network subscriber growth and an~~ increase in ~~monthly average revenue per subscriber,~~“ARPU” discussed below. DISH Network added approximately 270,000 net new subscribers for the three months ended June 30, 2003 compared to approximately 295,000 net new subscribers added during the same period in 2002. As of June 30, 2003, we had approximately 8.80 million DISH Network subscribers compared to approximately 7.46 million at June 30, 2002, an increase of approximately 18.0%. Subscription television services revenue“Subscriber-related revenue” will continue to increase to the extent we are successful in increasing the number of DISH Network subscribers and maintaining or increasing revenue per subscriber.

~~Monthly average revenue per subscriber.~~ARPU.Monthly average revenue per DISH Network subscriber was approximately ~~$51.60~~$55.59 during the three months ended June 30, ~~2003~~2004 and approximately ~~$48.85~~$51.69 during the same period in ~~2002. This~~2003. The $3.90 increase ~~was~~in monthly average revenue per DISH Network subscriber is primarily attributable to price increases of up to $2.00 in ~~March 2003 and~~February 2004 on some of our most popular packages, a reduction ~~in the amount of free and discounted programming offered during the three months ended June 30, 2003 compared to the same period in 2002. This increase was also attributable to an increase~~ in the number of subscribers receiving subsidized programming through our free and discounted programming promotions, the increased availability of local channels by satellite and an increase in subscribers with multiple set-top boxes. ~~Monthly average~~We provided local channels by satellite in 136 markets as of June 30, 2004 as compared to 69 markets as of June 30, 2003. This increase was also partially attributable to revenue ~~per subscriber will~~from equipment sales, installation and other services related to our relationship with SBC. While there can be ~~adversely affected~~no assurance, we expect revenues from this relationship, particularly the installation revenues, to continue to have a positive impact on ARPU in ~~any future periods~~the near term to the extent that we continue ~~our free programming promotions or expand our discounted programming promotions.~~to add co-branded subscribers under the agreement.


~~Item 2.~~		~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued~~

attempt to assist subscribers in arranging alternative means to receive network channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we cannot predict with any degree of certainty how many subscribers might ultimately cancel their primary DISH Network programming as a result of termination of their distant network channels. We could be required to terminate distant network programming to all subscribers in the event the plaintiffs prevail on their cross-appeal and we are permanently enjoined from delivering all distant network channels. Termination of distant network programming to subscribers would result in a reduction in ~~ARPU of no more than $0.30~~average monthly revenue per subscriber ~~per month.~~

In April 2002, the FCC concluded that our “must carry” implementation methods were not in compliance with the “must carry” rules. If the FCC finds our subsequent remedial actions unsatisfactory, while we would attempt to continue providing local network channels in all markets without interruption, we could be forced by capacity constraints to reduce the number of markets in which we provide local channels. This could causeand a temporary increase in ~~churn and a small reduction in average monthly revenue per subscriber.~~subscriber churn.

~~DTH equipment~~Equipment sales. DTH equipment sales consist of sales of digital set-top boxes by our ETC subsidiary to Bell ExpressVu, a subsidiary of Bell Canada, Canada’s national telephone company. DTH equipment sales also include sales of DBS accessories in the United States. For the three months ended June 30, ~~2003, DTH equipment sales~~2004, “Equipment sales” totaled ~~$50.8~~$85.7 million, ~~a decrease~~an increase of ~~$17.4~~$22.4 million compared to the same period during ~~2002.~~2003. This ~~decrease~~increase principally resulted from an increase in unsubsidized sales of DBS accessories to DISH Network subscribers and to retailers and other distributors of our equipment domestically. The increase in sales of DBS accessories primarily relates to, among other things, subscriber equipment upgrades to support the launch of additional programming, including local markets. The increase in “Equipment sales” was partially offset by a decrease in sales of ~~digital set-top boxes to Bell ExpressVu and a decrease in sales of DBS accessories.~~

~~Subscriber-related expenses~~~~. Subscriber-related expenses include costs incurred in the operation of our DISH~~non-DISH Network ~~customer service centers, programming expenses, copyright royalties, residual commissions, and billing, lockbox~~receivers and other ~~variable subscriber~~accessories sold by our EchoStar International Corporation subsidiary to international customers.

Subscriber-related expenses.“Subscriber-related ~~expenses~~expenses” totaled ~~$654.7~~$900.8 million during the three months ended June 30, ~~2003,~~2004, an increase of ~~$112.2~~$246.1 million or 37.6% compared to the same period in ~~2002. This~~2003. The increase isin “Subscriber-related expenses” was primarily attributable to the increase in the number of DISH Network ~~subscribers. These~~subscribers which resulted in increased expenses ~~represent 48.8%~~to support the DISH Network. “Subscriber-related expenses” represented 54.2% and ~~50.6%~~48.7% of ~~Subscription television services revenues~~“Subscriber-related revenue” during the three months ended June 30, ~~2003~~2004 and ~~2002,~~2003, respectively. The ~~decrease~~increase in ~~Subscriber-related expenses as a percentage of Subscription television services~~this expense to revenue ratio primarily resulted from increases in our programming and subscriber retention costs, and costs


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

associated with the expansion of our installation, in-home service and call center operations. These increased operational costs, some of which are temporary, related to, among other things, more complicated installations required by a larger dish, or “SuperDISH”, used to receive programming from our FSS satellites. This increase also resulted from an approximate $13.0 million charge during the three months ended June 30, 2004 to establish a reserve for estimated expenses related to prior periods, and further to cost of sales and expenses from equipment sales, installation and other services related to our relationship with SBC. Since margins related to our co-branded subscribers are lower than for our traditional subscribers, we expect this relationship to continue to negatively impact this ratio to the extent that we continue to add co-branded subscribers under the agreement. The increase in the expense to revenue ratio from 2003 to 2004 was partially offset by the increase in monthly average revenue per DISH Network subscriber discussed ~~above~~above. The ratio of “Subscriber-related expenses” to “Subscriber-related revenue” could continue to increase if our programming and ~~increased operating efficiencies.~~retention costs increase at a greater rate than our “Subscriber-related revenue.”

~~During~~We currently offer local broadcast channels in approximately 143 markets across the ~~three months ended March 31, 2003,~~United States. In 38 of those markets, two dishes are necessary to receive all local channels in the market. In connection with reauthorization of the Satellite Home Viewer Improvement Act this year, Congress is considering requiring that all local broadcast channels delivered by satellite to any particular market be available from one dish. We currently plan to transition all markets to a single dish by 2008. If a two-dish prohibition with a shorter transition period is enacted, we ~~combined~~would be forced by capacity limitations to move the ~~line item~~local channels in as many as 30 markets to new satellites, requiring subscribers in those markets to install a second dish to continue receiving their local channels. We may be forced to stop offering local channels in some of those markets altogether. The transition would result in disruptions of service for a substantial number of customers, and the cost of compliance could exceed $100.0 million. To the extent those costs are passed on to our ~~Condensed Consolidated Statement of Operations captioned Subscriber-related expenses with the previously included line item captioned Customer service center~~subscribers, and ~~other. In addition, at~~because many subscribers may be unwilling to install a second dish where one had been adequate, it is expected that time we reclassified certain amounts between categories on the Condensed Consolidated Statement of Operations. All prior period amounts have been reclassified to conform to the current year presentation. None of these changes had any impact on Operating income or Net income.subscriber churn would be negatively impacted.

Satellite and transmission expenses.“Satellite and transmission ~~expenses include expenses associated with the operation of our digital broadcast centers and contracted satellite telemetry, tracking and control services. Satellite and transmission expenses~~expenses” totaled ~~$16.3~~$27.6 million during the three months ended June 30, ~~2003, a $1.2~~2004, an $11.2 million increase compared to the same period in ~~2002.~~2003. This increase primarily resulted from launch and operational costs, including lease payment obligations pursuant to our Fixed Satellite Service (“FSS”) agreements, associated with the ~~launch~~increasing number of ~~additional~~markets in which we offer local ~~markets. Satellite~~network channels by satellite as previously discussed. “Satellite and transmission ~~expenses~~expenses” totaled 1.7% and 1.2% ~~and 1.4%~~ of ~~Subscription television services revenue~~“Subscriber-related revenue” during each of the three months ended June 30, 2004 and 2003, ~~and 2002,~~ respectively. The increase in the expense to revenue ratio principally resulted from additional operational costs to support launches of our local markets discussed above. These expenses will ~~increase in future periods as a result of our agreement with SES Americom (see Note 8 to the Condensed Consolidated Financial Statements for further discussion). These expenses could~~ increase further in the future ~~as additional satellites are placed in service, additional local markets are launched,~~ to the extent we ~~successfully~~enter into additional satellite lease agreements, obtain ~~commercial in-orbit~~traditional satellite insurance, and to the extent we increase the operations at our digital broadcast centers ~~in order,~~as, among other ~~reasons, to meet the demands of current “must carry” requirements.~~things, additional satellites are placed in service and additional local markets and other programming services are launched.

Cost of sales ~~— DTH equipment~~– equipment.. “Cost of sales — DTH equipment principally includes costs associated with digital set-top boxes and related components sold to an international DTH operator and sales of DBS accessories. Cost of sales — DTH equipment– equipment” totaled ~~$33.5~~$67.6 million during the three months ended June 30, ~~2003, a decrease~~2004, an increase of ~~$10.6~~$22.9 million compared to the same period in ~~2002.~~2003. This ~~decrease~~increase related primarily to ~~a decrease~~the increase in ~~sales of digital set-top boxes to Bell ExpressVu and a decrease in~~unsubsidized sales of DBS ~~accessories. Cost~~accessories to DISH Network subscribers and to retailers and other distributors of our equipment domestically discussed above and a $6.7 million write-off of certain defective DBS accessories provided by a bankrupt supplier. “Cost of sales — ~~DTH equipment~~equipment” represented ~~66.0%~~78.9% and ~~64.7%~~70.7% of ~~DTH equipment sales~~“Equipment sales”, during the three months ended June 30, 2004 and 2003, respectively. The increase in the expense to revenue ratio principally related to the write-off of certain defective DBS accessories discussed above.

Subscriber acquisition costs.“Subscriber acquisition costs” totaled approximately $365.3 million for the three months ended June 30, 2004, an increase of $79.6 million or 27.9% compared to the same period in 2003. The increase in “Subscriber acquisition costs” was directly attributable to a larger number of gross DISH Network subscriber additions during the three months ended June 30, 2004 compared to the same period in 2003. “Subscriber acquisition costs” during the three months ended June 30, 2003 ~~and 2002, respectively. The increase in this expense to revenue ratio is primarily attributable to~~included a ~~non-recurring reduction in the cost of DTH equipment~~benefit of approximately ~~$1.5~~$34.4 million resulting from a litigation settlement which also contributed to the increase. This increase was partially offset by a higher number of DISH Network subscribers participating in our equipment lease program and the acquisition of co-branded subscribers during ~~the three months ended June 30, 2002.~~2004 as discussed under “SAC” below.

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SAC.Subscriber acquisition costs.~~Generally, under most promotions, we subsidize the installation and all or a portion of the cost of EchoStar receiver systems in order to attract~~ per new DISH Network ~~subscribers. There is no clear industry standard used in the calculation of~~ subscriber acquisition costs. Our subscriber acquisition costs include Cost of sales — subscriber promotion subsidies, Other subscriber promotion subsidies and Subscriber acquisition advertising expenses. Cost of sales — subscriber promotion subsidies includes the cost of EchoStar receiver systems sold to retailers and other distributors of our equipment and receiver systems sold directly by us to subscribers. Other subscriber promotion subsidies includes net costs related to our free installation promotion and other promotional incentives. During the three months ended March 31, 2003, certain amounts previously included in Subscriber acquisition costsactivation (“SAC”) were reclassified to Subscriber related expenses on the Condensed Consolidated Statements of Operations. All prior period amounts have been reclassified to conform with the current year presentation. None of these changes had any impact on Operating income or Net income.

~~During~~approximately $431 for the three months ended June 30, ~~2003, our subscriber acquisition costs totaled approximately $285.7 million, or~~2004 and approximately $408 ~~per new subscriber activation. Comparatively, our subscriber acquisition costs~~ during the three months ended June 30, 2002 totaled approximately $248.3 million, or approximately $386 per new subscriber activation. This increase is primarily attributable to an increase in sales pursuant to promotions under which subscribers receive equipment at reduced or no cost, as opposed to promotions where the subscriber leases our equipment. This increase is also attributable to an increase in acquisition marketing compared to the same period in ~~2002. Subscriber acquisition costs~~2003. SAC during the three months ended June 30, 2003 ~~include~~included a benefit of approximately $34.4 million ~~primarily related~~discussed above. Absent this benefit, our SAC for the three months ended June 30, 2003 would have been approximately $49 higher, or $457. The decrease in SAC during the three months ended June 30, 2004 as compared to ~~the receipt of a reimbursement payment for previously sold set-top box equipment pursuant to a litigation settlement. Subscriber acquisition costs during~~ the same period in ~~2002 include~~2003 (excluding this benefit) was primarily attributable to an ~~adjustment~~increase in DISH Network subscribers participating in our equipment lease program, the acquisition of ~~approximately $16.8 million resulting from the completion of royalty arrangements with more favorable terms than estimated amounts previously accrued. Our~~co-branded subscribers during 2004, and reduced subscriber acquisition advertising. These factors were partially offset by more expensive promotions we offered during 2004 including up to three free receivers for new subscribers and free advanced products, such as digital video recorders and high definition receivers. Further, during the three months ended June 30, 2004, since a greater number of DISH Network subscribers activated multiple receivers, receivers with multiple tuners or other advanced products, including SuperDISH, installation costs increased as compared to the same period in 2003. Finally, subscribers added during the three months ended June 30, 2004 received more free equipment and less discounted programming than new subscribers activated during the comparable period in 2003. This change in promotional mix increased both SAC and ARPU for the three months ended June 30, 2004 as compared to the same period in 2003. Our “Subscriber acquisition costs”, both in the aggregate and on a ~~per-new-subscriber~~per new subscriber activation basis, may materially increase in the future to the extent that we introduce other more aggressive promotions if we determine that they are necessary to respond to competition, or for other reasons.

We exclude the value of equipment capitalized under our equipment lease ~~promotion~~program from our calculation of ~~subscriber acquisition costs.~~SAC. We also exclude payments and ~~certain~~the value of returned equipment ~~received from~~relating to disconnecting lease ~~promotion~~program subscribers from our calculation of SAC. If these amounts were included, our SAC would have been approximately $576 during the three months ended June 30, 2004 compared to $441 during the same period in 2003. As discussed above, “Subscriber acquisition costs” during the three months ended June 30, 2003 included a benefit of approximately $34.4 million or $49 per subscriber ~~acquisition costs. Equipment~~related to a litigation settlement. Absent this benefit, our SAC, including the value of equipment capitalized under our equipment lease ~~promotion totaled approximately $28.8 million~~program and ~~$88.9 million~~including payments and the value of returned equipment relating to disconnecting lease program subscribers would have been $490 for the three months ended June 30, ~~2003~~2003. Our equipment lease penetration increased during the three months ended June 30, 2004 as compared to the same period in 2003. Additional penetration of our equipment lease program will increase capital expenditures. See further discussion of capitalized subscriber acquisition costs and ~~2002, respectively. Returned~~payments and certain returned equipment ~~received from~~relating to disconnecting lease ~~promotion~~program subscribers ~~which became available for sale through other promotions rather than being redeployed through the lease promotion, together with payments received~~included in ~~connection with equipment not returned,~~“Liquidity and Capital Resources – Subscriber Acquisition and Retention Costs”.

General and administrative expenses.“General and administrative expenses” totaled ~~approximately $5.3 million and $9.3~~$97.2 million during the three months ended June 30, ~~2003 and 2002, respectively.~~

~~General and administrative expenses~~.~~General and administrative expenses totaled $89.1 million during the three months ended June 30, 2003,~~2004, an increase of ~~$18.8~~$8.1 million compared to the same period in ~~2002. This~~2003. The increase in “General and administrative expenses” was ~~principally~~primarily attributable to increased personnel and infrastructure expenses to support the growth of the DISH Network. ~~General~~“General and administrative ~~expenses~~expenses” represented 5.5% and 6.3% of ~~Total revenue~~“Total revenue” during the three months ended June 30, 2004 and 2003, ~~as compared~~respectively. The decrease in this expense to ~~6.0%~~revenue ratio resulted primarily from higher total revenues discussed above and administrative efficiencies.

Depreciation and amortization.“Depreciation and amortization” expense totaled $123.9 million during the three months ended June 30, ~~2002.~~

~~During~~2004, a $23.6 million increase compared to the ~~three~~same period in 2003. The increase in “Depreciation and amortization” expense primarily resulted from additional depreciation related to the commencement of commercial operation of our EchoStar IX satellite in October 2003, and increases in depreciation related to equipment leased to customers and other additional depreciable assets placed in service during the second half of 2003 and the six months ended ~~March~~June 30, 2004. As of December 31, 2003, ~~certain amounts previously included in General~~EchoStar IV was fully depreciated and administrative expenses were reclassified to Subscriber-related expenses on the Condensed Consolidated Statements of Operations. All prior period amounts have been reclassified to conform to the current year presentation. None of these changes had any impact on Operating income or Net income.

~~Non-cash, Stock-based Compensation~~.~~During 1999,~~accordingly, we ~~adopted an incentive plan under our 1995 Stock Incentive Plan, which provided certain key employees with incentives including stock options. During~~recorded no expense for this satellite during the three months ended June 30, 2004. This partially offset the increase in depreciation expense discussed above.

Interest expense, net of amounts capitalized.“Interest expense” totaled $93.4 million during the three months ended June 30, 2004, a decrease of $14.3 million compared to the same period in 2003. This decrease primarily resulted from a reduction in interest expense of approximately $57.5 million as a result of debt redemptions and repurchases during 2003 and ~~2002, we recognized approximately ($0.2) million and $2.2 million, respectively, of compensation under this performance-based plan.~~2004. This decrease ~~is primarily attributable~~was partially offset by additional interest expense totaling approximately $40.0 million related to ~~stock option forfeitures resulting from employee terminations. The remaining deferred compensation~~our $500.0 million 3% Convertible Subordinated Note due 2010 issued during July 2003 and our $2.5 billion aggregate of ~~$4.7 million as~~senior notes issued during October 2003, together with prepayment premiums and the write-off of ~~June 30, 2003, which will be reduced by future forfeitures, if any, will be recognized over the remaining vesting period, ending on March 31, 2004.~~debt

issuance costs totaling approximately $1.2 million related to repurchases of our 9 1/8% Senior Notes due 2009 during the second quarter of 2004.

~~We report all non-cash compensation based on stock option appreciation as a single expense category in our accompanying statements of operations. The following table indicates~~Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA was $296.1 million during the ~~other expense categories in our statements of operations that would be affected if non-cash, stock-based compensation was allocated~~three months ended June 30, 2004, compared to $325.0 million during the same ~~expense categories as the base compensation for key employees who participate~~period in ~~the 1999 incentive plan.~~

In addition, options to purchase 8.3 million shares were outstanding as of June 30, 2003 and were granted with exercise prices equal to the market value of the underlying shares on the dates they were issued during 1999, 2000 and 2001 pursuant to a separate long-term incentive plan under our 1995 Stock Incentive Plan. The weighted-average exercise price of these options is $8.85. Vesting of these options is contingent upon meeting certain longer-term goals which have not yet been achieved. Consequently, no compensation was recorded2003. EBITDA during the three months ended June 30, 2003 included a benefit of approximately $34.4 million related to these long-term options. We will record the related compensation at the achievement, if ever, of the performance goals. Such compensation, if recorded, would likely result in material non-cash, stock-based compensation expense ina litigation settlement. Absent this 2003 benefit, our ~~statements of operations.~~

~~Earnings Before Interest, Taxes, Depreciation and Amortization~~. EBITDA is defined as Net income (loss) plus net Interest expense, Taxes and Depreciation and amortization. Effective January 1, 2003, we include Non-cash, stock-based compensation expense in our definition of EBITDA. Effective April 1, 2003, we include Other income and expense items and Change in valuation of contingent value rights in our definition of EBITDA. All prior amounts conform to the current presentation. EBITDA was $325.0 million duringfor the three months ended June 30, ~~2003, compared to $222.2~~2004 would have been $5.5 million ~~during~~higher than EBITDA for the ~~same~~comparable period in ~~2002. This improvement~~2003. The increase in EBITDA (excluding this benefit) was ~~directly~~primarily attributable to increases in ARPU and in the number of DISH Network subscribers and an increase in the number of DISH Network subscribers participating in our equipment lease program (which results in an increase in capital expenditures and less SAC). The increase in EBITDA is also attributable in part to the acquisition of co-branded subscribers, which ~~continues to result in revenue sufficient to support the cost of new and existing subscribers. The improvement was~~reduces overall SAC. These factors were partially offset by a ~~decrease in~~higher number of gross DISH Network subscribers ~~leasing equipment and a corresponding increase in equipment subsidies~~additions during the three months ended June 30, 2004 as compared to the same period in ~~2002, as well as~~2003 and by a decrease in ~~DTH equipment sales.~~“Other” income, principally related to $9.5 million in net losses realized from the sale of certain securities from our marketable and non-marketable investment portfolio together with increases in our “Subscriber-related expenses” and “Satellite and transmission expenses” as a percentage of “Subscriber-related revenue”. EBITDA does not include the impact of capital expenditures under our new and existing subscriber equipment lease ~~promotion~~programs of approximately ~~$28.8~~$147.4 million and ~~$88.9~~$29.8 million during the three months ended June 30, ~~2003~~2004 and ~~2002,~~2003, respectively. As previously discussed, to the extent we introduce more aggressive marketing promotions and our subscriber acquisition costs materially increase, our EBITDA results will be negatively impacted because subscriber acquisition costs are generally expensed as incurred.

~~EBITDA is not a measure determined in accordance with accounting principles generally accepted in~~ the ~~United States, or GAAP, and should not be considered a substitute for operating income, net income or any other measure~~

~~determined in accordance with GAAP. EBITDA is used as a measurement of operating efficiency and overall~~accompanying financial performance and is believed to be a helpful measure for those evaluating companies in the multi-channel video programming distribution industry. Conceptually, EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures because EBITDA is independent of the actual leverage and capital expenditures employed by the business. EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

~~Depreciation and Amortization~~.Depreciation and amortization expense totaled $100.3 million during the three months ended June 30, 2003, a $12.3 million increase compared to the same period in 2002. This increase primarily resulted from an increase in depreciation related to the commencement of commercial operation of EchoStar VIII in October 2002 and leased equipment and other depreciable assets placed in service during 2002 and 2003.

~~Other Income and Expense~~.Other expense, net, totaled $91.0 million during the three months ended June 30, 2003, an improvement of $8.1 million compared to the same period in 2002. This improvement is primarily attributable to a decrease in Interest expense of approximately $8.7 million related to the redemption of our 9 1/4% senior notes due 2006, during February 2003. This improvement was partially offset by a reduction in the amount of interest capitalized during the three months ended June 30, 2003 as compared to the same period in 2002. Interest is capitalized during the construction phase of a satellite and ceases to be capitalized upon commercial operation of the satellite. Therefore, once EchoStar VIII commenced commercial operation during October 2002, we ceased capitalizing interest related to this satellite. The expensing of this previously capitalized interest resulted in an increase in Interest expense which was also partially offset by the cessation of interest costs related to our merger financing activities. Interest income decreased primarily as a result of lower cash balances in 2003 as compared to 2002. Change in valuation of contingent value rights decreased as a result of the repurchase of the Series D convertible preferred stock during December 2002.

~~Net income (loss)~~. Net income was $128.8 million during the three months ended June 30, 2003, an increase of $91.8 million compared to the same period in 2002. The increase was primarily attributable to an increase in Operating income and a decrease in Other income and expense, the components of which are discussed above.

~~Net income (loss) available (attributable) to common shareholders~~.Net income available to common shareholders was $128.8 million during the three months ended June 30, 2003, an increase of $91.8 million compared to the same period in 2002. The increase was primarily attributable to the improvement in Net income (loss) discussed above.

~~Six Months Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002.~~

~~Total revenue~~. Total revenue for the six months ended June 30, 2003 was $2.77 billion, an increase of $500.5 million or 22.0% compared to the six months ended June 30, 2002. This increase was attributable to continued DISH Network subscriber growth and increased monthly average revenue per subscriber. The increase was partially offset by a decrease in DTH equipment sales, discussed below.

~~Subscription television services~~. Subscription television services revenue totaled $2.63 billion for the six months ended June 30, 2003, an increase of $542.8 million or 26.0% compared to the same period in 2002. This increase was attributable to continued DISH Network subscriber growth and an increase in monthly average revenue per subscriber.

~~DTH equipment sales~~. For the six months ended June 30, 2003, DTH equipment sales totaled $91.5 million, a decrease of $33.6 million compared to the same period during 2002. This decrease resulted from a decrease in sales of digital set-top boxes to Bell ExpressVu and a decrease in sales of DBS accessories.

~~Subscriber-related expenses~~. Subscriber-related expenses totaled $1.29 billion during the six months ended June 30, 2003, an increase of $235.2 million compared to the same period in 2002. This increase is primarily attributable to the increase in DISH Network subscribers. These expenses represented 48.9% and 50.4% of Subscription television services revenues during the six months ended June 30, 2003 and 2002, respectively. The decrease in Subscriber-related expenses as a percentage of Subscription television services revenue primarily resulted from the increase in monthly average revenue per subscriber discussed above and increased operating efficiencies.

~~Satellite and transmission expenses~~. Satellite and transmission expenses totaled $32.3 million during the six months ended June 30, 2003, a $3.7 million increase compared to the same period in 2002. This increase primarily resulted from the launch of additional local markets. Satellite and transmission expenses totaled 1.2% and 1.4% of Subscription television services revenue during the six months ended June 30, 2003 and 2002, respectively.

~~Cost of sales — DTH equipment~~. Cost of sales — DTH equipment totaled $61.4 million during the six months ended June 30, 2003, a decrease of $22.1 million compared to the same period in 2002. This decrease related primarily to a decrease in sales of digital set-top boxes to Bell ExpressVu and a decrease in sales of DBS accessories. Cost of sales — DTH equipment represented 67.0% and 66.7% of DTH equipment sales during the six months ended June 30, 2003 and 2002, respectively. The increase in this expense to revenue ratio is primarily attributable to a non-recurring reduction in the cost of DTH equipment of approximately $1.5 million during the six months ended June 30, 2002.

~~Subscriber acquisition costs~~.During the six months ended June 30, 2003, our subscriber acquisition costs totaled approximately $593.9 million, or approximately $428 per new subscriber activation. Comparatively, our subscriber acquisition costs during the six months ended June 30, 2002 totaled approximately $514.7 million, or approximately $407 per new subscriber activation. This increase is primarily attributable to an increase in sales pursuant to promotions under which customers receive equipment at reduced or no cost to the subscriber, as opposed to promotions where the subscriber leases our equipment. This increase is also attributable to an increase in acquisition marketing compared to the same period in 2002. Subscriber acquisition costs during the six months ended June 30, 2003 include a benefit of approximately $34.4 million primarily related to the receipt of a reimbursement payment for previously sold set-top box equipment pursuant to a litigation settlement. Subscriber acquisition costs during the same period in 2002 include an adjustment of approximately $16.8 million resulting from the completion of royalty arrangements with more favorable terms than estimated amounts previously accrued.

We exclude equipment capitalized under our lease promotion from our calculation of subscriber acquisition costs. We also exclude payments and certain returned equipment received from disconnecting lease promotion subscribers from our calculation of subscriber acquisition costs. Equipment capitalized under our lease promotion totaled approximately $55.6 million and $165.5 million for the six months ended June 30, 2003 and 2002, respectively. Returned equipment received from disconnecting lease promotion subscribers, which became available for sale through other promotions rather than being redeployed through the lease promotion, together with payments received in connection with equipment not returned, totaled approximately $11.2 million and $20.8 million during the six months ended June 30, 2003 and 2002, respectively.

~~General and administrative expenses~~.General and administrative expenses totaled $171.5 million during the six months ended June 30, 2003, an increase of $22.2 million compared to the same period in 2002. This increase was principally attributable to increased personnel and infrastructure expenses to support the growth of the DISH Network. General and administrative expenses represented 6.2% of Total revenue during the six months ended June 30, 2003 as compared to 6.6% during the six months ended June 30, 2002.

~~Non-cash, Stock-based Compensation~~. During 1999, we adopted an incentive plan under our 1995 Stock Incentive Plan, that provided certain key employees with incentives including stock options. During the six months ended June 30, 2003 and 2002, we recognized approximately $1.8 million and $3.8 million, respectively, of compensation under this performance-based plan. This decrease is primarily attributable to stock option forfeitures resulting from employee terminations. The remaining deferred compensation of $4.7 million as of June 30, 2003, which will be reduced by future forfeitures, if any, will be recognized over the remaining vesting period, ending on March 31, 2004.

We report all non-cash compensation based on stock option appreciation as a single expense category in our accompanying statements of operations. The following table indicates the other expense categories in our statements of operations that would be affected if non-cash, stock-based compensation was allocated to the same expense categories as the base compensation for key employees who participate in the 1999 incentive plan.

EBITDA is not a measure determined in accordance with accounting principles generally accepted in the United States, or GAAP, and should not be considered a substitute for operating income, net income or any other measure determined in accordance with GAAP. EBITDA is used as a measurement of operating efficiency and overall financial performance and ~~is believed~~we believe it to be a helpful measure for those evaluating companies in the multi-channel video programming distribution industry. Conceptually, EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital ~~expenditures because EBITDA is independent of the actual leverage and capital expenditures employed by the business.~~expenditures. EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

~~Depreciation~~Income tax benefit (provision), net.Our income tax policy is to record the estimated future tax effects of temporary differences between the tax bases of assets and ~~Amortization~~.~~Depreciation~~liabilities and ~~amortization expense totaled $198.5 million during~~amounts reported in our accompanying condensed consolidated balance sheets, as well as operating loss and tax credit carryforwards. We follow the ~~six months ended June 30, 2003,~~guidelines set forth in Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”) regarding the recoverability of any tax assets recorded on the balance sheet and provide any necessary allowances as required. Determining necessary allowances requires us to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities. We currently have an approximately $1.1 billion valuation allowance recorded as an offset against all of our net deferred tax assets. In accordance with SFAS 109, we periodically evaluate our need for a ~~$28.9 million increase compared to~~valuation allowance based on both historical evidence, including trends, and future expectations in each reporting period. In the ~~same period in 2002. This increase primarily resulted from an increase in depreciation related to~~future, if we believe that it is more likely than not that some or all of our deferred tax assets will be realized, the commencement of commercial operation of EchoStar VII in April 2002, commencement of commercial operations of EchoStar VIII in October 2002 and leased equipment and other depreciable assets placed in service during 2002 and 2003.current valuation allowance, or some

portion of it, would be reversed. Reversing our current recorded valuation allowance would have a material positive impact on our “Net income (loss)” for future periods. However, there can be no assurance if or when all or a portion of our valuation allowance will be reversed.

~~Other Income~~Net income (loss).“Net income” was $85.3 million during the three months ended June 30, 2004, a decrease of $43.5 million compared to $128.8 million for the same period in 2003. The decrease was primarily attributable to decreases in “Operating income” and ~~Expense~~.~~Other~~“Other” income resulting from the factors discussed above, partially offset by a decrease in “Interest expense, net of amounts capitalized.” Our future net income (loss) results will be negatively impacted to the extent we introduce more aggressive marketing promotions that materially increase our subscriber acquisition costs since these subscriber acquisition costs are generally expensed as incurred.


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

Six Months Ended June 30, 2004 Compared to the Six Months Ended June 30, 2003.


	For the Six Months
	Ended June 30,						Variance
	2004			2003			Fav/(Unfav)			%
Statements of Operations Data	(In thousands)
Revenue:
Subscriber-related revenue	$	3,154,012		$	2,636,186		$	517,826			19.6	%
Equipment sales		162,330			119,267			43,063			36.1	%
Other		41,167			18,162			23,005			126.7	%

Total revenue		3,357,509			2,773,615			583,894			21.1	%

Costs and Expenses:
Subscriber-related expenses		1,672,442			1,287,525			(384,917	)		(29.9	%)
% of Subscriber-related revenue		53.0	%		48.8	%
Satellite and transmission expenses		53,562			32,341			(21,221	)		(65.6	%)
% of Subscriber-related revenue		1.7	%		1.2	%
Cost of sales — equipment		120,884			84,510			(36,374	)		(43.0	%)
% of Equipment sales		74.5	%		70.9	%
Cost of sales — other		12,132			1,904			(10,228	)		N/A
Subscriber acquisition costs		781,643			593,888			(187,755	)		(31.6	%)
General and administrative		184,944			171,469			(13,475	)		(7.9	%)
% of Total revenue		5.5	%		6.2	%
Non-cash, stock-based compensation		1,180			1,772			592			33.4	%
Depreciation and amortization		224,539			198,465			(26,074	)		(13.1	%)

Total costs and expenses		3,051,326			2,371,874			(679,452	)		(28.6	%)

Operating income		306,183			401,741			(95,558	)		(23.8	%)

Other income (expense):
Interest income		26,659			30,475			(3,816	)		(12.5	%)
Interest expense, net of amounts capitalized		(274,848	)		(238,216	)		(36,632	)		(15.4	%)
Other		(11,709	)		1,099			(12,808	)		N/A

Total other income (expense)		(259,898	)		(206,642	)		(53,256	)		(25.8	%)

Income (loss) before income taxes		46,285			195,099			(148,814	)		(76.3	%)
Income tax benefit (provision), net		(3,855	)		(8,389	)		4,534			54.0	%

Net income (loss)	$	42,430		$	186,710		$	(144,280	)		(77.3	%)

Subscribers (in millions), as of period end		10.125			8.800			1.325			15.1	%

Subscriber additions, net		700,000			620,000			80,000			12.9	%

Monthly churn percentage		1.60	%		1.51	%		(0.09	%)		(6.0	%)

Average subscriber acquisition costs per subscriber (“SAC”)	$	478		$	428		$	(50	)		(11.7	%)

Average revenue per subscriber (“ARPU”)	$	53.71		$	51.65		$	2.06			4.0	%

EBITDA	$	519,013		$	601,305		$	(82,292	)		(13.7	%)


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

Subscriber-related revenue.DISH Network “Subscriber-related revenue” totaled ~~$206.6~~$3.154 billion for the six months ended June 30, 2004, an increase of $517.8 million or 19.6% compared to the same period in 2003. This increase was directly attributable to continued DISH Network subscriber growth and the increase in “ARPU” discussed below. The increase in “Subscriber-related revenue” was partially offset by our free and reduced price programming promotions. This increase was also partially offset by credits issued to our subscribers as a result of Viacom’s decision, during the first quarter of 2004, to temporarily revoke our right to distribute their programming channels.

ARPU.Monthly average revenue per DISH Network subscriber was approximately $53.71 during the six months ended June 30, 2004 and approximately $51.65 during the same period in 2003. The $2.06 increase in monthly average revenue per DISH Network subscriber is primarily attributable to price increases of up to $2.00 in February 2004 and 2003 on some of our most popular packages, the increased availability of local channels by satellite and an increase in subscribers with multiple set-top boxes. This increase was also partially attributable to revenue from equipment sales, installation and other services related to our relationship with SBC. These increases were partially offset by subscriber promotions under which new subscribers received selected free programming for the first three months of their term of service, other promotions under which new subscribers received discounted programming, and the credits issued to our subscribers for the temporary unavailability of Viacom programming discussed above.

Equipment sales.For the six months ended June 30, 2004, “Equipment sales” totaled $162.3 million, an increase of $43.1 million compared to the same period during 2003. This increase principally resulted from an increase in unsubsidized sales of DBS accessories to DISH Network subscribers and to retailers and other distributors of our equipment domestically. The increase in sales of DBS accessories primarily relates to, among other things, subscriber equipment upgrades to support the launch of additional programming, including local markets. The increase in “Equipment sales” was partially offset by a decrease in sales of non-DISH Network receivers and other accessories sold by our EchoStar International Corporation subsidiary to international customers.

Subscriber-related expenses.“Subscriber-related expenses” totaled $1.672 billion during the six months ended June 30, 2004, an increase of $384.9 million or 29.9% compared to the same period in 2003. The increase in “Subscriber-related expenses” was primarily attributable to the increase in the number of DISH Network subscribers which resulted in increased expenses to support the DISH Network. “Subscriber-related expenses” represented 53.0% and 48.8% of “Subscriber-related revenue” during the six months ended June 30, 2004 and 2003, respectively. The increase in this expense to revenue ratio primarily resulted from increases in our programming and subscriber retention costs, and costs associated with the expansion of our installation, in-home service and call center operations. These increased operational costs, some of which are temporary, related to, among other things, more complicated installations required by our SuperDISH. This increase also resulted from an approximate $13.0 million charge during the six months ended June 30, 2004 to establish a reserve for estimated expenses related to prior periods, and further to cost of sales and expenses from equipment sales, installation and other services related to our relationship with SBC. The increase in the expense to revenue ratio from 2003 to 2004 was partially offset by an increase in monthly average revenue per DISH Network subscriber discussed above.

Satellite and transmission expenses.“Satellite and transmission expenses” totaled $53.6 million during the six months ended June 30, 2004, a $21.2 million increase compared to the same period in 2003. This increase primarily resulted from launch and operational costs, including lease payment obligations pursuant to our Fixed Satellite Service (“FSS”) agreements, associated with the increasing number of markets in which we offer local network channels by satellite as previously discussed. “Satellite and transmission expenses” totaled 1.7% and 1.2% of “Subscriber-related revenue” during each of the six months ended June 30, 2004 and 2003, respectively. The increase in the expense to revenue ratio principally resulted from additional operational costs to support launches of our local markets discussed above.


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

Cost of sales – equipment.“Cost of sales – equipment” totaled $120.9 million during the six months ended June 30, 2004, an ~~improvement~~increase of ~~$22.7~~$36.4 million compared to the same period in ~~2002.~~2003. This increase related primarily to the increase in unsubsidized sales of DBS accessories to DISH Network subscribers and to retailers and other distributors of our equipment domestically discussed above and a $6.7 million write-off of certain defective DBS accessories provided by a bankrupt supplier. “Cost of sales — equipment” represented 74.5% and 70.9% of “Equipment sales”, during the six months ended June 30, 2004 and 2003, respectively. The ~~improvement primarily resulted from a reduction~~increase in ~~Other~~the expense ~~totaling $35.2 million~~to revenue ratio principally related to ~~reduced net losses on marketable and non-marketable investment securities and reduced equity in losses~~the write-off of ~~affiliates. The improvement also resulted from a decrease~~certain defective DBS accessories discussed above.

Subscriber acquisition costs.“Subscriber acquisition costs” totaled approximately $781.6 million for the six months ended June 30, 2004, an increase of ~~approximately $14.5~~$187.8 million in Interest expense as a result of the redemption of our 9 1/4% senior notes due 2006, during February 2003. This improvement was partially offset by $20.6 million of additional costs associated with the redemption of our 9 1/4% senior notes (see Note 7or 31.6% compared to the ~~Condensed Consolidated Financial Statements for further discussion) and~~same period in 2003. The increase in “Subscriber acquisition costs” was directly attributable to a ~~reduction~~larger number of gross DISH Network subscriber additions during the six months ended June 30, 2004 compared to the same period in ~~the amount of interest capitalized~~2003. “Subscriber acquisition costs” during the six months ended June 30, 2003 included a benefit of approximately $34.4 million resulting from a litigation settlement which also contributed to the increase. This increase was partially offset by a higher number of DISH Network subscribers participating in our equipment lease program and the acquisition of co-branded subscribers during 2004 as discussed under “SAC” below.

SAC.Subscriber acquisition costs per new DISH Network subscriber activation (“SAC”) were approximately $478 for the six months ended June 30, 2004 and approximately $428 during the same period in 2003. SAC during the six months ended June 30, 2003 included the benefit of approximately $34.4 million discussed above. Absent this benefit, our SAC for the six months ended June 30, 2003 would have been approximately $25 higher, or $453. The increase in SAC during the six months ended June 30, 2004 as compared to the same period in ~~2002. Interest is capitalized~~2003 (excluding this benefit) was primarily attributable to more expensive promotions we offered during 2004 including up to three free receivers for new subscribers and free advanced products, such as digital video recorders and high definition receivers. Further, during the ~~construction phase~~six months ended June 30, 2004, since a greater number of ~~a satellite~~DISH Network subscribers activated multiple receivers, receivers with multiple tuners or other advanced products, including SuperDISH, installation costs increased as compared to the same period in 2003. Finally, subscribers added during the six months ended June 30, 2004 received more free equipment and ~~ceases~~less discounted programming than new subscribers activated during the comparable period in 2003. This change in promotional mix increased both SAC and ARPU for the six months ended June 30, 2004 as compared to ~~be capitalized upon commercial operation of~~ the satellite. Therefore, once EchoStar VII and EchoStar VIII commenced commercial operation during April 2002 and October 2002, respectively, we ceased capitalizing interest related to these satellites. The expensing of this previously capitalized interest resultedsame period in 2003. These factors were partially offset by an increase in ~~Interest expense which was~~DISH Network subscribers participating in our equipment lease program, the acquisition of co-branded subscribers during 2004, and reduced subscriber acquisition advertising.

We exclude the value of equipment capitalized under our equipment lease program from our calculation of SAC. We also ~~partially offset by~~exclude payments and the ~~cessation~~value of ~~interest costs~~returned equipment relating to disconnecting lease program subscribers from our calculation of SAC. If these amounts were included, our SAC would have been approximately $590 during the six months ended June 30, 2004 compared to $460 during the same period in 2003. As discussed above, “Subscriber acquisition costs” during the six months ended June 30, 2003 included a benefit of approximately $34.4 million or $25 per subscriber related to a litigation settlement. Absent this benefit, our ~~merger financing activities. Interest income decreased primarily as a result~~SAC, including the value of ~~lower cash balances in 2003~~equipment capitalized under our equipment lease program and including payments and the value of returned equipment relating to disconnecting lease program subscribers would have been $485 for the six months ended June 30, 2003. Our equipment lease penetration increased during the six months ended June 30, 2004 as compared to ~~2002. Change~~the same period in ~~valuation of contingent value rights decreased as a result of the repurchase of the Series D convertible preferred stock later during 2002.~~2003.

~~Net income (loss)~~General and administrative expenses.~~. Net income was $186.7~~“General and administrative expenses” totaled $184.9 million during the six months ended June 30, ~~2003,~~2004, an increase of ~~$184.9~~$13.5 million compared to the same period in ~~2002.~~2003. The increase in “General and administrative expenses” was primarily attributable to ~~an increase in Operating income~~increased personnel and ainfrastructure expenses to support the growth of the DISH Network. “General and administrative expenses” represented 5.5% and 6.2% of “Total revenue” during the six months ended June 30, 2004 and 2003, respectively. The decrease in ~~Other income~~this expense to revenue ratio resulted primarily from higher total revenues discussed above and administrative efficiencies.

Depreciation and amortization.“Depreciation and amortization” expense ~~the components of which are discussed above.~~

~~Net income (loss) available (attributable) to common shareholders~~.~~Net income available to common shareholders was $186.7~~totaled $224.5 million during the six months ended June 30, 2004, a $26.1 million increase compared to the same period in 2003. The increase in “Depreciation and amortization” expense primarily resulted from additional depreciation related to the commencement of commercial operation of our EchoStar IX satellite in October 2003, and increases in depreciation related to equipment leased to customers and other additional depreciable assets placed in service during the second


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

half of 2003 and the six months ended June 30, 2004. As of December 31, 2003, EchoStar IV was fully depreciated and accordingly, we recorded no expense for this satellite during the six months ended June 30, 2004. This partially offset the increase in depreciation expense discussed above.

Interest expense, net of amounts capitalized.“Interest expense” totaled $274.8 million during the six months ended June 30, 2004, an increase of ~~$246.7~~$36.6 million compared to the same period in ~~2002.~~2003. This increase primarily resulted from prepayment premiums and the write-off of debt issuance costs totaling approximately $78.7 million related to the redemption of our 9 3/8% Senior Notes due 2009 during February 2004 and the repurchase of $8.8 million of our 9 1/8% Senior Notes due 2009 during the second quarter of 2004. The increase also resulted from additional interest expense totaling approximately $80.1 million related to our $500.0 million 3% Convertible Subordinated Note due 2010 issued during July 2003 and our $2.5 billion aggregate of senior notes issued during October 2003. This increase was ~~primarily attributable~~partially offset by a reduction in interest expense of approximately $105.3 million as a result of the debt redemptions and repurchases during 2003 and 2004, and prepayment premiums and the write-off of debt issuance costs totaling approximately $20.6 million related to the ~~improvement in Net income (loss) discussed above. In addition, Net income (loss) available (attributable) to common shareholders~~redemption of our 9 1/4 % Senior Notes due 2006 during February 2003.

Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA was $519.0 million during the six months ended June 30, 2002 was negatively impacted by a one-time beneficial conversion feature charge associated with issuance of our Series D convertible preferred stock. Our Series D convertible preferred stock was subsequently repurchased during December 2002.

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Cash Sources~~

As of June 30, 2003, our restricted and unrestricted cash, cash equivalents and marketable investment securities totaled $2.82 billion, including $135.2 million of cash reserved for satellite insurance and approximately $10.0 million of other restricted cash,2004, compared to ~~$2.85 billion, including $151.4~~$601.3 million ~~of cash reserved for satellite insurance and $10.0 million of other restricted cash, as of December 31, 2002. For~~during the same period in 2003. EBITDA during the six months ended June 30, 2003 included a benefit of approximately $34.4 million related to a litigation settlement which contributed to the current period $82.3 million decrease in EBITDA. The decrease in EBITDA was primarily attributable to a higher number of gross DISH Network subscribers additions during the six months ended June 30, 2004 as compared to the same period in 2003 and ~~2002, we reported Net cash flows~~by a decrease in “Other” income, principally related to $8.5 million in net losses realized from ~~operating activities~~the sale of ~~$433.3~~certain securities from our marketable and non-marketable investment portfolio together with increases in our “Subscriber-related expenses” and “Satellite and transmission expenses” as a percentage of “Subscriber-related revenue”. These factors were partially offset by increases in ARPU and in the number of DISH Network subscribers and an increase in the number of DISH Network subscribers participating in our equipment lease program (which results in an increase in capital expenditures and less SAC). The decrease in EBITDA was also partially offset in part to the acquisition of co-branded subscribers, which reduces overall SAC. EBITDA does not include the impact of capital expenditures under our new and existing subscriber equipment lease programs of approximately $221.8 million and ~~$366.9~~$54.9 million during the six months ended June 30, 2004 and 2003, respectively.

~~Free Cash Flow~~The following table reconciles EBITDA to the accompanying financial statements:


	For the Six Months
	Ended June 30,
	2004		2003
	(In thousands)
EBITDA	$	519,013	$	601,305
Less:
Interest expense, net of amounts capitalized and interest income		248,189		207,741
Income tax provision (benefit), net		3,855		8,389
Depreciation and amortization		224,539		198,465

Net income (loss)	$	42,430	$	186,710

We define free cash flow as Net cash flows from operating activities less Purchases of property and equipment, as shown on our Condensed Consolidated Statements of Cash Flows. We believe free cash flow is an important metric because it measures during a given period the amount of cash generated that is available for debt obligations and investments other than purchases of property and equipment. Free cash flowEBITDA is not a measure determined in accordance with accounting principles generally accepted in the United States, or GAAP, and should not be considered a substitute for ~~Operating~~operating income, ~~Net~~net income ~~Net cash flows from operating activities~~ or any other measure determined in accordance with GAAP. EBITDA is used as a measurement of operating efficiency and overall financial performance and we believe it to be a helpful measure for those evaluating companies in the multi-channel video programming distribution industry. Conceptually, EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

Net income (loss).“Net income” was $42.4 million during the six months ended June 30, 2004, a decrease of $144.3 million compared to $186.7 million for the same period in 2003. The decrease was primarily attributable to decreases in “Operating income” and “Other” income and increases in “Interest expense, net of amounts capitalized” resulting from the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Cash Sources

All liquid investments purchased with an original maturity of 90 days or less are classified as cash equivalents. See“Item 3. – Quantitative and Qualitative Disclosures About Market Risk”for further discussion regarding our marketable investment securities. As of June 30, 2004, our restricted and unrestricted cash, cash equivalents and marketable investment securities totaled $1.856 billion, including $107.1 million of cash reserved for satellite insurance and approximately $30.5 million of other restricted cash and marketable investment securities, compared to $4.170 billion, including $176.8 million of cash reserved for satellite insurance and $20.0 million of restricted cash and marketable investment securities, as of December 31, 2003. As previously discussed, effective February 2, 2004, EDBS redeemed the remainder of its 9 3/8% Senior Notes due 2009. The redemption reduced our unrestricted cash by approximately $1.490 billion. As an indirect result of this redemption, during February 2004, we were able to reclassify approximately $57.2 million representing the depreciated cost of two of our satellites from cash reserved for satellite insurance to cash and cash equivalents. Repurchases of our Class A Common Stock further reduced our unrestricted cash and marketable investment securities by approximately $703.0 million during the six months ended June 30, 2004. Subsequent to June 30, 2004, we repurchased additional shares of our Class A Common stock for approximately $87.1 million.

Free Cash Flow

We believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available for debt obligations and investments but excluding purchases of property and equipment. Free cash flow is not a measure determined in accordance with GAAP and should not be considered a substitute for “Operating income”, “Net income”, “Net cash flows from operating activities” or any other measure determined in accordance with GAAP. Since free cash flow includes investments in operating assets, we believe this non-GAAP liquidity measure is useful in addition to the most directly comparable GAAP measure ~~of Net~~— “Net cash flows from operating ~~activities because free cash flow includes investments in operational assets.~~activities”. Free cash flow ~~does~~is not ~~represent~~the same as residual cash available for discretionary expenditures, since it excludes cash required for debt service. Free cash flow also excludes cash which may be necessary for acquisitions, investments and other needs that may arise.

27Free cash flow was $149.2 million and $276.0 million for the six months ended June 30, 2004 and 2003, respectively. The decrease from 2003 to 2004 of approximately $126.8 million resulted from an approximately $164.7 million increase in “Purchases of property and equipment” partially offset by an increase in “Net cash flows from operating activities” of approximately $38.0 million. The increase in “Net cash flows from operating activities” was primarily attributable to significantly more cash flow generated by changes in operating assets and liabilities in 2004 as compared to 2003, partially offset by lower net income for the six months ended June 30, 2004 as compared to net income for the same period in 2003. Cash flow from changes in operating assets and liabilities was $169.5 million during the six months ended June 30, 2004 compared to $35.9 million for the same period in 2003. The improvement in cash flow from changes in operating assets and liabilities resulted from increases in accounts payable and accrued programming expenses due to the timing of certain payments, and an increase in deferred revenue primarily attributable to equipment sales and development and implementation fees related to our relationship with SBC. The improvement in cash flows from changes in operating assets and liabilities was partially offset by rising inventory levels and our deferral of costs related to equipment sales to SBC. The improvement was also partially offset by increases in accounts receivable attributable to continued DISH Network subscriber growth, receivables from subscribers previously subsidized through our free and discounted programming promotions and receivables related to our relationship with SBC. The increase in “Purchases of property and equipment” was primarily attributable to increased spending for equipment under our lease program and for satellite construction.

Free cash flow was $276.0 million and $122.3 million for the six months ended June 30, 2003 and 2002, respectively. The increase of approximately $153.7 million from the same period in 2002 resulted from a decrease in Purchases of property and equipment of approximately $87.3 million and an increase in Net cash flows from operating activities of approximately $66.4 million. The decrease in Purchases of property and equipment was primarily attributable to reduced spending on the construction of satellites and the capitalization of less equipment under our lease promotion. The increase in Net cash flows from operating activities primarily related to an increase in net income for the six months ended June 30, 2003 compared to the same period in 2002 as discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations. This increase was partially offset by a decrease in the change in operating assets and liabilities compared to the same period in 2002, as well as the $50.0 million satellite deposit paid to SES Americom in 2003 (see Note 8 to the Condensed Consolidated Financial Statements for further discussion). The following table reconciles free cash flow to ~~Net~~“Net cash flows from operating ~~activities.~~

During the six months ended June 30, ~~2003~~2004 and ~~2002,~~2003, free cash flow was ~~positively~~significantly impacted by ~~material~~ changes in operating assets and liabilities as shown in the ~~Net~~“Net cash flows from operating ~~activities~~activities” section of our Condensed Consolidated Statements of Cash ~~Flows included herein.~~Flows. Operating asset and liability balances can fluctuate significantly from period to period and there can be no assurance that free cash flow will not be negatively impacted by material changes in operating assets and liabilities in future periods, since these changes depend upon, among other things, management’s timing of payments and ~~receipts~~control of inventory levels, and ~~inventory levels.~~cash receipts. In addition to fluctuations resulting from changes in operating assets and liabilities, free cash flow can vary significantly from period to period depending upon, among other things, subscriber growth, subscriber revenue, subscriber churn, subscriber acquisition costs, operating efficiencies, increases or decreases in purchases of property and equipment and other factors.

Our free cash flow during the third quarter of 2003 will benefit from a non-recurring $30.0 million prepayment received for services to be provided to third parties, which will be substantially offset by expenditures related to services to be performed during the third and fourth quarters of 2003. Impacts from our litigation with the networks in Florida, FCC rules governing the delivery of superstations and other factors could cause us to terminate delivery of network channels and superstations to a substantial number of our subscribers, which could cause many of those customers to cancel their subscription to our other services. ~~Particularly, but without limitation, in~~In the event the Court of Appeals ~~does not stay~~upholds the Miami District Court’s network litigation injunction, and if we do not reach private settlement agreements with additional stations, we will attempt to assist subscribers in arranging alternative means to receive network ~~channels.~~channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we cannot predict with any degree of certainty how many subscribers ~~will~~might ultimately cancel their primary DISH Network programming as a result of termination of their distant network channels. We could be required to terminate distant network programming to all subscribers in the event the plaintiffs prevail on their cross-appeal and we are permanently enjoined from delivering all distant network channels. Termination of distant network programming to subscribers would result in a reduction in ~~ARPU of no more than $0.30~~average monthly revenue per subscriber ~~per month. While there can be no assurance, we do not expect that those terminations would result in any more than~~and a ~~one percentage point~~temporary increase in ~~our otherwise anticipated churn over the course of the next 12 months.~~ subscriber churn.

Our future capital expenditures could increase or decrease depending on the strength of the economy, strategic opportunities or other factors.

~~deficit,~~“Accumulated other comprehensive income”, net of related deferred income ~~tax, if applicable.~~tax. Declines in the fair market value of a marketable investment security which are estimated to be “other than temporary” ~~must be~~are recognized in the ~~statement~~condensed consolidated statements of operations, ~~thus~~thereby establishing a new cost basis for ~~such~~the investment. We evaluate our marketable investment securities portfolio on a quarterly basis to determine whether declines in the fair market value of these securities are other than temporary. This quarterly evaluation consists of reviewing, among other things, the fair market value of our marketable investment securities compared to the carrying ~~value of these securities,~~amount, the historical volatility of the price of each security and any market and company specific factors related to each security. Generally, absent specific factors to the contrary, declines in the fair market value of investments below cost basis for a period of less than six months are considered to be temporary. Declines in the fair market value of investments for a period of six to nine months are evaluated on a case by case basis to determine whether any company or market-specific factors exist which would indicate that ~~such~~these declines are other than temporary. Declines in the fair market value of


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

investments below cost basis for greater than nine months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the contrary.

As of June 30, 2004 and December 31, 2003, we ~~recorded~~had unrealized gains of approximately ~~$65.3~~$29.2 million and $79.6 million, respectively, as a ~~separate component~~part of “Accumulated other comprehensive income” within “Total stockholders’ ~~deficit.~~deficit”. During the six months ended June 30, ~~2003,~~2004, we ~~also recorded an aggregate charge~~did not record any charges to earnings for other than temporary declines in the fair market value of ~~certain of~~ our marketable investment securities, and we realized net losses of approximately ~~$2.0 million and established a new cost basis for these securities. This amount does not include realized gains of approximately $2.0~~$8.5 million on the sales of marketable and non-marketable investment securities. Our approximately ~~$2.82~~$1.856 billion of restricted and unrestricted cash, cash equivalents and marketable investment securities ~~include~~includes debt and equity securities which we own for strategic and financial purposes. The fair market value of these strategic marketable investment securities aggregated approximately ~~$168.9~~$153.2 million as of June 30, ~~2003.~~2004. During the six months ended June 30, ~~2003,~~2004, our portfolio generally, and our strategic investments particularly, experienced volatility. If the fair market value of our marketable securities portfolio does not remain above cost basis or if we become aware of any market or company specific factors that indicate that the carrying value of certain of our securities is impaired, we may be required to record charges to earnings in future periods equal to the amount of the decline in fair value.

We also have made, and may continue in the future to make, strategic equity investments in ~~certain non-marketable investment securities. These~~ securities that are not publicly ~~traded.~~traded, including equity interests we received in exchange for cash and non-cash consideration (See Note 6 to our Condensed Consolidated Financial Statements). Our ability to realize value from our strategic investments in companies that are not ~~public~~publicly traded is dependent on the success of their business and their ability to obtain sufficient capital to execute their business plans. Since private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them ~~that~~ we will not be able to obtain full value for them. We evaluate our non-marketable investment securities on a quarterly basis to determine whether the carrying value of each investment is impaired. This quarterly evaluation consists of reviewing, among other things, company business plans and current financial statements, if available, for factors which may indicate an impairment in our investment. ~~Such~~These factors may include, but are not limited to, cash flow concerns, material litigation, violations of debt covenants and changes in business strategy. During the six months ended June 30, ~~2003,~~2004, we did not record any impairment charges with respect to these instruments.

Subscriber Turnover

Our percentage monthly subscriber churn for the six months ended June 30, ~~2003~~2004 was approximately ~~1.51%~~1.60%, compared to our percentage subscriber churn for the same period in ~~2002~~2003 of approximately ~~1.49%~~1.51%. We ~~calculate~~believe the increase in subscriber churn resulted from a number of factors, including but not limited to competition from digital cable, cable bounties, piracy, temporary customer service deficiencies resulting from rapid expansion of our installation, in-home service and call center operations, and from increasingly complex products, impacts from the temporary unavailability of Viacom programming, and the changes in promotional mix discussed below. While we believe the impact of many of these factors will diminish with time, there can be no assurance that these and other factors will not continue to contribute to relatively higher churn than we have experienced historically. Additionally, certain of our promotions allow consumers with relatively lower credit to become subscribers. While these subscribers typically churn at a higher rate, they are also acquired at a lower cost resulting in a smaller economic loss upon disconnect.

Effective February 1, 2004, we introduced our Digital Home Advantage promotion. Under this promotion, subscribers who lease equipment are not required to enter into annual or longer programming commitments. Therefore, Digital Home Advantage subscribers may be more likely to terminate during their first year of service since there is no financial disincentive for them to terminate. Prior to introduction of this promotion, a greater percentage ~~monthly churn by dividing~~of our new DISH Network subscribers entered into one or two year commitments, obligating them to pay cancellation fees for early termination. Since the number of our DISH Network subscribers ~~who terminate service during~~with expiring commitments currently exceeds the ~~month~~number of new multi-period commitment subscribers we are acquiring, subscriber churn has been and will be adversely impacted for approximately the next 12 months while these changes in promotional mix are being absorbed. However, we believe that any impact on our overall economic return has been, and will continue to be, mitigated by ~~total~~the


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

acquisition of more DISH Network subscribers asunder our Digital Home Advantage promotion whereby upon customer disconnect, the equipment is returned and may be redeployed to future subscribers.

We currently offer local broadcast channels in approximately 143 markets across the United States. In 38 of those markets, two dishes are necessary to receive all local channels in the market. In connection with reauthorization of the ~~beginning~~Satellite Home Viewer Improvement Act this year, Congress is considering requiring that all local broadcast channels delivered by satellite to any particular market be available from one dish. We currently plan to transition all markets to a single dish by 2008. If a two-dish prohibition with a shorter transition period is enacted, we would be forced by capacity limitations to move the local channels in as many as 30 markets to new satellites, requiring subscribers in those markets to install a second dish to continue receiving their local channels. We may be forced to stop offering local channels in some of those markets altogether. The transition would result in disruptions of service for a substantial number of customers, and the ~~month. We~~cost of compliance could exceed $100.0 million. To the extent those costs are passed on to our subscribers, and because many subscribers may be unwilling to install a second dish where one had been adequate, it is expected that subscriber churn would be negatively impacted.

In addition, if the FCC finds that our current “must carry” methods are not ~~aware~~in compliance with the “must carry” rules, while we would attempt to continue providing local network channels in all markets without interruption, we could be forced by capacity constraints to reduce the number of ~~any uniform standards for calculating~~markets in which we provide local channels. This could cause a temporary increase in subscriber churn and ~~believe presentations of churn may not be calculated consistently by different entities~~a small reduction in ~~the same or similar businesses.~~ average monthly revenue per subscriber.

Impacts from our litigation with the networks in Florida, FCC rules governing the delivery of superstations and other factors could cause us to terminate delivery of network channels and superstations to a substantial number of our subscribers, which could cause many of those customers to cancel their subscription to our other services. ~~Particularly, but without limitation, in~~In the event the Court of Appeals ~~does not stay~~upholds the Miami District Court’s network litigation injunction, and if we do not reach private settlement agreements with additional stations, we will attempt to assist subscribers in arranging alternative means to receive network ~~channels.~~channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we ~~can not~~cannot predict with any degree of certainty how many subscribers ~~will~~might ultimately cancel their primary DISH Network programming as a result of termination of their distant network


~~Item 2.~~		~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued~~

channels. ~~While there can~~We could be ~~no assurance,~~required to terminate distant network programming to all subscribers in the event the plaintiffs prevail on their cross-appeal and we ~~do not expect that those terminations~~are permanently enjoined from delivering all distant network channels. Termination of distant network programming to subscribers would result in ~~any more than~~ a ~~one percentage point~~reduction in average monthly revenue per subscriber and a temporary increase in ~~our otherwise anticipated churn over the course of the next 12 months.~~subscriber churn.

Increases in piracy or theft of our signal, or our competitors’ signals, also could cause subscriber churn to increase in future periods. In addition, in April 2002, the FCC concluded that our “must carry” implementation methods were not in compliance with the “must carry” rules. If the FCC finds our subsequent remedial actions unsatisfactory, while we would attempt to continue providing local network channels in all markets without interruption, we could be forced by capacity constraints to reduce the number of markets in which we provide local channels. This could cause a temporary increase in churn and a small reduction in average monthly revenue per subscriber. Additionally, as the size of our subscriber base continues to increase, even if percentage subscriber churn remains constant, increasing numbers of gross new DISH Network subscribers are required to sustain net subscriber growth.

Subscriber Acquisition and Retention Costs

As previously described, we generally subsidize installation and all or a portion of the cost ~~and installation~~ of EchoStar receiver systems in order to attract new DISH Network subscribers. Our spending for subscriber acquisition costs, and to a lesser extent subscriber retention costs, can vary significantly from period to period and can cause material variability to our net income (loss) and free cash flow. Our average subscriber acquisition costs were approximately ~~$428~~$478 per new subscriber activation during the six months ended June 30, ~~2003.~~2004. While there can be no assurance, we believe continued tightening of credit requirements, together with promotions tailored towards subscribers with multiple receivers and advanced products, will attract better long-term subscribers. Our ~~subscriber~~“Subscriber acquisition ~~costs,~~costs”, both in the aggregate and on a per new subscriber activation basis may materially increase in future periods to the extent that we introduce more aggressive promotions if we determine that they are necessary to respond to competition, or for other reasons. We anticipate that our per activation subscriber acquisition costs will continue to be positively impacted as we continue to add co-branded subscribers to our subscriber base.


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

We exclude the value of equipment capitalized under our equipment lease ~~promotion~~program from our calculation of ~~subscriber acquisition costs.~~SAC. We also exclude payments and ~~certain~~the value of returned equipment ~~received from~~relating to disconnecting lease ~~promotion~~program subscribers from our calculation of ~~subscriber acquisition costs.~~SAC. Equipment capitalized under our lease ~~promotion~~program for new customers totaled approximately ~~$55.6~~$209.4 million and ~~$165.5~~$55.6 million for the six months ended June 30, ~~2003~~2004 and ~~2002,~~2003, respectively. Returned equipment ~~received from~~relating to disconnecting lease ~~promotion~~program subscribers, which became available for sale ~~through other promotions~~ rather than being redeployed through the lease ~~promotion,~~program, together with payments received in connection with equipment not returned, totaled approximately ~~$11.2~~$27.8 million and ~~$20.8~~$11.2 million during the six months ended June 30, 2004 and 2003, respectively. Our equipment lease penetration increased during the six months ended June 30, 2004 as compared to the same period in 2003. Our per activation subscriber acquisition costs will be positively impacted to the extent our equipment lease penetration continues to increase. Additional penetration of our equipment lease program will also increase capital expenditures.

We also offer various programs to existing subscribers including programs for new and ~~2002, respectively.~~upgraded equipment. We generally subsidize installation and all or a portion of the cost of EchoStar receivers pursuant to our subscriber retention programs. Costs related to subscriber retention programs are expected to continue to increase during the remainder of 2004.

~~Funds~~Cash necessary to ~~meet~~fund subscriber acquisition and retention costs are expected to be satisfied from existing cash and marketable investment securities balances to the extent available. We may, however, decide to raise additional capital in the future to meet these requirements. If we ~~decide~~decided to raise capital today, a variety of debt and equity funding sources would likely be available to us. However, there can be no assurance that additional financing will be available on acceptable terms, or at all, if needed in the future.

Obligations and Future Capital Requirements

~~The~~As of June 30, 2004, the indentures related to certain of EDBS’ outstanding senior notes contain restrictive covenants that ~~require~~required us to maintain satellite insurance with respect to at least ~~half~~the depreciated cost of three of the ten satellites ~~we own~~EDBS owns or ~~lease. Eight~~leases. We currently do not carry traditional insurance for any of our nine in-orbit satellites are currently owned by a direct subsidiary of EDBS. Insurance coverage is therefore required for at least four of EDBS’ eight satellites. The launch and/or in-orbit insurance policies for EchoStar I through EchoStar VIII have expired. We have been unable to obtain insurance on any of these satellites on terms acceptable to us. As a result, we are currently self-insuring these satellites. To satisfy insurance covenants related to EDBS’ senior notes, we ~~have reclassified~~classify an amount equal to the depreciated cost of ~~four~~three of our satellites ~~from cash and cash equivalents to cash~~as “Cash reserved for satellite ~~insurance~~insurance” on our balance sheet. As of June 30, ~~2003,~~2004, cash reserved for satellite insurance totaled approximately ~~$135.2~~$107.1 million. ~~The reclassifications~~We will continue to reserve cash for satellite insurance on our balance sheet until such time, if ever, as we ~~can~~ again insure our satellites on acceptable terms and for acceptable amounts or until the covenants requiring ~~the~~that insurance are no longer applicable. We believe we have ~~in-orbit~~ satellite capacity sufficient to expeditiously recover transmission of most programming in the event one of our ~~in-orbit~~ satellites fails. However, the ~~cash~~“Cash reserved for satellite ~~insurance~~insurance” is not adequate to fund the construction, launch and insurance for a replacement satellite, ~~in the event of a complete loss of~~and it typically takes several years to design, construct and launch a satellite. Programming continuity cannot be assured in the event of multiple satellite losses.

As of June 30,


~~Item 2.~~		~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued~~

~~During March 2003, one~~ 2004, our purchase obligations, primarily consisting of binding purchase orders for EchoStar satellite receiver systems and related equipment and for products and services related to the operation of our ~~wholly-owned subsidiaries, EchoStar Satellite Corporation (“ESC”), entered into a satellite service agreement with SES Americom for all~~DISH Network, totaled approximately $935.4 million. Our purchase obligations can fluctuate significantly from period to period due to, among other things, management’s control of ~~the capacity on an FSS satellite to be located at the 105 degree west orbital location. This satellite is scheduled to be launched~~inventory levels, and can materially impact our future operating asset and liability balances, and our future working capital requirements. The future maturities of our satellite-related obligations and operating leases did not change materially during the ~~second half of~~six months ended June 30, 2004. ESC also agreed to lease all of the capacity on an existing in-orbit FSS satellite at the 105 degree orbital location beginning August 1, 2003 and continuing in most circumstances until the new satellite is launched. ESC intends to use the capacity on the satellites to offer a combination of satellite TV programming including local network channels in additional markets and expanded high definition programming, together with satellite-delivered, high-speed internet services. In connection with the SES agreement, ESC paid $50.0 million to SES Americom to partially fund construction of the new satellite. The ten-year satellite service agreement is renewable by ESC on a year to year basis following the initial term, and provides ESC with certain rights to replacement satellites at the 105 degree west orbital location. We are required to make monthly payments to SES Americom for both the existing in-orbit FSS satellite and also for the new satellite for the ten-year period following its launch.

In addition to our DBS business plan, we have a business plan and authorized orbital slots for a two-satellite FSS Ku-band satellite system and a two-satellite FSS Ka-band satellite system. EchoStar IX was successfully launched on August 7, 2003. Assuming successful completion of on orbit check out, EchoStar IX will be located at the 121 degree orbital location. Its 32 Ku-band transponders are expected to provide additional video service choices for DISH Network subscribers utilizing a new specially-designed dish. EchoStar IX is also equipped with two Ka-band transponders which we intend to utilize to confirm the commercial viability of direct-to-home Ka-band video and data services.

We currently own a 90.0% interest in VisionStar, Inc., (“VisionStar”) which holds a Ka-band FCC license at the 113 degree orbital location. We did not complete construction or launch of a VisionStar satellite by the applicable FCC milestone deadlines and have requested an extension of these milestones from the FCC. Failure to receive an extension, of which there can be no assurance, would render the license invalid. In the future, we may fund construction, launch and insurance of this and additional satellites through cash from operations, public or private debt or equity financing, joint ventures with others, or from other sources, although there is no assurance that such funding will be available.

As a result of our recent agreements with SES Americom, and for the construction of EchoStar X, our obligations for payments related to satellites have increased substantially. While in certain circumstances the dates on which we are obligated to make these payments could be delayed, the aggregate amount due under all of our existing satellite-related contracts including satellite construction and launch, satellite leases, in-orbit payments to satellite manufacturers and tracking, telemetry and control payments is expected to be approximately $48.0 million for the remainder of 2003, $79.0 million during 2004, $87.0 million during 2005, $72.0 million during 2006, $57.0 million during 2007 and similar amounts in subsequent years. These amounts will increase further when we procure and commence payments for the launch of EchoStar X, and would further increase to the extent we procure insurance for our satellites or contract for the construction, launch or lease of additional satellites.

We expect that our future working capital, capital expenditure and debt service requirements will be satisfied primarily from existing cash and marketable investment securities balances and cash generated from operations. Our ability to generate positive future operating and net cash flows is dependent upon, among other things, our ability to retain existing DISH Network subscribers. There can be no assurance that we will be successful in achieving any or all of our goals. The amount of capital required to fund our ~~2003~~future working capital and capital expenditure needs will vary, depending, among other things, on the rate at which we acquire new subscribers and the cost of subscriber acquisition, including capitalized costs associated with our lease ~~promotion.~~program. Our capital expenditures will also vary depending on the number of satellites leased or under construction at any point in time. Our working capital and capital expenditure


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued

requirements could increase materially in the event of increased competition for subscription television customers, significant satellite


~~Item 2.~~		~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Continued~~

failures, or in the event of a continued general economic downturn, among other factors. These factors could require that we raise additional capital in the future.

From time to time, we evaluate opportunities for strategic investments or acquisitions that would complement our current services and products, enhance our technical capabilities or otherwise offer growth opportunities. Future material investments or acquisitions may require that we obtain additional capital. Further, effective August 9, 2004 our Board of Directors approved the repurchase of up to an additional $1.0 billion of our Class A Common Stock, which could require that we raise additional capital (See Note 12 to the Condensed Consolidated Financial Statements). Finally the indenture governing our $1.0 billion outstanding principal amount of 10 3/8% Senior Notes due 2007 provides that we can redeem them commencing October 1, 2004 at a price of 105.188% for a total of $1.052 billion plus accrued and unpaid interest. While we have not reached any decision whether to redeem or repurchase the notes, the redemption or repurchase of these notes also could require that we raise additional capital. There can be no assurance that we could raise all required capital or that required capital would be available on acceptable terms.


~~Item 3.~~		~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks Associated With Financial Instruments

As of June 30, ~~2003,~~2004, our restricted and unrestricted cash, cash equivalents and marketable investment securities had a fair market value of approximately ~~$2.82~~$1.856 billion. Of that amount, a total of approximately ~~$2.65~~$1.703 billion was invested in: (a) cash; (b) debt instruments of the U.S. Government and its agencies; (c) commercial paper and notes with an overall average maturity of less than one year and rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations; and (d) instruments with similar risk characteristics to the commercial paper described above. The primary purpose of these investing activities has been to preserve principal until the cash is required to, among other things, fund ~~operations.~~operations, make strategic investments and expand the business. Consequently, the size of this portfolio fluctuates significantly as cash is received and used in our business.

Our restricted and unrestricted cash, cash equivalents and marketable investment securities had an average annual return for the six months ended June 30, ~~2003~~2004 of approximately ~~2.4%~~1.9%. A hypothetical 10.0% decrease in interest rates would result in a decrease of approximately ~~$6.2~~$5.4 million in annual interest income. The value of certain of the investments in this portfolio can be impacted by, among other things, the risk of adverse changes in securities and economic markets generally, as well as the risks related to the performance of the companies whose commercial paper and other instruments we hold. However, the high quality of these investments (as assessed by independent rating agencies), reduces these risks. The value of these investments can also be impacted by interest rate fluctuations.

At June 30, ~~2003,~~2004, all of the ~~$2.65~~$1.703 billion was invested in fixed or variable rate instruments or money market type accounts. While an increase in interest rates would ordinarily adversely impact the fair market value of fixed and variable rate investments, we normally hold these investments to maturity. Consequently, neither interest rate fluctuations nor other market risks typically result in significant realized gains or losses to this portfolio. A decrease in interest rates has the effect of reducing our future annual interest income from this portfolio, since funds would be re-invested at lower rates as the instruments mature. Over time, any net percentage decrease in interest rates could be reflected in a corresponding net percentage decrease in our interest income.

Included in our marketable securities portfolio balance is debt and equity of public and private companies we hold for strategic and financial purposes. As of June 30, ~~2003,~~2004, we held strategic and financial debt and equity investments of public companies with a fair market value of approximately ~~$168.9~~$153.2 million. We may make additional strategic and financial investments in ~~other~~ debt and other equity securities in the future.

The fair value of our strategic debt investments can be impacted by interest rate fluctuations. Absent the effect of other factors, a hypothetical 10.0% increase in LIBOR would result in a decrease in the fair value of our investments in these debt instruments of approximately $6.5 million. The fairmarket value of our strategic and financial debt and equity investments can ~~also~~ be significantly impacted by the risk of adverse changes in securities markets generally, as well as risks related to the performance of the companies whose securities we have invested in, risks associated with specific industries, and other factors. These investments are subject to significant fluctuations in fair market value due to the volatility of the securities markets and of the underlying businesses. A hypothetical 10.0% adverse change in the price of our public strategic debt and equity investments would result in approximately a ~~$16.9~~ $15.3

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - continued

million decrease in the fair market value of that portfolio. The fair market value of our strategic debt investments are currently not materially impacted by interest rate fluctuations due to the nature of these investments.


~~Item 3.~~		~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK — continued~~

~~In accordance with generally accepted accounting principles, we~~We currently classify all marketable investment securities as available-for-sale. We adjust the carrying value of our available-for-sale ~~marketable investment~~ securities to fair market value and report the related temporary unrealized gains and losses as a ~~separate~~ component of ~~stockholders’ deficit,~~“Accumulated other comprehensive income”, net of related deferred income ~~tax, if applicable.~~tax. Declines in the fair market value of a marketable investment security which are estimated to be “other than temporary” ~~must be~~are recognized in the ~~statement~~condensed consolidated statements of operations, ~~thus~~thereby establishing a new cost basis for ~~such~~the investment. We evaluate our marketable investment securities portfolio on a quarterly basis to determine whether declines in the fair market value of these securities are other than temporary. This quarterly evaluation consists of reviewing, among other things, the fair market value of our marketable investment securities compared to the carrying ~~value of these securities,~~amount, the historical volatility of the price of each security and any market and company specific factors related to each security. Generally, absent specific factors to the contrary, declines in the fair market value of investments below cost basis for a period of less than six months are considered to be temporary. Declines in the fair market value of investments for a period of six to nine months are evaluated on a case by case basis to determine whether any company or market-specific factors exist which would indicate that ~~such~~these declines are other than temporary. Declines in the fair market value of investments below cost basis for greater than nine months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the contrary.

As of June 30, 2004 and December 31, 2003, we ~~recorded~~had unrealized gains of approximately ~~$65.3~~$29.2 million and $79.6 million, respectively, as a ~~separate component~~part of “Accumulated other comprehensive income” within “Total stockholders’ ~~deficit.~~deficit”. During the six months ended June 30, ~~2003,~~2004, we ~~also recorded an aggregate~~did not record any charge to earnings for other than temporary declines in the fair market value of ~~certain of~~ our marketable investment securities, and we realized net losses of approximately ~~$2.0 million, and established a new cost basis for these securities. This amount does not include realized gains of approximately $2.0~~$8.5 million on the sales of marketable and non-marketable investment securities. Our approximately $2.82 billion of restricted and unrestricted cash, cash equivalents and marketable investment securities include debt and equity securities which we own for strategic and financial purposes. The fair market value of these strategic marketable investment securities aggregated approximately $168.9 million as of June 30, 2003. During the six months ended June 30, ~~2003,~~2004, our portfolio generally, and our strategic investments particularly, experienced and continue to experience volatility. If the fair market value of our marketable securities portfolio does not remain above cost basis or if we become aware of any market or company specific factors that indicate that the carrying value of certain of our securities is impaired, we may be required to record charges to earnings in future periods equal to the amount of the decline in fair market value.

We also have made, and may continue in the future to make, strategic equity investments in ~~certain non-marketable investment securities. These~~ securities that are not publicly ~~traded.~~traded, including equity interests we received in exchange for cash and non-cash consideration (See Note 6 to our Condensed Consolidated Financial Statements). Our ability to realize value from our strategic investments in companies that are not ~~public~~publicly traded is dependent on the success of their business and their ability to obtain sufficient capital to execute their business plans. Since private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments or that when we desire to sell them ~~that~~ we will not be able to obtain full value for them. We evaluate our non-marketable investment securities on a quarterly basis to determine whether the carrying value of each investment is impaired. This quarterly evaluation consists of reviewing, among other things, company business plans and current financial statements, if available, for factors which may indicate an impairment in our investment. ~~Such~~These factors may include, but are not limited to, cash flow concerns, material litigation, violations of debt covenants and changes in business strategy. During the six months ended June 30, ~~2003,~~2004, we did not record any impairment charges with respect to these instruments.

As of June 30, ~~2003,~~2004, we estimated the fair market value of our fixed-rate debt and mortgages and other notes payable to be approximately ~~$5.71~~$5.635 billion using quoted market prices where available, or discounted cash flow analyses. The interest rates assumed in ~~such~~these discounted cash flow analyses reflect interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The fair market value of our fixed-rate debt and mortgages is affected by fluctuations in interest rates. A hypothetical 10.0% decrease in assumed interest rates would increase the fair market value of our debt by approximately ~~$150.4~~$131.0 million. To the extent interest rates increase, our costs of financing would increase at such time as we are required to refinance our debt. As of June 30, ~~2003,~~2004, a hypothetical 10.0% increase in assumed interest rates would increase our annual interest expense by approximately ~~$43.0~~$36.4 million.

We have not used derivative financial instruments for hedging or speculative purposes. ~~We have not hedged or otherwise protected against the risks associated with any of our investing or financing activities.~~

3339

PART II – OTHER INFORMATION

~~PART II — OTHER INFORMATION~~


~~Item 1.~~		Item 1. LEGAL PROCEEDINGS

~~WIC Premium Television Ltd.~~

During July 1998, a lawsuit was filed by WIC Premium Television Ltd. (“WIC”), an Alberta corporation, in the Federal Court of Canada Trial Division, against General Instrument Corporation, HBO, Warner Communications, Inc., John Doe, Showtime, United States Satellite Broadcasting Company, Inc., EchoStar, and certain EchoStar subsidiaries.

During September 1998, WIC filed another lawsuit in the Court of Queen’s Bench of Alberta Judicial District of Edmonton against certain defendants, including us. WIC is a company authorized to broadcast certain copyrighted work, such as movies and concerts, to residents of Canada. WIC alleges that the defendants engaged in, promoted, and/or allowed satellite dish equipment from the United States to be sold in Canada and to Canadian residents and that some of the defendants allowed and profited from Canadian residents purchasing and viewing subscription television programming that is only authorized for viewing in the United States. The lawsuit seeks, among other things, interim and permanent injunctions prohibiting the defendants from importing satellite receivers into Canada and from activating satellite receivers located in Canada to receive programming, together with damages in excess of $175.0 million.

The Court in the Alberta action denied our motion to dismiss, and our appeal of that decision. The Federal action has been dismissed by the federal court. The Alberta action is pending. We intend to continue to vigorously defend the suit. During 2002, the Supreme Court of Canada ruled that the receipt in Canada of programming from United States pay television providers is prohibited. While we were not a party to that case, the ruling could adversely affect our defense. It is too early to make an assessment of the probable outcome of the litigation or to determine the extent of any potential liability or damages.

Distant Network Litigation

In April 2002, we reached a private settlement with ABC, Inc., one of the plaintiffs in the litigation, and jointly filed a stipulation of dismissal. In November 2002, we reached a private settlement with NBC, another of the plaintiffs in the litigation, and jointly filed a stipulation of dismissal. On March 10, 2004, we reached a private settlement with CBS, another of the plaintiffs in the litigation, and jointly filed a stipulation of dismissal. We have also reached private settlements with ~~a small~~

~~PART II — OTHER INFORMATION~~

~~number of~~many independent stations and station groups. We were unable to reach a settlement with ~~six~~five of the original eight plaintiffs ~~— CBS,~~– Fox orand the ~~associations affiliated~~independent affiliate groups associated with each of the four networks.

~~While we are pleased the District Court did not provide the relief sought by the plaintiffs, we~~41

PART II – OTHER INFORMATION

We believe the District Court made a number of errors and ~~have filed a notice of appeal of~~appealed the ~~District Court’s~~ decision. ~~We have also asked the~~Plaintiffs cross-appealed. The Court of Appeals granted our request to stay the injunction until our appeal is decided, the current September 22, 2003 date by which EchoStar has been ordered to terminate distant network channels to all subscribers impacted by the District Court’s decision. The Court of Appeals has indicated it will ruledecided. Oral argument occurred on ~~our request for a stay on or before August 15, 2003.~~February 26, 2004. It is not possible to predict ~~how the Court of Appeals will rule on our stay, or~~ how or when the Court of Appeals will rule on the merits of our appeal.

In the event the Court of Appeals ~~does not stay~~upholds the ~~lower court’s ruling,~~injunction, and if we do not reach private settlement agreements with additional stations, we will attempt to assist subscribers in arranging alternative means to receive network channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we cannot predict with any degree of certainty how many subscribers will cancel their primary DISH Network programming as a result of termination of their distant network channels. We could be required to terminate distant network programming to all subscribers in the event the plaintiffs prevail on their cross-appeal and we are permanently enjoined from delivering all distant network channels. Termination of distant network programming to subscribers would result, among other things, in a reduction in ~~ARPU of no more than $0.30~~average monthly revenue per subscriber ~~per month. While there can be no assurance, we do not expect that those terminations would result in any more than~~and a ~~one percentage point~~temporary increase in ~~our otherwise anticipated churn over the course of the next 12 months.~~subscriber churn.

Gemstar

In December 2000, we filed suit against Gemstar-TV Guide (and certain of its subsidiaries) in the United States District Court for the District of Colorado alleging violations by Gemstar of various federal and state anti-trust laws and laws governing unfair competition. ~~The lawsuit seeks an injunction and monetary damages.~~ Gemstar filed counterclaims alleging infringement of ~~United States Patent Nos. 5,923,362 and 5,684,525 that relate to certain electronic program guide functions. We examined these~~additional patents and believe they are not infringed by any of our products or services. In August 2001, the Federal Multi-District Litigation panel combined this suit, for pre-trial purposes, with other lawsuits asserting antitrust claims against Gemstar, which had previously been filed by other parties. In January 2002, Gemstar dropped the counterclaims of patent infringement. During March 2002, the Court denied Gemstar’s motion to dismiss

~~PART II — OTHER INFORMATION~~

~~our antitrust claims. In January 2003, the Court denied a more recently filed Gemstar motion for summary judgment based generally on lack of standing. In its answer, Gemstar~~ asserted new patent infringement counterclaims regarding United States Patent Nos. 4,908,713 (“the `713 patent”) and 5,915,068 (“the `068 patent”, which is expired). These patents relate to on-screen programming of VCRs. We have examined these patents and believe that they are not infringed by any of our products or services. The Court recently granted our motion to dismiss the `713 patent for lack of standing.counterclaims.

In February 2001, Gemstar filed additional patent infringement actions against us in the District Court in Atlanta, Georgia and with the ITC. ~~These suits allege infringement of United States Patent Nos. 5,252,066, 5,479,268 and 5,809,204,~~We settled all of ~~which relate to certain electronic program guide functions. In addition,~~ the ~~ITC action alleged infringement of the `121 Patent which was also asserted in the North Carolina case previously discussed. In the Georgia district court case,~~litigation with Gemstar seeks damages and an injunction. The Georgia case was stayed pending resolution of the ITC action and remains stayed at this time. In December 2001, the ITC held a 15-day hearing before an administrative law judge. Priorduring 2004 (See Note 6 to the hearing, Gemstar dropped its infringement allegations regarding United States Patent No. 5,252,066 with respect to which we had asserted substantial allegations of inequitable conduct. The hearing addressed, among other things, Gemstar’s allegations of patent infringement and respondents’ (SCI, Scientific Atlanta, Pioneer and us) allegations of patent misuse. During June 2002, the judge issued a Final Initial Determination finding that none of the patents asserted by Gemstar had been infringed. In addition, the judge found that Gemstar was guilty of patent misuse with respect to the `121 Patent and that the `121 Patent was unenforceable because it failed to name an inventor. The parties then filed petitions for the full ITC to review the judge’s Final Initial Determination. During August 2002, the full ITC adopted the judge’s findings regarding non-infringement and the unenforceability of the `121 Patent. The ITC did not adopt, but did not overturn, the judge’s findings of patent misuse. Gemstar is appealing the decision of the ITC to the United States Court of Appeals for the Federal Circuit. If the Federal Circuit were to overturn the judge’s decision, such an adverse decision in this case could temporarily halt the import of our receivers and could require us to materially modify certain user-friendly electronic programming guides and related features we currently offer to consumers. Based upon our review of these patents, and based upon the ITC’s decision, we continue to believe that these patents are not infringed by any of our products or services. We intend to continue to vigorously contest the ITC, North Carolina and Georgia suits and will, among other things, continue to challenge both the validity and enforceability of the asserted patents.Condensed Consolidated Financial Statements).

Superguide

A Markman ruling interpreting the patent claims was issued by the Court and in response to that ~~ruling,~~ruling; we filed motions for summary judgment of non-infringement for each of the asserted patents. Gemstar filed a motion for summary judgment of infringement with respect to one of the patents. During July 2002, ~~the Court issued a Memorandum of Opinion on the summary judgment motions. In its Opinion,~~ the Court ruled that none of our products infringe the 5,038,211 and 5,293,357 patents. With respect to the 4,751,578 patent, the Court ruled that none of our current products infringed that patent and asked for additional information before it could rule on certain low-volume products that are no longer in production. During July 2002, the Court summarily ruled that the ~~aforementioned low-volume~~low- volume products did not infringe any of the asserted patents. Accordingly, the Court dismissed the case and awarded us our court ~~costs. Superguide~~costs and ~~Gemstar are appealing this~~the case was appealed to the United States Court of Appeals for the Federal Circuit. On February 12, 2004, the Federal Circuit affirmed in part and reversed in part the District Court’s findings and remanded the case back to the District Court for further proceedings. A petition for reconsideration of the Federal

PART II – OTHER INFORMATION

Circuit Decision was denied. Based upon the settlement with Gemstar, we now have an additional defense in this case based upon a license from Gemstar. We will continue to vigorously defend this case. In the event ~~the Federal Circuit~~that a Court ultimately determines that we infringe on any of the ~~aforementioned~~ patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly electronic programming guide and related features that we currently offer to consumers. It is ~~too early~~not possible to make ana firm assessment of the probable outcome of the ~~suits.~~suit or to determine the extent of any potential liability or damages.

37Broadcast Innovation, LLC

In November of 2001, Broadcast Innovation, LLC filed a lawsuit against us, DirecTV, Thomson Consumer Electronics and others in Federal District Court in Denver, Colorado. The suit alleges infringement of United States Patent Nos. 6,076,094 (“the ‘094 patent”) and 4,992,066 (“the ‘066 patent”). The ‘094 patent relates to certain methods and devices for transmitting and receiving data along with specific formatting information for the data. The ‘066 patent relates to certain methods and devices for providing the scrambling circuitry for a pay television system on removable cards. We examined these patents and believe that they are not infringed by any of our products or services. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leaving us as the only defendant.

On January 23, 2004, the judge issued an order finding the ‘066 patent invalid. Motions with respect to the infringement, invalidity and construction of the ‘094 patent remain pending. We intend to continue to vigorously defend this case. In the event that a Court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. It is not possible to make a firm assessment of the probable outcome of the suit or to determine the extent of any potential liability or damages.

TiVo Inc.

~~PART II — OTHER INFORMATION~~

~~California Actions~~

~~A purported class action was~~In January of 2004, TiVo Inc. filed a lawsuit against us in the ~~California State Superior~~United States District Court for ~~Alameda County during May 2001~~the Eastern District of Texas. The suit alleges infringement of United States Patent No. 6,233,389 (“the ‘389 patent”). The ‘389 patent relates to certain methods and devices for providing what the patent calls “time-warping”. We have examined this patent and do not believe that it is infringed by ~~Andrew A. Werby. The complaint, relating~~any of our products or services. We intend to ~~late fees, alleges unlawful, unfair~~vigorously defend this case and ~~fraudulent business practices in violation~~we have moved to have it transferred to the United States District Court for the Northern District of ~~California Business and Professions Code Section 17200 et seq., false and misleading advertising in violation of California Business and Professions Code Section 17500, and violation~~California. In the event that a Court ultimately determines that we infringe this patent, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. It is not possible to make a firm assessment of the ~~California Consumer Legal Remedies Act. A settlement was subsequently reached with plaintiff’s counsel. The Court issued its preliminary approval~~probable outcome of the ~~settlement during October 2002 and issued its final approval~~suit or to determine the extent of ~~the settlement on March 7, 2003. As a result, this matter was concluded with no material impact on our business.~~any potential liability or damages.

California Action

PART II – OTHER INFORMATION

representations “crystal clear digital video” or “CD quality” audio constituted a cause of action. Moreover, the Court affirmed that the “reasonable consumer” standard was applicable to each of the alleged consumer statutes. Plaintiff argued the standard should be the “least sophisticated” consumer. The Court also affirmed the dismissal of Plaintiffs’ breach of warranty claim. Plaintiff filed a Petition for Review with the California Supreme Court and we responded. During March 2004, the California Supreme Court denied Plaintiff’s Petition for Review. Therefore, the action has been remanded to the trial court pursuant to the instructions of the Court of Appeals. It is not possible to make ~~a firm~~an assessment of the probable outcome of the ~~appeal~~litigation or to determine the extent of any potential ~~liability or damages.~~liability.

~~State Investigation~~

Retailer Class Actions

We have been sued by retailers in three separate purported class actions. During October 2000, two separate lawsuits were filed in the Arapahoe County District Court in the State of Colorado and the United States District Court for the District of Colorado, respectively, by Air Communication & Satellite, Inc. and John DeJong, et al. on behalf of themselves and a class of persons similarly situated. The plaintiffs are attempting to certify nationwide classes on behalf of certain of our satellite hardware retailers. The plaintiffs are requesting the Courts to declare certain provisions of, and changes to, alleged agreements between us and the retailers invalid and unenforceable, and to award damages for lost incentives and payments, charge backs, and other compensation. We are vigorously defending against the suits and have asserted a variety of counterclaims. The United States District Court for the District of Colorado stayed the Federal Court action to allow the parties to pursue a comprehensive adjudication of their dispute in the Arapahoe County State Court. John DeJong, d/b/a Nexwave, and Joseph Kelley, d/b/a Keltronics, subsequently intervened in the Arapahoe County Court action as plaintiffs and proposed class representatives. We have filed a motion for summary judgment on all counts and against all plaintiffs. The plaintiffs have filed a motion for additional time to conduct discovery to enable them to respond to our motion. The Court has not ruled on either of the two motions. It is ~~too early~~not possible to make an assessment of the probable outcome of the litigation or to determine the extent of any potential liability or damages.

~~PART II — OTHER INFORMATION~~

StarBand Shareholder Lawsuit

OnDuring August ~~20,~~ 2002, a limited group of shareholders in StarBand filed an action in the Delaware Court of Chancery against ~~EchoStar~~us and EchoBand Corporation, together with four EchoStar executives who sat on the Board of Directors for StarBand, for alleged breach of the fiduciary duties of due care, good faith and loyalty, and also against ~~EchoStar~~us and EchoBand Corporation for aiding and abetting such alleged breaches. Two of the individual defendants, Charles W. Ergen and David K. Moskowitz, are members of our Board of Directors. The action stems from the defendants’ involvement as directors, and ~~EchoBand’s~~our position as a shareholder, in StarBand, a broadband Internet satellite venture in which we invested. OnDuring July ~~28,~~ 2003, the Court granted the defendants’ motion to dismiss on all counts. ~~We do not know if plaintiffs will appeal~~The Plaintiffs appealed. On April 15, 2004, the ~~Court’s decision.~~

~~Shareholder Derivative Action~~

~~During October 2002,~~Delaware Supreme Court remanded the case instructing the Chancery Court to re-evaluate its decision in light of a ~~purported shareholder filed a derivative action against members~~recent opinion of ~~our Board of Directors in~~ the ~~United States District~~Delaware Supreme Court, of Clark County, Nevada and naming us as a nominal defendant. The complaint alleges breach of fiduciary duties, corporate waste and other unlawful acts relating to our agreement to (1) pay Hughes Electronics Corporation a $600.0 million termination fee in certain circumstances and (2) acquire Hughes’ shareholder interest in PanAmSat. The agreements to pay the termination fee and acquire PanAmSat were required in the event that the merger with DirecTV was not completed by January 21, 2003. During July 2003, the individual Board of Director defendants were dismissed from the suit. The plaintiff has filed a motion for attorney’s fees.Tooley v. Donaldson, No. 84,2004 (Del. Supr. April 2, 2004). It is not possible to make ana firm assessment of the probable outcome of the ~~outstanding motions~~litigation or to determine the extent of any potential liability or damages.

PART II – OTHER INFORMATION

Enron Commercial Paper Investment Complaint

During November 2003, an action was commenced in the United States Bankruptcy Court for the Southern District of New York, against approximately 100 defendants, including us, who invested in Enron’s commercial paper. The complaint alleges that Enron’s October 2001 prepayment of its commercial paper is a voidable preference under the bankruptcy laws and constitutes a fraudulent conveyance. The complaint alleges that we received voidable or fraudulent prepayments of approximately $40.0 million. We typically invest in commercial paper and notes which are rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations. At the time of our investment in Enron commercial paper, it was considered to be high quality and considered to be a very low risk. It is too early to make an assessment of the probable outcome of the litigation or to determine the extent of any potential liability or damages.

Acacia

In June of 2004, Acacia Media Technologies filed a lawsuit against us in the United States District Court for the Northern District of California. The suit also named DirecTV, Comcast, Charter, Cox and a number of smaller cable companies as defendants. Acacia is an intellectual property holding company which seeks to license the patent portfolio that it has acquired. The suit alleges infringement of United States Patent Nos. 5,132,992, 5,253,275, 5,550,863, 6,002,720 and 6,144,702 (herein after the ‘992, ‘275, ‘863, ‘720 and ‘702 patents, respectively). The ‘992, ‘863, ‘720 and ‘702 patents have been asserted against us although Acacia’s complaint does not identify any products or services that it believes are infringing these patents. These patents relate to various systems and methods related to the transmission of digital data. The ‘992 and ‘702 patents have also been asserted against several internet adult content providers in the United States District Court for the Central District of California. On July 12, 2004, that Court issued a Markman ruling which found that the ‘992 and ‘702 patents were not as broad as Acacia had contended. We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. It is not possible to make a firm assessment of the probable outcome of the suit or to determine the extent of any potential liability or damages.

Fox Sports Direct

Satellite Insurance

PART II – OTHER INFORMATION

Assicurazione E Riassicurazione S.P.A, Genova; E. Patrick; ZC Specialty Insurance; Lloyds of London Syndicates 588 NJM, 1209 Meb AND 861 Meb; Generali France Assurances; Assurance France Aviation; and Ace Bermuda Insurance Ltd.

~~PART II — OTHER INFORMATION~~

PART II – OTHER INFORMATION

Item 2.CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Issuer Purchases of Equity Securities

The following table provides information regarding purchases of our Class A Common stock made by us for the period from January 1 through July 15, 2004. As of July 15, 2004, we completed our stock repurchase plan, having purchased a total of 31.8 million shares of our Class A Common stock for a total of $1.0 billion:


	Total				Total Number of		Maximum Approximate
	Number of		Average		Shares Purchased as		Dollar Value of Shares
	Shares		Price		Part of Publicly		that May Yet be
	Purchased		Paid per		Announced Plans or		Purchased Under the
Period	(a)		Share		Programs		Plans or Programs (b)
	(In thousands, except share data)
January 1 - January 31, 2004		—	$	—		—	$	809,639
February 1 - February 29, 2004		—	$	—		—	$	809,639
March 1 - March 31, 2004		2,085,000	$	32.73		2,085,000	$	741,371
April 1 - April 30, 2004		3,098,800	$	32.93		3,098,800	$	639,300
May 1 - May 31, 2004		10,964,600	$	31.11		10,964,600	$	298,065
June 1 - June 30, 2004		6,797,658	$	31.02		6,797,658	$	87,144
July 1 - July 15, 2004		2,932,356	$	29.71		2,932,356	$	—

Total		25,878,414	$	31.28		25,878,414	$	—

(a) During the period from January 1 through July 15, 2004 all purchases were made pursuant to the program discussed below in open market transactions.

~~Item 4.~~ (b) Our Board of Directors authorized the purchase of up to $1.0 billion of our Class A Common stock on November 22, 2003. All purchases were made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934 pursuant to our Rule 10b5-1 plan entered into on November 28, 2003 and which expires on the earlier of December 1, 2004 or when an aggregate amount of $1.0 billion of stock has been purchased. All purchases were made through open market purchases under the plan or privately negotiated transactions subject to market conditions and other factors. To date, no plans or programs for the purchase of our stock have been terminated prior to their expiration. There were also no other plans or programs for the purchase of our stock that expired during the period from January 1 through July 15, 2004. Purchased shares have and will be held as Treasury shares and may be used for general corporate purposes. The maximum approximate dollar value of our stock that may yet be purchased under the plan reflects the $1.0 billion authorized by our Board of Directors during November 2003 less, the cost of the purchases of approximately $809.6 million and $190.4 million for the period from January 1 through July 15, 2004 and during November and December 31, 2003, respectively. As of July 15, 2004, we completed the November 2003 plan, having purchased a total of 31.8 million shares of our Class A Common stock for a total of $1.0 billion.
Effective August 9, 2004, our Board of Directors authorized the repurchase of an aggregate of up to an additional $1.0 billion of our Class A Common stock, which is not included in the table above. We may make repurchases of our Class A Common stock under this plan through open market purchases or privately negotiated transactions subject to market conditions and other factors. Our repurchase programs do not require us to acquire any specific number or amount of securities and any of those programs may be terminated at any time. We may enter into Rule 10b5-1 plans from time to time to facilitate repurchases of our securities.

PART II – OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following matters were voted upon at the annual meeting of our shareholders held on May 6, ~~2003:~~2004:

a. The election of James DeFranco, Michael T. Dugan, Cantey Ergen, Charles W. Ergen, ~~James DeFranco,~~Raymond L. Friedlob, Steven R. Goodbarn, David K. Moskowitz ~~Raymond L. Friedlob, Cantey Ergen, Peter A. Dea~~ and ~~Steven R. Goodbarn~~C. Michael Schroeder as directors to serve until the ~~2004~~2005 annual meeting of shareholders; and

b. ~~The approval of an amendment to our Amended and Restated Articles of Incorporation to modify one of our indemnification provisions relating to payment of litigation expenses; and~~
c. Ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, ~~2003.~~2004.

All matters voted on at the annual meeting were approved. The voting results were as follows:

Votes

For Against Withheld

Election as directors:
Peter A. Dea 2,596,615,089 — 10,798,156
James DeFranco 2,553,696,377 — 53,716,868
Cantey Ergen 2,553,591,551 — 53,821,694
Charles W. Ergen 2,596,384,770 — 11,028,475
Raymond L. Friedlob 2,596,373,786 — 11,039,459
Steven R. Goodbarn 2,596,655,717 — 10,757,528
David K. Moskowitz 2,596,395,204 — 11,018,041
Approval of an amendment to our Amended and Restated Articles of Incorporation to modify one of our indemnification provisions relating to payment of litigation expenses
2,605,193,971 2,027,950 191,324
Ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2003
2,602,159,897 5,111,323 142,025


	Votes
	For		Against		Withheld
Election as directors:
James DeFranco		2,525,783,836		—		69,786,621
Michael T. Dugan		2,525,776,901		—		69,793,556
Cantey Ergen		2,525,752,843		—		69,817,614
Charles W. Ergen		2,526,413,514		—		69,156,943
Raymond L. Friedlob		2,571,491,735		—		24,078,722
Steven R. Goodbarn		2,571,483,473		—		24,086,984
David K. Moskowitz		2,525,771,816		—		69,798,641
C. Michael Schroeder		2,571,527,345		—		24,043,112

Ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2004		2,583,224,245		12,236,587		109,625

4048

***

~~Filed~~Certain provisions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. A conforming electronic copy is being filed herewith.

~~On May 6, 2003, we filed a Current Report~~No reports on Form 8-K ~~in connection with~~were filed during the ~~filing~~second quarter of our Quarterly Report on Form 10-Q for the period ended March 31, 2003 stating that our Chief Executive Officer and our Chief Financial Officer certified our report pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.2004.

On May 9, 2003, we filed a Current Report on Form 8-K in connection with the filing of our Quarterly Report on Form 10-Q for the period ended March 31, 2003 announcing our financial results for the quarter ended March 31, 2003.49


Nevada		88-0336997
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


~~5701 S. Santa Fe Drive~~ ~~Littleton, Colorado~~9601 South Meridian Boulevard		~~80120~~
Englewood, Colorado		80112
(Address of principal executive offices)		(Zip code)


~~DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS~~
		~~CONDENSED CONSOLIDATED BALANCE SHEETS~~
		~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~
		~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~
		~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
	~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
	~~Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
	~~Item 4. CONTROLS AND PROCEDURES~~
~~PART II — OTHER INFORMATION~~
	~~Item 1. LEGAL PROCEEDINGS~~
	~~Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~
	~~Item 6. EXHIBITS AND REPORTS ON FORM 8-K~~
~~SIGNATURES~~
~~INDEX TO EXHIBITS~~
~~EX-3.1.a Articles of Incorporation~~
~~EX-3.1.b Amended and Restated Bylaws~~
~~EX-31.1 Section 302 Certification - Chairman & CEO~~
~~EX-31.2 Section 302 Certification - Sr. VP & CFO~~
~~EX-32.1 Section 906 Certification - Chairman & CEO~~
~~EX-32.2 Section 906 Certification - Sr. VP & CFO~~


~~3.1(a)~~10.1***		~~Amended~~Amendment No. 2 to Satellite Service Agreement, dated April 30, 2004, between SES Americom, Inc. and ~~Restated Articles of Incorporation of~~ EchoStar.

~~3.1(b)~~10.2***		~~Amended~~Second Amendment to Whole RF Channel Service Agreement, dated May 5, 2004, between Telesat Canada and ~~Restated Bylaws of EchoStar.~~Echostar.

31.1*31.1		Section 302 Certification by Chairman and Chief Executive Officer

31.2*31.2		Section 302 Certification by ~~Senior~~Executive Vice President and Chief Financial Officer

32.1*32.1		Section 906 Certification by Chairman and Chief Executive Officer

32.2*32.2		Section 906 Certification by ~~Senior~~Executive Vice President and Chief Financial Officer


		ECHOSTAR COMMUNICATIONS CORPORATION
By:	/s/Charles W. Ergen
	Charles W. Ergen
	Chairman and Chief Executive Officer (Duly Authorized Officer)


(Mark One)
x[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, ~~2003~~2004


OR

o[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		For the transition period from _____________ to _____________.


PART I —– FINANCIAL INFORMATION
Disclosure Regarding Forward-Looking Statements		i
Item 1. Financial Statements
~~Disclosure Regarding Forward-Looking Statements~~	i

~~Item 1.~~	~~Financial Statements~~

	Condensed Consolidated Balance Sheets -– June 30, 2004 and December 31, ~~2002 and June 30,~~ 2003 (Unaudited)			1

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, ~~2002~~2004 and 2003 (Unaudited)			2

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2002~~2004 and 2003 (Unaudited)			3

	Notes to Condensed Consolidated Financial Statements (Unaudited)			4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		32		38
Item 4. Controls and Procedures		40
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		41
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
~~Item 4.~~	~~Controls and Procedures~~		34

~~PART II — OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~		35

~~Item 2.~~	~~Changes in Securities and Use of Proceeds~~		~~None~~
					47
Item 3.	Defaults Upon Senior Securities		None

Item 4.	Submission of Matters to a Vote of Security Holders		40
					48
Item 5.	Other Information		None

Item 6.	Exhibits and Reports on Form 8-K		41		49
Signatures					50
~~Signatures~~Amendment No. 2 to Satellite Service Agreement
Second Amendment to Whole RF Channel Service Agreement
42Section 302 Certification by Chairman and CEO
Section 302 Certification by Executive VP and CFO
Section 906 Certification by Chairman and CEO
						Section 906 Certification by Executive VP and CFO

	•		we face intense and increasing competition from the satellite and cable television industry; new competitors may enter the subscription television business, and new technologies may increase competition;

	•		DISH Network subscriber growth may decrease, subscriber turnover may increase and subscriber acquisition costs may increase;

	•		satellite programming signals have been pirated and ~~could~~will continue to be pirated in the future; pirating could cause us to lose subscribers and revenue, orand result in higher costs to us;

	•		programming costs may increase beyond our current expectations; we may be unable to obtain or renew programming agreements on acceptable terms or at all; existing programming agreements could be subject to cancellation;

	•		weakness in the global or U.S. economy may harm our business generally, and adverse local political or economic developments may occur in some of our markets;

	•		the regulations governing our industry may change;

	•		new provisions of the Satellite Home Viewer Improvement Act may force us to stop offering local channels in certain markets or incur additional costs to continue offering local channels in certain markets;

	•		our satellite launches may be delayed or fail, or our satellites may fail in orbit prior to the end of their scheduled lives, which could result in extended interruptions of some of the channels we offer;

	•		we currently do not have traditional commercial insurance covering losses incurred from the failure of satellite launches and/or ~~in orbit~~in-orbit satellites and we may be unable to settle outstanding claims with insurers;

	•		~~the regulations governing our industry may change;~~

	•		~~our satellite launches may be delayed or fail and our satellites may fail prematurely in orbit;~~

	•		service interruptions arising from technical anomalies on satellites or ~~on ground~~on-ground components of our DBS system, or caused by war, terrorist activities or natural disasters, may cause customer cancellations or otherwise harm our business;

	•		we may be unable to obtain needed retransmission consents, ~~FCC~~Federal Communications Commission (“FCC”) authorizations or export ~~licenses;~~licenses, and we may lose our current or future authorizations;

	•		we are party to various lawsuits which, if adversely decided, could have a significant adverse impact on our business;

	•		we may be unable to obtain patent licenses from holders of intellectual property or redesign our products to avoid patent infringement;

	•		sales of digital equipment and related services to international direct-to-home service providers may decrease;

	•		we are highly leveraged and subject to numerous constraints on our ability to raise additional debt;

	•		~~future~~ acquisitions, business combinations, strategic partnerships, divestitures and ~~divestitures~~other significant transactions may involve additional uncertainties;

	•		~~the September 11, 2001~~ terrorist attacks, ~~consequences of the war in Iraq, and~~ the possibility of war or ~~hostilities relating to~~ other ~~countries,~~hostilities, and changes in ~~international~~ political and economic conditions as a result of these events may continue to affect the U.S. and the global economy and may increase other risks; and

	•		we may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange ~~Commission.~~Commission (“SEC”).


			As of

			December 31,			June 30,
			2002			2003

Assets
Current Assets:
	Cash and cash equivalents		$	1,483,078		$	1,151,967
	Marketable investment securities			1,203,917			1,521,280
	Trade accounts receivable, net of allowance for uncollectible accounts of $27,649 and $24,262, respectively			329,020			325,133
	Insurance receivable			106,000			106,000
	Inventories			150,290			151,816
	Other current assets			47,212			59,661

Total current assets				3,319,517			3,315,857
Restricted cash				9,972			9,982
Cash reserved for satellite insurance				151,372			135,222
Property and equipment, net				1,974,516			1,924,352
FCC authorizations, net				696,409			696,409
Other noncurrent assets				108,799			151,171

		Total assets	$	6,260,585		$	6,232,993

Liabilities and Stockholders’ Deficit
Current Liabilities:
	Trade accounts payable		$	264,813		$	321,503
	Deferred revenue			443,757			477,313
	Accrued expenses			923,217			894,456
	Current portion of long-term obligations			13,432			13,501

Total current liabilities				1,645,219			1,706,773

Long-term obligations, net of current portion:
	9 1/4% Seven Year Notes (Note 7)			375,000			—
	9 3/8% Ten Year Notes			1,625,000			1,625,000
	10 3/8% Seven Year Notes			1,000,000			1,000,000
	9 1/8% Seven Year Notes			700,000			700,000
	4 7/8% Convertible Notes			1,000,000			1,000,000
	5 3/4% Convertible Notes			1,000,000			1,000,000
	Mortgages and other notes payable, net of current portion			33,621			33,964
	Long-term deferred distribution and carriage payments and other long-term liabilities			87,383			96,728

Total long-term obligations, net of current portion				5,821,004			5,455,692

		Total liabilities		7,466,223			7,162,465
Commitments and Contingencies (Note 8)
Stockholders’ Deficit:
	Class A Common Stock, $.01 par value, 1,600,000,000 shares authorized, 242,539,709 and 245,743,730 shares issued and outstanding, respectively			2,425			2,458
	Class B Common Stock, $.01 par value, 800,000,000 shares authorized, 238,435,208 shares issued and outstanding			2,384			2,384
	Class C Common Stock, $.01 par value, 800,000,000 shares authorized, none outstanding			—			—
	Additional paid-in capital			1,706,731			1,732,831
	Non-cash, stock-based compensation			(8,657	)		(4,662	)
	Accumulated other comprehensive income			6,197			65,525
	Accumulated deficit			(2,914,718	)		(2,728,008	)

Total stockholders’ deficit				(1,205,638	)		(929,472	)

	Total liabilities and stockholders’ deficit		$	6,260,585		$	6,232,993


		Three Months								Six Months
			Ended June 30,						Ended June 30,

			2002			2003			2002			2003

Revenue:
	Subscription television services		$	1,071,845		$	1,340,601		$	2,087,902		$	2,630,712
	Other subscriber-related revenue			7,843			2,440			10,670			5,474
	DTH equipment sales			68,140			50,761			125,190			91,542
	Other			20,856			20,765			49,390			45,887

Total revenue				1,168,684			1,414,567			2,273,152			2,773,615
Costs and Expenses:
	Subscriber-related expenses (exclusive of depreciation shown below — Note 9)			542,454			654,699			1,052,355			1,287,525
	Satellite and transmission expenses (exclusive of depreciation shown below — Note 9)			15,150			16,315			28,637			32,341
	Cost of sales — DTH equipment			44,103			33,484			83,479			61,355
	Cost of sales — other			9,969			12,204			26,170			25,059
	Cost of sales — subscriber promotion subsidies (exclusive of depreciation shown below — Note 9)			80,767			96,884			181,702			220,882
	Other subscriber promotion subsidies			138,002			148,892			271,372			299,529
	Subscriber acquisition advertising			31,407			39,925			65,128			73,477
	General and administrative			70,254			89,089			149,249			171,469
	Non-cash, stock-based compensation			2,169			(217	)		3,835			1,772
	Depreciation and amortization (Note 9)			87,981			100,299			169,518			198,465

Total costs and expenses				1,022,256			1,191,574			2,031,445			2,371,874

Operating income				146,428			222,993			241,707			401,741
Other Income (Expense):
	Interest income			29,336			14,959			59,139			30,475
	Interest expense, net of amounts capitalized			(116,272	)		(107,715	)		(245,515	)		(238,216	)
	Change in valuation of contingent value rights			(8,839	)		—			(5,378	)		—
	Other			(3,358	)		1,713			(37,580	)		1,099

Total other income (expense)				(99,133	)		(91,043	)		(229,334	)		(206,642	)

Income before income taxes				47,295			131,950			12,373			195,099
Income tax provision, net				(10,294	)		(3,157	)		(10,519	)		(8,389	)

Net income				37,001			128,793			1,854			186,710
Accretion of Series D Convertible Preferred Stock				—			—			(61,860	)		—

Numerator for basic and diluted income (loss) per share — income (loss) available (attributable) to common shareholders			$	37,001		$	128,793		$	(60,006	)	$	186,710

Denominator for basic income (loss) per share — weighted-average common shares outstanding				480,405			483,372			480,070			482,241

Denominator for diluted income (loss) per share — weighted-average common shares outstanding				544,130			488,385			480,070			487,557

Net income (loss) per common share:
Basic net income (loss)			$	0.08		$	0.27		$	(0.12	)	$	0.39

Diluted net income (loss)			$	0.07		$	0.26		$	(0.12	)	$	0.38


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - continued

	(a)	During the period from January 1 through July 15, 2004 all purchases were made pursuant to the program discussed below in open market transactions.

~~Item 4.~~	(b)	Our Board of Directors authorized the purchase of up to $1.0 billion of our Class A Common stock on November 22, 2003. All purchases were made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934 pursuant to our Rule 10b5-1 plan entered into on November 28, 2003 and which expires on the earlier of December 1, 2004 or when an aggregate amount of $1.0 billion of stock has been purchased. All purchases were made through open market purchases under the plan or privately negotiated transactions subject to market conditions and other factors. To date, no plans or programs for the purchase of our stock have been terminated prior to their expiration. There were also no other plans or programs for the purchase of our stock that expired during the period from January 1 through July 15, 2004. Purchased shares have and will be held as Treasury shares and may be used for general corporate purposes. The maximum approximate dollar value of our stock that may yet be purchased under the plan reflects the $1.0 billion authorized by our Board of Directors during November 2003 less, the cost of the purchases of approximately $809.6 million and $190.4 million for the period from January 1 through July 15, 2004 and during November and December 31, 2003, respectively. As of July 15, 2004, we completed the November 2003 plan, having purchased a total of 31.8 million shares of our Class A Common stock for a total of $1.0 billion.

		Effective August 9, 2004, our Board of Directors authorized the repurchase of an aggregate of up to an additional $1.0 billion of our Class A Common stock, which is not included in the table above. We may make repurchases of our Class A Common stock under this plan through open market purchases or privately negotiated transactions subject to market conditions and other factors. Our repurchase programs do not require us to acquire any specific number or amount of securities and any of those programs may be terminated at any time. We may enter into Rule 10b5-1 plans from time to time to facilitate repurchases of our securities.

	a.		The election of James DeFranco, Michael T. Dugan, Cantey Ergen, Charles W. Ergen, ~~James DeFranco,~~Raymond L. Friedlob, Steven R. Goodbarn, David K. Moskowitz ~~Raymond L. Friedlob, Cantey Ergen, Peter A. Dea~~ and ~~Steven R. Goodbarn~~C. Michael Schroeder as directors to serve until the ~~2004~~2005 annual meeting of shareholders; and

	b.		~~The approval of an amendment to our Amended and Restated Articles of Incorporation to modify one of our indemnification provisions relating to payment of litigation expenses; and~~

	c.		Ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, ~~2003.~~2004.


		Votes

		For		Against		Withheld

Election as directors:
	Peter A. Dea		2,596,615,089		—		10,798,156
	James DeFranco		2,553,696,377		—		53,716,868
	Cantey Ergen		2,553,591,551		—		53,821,694
	Charles W. Ergen		2,596,384,770		—		11,028,475
	Raymond L. Friedlob		2,596,373,786		—		11,039,459
	Steven R. Goodbarn		2,596,655,717		—		10,757,528
	David K. Moskowitz		2,596,395,204		—		11,018,041
Approval of an amendment to our Amended and Restated Articles of Incorporation to modify one of our indemnification provisions relating to payment of litigation expenses			2,605,193,971		2,027,950		191,324
Ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2003			2,602,159,897		5,111,323		142,025


By:	~~By:~~		/s/~~Charles W. Ergen~~Michael R. McDonnell

		~~Charles W. Ergen~~ ~~Chairman and Chief Executive Officer~~ ~~(Duly Authorized Officer)~~

	~~By:~~		~~/s/~~Michael R. McDonnell

		~~Michael R. McDonnell~~ ~~Senior~~Executive Vice President and Chief Financial Officer (Principal Financial Officer)


~~EXHIBIT~~
~~NUMBER~~		~~DESCRIPTION~~

~~3.1(a)~~10.1***		~~Amended~~Amendment No. 2 to Satellite Service Agreement, dated April 30, 2004, between SES Americom, Inc. and ~~Restated Articles of Incorporation of~~ EchoStar.

~~3.1(b)~~10.2***		~~Amended~~Second Amendment to Whole RF Channel Service Agreement, dated May 5, 2004, between Telesat Canada and ~~Restated Bylaws of EchoStar.~~Echostar.

31.1*31.1		Section 302 Certification by Chairman and Chief Executive Officer

31.2*31.2		Section 302 Certification by ~~Senior~~Executive Vice President and Chief Financial Officer

32.1*32.1		Section 906 Certification by Chairman and Chief Executive Officer

32.2*32.2		Section 906 Certification by ~~Senior~~Executive Vice President and Chief Financial Officer