Jason Keiser - Treasurer Stan Dodge - EVP, General Counsel and Secretary Charlie Ergen - Chairman, President and CEO Bernie Han - EVP and CFO

Kit Spring - Stifel Nicolaus Doug Mitchelson - Deutsche Bank James Repard - Barclays Tom Egan - Collins Stewart Benjamin Swinburne - Morgan Stanley Pat Cloonan - Daily News Bryan Kraft - Banc of America Securities April Horace - Janco Partners Lee Cooperman - Omega Advisors Tuna Anobi - Standard & Poor's Craig Moffett - Sanford Bernstein Matthew Armas - Goldman Sachs

At this time, I want to welcome everyone to the Dish Network Corporation Q3 2008 earnings conference earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question and answer session. (Operator instructions) Mr. Jason Keiser, you may begin your conference.

Thank you. Well, thanks for joining us. My name is Jason Keiser. I am the Treasurer here at Dish Network. I am joined today by Charlie Ergen, our Chairman and Chief Executive Officer; Bernie Han, our CFO; and Stan Dodge, our General Counsel. Before we open it up for some Q&A, we do need to do our Safe Harbor disclosures. So, for that, I will turn it over to Stan.

Good morning everyone and thank you for joining us. We invite media to participate in listen only mode on the call and ask that you do not identify the participants or their firms in your report. We also do not allow audio taping and ask that you respect that. All statements we make during this call that are not statements of historical fact constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results, from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q. All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risk described in our reports and should not place undo reliance in any forward-looking statements. We assume no responsibility for updating any forward-looking statements. With that out of the way, I will turn it back over to Jason.

Thanks Stan. Operator, I think we are going to go straight into Q&A. So you can open up the lines. Kit Spring - Stifel Nicolaus: Okay. Can you talk about what you can do to reaccelerate subs and secondly, maybe how you'd rated yourself on your current turboHD product launch? Thanks.

I'll just take the second part first. TurboHD in the sense that it got us back in the HD game has been successful. Obviously with the launch failure earlier in the year we didn't have the channel count to be competitive in the marketplace but we do today and so I think there's a couple of things, one is that marketplace is only all HD products out in the marketplace and so that puts us the back in the HD game. We really weren't in the game previously. So that's a good thing. In terms of accelerated headcount, I guess the first -- that's a pretty complex question, the first thing we have to do as a company really is to get our operating metrics stronger: We don't do as good a job in customer service as we have in the past. We have always been really leading this industry. We have an additional component of installation and service networks now, where we actually go out and install a large portion of our customers ourselves and that process needs to be improved. So there's a fair amount of investment that takes place there. For example, we opened a new call center during the quarter. Those are always relatively inefficient when you open them up. It takes about six months for those people to become efficient as someone who has been in the business for two or three years in other call centers. This investment we have to make under installation service networks. We have to do those things to give good customer service and really there's no excuse for us not leading this industry in terms of customer service. The second part of the question is, in today's environment, the question is how much are you going to spending to get customers and what kind of customers can you get? So, obviously people are shopping for deals and customers are flipping around. They have a variety of choices. So we have to be a little bit careful about that. Obviously an HD customer we think is a good long-term customer for us. We think a DVR customer is a good long-term customer for us. In that sense, I think at some point in time you have to be willing to tread a little bit of water, based on the marketplace that's out there. Today the marketplace is giving us in terms of value of a subscriber, really about the same amount it costs to us get a subscriber. So the marketplace isn't really saying, go out there and get a lot more subscribers. We look at it a little bit differently because we know, that not all subscribers are equal and that some kind of relationship costs to us get the customer, how long that customer stays with us. So we have a lot of blocking and tackling to do in our company, which we talked about in previous quarters and we continue to do that, continue to make progress. Based on that progress, based on the economy, based on what everybody else does and tells us where we think the spots are to go, where we have an advantage or where we can be competitive.

And the next question is from Doug Mitchelson from Deutsche Bank.. Doug Mitchelson - Deutsche Bank: . So, Charlie, I think you talked a lot about investing operations driving expenses higher this quarter but you've been talking about over a year the need to improve internal execution. So, why didn't the investments in operations start before now?

Well, I don't think at least from my perspective I knew exactly what we needed to do. I really got -- and the team that we have today really got involved around the first of February in operations and that we really had to go kind of supernatural with the operations, and there were some investments that were planned that we didn't think made sense long-term. That would have been short term gain but wouldn't have been good long-term investments for us and we've gone back and looked at it from a different perspective, which is how do we run this business long-term and how do we want to make an investment that would be a long-term pay out for us inform. And in doing that it took us longer to figure out what we wanted to do. For example, it made sense for us that we thought to open new call center. So we did that, right. And, so whereas before maybe they were going to use an external call center for that operation that might have been a little cheaper short-term but might have hurt us long-term. We have f gone through that whole analysis and we know where we need to invest and that's what we started doing in this quarter. Doug Mitchelson - Deutsche Bank: Okay. And then I missed the first minute of the Q&A but if you didn't comment on AT&T at all, it seems that it's possible from the numbers that you have currently reported that AT&T churn is remarkably high. Is that a fair statement and can you give us any sense of what the churn might look like on a normalized basis excluding the AT&T subs that you've added over the last few years?

Well, AT&T in general has customers who have churned a little higher than our normal subscriber base but I wouldn't churn it.

It doesn't SKU our, skew our overall numbers quite considerably. We mentioned in the Q this time that they currently represent a million of our 13-point whatever million of subs. So even if their churn is a bit hire they reasons go to skew our overall numbers by a lot.

I would say that obviously they churn just a little bit higher than normal subs. Some of that's because their credit policies just by law and stuff may a little bit more or less than ours. But having said that, in the first quarter next year when AT&T no longer sells our product they probably don’t -- you can expect that from a practical point of view the churn with AT&T. customers will not get any better. Doug Mitchelson - Deutsche Bank: Right. I think the last question, I mean right now you're in a period where your revenue growth is slowing and the cost growth is increasing and the ultimately the goal would be to get to a point, where you reverse that back out and once you cycle through these issues the revenue growth accelerates, the cost growth decelerates. But in the meantime I'm trying to think about 2009, is there pricing power within your sub-base that can help you, on the margin side as you sort of work through some of these transitional issues.

We probably have got more pricing power than most because we are a little bit -- we are a fair amount lower cost than most and in terms of -- but we haven't from an operational point of view been lower cost and that's really the problem. So we really got - we have some pricing power vis-a-vis others. We've seen obviously cable company's raise rates recently. The programming costs continued to rise for everybody, although we've obviously been -- we want to take customers down, programming off and we will continued to so if need be. So I think we are in pretty good shape there. We will have to see. But clearly we have a little bit -- our average ARPUs is quite a bit lower than some of our competitors. So we have some room there. Doug Mitchelson - Deutsche Bank: And I guess I was trying [to beat the Q] with regarding asking whether we should expect normal price increases for 2009?

I think, you’ve to balance what you can do with where the market is but I think that everybody in the video business is getting increases from their programming partners. Obviously, sports continuing to up at quite a bit more than inflationary rates. That’s an example but almost everything else in programming goes up at least at the rate of inflation if not higher. So, think everybody has those kind of pressures. The real key is who can get their operational costs and scale those costs. We just don’t know, we probably didn't pay the kind of attention for threes years that we should have to those things and you can't turn that around in two quarters but you certainly can turn around and it's certainly doable. And it's a good environment to do it. People are focused. People are worried about their jobs. People are engaged to do that. So it's a good time to do it but it's a complex product. It's a time consuming thing to do. Doug Mitchelson - Deutsche Bank: All right. Thank you very much.

And the next question is from [Vijay, James] from Barclays.. James Repard - Barclays: It's James Repard far Vijay. First off, you mentioned that some of the retention expense increase was related to the MPEG 4 box upgrades. Can you give us an idea of how big those were and dollar-wise how much more we have left and over what time frame?

There are real two factors in retention spending. Probably the bigger Capone meant of that was migrations where we had a satellite failure at the 148-degree slot and we decided to do start moving those customers over to our core slot, core western slot. We started doing that. We also moved some of our international customers off to our -- we have one location for all our new international customers now in our core slot. So we started moving some of the wing international customers. It does drive retention cost and it does, also drives a little bit of churn. But we think it makes sense to do that long-term. One is, it frees up a satellite, of course due to the 148-degree slot, possibly for use elsewhere and it simplifies our business where we start doing a lot more one-dish installations instead of two-dish installations which increases sat and complexities and com cost and forth. So that's an investment we have to do make today. The migration, we still have migrations for the first half of next year and then we don't anticipate what we will have in the field of migrations. The other part of it's is, its not quite as big, is that because we have competitive HD offerings and competitive offerings today and because we are now fully engaged in MPEG 4, it makes sense upgrade our customers. We really delayed that a little bit just because we didn't want to upgrade somebody to an MPEG 2 receiver and then come back six months later and upgrade them to an MPEG 4 receiver. So, today I think that retention marketing will continue to be an investment we are going to make Although as migrations ease, that number will probably be less when it's just retention marketing for customers who we need to upgrade their service. So there's really, I guess the long answer is two components of that, one short-term, one is going to continue. James Repard - Barclays: Okay. Can you talk a little bit about the status of the TiVo litigation, when you expect to here on the contempt hearing and your thoughts? I mean, you've commented before about the potential working out a deal with them?

Nobody should listen to me because I have been --- I think go back over three and -- so far in our predictions but the issue before the court today is whether we violate their injunction with our work around, with our download. Obviously we paid them the $100 million something that the jury awarded to do them and that's been paid. There are two things in front of the court, really. One is, how much more money do we owe them until we did our designer round. So there would be some period of time for a smaller number of boxes that we potentially would owe them money on. They claimed last quarter also I think they claimed a couple of $100 million. I think we believe that the number is more like [$15 million]. We owe them until we do the design round. Then we downloaded—we turned off the boxes, downloaded the new software, turned them on again. For software, which obviously we believe does not in any way violate their patent. They've taken got to the court and l gone to the court and said, we don't know if that's true or not but we do know they shouldn't have been able download new software because that's in violation of the new junction and that's the issue that's in front of the court along with any monetary damages. Obviously they are confident they are going to win. Based on what I think I've heard them say. Obviously we think we are going to win. Their track record is better than ours in predictions but we wouldn't be going o with this litigation, if we didn't think we were right. We'll continue as long as we think we're right. So the judge could rule any day. I mean there's no other hearings in front of the judge, he has all the information he needs to make this ruling. And I think, as I've said in previous quarters regardless of the ruling, we think there's things that TiVo have that we could do together but in terms of -- obviously this judges ruling would affect somebody's position in those negotiations, let's put it that way, good or bad. James Repard - Barclays: All right. And third, one housekeeping question, if you could give us the total CP CapEx number in the quarter, please.

254 million. James Repard - Barclays: 254, okay, thank you.

The next question is from Tom Egan from Collins Stewart. Tom Egan - Collins Stewart: Great, thank you. Just two questions. First on churn, I was hoping you could give us a little bit more detail about how much of the increase was voluntary versus involuntary? And then I have a follow up. Thanks.

Well, it's a little bit difficult to answer that because we have a dynamic that probably nobody else has but wishes to have, the system that's not secure. So we still have a fair amount of piracy out there in the marketplace. So somebody who might be voluntary May just be getting a pirate box. So it's a little bit difficult. I would say the churn is made up of a couple different components. One is our normal churn, normal course of business and that's probably under some pressure from the economy, but it's certainly not as high as our churn numbers. The second and third parts of churn really are piracy and really consumer fraud, kind of stuff where you see we may have -- we had retailers who might have been engaging in fraudulent accounts and so forth and so on. Two things that obviously are part of operations things that we probably didn't do such a good job on and didn't invest in enough those things we are investing in today. So we are in the process of all new SmartCard encryption systems being sent to our customers. That's a process that goes into next year but we will be able to start turning some customers off that we know are the high piracy pockets much sooner than that as we get those programs all converted over and make sure the cards are out. So while there's a cost of doing that, again it's in operational inefficiency to send out SmartCards. At least we know we are able to resecure our system. And then obviously on the fraud front we are really are terminating and even prosecuting where we find fraud, so those areas we are doing a much better job and that will pay dividends for us next year. Tom Egan - Collins Stewart: So is it fair to think that the number, that the piracy securing could increase in 4Q?

It's hard -- I can't predict piracy. I don't think we are in a position in the fourth quarter to have an impact on it. I think it will be a first quarter next year before we started having an impact and it will be this time next year before we totally are secure. Tom Egan - Collins Stewart: Right and then...

And then, that's assuming the next-generation of our system holds of course, which we hope it will. Tom Egan - Collins Stewart: Right. Then looking at the AT&T subscriber group, or base, is it possible that without -- is it possible that the churn on that base could be more than 200,000 subscribers next year?

It's hard to say. Obviously contractually AT&T is not able to target those customers and we hope -- they are a honorable company, we have no indication they won't be in that regard, but they also have a competing product in [NewBurst] and there's no advantage to switching them to direct TV but there's some advantage to them switching to their own [NewBurst] product which we have to compete against. So, secondly when a customer needs customer service are they going to get the same level of customer service that we hope we are going to give. For example, they bill the customer. So if they have a billing question the customer couldn't call us and get answers to his billing question, he has to do that through AT&T, because we don’t have access to the billing information. So it ends up with customer getting Ping-Ponged back and forth. So it's a problem today for that and it's probably a situation that I wish we hadn't gotten in, in terms of not having access to see, to see all the information the customer has, so we can take care of the customer. But from a practical point of view I would say that AT&Ts churn within our subscriber base could go up next year, relative to where it is when we currently had a contract with them. Tom Egan - Collins Stewart: Right, thank you.

And the next question is from Benjamin Swinburne from Morgan Stanley Benjamin Swinburne - Morgan Stanley: I have a couple of questions. First going back to AT&T, Charlie, if you could comment on sort of the strategic importance of that relationship historically? You commented that you are sort of adding subs at, in your net gain ZERO TV today as the cost to acquire them is equal to the value that they are creating. So I guess I would ask, if you look to '09 does ramping sack further to try to offset some of the lost subscriber growth from AT&T make sense in this environment? On the balance sheet there's a lot of disclosure in the queue about marketable securities. I just want to get a sense from you guys, of how much of that cash is liquid and able to be accessed on a real-time basis currently? Lastly you bought a little bit of stock back in the quarter. Any comment there? It looked like it was earlier in the quarter but want to get a sense for why you were back in the market for a brief period of time?

A lot of questions. I'm not sure I got them all. Stock buy back, it is what it is. We looked at where we think we are and felt that was a -- we also have options that we have for our employees and so forth. So we looked at that and at that point in time that probable until hindsight that probably wasn't the smartest thing we could have done but we didn't foresee the precipitous fall off in the fall. From an AT&T perspective, we are not saying, we don't see the net present value of return to the customer, we are saying the marketplace has not given us enough pricing, but the marketplace is buying our customers, much greater than the sack that we have today. Obviously we think that there are certain customers that we can spend money on. We think there are still a fair number of customers out there we could spend money on and have a much higher and greater return than what the marketplace gives us. Having said that, I think you have to be prudent. I think if everybody else is making sub-prime loans, doesn't mean you have to go make sub-prime loans, right and I think we have to be prudent in terms of where we spend our money and where we invest in. We've always said that satellite customers are the best place for to us spend our money that may change in 2009. It depends on where the market goes from here and if it deteriorates. But we also have, we as long as have to look at other ways to build our business and say what other things we can be doing besides what we are doing today, and we think again in this marketplace being liquid, and having a good management team and having a lot of assets and having a lot of thing at your disposal are probably good things. We've done a lot of stuff right. While I'm very disappointed from an operational point of view, the fact that we paid off $1.5 billion last month, we don't have any material debt coming due for three years, we are cash flow positive and generated in the $1 billion free cash flow kind of range so far. We got a lot of good things that we've done. We haven't got ourselves in a precarious position. So we have time to be very competitive in the marketplace. The marketable rate securities, Bernie do you want to take that?

Yes. As you know, we I think a quarter ago, we moved some of our auction rate securities and mortgage backed securities from current down to noncurrent to reflect the fact that we didn't believe those assets were liquid and shouldn't count in our liquidity. What remained on our balance sheet in the current section, both cash and equivalents and marketable investment securities are what we believe to be fairly liquid. In this quarter alone we further reclassified some of our assets variable rate demands notes, previously cash and equivalents, so we moved those to marketable investment securities. That said, these instruments have been able to provide liquidity to us on a one and five days on a business day basis and they continue to do that. So we view the cash and equivalents number, and the marketable investments securities number combined, to kind of be on liquid and obviously that's as of the end of the quarter. Since the end of the quarter we did repay back close to $1 billion in debt and then further cash flow generated from operations has occurred since then. So that's the way we look at it.

I mean I think we are trying to get you the best transparency we possibly can based on the marketplace. It's a case where we did all the right thing we just -- our cash flow external sources of cash flow got into some -- that is the collateral damage that perhaps is we will see more of in the marketplace where people, even people who have invested in AAA securities and managed their money pretty conservatively are going to get potentially burned by some of the things that's gone on out there. We are fortunate, I guess that that's the extent of it but nonetheless it's disappointing. Benjamin Swinburne - Morgan Stanley: Thank you.

And your next question is from Pat Cloonan from the Daily News. Pat Cloonan - Daily News: Thank you very much, I appreciate this. You must forgive me because I don't have the names of the gentlemen who are leading this news conference, but I'm calling with respect to the [Key] Sport Customer Service Center. My understanding is that you have in fact decided to do stay in the key sport, you've extended your lease there. Is that correct?

We don't -- this isn't a press conference, I'm sorry, I apologize. I'm sorry if you thought it was a press conference. This a financial quarterly conference call. So we will take that question… Pat Cloonan - Daily News: I'm aware that it's a financial quarter call.

We will take financial questions but this is not open to the press. The press are in listen-only mode.

The next question is from Bryan Kraft from Banc of America. Your line is open. Bryan Kraft - Banc of America Securities: First just following up on the piracy issue. Do you have any kind of estimate, even if it's just a rough range as to what the impact on churn actually has been? And also, when exactly did the piracy problems start to become significant for you? And then my two other questions, one, how are you planning to leverage the Eastern Arc Service that you launched in the fourth quarter into improving customer metrics? And lastly can you break out how much of the CapEx in the quarter was for satellites? Thank you.

Do you want to take that last part,. Do we break that out? We don't break out the CapEx for satellites. But you gave -- we gave you the [24] on the CPE. So you can probably break it out from there. Bryan Kraft - Banc of America Securities: Okay, that’s fair.

There's some other things, but relatively…

That would give you a pretty good indication. The piracy probably started in the spring as a material item, probably in the spring of 2007. We've obviously been in a lot of litigation with people that are doing it. But it's probably the spring of 2007. And piracy is one of those things where -- and so I can't quantify how it's affecting churn but it's certainly has a negative impact on churn. And piracy tends to grow. So if not stopped it tends to grow a little bit each quarter. So I would say the piracy today is quite a bit more than it was in 2007. It's one of those things where it's a significant investment from an operational point of view for us to do it to send out cards and we had to wait until we had a new encryption system to send out. Because first, you have to see how the pirates are beating you and then you have to go design a way to counteract it. So, I think we are not as diligent as we should have been, which won't happen the next time is. We should have always assumed that the pirates will beat us and somebody else and everybody else in the industry. And we always should have a next-generation ready to go as opposed to have to go out and get the next-generation. So we really got delayed a year longer than we would have liked to while we designed the next-generation with our encryption vendor. So in the future, even as we finish this roll-out of new encryption, we will have another generation beyond that ready to go. So we won't make that mistake again. Bryan Kraft - Banc of America Securities: And you mentioned that I think you said before in the first quarter all of the new cards will be deployed and you will be ready to shutoff the old encryption. But I think you said a few minutes ago it would be until the third quarter that you get the full benefit of that. I'm trying to understand exactly what you mean there.

Yes. What happens is for example you may be able to do to all your high-definition customers and since that's a smaller subset of your base and you can make sure they can have all new cards and you can shut that data stream off. So that you can secure your High-Definition signal. As an example. You can do that before you have your whole subscriber base within the card. So sometime next year we will be able to start turning off segments, subsets of our subscriber base and it will be sometime next year before we can turn off the entire base. And I don't know exactly when that will be, because you never know how long it takes to send them out but we think it's sometime in the next year for sure. Bryan Kraft - Banc of America Securities: Okay. And then if you could comment on the eastern ark service? I mean how do you think you can use marketing?

The eastern ark is a little bit strategically to explain but it basically is a totally MPEG-4 service. So, it's only MPEG-4 product. It basically mirrors our Western Ark Service, so it has the same channels but they are on MPEG-4. It allows us then to put in new product, that's going to last for a long, long time. It gives us better look angles in the south and the Northeast where we've been at a disadvantage vis-a-vis our competition. So probably over 10% of our customers that we go to today we can't physically get a line of site and so it eliminates that problem to for the most part. It gives us other opportunities to differentiate our product. So that - we still have one satellite launch to be able to fully implement that strategy, that satellite hopefully, we are next in line on the Proton after their successful launch last week. So hopefully that satellite is going to go up before the ends of the year and be operational early next year. So that's kind of the final launch for us to have a complete system up there and make sure we have competitive from a local-local basis both in standard definition and high definition television, and competitive from a total channel count in terms of number of channels and number of high-definition channels. So, I wouldn't say the Eastern Ark is a material part of our business today but we suspect it will be next year. Bryan Kraft - Banc of America Securities: Great, thank you very much.

The next question is from April Horace from Janco Partners. Your line is open. April Horace - Janco Partners: A couple quick questions. Now that you have all this new HD product, are you going to step up some of your marketing initiatives in this fourth quarter, as well as promoting some of the new capabilities of the SlingBox in your set-tops? And then also I was wondering if you could give us any kind of an update, as it relates to the spectrum that you recently acquired? Thanks.

Okay. A lot of questions there. We have stepped up our marketing in HD in terms of TurboHD and in terms of product out there. We are a little concerned about the fact that consumers have pulled their [horns] in a little bit on high-end product and so they are probably not going to buy quite as much as HD as we would have thought given the economy. But we still think that's a good place for to us play, and we think we are very competitive in that field and we'll continue to market high-definition television. There also is the other side of the market where people are going down scale a little bit. So McDonald's is having really good numbers and the rest, because people can save money. So there is certainly a flight to saving money by consumers and we have to take that into consideration. The Sling; the Sling is -- I guess the difference we'll see, you are not going to see a lot with Sling this year because Sling has been sold at this point at kind of as a product and we really think Sling is a feature a DVR. We think it’s a extremely viable feature. It's hard to explain, once people use it, once people integrate it's something that's hard to live without because you can take your TV with you wherever you go. So the real thing is to put that inside a set top box as a feature, as opposed to making that a separate set-top box and making sure on the installation side then it becomes seamless to the customer. That again is not very easy to do because you have got routers and broadband connections and fire walls and all kind of things to deal with. But look for us to integrate that into a product, and make that a feature that we think will give us a competitive advantage in the marketplace. And what was the last question?

700 Megahertz spectrum.

700 Megahertz spectrum; . Well, we don't have the spectrum yet because we have to wait for the digital transition happening next year. And we think there's strategic opportunities for us or we wouldn't have gone to the auction. I think we will wait on that until next year we actually get the spectrum because the government could delay the for example the digital transition. But wait until we get the spectrum and we'll see where the marketplace is at that point in time and see if the strategy still makes a lot of sense. But it's a good asset that we have and we've got time to make sure we do the right thing there. We'll talk about that probably when will we get the spectrum and then I think we will be ready to talk about it on a call. So if we get the spectrum prior to the next call we will be ready to talk about it more.

The next question is from Lee Cooperman from Omega Advisors. Lee Cooperman - Omega Advisors: Thank you. I have two questions, the first one is just kind of a simple question. Would you expect, maybe it's asking you for guidance, which I would apologize for because I don't think you give any. Would you expect cash flow in '09 to be greater or less than '08? Is one question. The second and easier question, and this repurchase stuff, I've watched over the years, I see four kind of repurchase programs. I was wondering, maybe if you could slot yourself because you mumbled a little bit, I'm just being cute you didn't mumble because you speak very clearly. I see four purchase programs, no opinion on valuation, management is simply trying to offset option dilution and avoiding shareholder flack over the option creep. And you made a reference to options as part of the buybacks and I'm wondering to what extend that's a factor? Second, kind of buy back is very nefarious conduct up on the part of management, they basically buy back, think they're making a statement about valuation, and executives exercise options and sell stock back into a conditioned market. I think I can dismiss that one because you are not selling any stock. Third, we've gone through a period of terrific cash flow, corporations were blessed with excess liquidity. They essentially said, hey, dividends are forever, it's very embarrassing to eliminate a dividend, it's easier to shutoff a repurchase program, so we will buy back stock. And really most of them have paid no attention to valuation. And the fourth kind of buy back which I would think is a very smart guy like you would be part of is the fact that management understand what their business is worth. I think they have a view, an intelligent view. They think that they are going to leverage the return to long-term oriented investor by buying back stock as mispriced. Now, nobody asked this question but the $82 million you spent was $26.45 per share. We all got cremated in October. The stock is now $13 and change. We have almost $1 billion left on the repurchase program. Was the repurchase program motivated by type four that you think the stock was mispricing stocks at 26 and it is likely we will use our free cash flow to persist in this program or was it more type one? Anything you can do in those two questions, the motivation for the repurchase program and then secondly the kind of free cash flow that you would hope to be generating as a business. Thank you.

I can't comment on the first part on what we expect free cash flow to be next year because that would be guidance, but obviously we focus heavily on free cash flow, particularly in this environment. Obviously, our stock buy back had nothing to do with number two or number three. And we look, but primarily we would be a number four, we look at buybacks and say what do we think long-term this business is going to do. We are cognizant of what people think we are going to do or what people say about us and what the consensus out there and we think that undervalues us then we would be opportunistic. Vis-a-vis what our other options in the marketplace, whether that be paying a dividend or going out in the acquisition mode or whatever. We would look at everything and say what's the best use of our capital and where do we think long-term we will get the best return. So… Lee Cooperman - Omega Advisors: It seems to me.

Obviously we liked it at 26, we probably like it better at 13. Lee Cooperman - Omega Advisors: Well, that's what I'm getting at. If we liked it at 26 it seems to me if we had $1 billion of free cash flow which is 15% of the company if Mr. [Mbacka] would give you the opportunity to persist in this program it would make a great deal of sense. But, I don't expect you to answer that one Charlie. But I thought …?.

I think you might be able to, there might be some other company out there that's, that would prioritized or you might have an investment that you might want to make in your company in terms of capital, CapEx. So there's a lot of things that come into play there. Lee Cooperman - Omega Advisors: Gotcha.

I mean we would like to be a prudent, we would like to be a prudent steward of the cash. We probably, with the markdown of the auction rate securities we probably didn't do as good a job as we would liked to. Lee Cooperman - Omega Advisors: You will get that money back, just wait a little for it. Thank you very much and all the best.

Thanks.

The next question is from Tuna Anobi from Standard & Poor's. Tuna Anobi - Standard & Poor's: Okay. So I guess my first question is regarding AT&T just another kind of product, the relationship. Charlie, as you think about kind of why you ,kind of lost that relationship, I was trying to understand a little bit more about the thought process on both sides. Particularly, given that you guys have the power of incumbency and I've heard all kinds of theories that it may have come down to HD channels, which you guys obviously well over 800 channels now. So it's hard to imagine that that was the main reason that they picked DIRECTV. So I'm trying to get your thoughts on any kind of lessons that you learned and I know you guys have done a number of different things with AT&T Homezone and all that stuff and it seemed to be a relationship that got off to a pretty good start. So what was it that kind of went wrong toward the end of that relationship that kind of made you guys, you feel kind of lose that relationship to DIRECTV?

I don't know that I can answer that. That’s probably more properly answered by AT&T. I don't think HD channels would have been a factor. Obviously, not only do we have materially the same amount of channels, I think we have with the next satellite launch capacity to be a leader there. So, I don't think that would be it. Obviously we had the power of incumbency, so there has to do other motivations to make a change and you would really have to just ask AT&T those questions. I think we were very competitive, it was a good relationship, it's still a good relationship. I think we are very competitive in terms of -- and perhaps maybe even a better offering to AT&T, in terms of economics to AT&T. But you'd have to really just discuss it with them. Tuna Anobi - Standard & Poor's: Okay. That's fair enough.

It wouldn't be for me to speak for them. Tuna Anobi - Standard & Poor's: Okay. Fair enough. Let me switch gears then to your debt. You paid down $1.5 billion as you indicated just recently and it seems like your debt to subscriber ratio has been well under the range that you've talked about in the past. So, I just kind of, along those lines, as you think about your balance sheet in this kind of environment and given that you still have potential spending related to the spectrum how do you see your debt level or target level kind of over the next year? Do you expect to be closer to the higher end of that range when you hopefully are able to deploy the spectrum? I'm just kind trying to get an understanding because it seems like you guys are one of the good companies out there managing your balance sheet in a very tough environment. So I'm kind of just trying to understand what the overall strategy there is?

I mean I think today it's safe to say that there's probably not a lot of capacity at market rates that would be interesting to us nor do we need capital. So I'd say that we are probably going to be at the lower end of our debt structure and we are glad. I mean we are glad we stayed conservative when people thought we should be more aggressive in the marketplace. It's funny they don't tell you, you have to pay it back when you borrow it. They just tell you can roll it over but we always made sure that we had the money. We didn't necessarily believe everybody, so we hoped it would be true but we always had the money when it came due. Having said that, I agree with you, I think that is -- there certainly will be liquidity in the marketplace at some point in time. The government printing presses are going full time now. And there will be liquidity but the liquidity is going to go back to -- I think we are going to go back to some basic business rules, other than the auto industry and AIG it's probably going to go back to real business rules, of having a business, and having cash flow and having the ability to repay the money. When you start doing that, there are going to be less companies that can access the markets and I hope we will be one of those companies that can access the markets if there's an opportunity for something we need to do. Otherwise we think we can run our business without going to the marketplace. Tuna Anobi - Standard & Poor's: Just to follow up on that, on the $1.5 billion did you -- was it always the plan to repay that or was your, did you try to rollover and maybe perhaps your hand was forced in this environment? I'm trying to understand if that was -- because I was a little bit surprised that you opted to kind of not roll over?

Well, given the market conditions and given what we would pay for additional capital and given that we had the cash and given that we didn't have another use for the cash, that was pressing at the time we felt it made sense to pay it. Tuna Anobi - Standard & Poor's: Okay, thank you.

We just -- the market is going to get better at some point in time. I think it's difficult for management teams to tread water and there's been a few times in our life where we had to tread water. We had the big DISH business years ago, suddenly every channel was free and overnight every channel was scrambled. We had to tread water for a year, while we spent money, doing things to position ourselves for scrambling. Then when the big DISH business became clear it was going to go away, we had to tread water for two years, almost three years while we prepared for DBS. Today I think that the market conditions in terms of the economy and in terms of credit markets and so forth, don't dictate a lot of careless spending. And I think smart company, absent a defined business plan is probably not going to be speculative and I think everybody is going to be more conservative and I think we are always pretty conservative So we are maintaining -- but we are probably more conservative than we normally are. I think we'll look for opportunities and make sure that we can take advantage of them if they develop. If not we will tread water. Tuna Anobi - Standard & Poor's: All right. Thanks.

The next question is from Craig Moffett from Sanford C. Bernstein. Craig Moffett - Sanford Bernstein: I want to drill down on the comment that you made earlier about the value of your subscribers. It sounds like you were referring to the market cap and the market [value] rather than the present value you see in subscribers. So could you drill down on that a little bit? What value do you see in the subscribers you are getting today? I think about the 800,000 or so growth adds that you had in the quarter, what do those customers look for today in term of the churn rates that you're expecting on them, the ARPU that you are getting from the marginal subscriber, and the fact, we know the SAC that you are paying but how attractive are those customers at this point?

Well, it's a complicated question but obviously we think that the kind of customers we are getting today are more valuable than the marketplace is placing on our total customer base or else we wouldn't be going after them, right? But you've got to look at a lot of different think one of the things that's nice about a customer today that you put on an MPEG-4 is you are not realistic, in going to have to upgrade that customer, again for a fair amount of time in terms of his product. The customer we might have put on next year in MPEG-2 we know we are going to have to go back next year and upgrade that person to MPEG-4, which is another truck roll and it's actually more SAC on top of the SAC you already spent. So you have to take retention marketing and SAC and look at your customer and churn and ARPU and factor all that in with your customer base and not a all customers are equal. So when you do that I think you just have to have different strategies about how you go about it. We don't take debit cards today for example, because it could end up being a lot of fraud in debit cards, where people would put money into an account and suddenly there wouldn't be money there to pay the bill when the monthly payment came due, right? So you just end up learning some hard lessons there, in terms of how you go about getting your customers. Kind of the reverse side of that interestingly enough, there may be customers where your SAC is very low or maybe the customer will even pay all of your SAC and they may be a customer that churns a lot but you don't have a lot of SAC in that customer if any, right? S it may be, though this kind of customers may be available during the digital transition, where customer are willing to pay a small amount for a service but you don't really have any cost to acquire those customers. So you just got to look at it as a “soup to nuts” and say where do you want to be and not all customers are equal and the SAC that we have today is not, -- the SAC we had this quarter is not, has nothing to do with the customers we got this quarter, it has to do with the customer we got last year and the year before that for the most part. I guess I would summarize it this way. You got to, the first thing you have to do is quit getting worse and then you have to get better and then you have to be best in class. And for at least what you guys see for this year we are just I guess what you guys see is we just have to quit getting worse and I hope what you see next year is us getting better. Craig Moffett - Sanford Bernstein: Would you say that there's a deep pool of additional customers out there that are above your cost of acquisition that allow you to grow the pool?

Yes, whether we can execute, and whether we are smart enough and whether we can build the products, and distribution system to go get them is another story. But the world is going to change again, and again this is the third time I've been through it. One with scrambling, one was DBS and now it's going to change again. We want to be ready for that change as it takes place and be a leader in that change. And it's more dramatic than just HD TV and DVRs but, it ends up -- video is going to go to a different place. Craig Moffett - Sanford Bernstein: If I can ask just one final follow up because you sort of teased it and I sort of have to follow up now. You said, you thought we might actually see the DTV transition delayed. Do you think that's really a real prospect?

Well, I've been going to Washington for a long time now and I think if, the new administration comes in and if they see that consumers, that the transition is not ready and that consumers could lose their signal, Congress is going to go out to protect consumers. I mean that's their job, right? And I think, look, we are ready. I hope that it's not delayed. But it won't take too many phone calls. I would do the transition a little differently. I think to do the whole country at one time is difficult. But its more difficult than it has to be but I wouldn't be surprised. I'm not betting one way or the other. Craig Moffett - Sanford Bernstein: Thanks, Charlie.

I think we have -- one more question? Time for one more question.

Okay. And the last question is from [Matthew Armas] from Goldman Sachs. Your line is open. Matthew Armas - Goldman Sachs: Thanks for taking the question, just a couple quick ones. From what you have said and concerning what was in the Q., big spending initiatives around the piracy of the upgrades, to the MPEG-4 and the customer service investment. Can you say, as you budgeted for those investments, did you budget relatively evenly through the next couple of quarters or when you talk about not seeing returns until '09, is that just return and the bulk of the spending has already been executed?

Yes, I can answer that, I guess from my personal perspective. I think, as I got a bit more involved in the day-to-day operations, I realized that the some of the investments we are making were short-term and we needed to make some longer term investments. The longer term investments were a little bit more expensive than where budget would be, right? Because obviously budget was based on where management thought we should be spending. But as we got into it and we started to ask, I got five rules around here, but one of them is think long-term. And when you really got management thinking long-term they came back with different places they want to spend their money. I think the right place to spend their money. When you spend for long-term it typically is a little more expensive than short- term money and it pays dividends for you long-term. You get a return on investment if you do it right. But it doesn't show up in 2008 for sure. And we probably, and it's my fault, but we probably had too much of a short-term outlook at the lower levels of our company and I just wasn't aware of that, to be honest with you. Everything about what we do is we should be thinking about long-term and where we are five or ten years from now as opposed to where we are next quarter. And you can always have an eye on next quarter but you really have to think about where you are going to be in the years ahead. I have great confidence that we are one of the few companies that can think long-term. There are not a lot of companies that are able to do that. Or as long-term as we -- so, its fortunate. This is an interesting environment. It's a good environment for us. Your mistakes are magnified. Your successes are magnified. You've got to be good to be successful in this environment, and we are not as good as we'd like to be but it's going to be a fun environment no matter what. With that we will, I guess be back on sometime early next year or sometime for the year end, right? So, thanks for joining us.

This concludes today's conference call.