<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549

                                      Form 10-K

(Mark One) 

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                          OR

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

          For the transition period from _______________ to ________________

                          Commission file number: 333-31929

                               ECHOSTAR DBS CORPORATION
                (Exact name of registrant as specified in its charter)

              COLORADO                          84-1328967
  (State or other jurisdiction of            (I.R.S. Employer 
   incorporation or organization)            Identification No.)

         5701 S. SANTA FE
        LITTLETON, COLORADO                       80120
(Address of principal executive offices)        (Zip Code)

      Registrant's telephone number, including area code: (303) 723-1000

      Securities registered pursuant to Section 12(b) of the Act: None

      Securities registered pursuant to Section 12(g) of the Act: None


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.  Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of Registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.  [X]

    As of March 19, 1999, the Registrant's outstanding Common stock consisted 
of 1,000 shares of Common Stock, $0.01 par value.

    THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS 
(I)(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING this Annual Report on 
Form 10-K with the reduced disclosure format. 

                     DOCUMENTS INCORPORATED BY REFERENCE

    The following documents are incorporated into this Form 10-K by reference:

    None

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                       <C>
                                    PART I

Item 1.  Business.........................................................   1
Item 2.  Properties.......................................................   3
Item 3.  Legal Proceedings................................................   3
Item 4.  Submission of Matters to a Vote of Security Holders..............   *

                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder 
         Matters..........................................................   6
Item 6.  Selected Financial Data..........................................   *
Item 7.  Management's Narrative Analysis of Results of Operations.........   6
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......  12
Item 8.  Financial Statements and Supplementary Data......................  12
Item 9.  Changes In and Disagreements with Accountants on Accounting 
         and Financial Disclosure.........................................  12

                                   PART III

Item 10. Directors and Executive Officers of the Registrant...............   *
Item 11. Executive Compensation...........................................   *
Item 12. Security Ownership of Certain Beneficial Owners and Management...   *
Item 13. Certain Relationships and Related Transactions...................   *

                        PART IV
                                                           
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..  13

         Signatures.......................................................  17
         Index to Financial Statements.................................... F-1

</TABLE>

-------------------
* This item has been omitted pursuant to the reduced disclosure format as set 
  forth in General Instructions (I)(1)(a) and (b) of Form 10-K.

<PAGE>

                                    PART I

ITEM 1.   BUSINESS

BRIEF DESCRIPTION OF BUSINESS

     We are a wholly-owned subsidiary of EchoStar Communications Corporation, 
a publicly traded company on the Nasdaq National Market.  Our company was 
formed under Colorado law in January 1996 for the initial purpose of 
participating in an FCC auction.  On January 26, 1996, we submitted the 
winning bid of $52.3 million for 24 DBS frequencies at the 148DEG. West 
Longitude orbital location.  Funds necessary to complete the purchase of the 
DBS frequencies and commence construction of our fourth DBS satellite, 
EchoStar IV, were advanced to us by our parent company and EchoStar Satellite 
Broadcasting Corporation, or ESBC.  In June 1997, we sold the 1997 notes 
which consisted of $375 million of 12 1/2% Senior Secured Notes due 2002.  The 
1997 notes were retired on January 25, 1999 upon completion of the tender 
offers described below.  Prior to consummation of the 1997 notes offering, 
our parent company contributed the outstanding capital stock of ESBC to us.  
As a result of the contribution, ESBC became our wholly-owned subsidiary.  
This transaction was accounted for as a reorganization of entities under 
common control in which ESBC is treated as our predecessor.
     
     Unless otherwise stated, or the context otherwise requires, references 
to EchoStar and our parent company shall include all of its direct and 
indirect wholly-owned subsidiaries.  We refer readers of this report to 
EchoStar's Annual Report for the year ended December 31, 1998. Substantially 
all of our operations are conducted by subsidiaries.  Our operations include 
three interrelated business units:

     - The DISH Network--our direct broadcast satellite, or DBS, subscription 
       television service in the United States.  As of December 31, 1998, we 
       had approximately 1.9 million DISH Network subscribers. 

     - EchoStar Technologies Corporation--our engineering division, which is 
       principally responsible for the design of digital set-top boxes, or 
       satellite receivers, necessary for consumers to receive DISH Network 
       programming, and set-top boxes sold to international direct-to-home 
       satellite operators.  We also provide uplink center design, construction
       oversight and other project integration services for international 
       direct-to-home ventures.

     - Satellite Services--our division that provides video, audio and data 
       services to business television customers and other satellite users.

RECENT DEVELOPMENTS

REORGANIZATION
     
     During March 1999, our parent company received approval from the FCC to 
implement a plan to reorganize certain of its direct and indirect 
wholly-owned subsidiaries in order to streamline its organization and 
operations.  During the first quarter of 1999, we intend to place ownership 
of all of our direct broadcast satellites and related FCC licenses into 
EchoStar Satellite Corporation.  For additional information regarding our 
organizational structure, see Note 1 to our Combined and Consolidated 
Financial Statements.  DirectSat Corporation and Direct Broadcasting 
Satellite Corporation which currently own EchoStar II and EchoStar III, 
respectively, will both be merged into EchoStar Satellite Corporation.  Our 
parent also intends to merge EchoStar Space Corporation into EchoStar 
Satellite Corporation.  Dish, Ltd., and ESBC will be merged into us.  
EchoStar IV and the related FCC licenses, which are currently owned by us, 
and those satellites and FCC licenses to be acquired in the transaction with 
News Corporation Limited and MCI Telecommunications Corporation/WorldCom, 
also will be transferred to EchoStar Satellite Corporation.  Direct 
Broadcasting Satellite Corporation and EchoStar Space Corporation's assets 
consist principally of certain satellite and FCC authorization assets.  There 
are no significant operating activities conducted by either Direct 
Broadcasting Satellite Corporation or EchoStar Space Corporation.

                                       1

<PAGE>

AGREEMENT WITH NEWS CORPORATION LIMITED AND MCI TELECOMMUNICATIONS 
CORPORATION/WORLDCOM

     On November 30, 1998, our parent company announced an agreement with 
MCI, News Corporation and its American Sky Broadcasting, LLC subsidiary, 
pursuant to which it would acquire or receive:

     - the rights to 28 frequencies at the 110DEG. WL orbital location from 
       which we could transmit programming to the entire continental 
       United States; 

     - two DBS satellites constructed by Space Systems/Loral, delivered 
       in-orbit, and currently expected to be launched in 1999; 

     - a recently-constructed digital broadcast operations center located 
       in Gilbert, Arizona; 

     - a worldwide license agreement to manufacture and distribute set-top 
       boxes internationally using News Data System, Limited's 
       encryption/decoding technology; 

     - a commitment by an affiliated entity of News Corporation to purchase 
       from EchoStar Technology Corporation a minimum of 500,000 set-top 
       boxes; and 

     - a three-year, no fee retransmission consent agreement for DISH Network 
       to rebroadcast FOX Network owned-and-operated local station signals to 
       their respective markets. 
     
     Our parent company will not incur any costs associated with the 
construction, launch or insurance (including launch insurance and one year of 
in-orbit insurance) of the two DBS satellites.  Our parent company and MCI 
also agreed that MCI will have the non-exclusive right to bundle DISH Network 
service with MCI's telephony service offerings on mutually agreeable terms.  
In addition, our parent company agreed to carry the FOX News Channel on the 
DISH Network. Our parent company received standard program launch support 
payments in exchange for carrying the programming.  Throughout this document, 
we refer to the above transaction as the "110 acquisition". 
     
     Subject to FCC approval, if we combine the capacity of the two newly 
acquired satellites with our four current satellites, we expect that DISH 
Network will have the capacity to provide more than 500 channels of 
programming, Internet and high-speed data services and high definition 
television nationwide to a subscriber's single 18-inch satellite dish. We 
also believe that this transaction would position us to offer a one-dish 
solution for satellite-delivered local programming to major markets across 
the country.  Since we plan to use many of those channels for local 
programming, no particular consumer could subscribe to all 500 channels, but 
all of those channels would be capable of being received from a single dish.  
We also expect to be able to begin small dish service to Alaska, Hawaii, 
Puerto Rico and the United States territories in the Caribbean.  However, we 
expect to expend over $100 million, and perhaps more than $125 million during 
1999 and 2000 in one-time expenses associated with repositioning subscriber 
satellite dishes to the new orbital location.

     In connection with this agreement, the litigation with News Corporation 
described below under "LEGAL PROCEEDINGS" has been stayed and will be 
dismissed with prejudice upon closing or if the transaction is terminated for 
reasons other than the breach by, or failure to fulfill a condition within 
the control of, News Corporation or MCI, or in certain other limited 
circumstances. 

     During December 1998, the Department of Justice provided antitrust 
clearance for the transaction to proceed.  Both the FCC and our parent 
company's shareholders still must approve the transaction before we can 
close.  Charles W. Ergen, our parent company's controlling shareholder, has 
agreed to vote in favor of the transaction, so shareholder approval is 
assured.  During December 1998, our parent company asked the FCC to approve 
the transaction.  That approval has not yet been provided and we can not 
predict when the FCC will act on our parent company's request.  To the best 
of our knowledge, our parent company does not need to obtain any other 
regulatory approvals prior to consummating the transaction.

     Beneficial interest in substantially all of the assets and rights to be 
acquired by EchoStar in the 110 acquisition will be transferred us promptly 
after closing.

                                       2
<PAGE>

TENDER OFFERS
     
     On December 23, 1998, our parent company commenced cash tender offers as 
part of a plan to refinance its indebtedness at more favorable interest rates 
and terms.  Our parent company offered to purchase any and all of the 
following debt securities: 

     - the 12 7/8% Senior Secured Discount Notes due June 1, 2004 issued by 
       Dish, Ltd.;

     - the 13 1/8% Senior Secured Discount Notes due 2004 issued by ESBC and;

     - the 1997 notes which were issued by us.

     Our parent company also announced that it had sent to all holders of its 
issued and outstanding 12 1/8% Series B Senior Redeemable Exchangeable 
Preferred Stock due 2004 a notice to exchange all of the outstanding shares 
of Series B Preferred Stock into 12 1/8% Senior Preferred Exchange Notes due 
2004 on the terms and conditions set forth in the certificate of designation 
relating to the Series B Preferred Stock.  The Senior Exchange Notes were 
issued on January 4, 1999. Immediately following the exchange, our parent 
company commenced an offer to purchase any and all outstanding Senior 
Exchange Notes.  

     The tender offers for the first three issues of notes were consummated 
on January 25, 1999.  The tender offers were funded with proceeds from the 
offering of the 9 1/4% Senior Notes due 2006 and the 9 3/8% Senior Notes due 
2009, collectively referred to as the notes.  Holders of more than 99% of 
each issue of debt securities tendered their notes and consented to certain 
amendments to the indentures governing the notes that eliminated 
substantially all of the restrictive covenants and amended certain other 
provisions.  The tender offer for the Senior Exchange Notes expired on 
February 1, 1999 and was funded by us with proceeds from the issuance of the 
Notes.  More than 99% of the outstanding Senior Exchange Notes were validly 
tendered.

ITEM 2.   PROPERTIES

     The following table sets forth certain information concerning our 
material properties:

<TABLE>
<CAPTION>
                                                                         APPROXIMATE     OWNED OR
DESCRIPTION/USE                             LOCATION                   SQUARE FOOTAGE     LEASED
---------------                             --------                   --------------    -------
<S>                                         <C>                        <C>               <C>
Corporate headquarters and customer 
  service center.......................     Littleton, Colorado            156,000       Owned
EchoStar Technologies Corporation 
  office and distribution center.......     Englewood, Colorado            155,000       Owned
Warehouse and distribution center......     Denver, Colorado               132,800       Leased
Customer service center................     McKeesport, Pennsylvania       100,000       Leased
Office and distribution center.........     Sacramento, California          78,500       Owned
Digital broadcast operations center....     Cheyenne, Wyoming               55,000       Owned
Customer service center................     Thornton, Colorado              55,000       Owned
European headquarters and warehouse....     Almelo, The Netherlands         53,800       Owned

</TABLE>

ITEM 3.   LEGAL PROCEEDINGS

THE NEWS CORPORATION LIMITED

     During February 1997, EchoStar and News Corporation announced an 
agreement pursuant to which, among other things, News Corporation agreed to 
acquire approximately 50% of the outstanding capital stock of EchoStar.  News 
Corporation also agreed to make available for use by EchoStar the DBS permit 
for 28 frequencies at the 110  WL orbital slot purchased by MCI for more than 
$682 million following a 1996 FCC auction.  During late April 1997, 
substantial disagreements arose between the parties regarding their 
obligations under this agreement. Those substantial disagreements led the 
parties to litigation. In mid-1997, EchoStar filed a complaint seeking 
specific performance of this agreement and damages, including lost profits.  
News Corporation filed an answer and counterclaims seeking unspecified 
damages, denying all of the material allegations and asserting numerous 
defenses.  Discovery commenced in July 1997, and the case was set for trial 
commencing March 1999.  In connection with the 

                                       3

<PAGE>

pending 110 acquisition, the litigation between EchoStar and News Corporation 
will be stayed and will be dismissed with prejudice upon closing or if the 
transaction is terminated for reasons other than the breach by, or failure to 
fill a condition within the control of, News Corporation or MCI.

     In connection with the News Corporation litigation that arose in 1997, 
EchoStar has a contingent fee arrangement with its lawyers, which provides 
for the lawyers to be paid a percentage of any net recovery obtained in its 
dispute with News Corporation.  Although they have not been specific, the 
lawyers have asserted that they may be entitled to receive payments in excess 
of $80 million to $100 million under this fee arrangement in connection with 
the settlement of the dispute with News Corporation.  EchoStar intends to 
vigorously contest the lawyers' interpretation of the fee arrangement, which 
it believes significantly overstates the magnitude of its liability 
thereunder.  If the lawyers and EchoStar are unable to resolve this fee 
dispute under the fee arrangement, the fee dispute would be resolved under 
arbitration.  It is too early to determine the outcome of negotiations or 
arbitration regarding this fee dispute.

WIC PREMIUM TELEVISION LTD.

     On July 28, 1998, a lawsuit was filed by WIC Premium Television Ltd. 
("WIC"), an Alberta corporation, in the Federal Court of Canada Trial 
Division, against certain defendants which include: General Instrument 
Corporation, HBO, Warner Communications, Inc., John Doe, Showtime, USSB, ECC 
and two of ECC's wholly-owned subsidiaries, Dish, Ltd. and Echosphere. The 
lawsuit seeks, among other things, an interim and permanent injunction 
prohibiting the defendants from activating receivers in Canada and from 
infringing any copyrights held by WIC.  It is too early to determine whether 
or when any other lawsuits and/or claims will be filed.  It is also too early 
to make an assessment of the probable outcome of the litigation or to 
determine the extent of any potential liability or damages. 
     
     On September 28, 1998, WIC filed another lawsuit in the Court of Queen's 
Bench of Alberta Judicial District of Edmonton against certain defendants, 
which also include ECC, Dish, and Echosphere.  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 
injunction prohibiting the defendants from importing hardware into Canada and 
from activating receivers in Canada and damages in excess of the equivalent 
of US $175 million.  It is too early to determine whether or when any other 
lawsuits and/or claims will be filed.  It is also too early to make an 
assessment of the probable outcome of the litigation or to determine the 
extent of any potential liability or damages. 

BROADCAST NETWORK PROGRAMMING

     Section 119 of the Satellite Home Viewer Act authorizes EchoStar to 
substitute satellite-delivered network signals its subscribers, but only if 
those subscribers qualify as "unserved households", defined in the Satellite 
Home Viewer Act, those that, among other things, "cannot receive, through the 
use of a conventional outdoor rooftop receiving antenna, an over-the-air 
signal of Grade B intensity (as defined by the FCC) of a primary network 
station affiliated with that network."  Historically, EchoStar obtained 
distant broadcast network signals for distribution to its subscribers through 
PrimeTime 24, Joint Venture ("PrimeTime 24").  PrimeTime 24 also distributes 
network signals to certain of EchoStar's competitors in the satellite 
industry.  
     
     The national networks and local affiliate stations have recently 
challenged PrimeTime 24's methods of selling network programming (national 
and local) to consumers based upon infringement of copyright.  The United 
States District Court for the Southern District of Florida has entered 
nationwide preliminary and permanent injunctions preventing PrimeTime 24 from 
selling its programming to consumers unless the programming was sold in 
according to certain stipulations in the injunction.  The preliminary 
injunction took effect on February 28, 1999, and the permanent injunction is 
set to take effect on April 30, 1999.  The injunctions cover "distributors" 
as well.  The plaintiff in the Florida litigation informed EchoStar that it 
considered EchoStar a "distributor" for purposes of that injunction.  A 
federal district court in North Carolina has also issued an injunction 
against PrimeTime 24 prohibiting 

                                       4

<PAGE>

certain distant signal retransmissions to homes delineated by a contour in 
the Raleigh area.  Other copyright litigation against PrimeTime 24 is 
pending. 

     EchoStar ceased delivering PrimeTime 24 programming in July 1998, and 
began uplinking and distributing network signals directly. EchoStar has also 
implemented Satellite Home Viewer Act Section 119 compliance procedures which 
will materially restrict the market for the sale of network signals by 
EchoStar.  CBS and other broadcast networks have informed EchoStar that they 
believe EchoStar's method of providing distant network programming violates 
the SHVA and hence infringes their copyright.  
     
     On October 19, 1998, EchoStar filed a declaratory judgment action in the 
United States District Court for the District of Colorado against the four 
major networks.  In the future, EchoStar may attempt to certify a class 
including the networks as well as any and all owned and operated stations and 
any independent affiliates.  EchoStar has asked the court to enter a judgment 
declaring that its method of providing distant network programming does not 
violate the Satellite Home Viewer Act and hence does not infringe the 
networks' copyrights.  
     
     On November 5, 1998, several broadcast parties, acting on prior threats 
filed a complaint alleging, among other things, copyright infringement 
against EchoStar in federal district court in Miami.  The plaintiffs in that 
action have also requested the issuance of a preliminary injunction against 
EchoStar.  The networks also filed a counter claim containing similar 
allegations against us in the Colorado litigation.
     
     On February 24, 1999, CBS, NBC, Fox, and ABC filed with the court a 
"Motion for Temporary Restraining Order, Preliminary Injunction, and Contempt 
Finding" against DIRECTV in response to an announcement by DIRECTV that it 
was discontinuing retransmission of the programming of the four networks 
received from PrimeTime 24 and would instead distribute its own package of 
network affiliates to its existing subscribers.  On February 25, 1999, the 
court granted CBS and Fox a temporary restraining order requiring DIRECTV and 
its agents and those who act in active concert or participation with DIRECTV, 
not to deliver CBS or Fox programming to subscribers who do not live in 
"unserved households."  For purposes of determining whether a subscriber is 
"unserved," the court referred to a modified version of the Longley-Rice 
signal propagation model. The modifications in some respects reflect an order 
adopted by the FCC on February 2, 1999.  On March 12, 1999, DIRECTV and the 
four major broadcast networks and their affiliates announced that they have 
reached a settlement of that dispute.  Under the terms of the settlement, 
DIRECTV, stations and networks have agreed on a timeframe to disconnect 
distant broadcast network signals from subscribers predicted to be ineligible 
based on a modified version of the Longley-Rice signal propagation model. 
Subscribers predicted to be ineligible who obtain consent from the affected 
affiliate stations to receive their signals via satellite will not lose 
receipt of their distant network signals. We are not sure what effect this 
development will have on our business.
     
     On March 24, 1999, the United States District Court for the District of 
Colorado transferred our Colorado declaratory judgment action to Miami, where 
it will in all likelihood be consolidated with the November 2, 1998 suit 
filed against us by the broadcasters.  It is likely that the broadcasters 
will move forward on their lawsuit filed in Miami and will seek similar 
remedies against us, including a temporary restraining order requiring us to 
stop delivering network signals to subscribers who do not live in "unserved 
households."  Depending upon the terms, a restraining order could result in 
us having to terminate delivery of network signals to a material portion of 
our subscriber base, which could result in decreases in subscriber 
activations and subscription television services revenue and an increase in 
subscriber turnover.
     
     We are subject to various other legal proceedings and claims which arise 
in the ordinary course of our business.  In the opinion of management, the 
amount of ultimate liability with respect to those actions will not 
materially affect the our financial position or results of operations.

                                       5

<PAGE>

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     As of March 19, 1997, all 1,000 authorized, issued and outstanding 
shares of our common stock were held by EchoStar. There is currently no 
established trading market for our common stock.
     
     We have never declared or paid any cash dividends on our common stock 
and do not expect to declare dividends in the foreseeable future.  Payment of 
any future dividends will depend upon our earnings and capital requirements, 
our debt facilities, and other factors the Board of Directors considers 
appropriate.  We currently intend to retain our earnings, if any, to support 
future growth and expansion.  Our ability to declare dividends is affected by 
covenants in our debt facilities.

ITEM 7.  MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

     ALL STATEMENTS CONTAINED HEREIN, AS WELL AS STATEMENTS MADE IN PRESS 
RELEASES AND ORAL STATEMENTS THAT MAY BE MADE BY US OR BY OFFICERS, DIRECTORS 
OR EMPLOYEES ACTING ON OUR BEHALF, THAT ARE NOT STATEMENTS OF HISTORICAL FACT 
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE 
SECURITIES LITIGATION REFORM ACT OF 1995.   SUCH FORWARD-LOOKING STATEMENTS 
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD 
CAUSE OUR ACTUAL RESULTS TO BE MATERIALLY DIFFERENT FROM HISTORICAL RESULTS 
OR FROM ANY FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING 
STATEMENTS.  AMONG THE FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER 
MATERIALLY ARE THE FOLLOWING:  A TOTAL OR PARTIAL LOSS OF A SATELLITE DUE TO 
OPERATIONAL FAILURES, SPACE DEBRIS OR OTHERWISE; A DECREASE IN SALES OF 
DIGITAL EQUIPMENT AND RELATED SERVICES TO INTERNATIONAL DIRECT-TO-HOME 
SERVICE PROVIDERS; A DECREASE IN DISH NETWORK SUBSCRIBER GROWTH; AN INCREASE 
IN SUBSCRIBER ACQUISITION COSTS; IMPEDIMENTS TO THE RETRANSMISSION OF LOCAL 
OR DISTANT BROADCAST NETWORK SIGNALS WHICH COULD RESULT FROM PENDING 
LITIGATION OR LEGISLATION; LOWER THAN EXPECTED DEMAND FOR OUR DELIVERY OF 
LOCAL BROADCAST NETWORK SIGNALS; AN UNEXPECTED BUSINESS INTERRUPTION DUE TO 
THE FAILURE OF THIRD-PARTIES TO REMEDIATE YEAR 2000 ISSUES; OUR INABILITY TO 
RETAIN NECESSARY AUTHORIZATIONS FROM THE FCC; AN INCREASE IN COMPETITION FROM 
CABLE, DIRECT BROADCAST SATELLITE, OTHER SATELLITE SYSTEM OPERATORS, AND 
OTHER PROVIDERS OF SUBSCRIPTION TELEVISION SERVICES; THE INTRODUCTION OF NEW 
TECHNOLOGIES AND COMPETITORS INTO THE SUBSCRIPTION TELEVISION BUSINESS; A 
MERGER OF EXISTING DBS COMPETITORS; A CHANGE IN THE REGULATIONS GOVERNING THE 
SUBSCRIPTION TELEVISION SERVICE INDUSTRY; THE OUTCOME OF ANY LITIGATION IN 
WHICH WE MAY BE INVOLVED; FAILURE TO CONSUMMATE THE 110 ACQUISITION; GENERAL 
BUSINESS AND ECONOMIC CONDITIONS; AND OTHER RISK FACTORS DESCRIBED FROM TIME 
TO TIME IN OUR REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.  IN 
ADDITION TO STATEMENTS THAT EXPLICITLY DESCRIBE SUCH RISKS AND UNCERTAINTIES, 
READERS ARE URGED TO CONSIDER STATEMENTS THAT INCLUDE THE TERMS "BELIEVES," 
"BELIEF," "EXPECTS," "PLANS," "ANTICIPATES," "INTENDS" OR THE LIKE TO BE 
UNCERTAIN AND FORWARD-LOOKING. ALL CAUTIONARY STATEMENTS MADE HEREIN SHOULD 
BE READ AS BEING APPLICABLE TO ALL FORWARD-LOOKING STATEMENTS WHEREVER THEY 
APPEAR.  IN THIS CONNECTION, INVESTORS SHOULD CONSIDER THE RISKS DESCRIBED 
HEREIN AND SHOULD NOT PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997.

     REVENUE.  Total revenue for the year ended December 31, 1998 was $986 
million, an increase of $510 million compared to total revenue for the year 
ended December 31, 1997 of $476 million.  The increase in total revenue was 
primarily attributable to DISH Network subscriber growth combined with 
increased revenue from our ETC and Satellite Services business units.  We 
expect that our revenues will continue to increase as the number of DISH 
Network subscribers increases. 
     
     DISH Network subscription television services revenue totaled $669 
million for the year ended December 31, 1998, an increase of $370 million or 
124% compared to 1997.  This increase was directly attributable to the 
increase in the number of DISH Network subscribers.  Average DISH Network 
subscribers for the year ended December 31, 1998 increased approximately 120% 
compared to 1997.  As of December 31, 1998, we had approximately 1.9 million 
DISH Network subscribers compared to 1.04 million at December 31, 1997. Monthly

                                       6

<PAGE>

revenue per subscriber approximated $39.25 and $38.50 during the years ended 
December 31, 1998 and 1997, respectively. DISH Network subscription 
television services revenue principally consists of revenue from basic, 
premium and pay-per-view subscription television services.  DISH Network 
subscription television services 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.  
     
     For the year ended December 31, 1998, DTH equipment sales and 
integration services totaled $254 million, an increase of $164 million 
compared to 1997.  DTH equipment sales consist of sales of digital set-top 
boxes and other digital satellite broadcasting equipment by us to 
international DTH service operators.  We currently have agreements to provide 
equipment to DTH service operators in Spain and Canada.  The increase in DTH 
equipment sales and integration services revenue was primarily attributable 
to an increase in the volume of set-top boxes sold.  
     
     Substantially all of our ETC revenues have resulted from sales to two 
international DTH providers.  As a result, our ETC business currently is 
economically dependent on these two DTH providers.  Our future revenue from 
the sale of DTH equipment and integration services in international markets 
depends largely on the success of these DTH operators and continued demand 
for our digital set-top boxes.  Due to an expected decrease in demand 
combined with a decrease in the sales price of digital set-top boxes 
attributable to increased competition, we expect that our DTH equipment and 
integration services revenue will decline during 1999 as compared to 1998. 
Such revenue may decline in 1999 by as much as 50% as compared to 1998.
     
     During July 1998, Telefonica, one of the two DTH service providers 
described above, announced its intention to merge with Sogecable (Canal Plus 
Satellite), one of its primary competitors.  In October 1998, Telefonica 
announced that the merger negotiations had been suspended.  Subsequently, 
negotiations between Telefonica and Canal Plus Satellite have resumed.  
Although we have binding purchase orders from Telefonica for 1999 deliveries 
of DTH equipment, we cannot yet predict what impact, if any, consummation of 
this merger might have on our future sales to Telefonica.  As part of the 110 
acquisition, we received a minimum order from a subsidiary of News 
Corporation for 500,000 set-top boxes.  Although we continue to actively 
pursue additional distribution and integration service opportunities 
internationally, no assurance can be given that any such additional 
negotiations will be successful.
     
     Satellite services revenue totaled $22 million during 1998, an increase 
of $11 million as compared to 1997.  These revenues principally include fees 
charged to content providers for signal carriage and revenues earned from 
business television, or BTV customers.  The increase in satellite services 
revenue was primarily attributable to increased BTV revenue due to the 
addition of new full-time BTV customers. Satellite services revenue is 
expected to increase during 1999 to the extent we are successful in 
increasing the number of our BTV customers and developing and implementing 
new services.
     
     DISH NETWORK OPERATING EXPENSES.  DISH Network operating expenses 
totaled $397 million during 1998, an increase of $204 million or 106%, 
compared to 1997.  The increase in DISH Network operating expenses was 
consistent with, and primarily attributable to, the increase in the number of 
DISH Network subscribers.  DISH Network operating expenses represented 59% 
and 65% of subscription television services revenue during 1998 and 1997, 
respectively.  Although we expect DISH Network operating expenses as a 
percentage of subscription television services revenue to decline modestly 
from 1998 levels in future periods, this expense to revenue ratio could 
increase. 

     Subscriber-related expenses totaled $298 million during 1998, an 
increase of $154 million compared to 1997.  Such expenses, which include 
programming expenses, copyright royalties, residuals payable to retailers and 
distributors, and billing, lockbox and other variable subscriber expenses, 
represented 45% of subscription television services revenues during 1998 
compared to 48% during 1997.  The decrease in subscriber-related expenses as 
a percentage of subscription television services revenue resulted primarily 
from a decrease in programming expenses on a per subscriber basis, which 
resulted from a change in product mix combined with price discounts received 
from certain content providers.  
     
     Customer service center and other expenses principally consist of costs 
incurred in the operation of our DISH Network customer service centers, such 
as personnel and telephone expenses, as well as subscriber equipment 
installation and other operating expenses.  Customer service center and other 
expenses totaled $72 million during 1998, an increase of $37 million as 
compared to 1997.  The increase in customer service center and other expenses 
resulted from increased personnel and telephone expenses to support the 
growth of the DISH Network.  Customer service center 

                                       7

<PAGE>

and other expenses totaled 11% of subscription television services revenue 
during 1998 compared to 12% of subscription television services revenue 
during 1997.  Although we expect customer service center and other expenses 
as a percentage of subscription television services revenue to remain near 
1998 levels in the future, this expense to revenue ratio could increase.  
     
     Satellite and transmission expenses include expenses associated with the 
operation of our digital broadcast center, contracted satellite telemetry, 
tracking and control services, and satellite in-orbit insurance.  Satellite 
and transmission expenses totaled $26 million during 1998, an $11 million 
increase compared to 1997.  This increase resulted from higher satellite and 
other digital broadcast center operating expenses due to an increase in the 
number of operational satellites.  We expect satellite and transmission 
expenses to continue to increase in the future as additional satellites are 
placed in service. 
     
     COST OF SALES--DTH EQUIPMENT AND INTEGRATION SERVICES. Cost of 
sales--DTH equipment and integration services totaled $175 million during 
1998, an increase of $114 million compared to 1997.  This increase is 
consistent with the increase in DTH equipment revenue.  Cost of sales--DTH 
equipment and integration services principally includes costs associated with 
digital set-top boxes and related components sold to international DTH 
operators.  As a percentage of DTH equipment revenue, cost of sales 
represented 69% and 68% during 1998 and 1997, respectively.  We expect that 
cost of sales may increase as a percentage of DTH equipment revenue in the 
future due to price pressure resulting from increased competition from other 
providers of DTH equipment.  
     
     MARKETING EXPENSES.  Marketing expenses totaled $332 million during 
1998, an increase of $149 million or 81%, compared to 1997.  The increase in 
marketing expenses was primarily attributable to the increase in subscriber 
promotion subsidies.  Subscriber promotion subsidies include the excess of 
transaction costs over transaction proceeds at the time of sale of EchoStar 
receiver systems, activation allowances paid to retailers, and other 
promotional incentives.  During all of 1998 we recognized subscriber 
promotion subsidies as incurred. These expenses totaled $284 million during 
1998, an increase of $135 million over 1997.  This increase resulted from 
increased subscriber activations and the immediate recognition of all 
subscriber promotion subsidies incurred in 1998, due to the removal of any 
prepaid subscription requirement.  During 1997, a portion of such expenses 
were initially deferred and amortized over the related prepaid subscription 
term, generally one year.  Advertising and other expenses totaled $48 million 
during 1998, an increase of $13 million over 1997. 

     During 1998, our subscriber acquisition costs, inclusive of acquisition 
marketing expenses, totaled $314 million, or approximately $285 per new 
subscriber activation. Comparatively, our 1997 subscriber acquisition costs, 
inclusive of acquisition marketing expenses and deferred subscriber 
acquisition costs, totaled $252 million, or approximately $340 per new 
subscriber activation.  The decrease in our subscriber acquisition costs, on 
a per new subscriber activation basis, principally resulted from decreases in 
the manufactured cost of EchoStar receiver systems.  We expect that our 
subscriber acquisition costs, on a per new subscriber activation basis, will 
increase in the near-term as we introduce aggressive marketing promotions to 
acquire new subscribers.  For example, during 1999 we introduced the 
PrimeStar bounty program.  Our subscriber acquisition costs under this 
program are significantly higher than those under our other marketing 
programs.  To the extent that we either extend the duration of the PrimeStar 
bounty program or begin to offer similar bounty programs for other 
competitors' subscribers, our subscriber acquisition costs, both in the 
aggregate and on a per new subscriber activation basis, will materially 
increase.
     
     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative 
expenses totaled $95 million during 1998, an increase of $29 million as 
compared to 1997.  The increase in G&A expenses was principally attributable 
to increased personnel expenses to support the growth of the DISH Network. 
G&A expenses as a percentage of total revenue decreased to 10% during 1998 
compared to 14% during 1997.  Although we expect that G&A expenses as a 
percentage of total revenue will approximate 1998 levels or decline modestly 
in the future, this expense to revenue ratio could increase.  

     EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION 
("EBITDA").  EBITDA was negative $29 million and negative $52 million, during 
1998 and 1997, respectively. EBITDA, as adjusted to exclude amortization of 
subscriber acquisition costs, was negative $48 million for 1998 compared to 
negative $173 million for 1997.  This improvement in EBITDA principally 
resulted from increases in our ETC and DISH Network revenues.  We believe our 
ability to repay our existing debt will be significantly influenced by our 
ability to continue to improve 

                                       8

<PAGE>

reported EBITDA.  However, EBITDA does not purport to represent cash provided 
or used by operating activities and should not be considered in isolation or 
as a substitute for measures of performance prepared in accordance with 
generally accepted accounting principles.  

     We believe it is common practice in the telecommunications industry for 
investment bankers and others to use various multiples of current or 
projected EBITDA for purposes of estimating current or prospective enterprise 
value and as one of many measures of operating performance. Conceptually, 
EBITDA measures the amount of income generated each period that could be used 
to service debt, because EBITDA is independent of the actual leverage 
employed by the business; but EBITDA ignores funds needed for capital 
expenditures and expansion.  Some investment analysts track the relationship 
of EBITDA to total debt as one measure of financial strength.  However, 
EBITDA does not purport to represent cash provided or used by operating 
activities and should not be considered in isolation or as a substitute for 
measures of performance prepared in accordance with generally accepted 
accounting principles. 
     
     EBITDA differs significantly from cash flows from operating activities 
reflected in the consolidated statement of cash flows.  Cash from operating 
activities is net of interest and taxes paid and is a more comprehensive 
determination of periodic income on a cash (vs. accrual) basis, exclusive of 
non-cash items of income and expenses such as depreciation and amortization.  
In contrast, EBITDA is derived from accrual basis income and is not reduced 
for cash invested in working capital.  Consequently, EBITDA is not affected 
by the timing of receivable collections or when accrued expenses are paid.  
We are not aware of any uniform standards for determining EBITDA and believe 
presentations of EBITDA may not be calculated consistently by different 
entities in the same or similar businesses.  EBITDA is shown before and after 
amortization of subscriber acquisition costs, which were deferred through 
September 1997 and amortized over one year.
     
     During the fourth quarter of 1998, we introduced the DISH Network 
One-Rate Plan.  Under the DISH Network One-Rate Plan, consumers are eligible 
to receive a rebate of up to $299 on the purchase of certain EchoStar 
receiver systems. Consequently, the costs of acquiring subscribers who 
qualify for the DISH Network One-Rate Plan are materially higher than for 
other DISH Network subscribers.  The rebate is contingent upon the 
subscriber's one-year commitment to subscribe to the America's Top 100 CD 
programming package and two premium channel packages, committing the 
subscriber to a monthly programming payment of at least $48.98.  The consumer 
must pay the entire sales price of the system at the time of purchase, but is 
not required to prepay for the programming.  After receiving the subscriber's 
first full programming payment (equal to $97.96 for two months of 
programming), we issue a rebate of up to $299 to the subscriber.  Although 
subscriber acquisition costs are materially higher under the DISH Network 
One-Rate Plan, we believe that these customers are more profitable because of 
the higher average revenue per subscriber.  In addition, we believe that 
these customers represent lower credit risk and therefore may be marginally 
less likely to churn than other DISH Network subscribers. Although there can 
be no assurance as to the ultimate duration of the DISH Network One-Rate 
Plan, it will continue through at least April 1999.  
     
     Our subscriber acquisition costs, both in the aggregate and on a per 
subscriber basis, will increase in direct relation to the participation rate 
in the DISH Network One-Rate Plan.  While we presently expect approximately 
one-third of our new subscriber activations to result from the DISH Network 
One-Rate Plan during the duration of the promotion, the actual consumer 
participation level could be significantly higher.  To the extent that actual 
consumer participation levels exceed present expectations and subscriber 
acquisition costs materially increase, our EBITDA results will be negatively 
impacted because subscriber acquisition costs are expensed as incurred.  
     
     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses 
during 1998, including amortization of subscriber acquisition costs of $19 
million, aggregated $102 million, a $71 million decrease compared to 1997.  
The decrease in depreciation and amortization expenses principally resulted 
from a decrease in amortization of subscriber acquisition costs of $102 
million, partially offset by an increase in depreciation related to the 
commencement of operation of EchoStar III, EchoStar IV and other depreciable 
assets placed in service during 1998.  Promotional programs changed in 
October 1997 and we ceased deferral of subscriber acquisition costs after 
that date.  All previously deferred costs were fully amortized during 1998
     
     OTHER INCOME AND EXPENSE.  Other expense, net totaled $163 million 
during 1998, an increase of $64 million as compared to 1997.  The increase in 
other expense resulted primarily from interest expense associated with our 
12 1/2% Senior Secured Notes due 2002 issued in June 1997, combined with 
increased interest expense resulting from 

                                       9

<PAGE>

increased accreted balances on our 12 7/8% Senior Secured Discount Notes due 
2004 issued in 1994 and our 13 1/8% Senior Secured Discount Notes due 2004 
issued in 1996.  

YEAR 2000 READINESS DISCLOSURE

     We have assessed and continue to assess the impact of the Year 2000 
issue on our computer systems and operations.  The Year 2000 issue exists 
because many computer systems and applications currently use two-digit date 
fields to designate a year.  Thus, as the century date approaches, date 
sensitive systems may recognize the year 2000 as 1900 or not at all. The 
inability to recognize or properly treat the year 2000 may cause computer 
systems to process critical financial and operational information 
incorrectly.  If our Year 2000 remediation plan is not successful or is not 
completed in a timely manner, the Year 2000 issue could significantly disrupt 
our ability to transact business with our customers and suppliers, and could 
have a material impact on our operations. Even if our Year 2000 remediation 
plan is successful or completed on time, there can be no assurance that the 
systems of other companies with which our systems interact will be timely 
converted, or that any such failure to convert by another company would not 
have an adverse effect on our business or operations.
     
     We have established a five-phase plan to address potential Year 2000 
issues:
     
     - INVENTORY--the identification of all relevant hardware, embedded 
       software, system software and application software to establish 
       the scope of subsequent phases;
     - ASSESSMENT--the process of evaluating the current level of Year 2000 
       readiness of all components identified in the inventory phase, 
       defining actions necessary to retire, replace or otherwise correct all
       non-conforming components and estimating resources and timelines 
       required by action plans;
     - REMEDIATION--the correction of previously identified Year 2000 issues;
       Validation/testing--the evaluation of each component's performance as 
       the date is rolled forward to January 1, 2000 and other dates and times 
       relating to the Year 2000 issue; and
     - IMPLEMENTATION--the process of updating components and correcting 
       Year 2000 issues in the production operating environment of a system.

     In connection with this effort, we have segregated our computer systems 
and corresponding Year 2000 readiness risk into three categories: internal 
financial and administrative systems, service-delivery systems, and 
third-party systems.  
     
INTERNAL FINANCIAL AND ADMINISTRATIVE SYSTEMS
     
     With respect to our internal financial and administrative systems, we 
have completed the inventory phase of the Year 2000 readiness plan by 
identifying all systems with potential Year 2000 problems.  We are currently 
in the process of assessing these systems by communicating with our outside 
software and hardware vendors and reviewing their certifications of Year 2000 
readiness, as well as reviewing internal custom programming codes.  We expect 
to have the assessment phase substantially completed by April 1999.
     
     Upon completion of the assessment phase, we will begin the remediation 
and validation/testing phases.  During the remediation phase, we will attempt 
to correct all problems detected while performing the assessment phase. 
During the validation/testing phase, we will create a parallel environment of 
all internal and administrative systems.  We will run tests on the parallel 
environment to assess its reaction to changes in dates and times relating to 
the Year 2000 issue.  We currently expect the remediation and 
validation/testing phases to be complete by June 1999.
     
     Once all known problems are corrected within the parallel environment, 
we will make changes to the actual operating environment of our internal 
financial and administrative systems during the implementation phase.  We 
currently expect to complete the implementation phase by August 1999.  Upon 
successful completion of the implementation phase we will be able to certify 
our Year 2000 readiness.  While there can be no assurance, we currently 
believe that our internal financial and administrative systems are Year 2000 
ready.

                                       10

<PAGE>

SERVICE-DELIVERY SYSTEMS

     We have defined service-delivery systems as all internal systems 
necessary to deliver DISH Network programming to our subscribers.  During the 
inventory phase we initially identified our set-top boxes, compression and 
conditional access systems at our digital broadcast center, DBS satellites 
and third-party billing system as systems with potential Year 2000 issues.  
     
     Given the interdependent nature of the receiver and broadcast systems 
used to deliver our service, we previously implemented a smaller, offline 
version of our overall system to aid in the evaluation and test of hardware 
and software changes that normally occur over time.  This system gives us the 
ability to perform "real-time" testing of the various elements of the system 
by simulating the year 2000 rollover, and confirming system operation.  This 
ability to perform accurate offline simulations has provided a tremendous 
benefit to our Year 2000 test process.
     
     We have completed initial testing of our set-top receivers.  During 
these tests, the dates in the broadcast system, and hence the set-top 
receivers were rolled forward to each of the dates and times affected by the 
Year 2000 issue. We deemed these initial tests successful, as no problems 
were detected during thorough testing of the set-top receivers when the dates 
were rolled forward.  These tests also affirm the integrity of the broadcast 
systems supplying the set-top receivers with critical operational system 
information.  As new technology and software are integrated into our set-top 
receivers, we will perform additional testing to attempt to ensure continued 
Year 2000 readiness. 
     
     In addition to the practical testing performed above, we have completed 
an independent inventory and assessment of the systems at our digital 
broadcast center and are currently in the remediation phase of our Year 2000 
readiness plan.  The remediation phase of the plan is expected to be complete 
by April 1999.  We expect to perform validation and testing of communications 
between our digital broadcast center and our DBS satellites during the third 
quarter of 1999.  The validation and testing of our digital broadcast center 
is not expected to cause interruption of programming to DISH Network 
subscribers.
     
     During the assessment of our DBS satellites, we determined that our 
satellites do not operate under a calendar-driven system.  Therefore, we do 
not expect changes in dates and times to affect the operation of our DBS 
satellites.  
     
     We are currently working with the vendor of our third-party billing 
system to attempt to ensure its Year 2000 readiness.  This vendor has 
indicated it has completed all remediation activities and is currently in the 
final stages of testing/validation.  Subsequent to completion of its 
testing/validation activities, the vendor has indicated it will contractually 
certify its Year 2000 readiness during the second quarter of 1999, however we 
can not provide any assurance in this regard.  

THIRD-PARTY SYSTEMS
     
     We also are currently assessing our vulnerability to unexpected business 
interruptions due to the failure of third-parties to remediate Year 2000 
readiness issues associated with products or services on which our business 
relies.  In connection with this assessment, we sent letters to third-party 
business partners, suppliers and vendors which we deemed significant 
requesting that they certify their Year 2000 readiness.  To date, we have 
received responses from approximately 70% of these vendors.  We are presently 
in the process of contacting our critical suppliers and vendors who have 
either not responded or have not responded adequately to our requests for 
proof of certification.  We presently expect to complete this process by 
April 1999 and will continue to follow-up on unresolved issues thereafter.  
There can be no assurance that third-parties who have responded, or will 
respond, to our request regarding Year 2000 readiness have responded, or will 
respond, accurately or satisfactorily, or that anticipated Year 2000 actions 
set forth in their responses will be properly conducted.

CONTINGENCY PLANNING

     We also are involved in limited contingency planning.  In the event that 
previously undetected Year 2000 issues arise, contingency plans will be used 
to try to mitigate potential system problems.  Our internal financial and 
administrative and service-delivery contingency plan includes making back-up 
copies of certain systems as well as using standby power generators at our 
digital broadcasting center.  With respect to other third-party systems, we 
will continue to contact our critical vendors in order to obtain 
certification of their Year 2000 readiness.  However, no 

                                       11

<PAGE>

assurance can be made that such contingency plans will resolve any Year 2000 
problems that may occur, in a manner which is satisfactory or desirable to us.

COSTS

     We have not yet determined the full cost of our Year 2000 readiness plan 
and its related impact on our financial condition.  In the ordinary course of 
business, we have made capital expenditures over the past few years to 
improve our systems, for reasons other than Year 2000 remediation. Because 
these upgrades also resulted in improved Year 2000 readiness, replacement and 
remediation costs have not been material.  We currently have budgeted 
$300,000 for the completion of our Year 2000 readiness plan.  While there can 
be no assurance, we believe our costs to successfully mitigate the Year 2000 
issue will not be material to our operations. No assurance can be made, 
however, as to the total cost for the Year 2000 plan until the plan has been 
completed. 

EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In March 1998, the American Institute of Certified Public Accountants 
issued Statement of Position 98-1, "Accounting for the Costs of Computer 
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which provides 
guidance that requires capitalization of certain costs incurred during an 
internal-use software development project.  SOP 98-1 is effective for fiscal 
years beginning after December 15, 1998. We do not expect that adoption of 
SOP 98-1 will materially affect our consolidated financial statements.

INFLATION

     Inflation has not materially affected our operations during the past 
three years.  We believe that our ability to increase the prices charged for 
our products and services in future periods will depend primarily on 
competitive pressures. We do not have any material backlog of our products.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
     
     INTEREST RATE RISK.  Our exposure to market risk for changes in interest 
rates relates to our debt obligations and cash and marketable investment 
securities (unrestricted and restricted) portfolio.
     
     As of December 31, 1998, we estimated the fair value of our fixed-rate 
debt and mortgages and other notes payable to be approximately $1.9 billion 
using quoted market prices where available, or discounted cash flow analyses. 
 The market risk associated with our debt is the potential increase in fair 
value resulting from a decrease in interest rates.  A 10% decrease in assumed 
interest rates would increase the fair value of our debt by approximately 
$50.8 million.
     
     Based on our average balance of cash and cash equivalents and restricted 
and unrestricted marketable investment securities during 1998, a 10% decrease 
in the average interest rate experienced in 1998 would not materially impact 
our annual interest income.
     
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our Consolidated Financial Statements are included in this report 
beginning on page F-1.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
          FINANCIAL DISCLOSURE

     None.

                                       12

<PAGE>
                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this report:

<TABLE>
<CAPTION>
         (1) FINANCIAL STATEMENTS                                                           PAGE
                                                                                             ----
<S>                                                                                          <C>
             Report of Independent Public Accountants....................................... F-2
             Combined and Consolidated Balance Sheets at December 31, 1997 and 1998......... F-3
             Combined and Consolidated Statements of Operations and Comprehensive Loss 
               for the years ended December 31, 1996, 1997 and 1998......................... F-4
             Combined and Consolidated Statements of Changes in Stockholders' Equity 
               for the years ended December 31, 1996, 1997 and 1998......................... F-5
             Combined and Consolidated Statements of Cash Flows for the years ended 
               December 31, 1996, 1997 and 1998............................................. F-6
             Notes to Combined and Consolidated Financial Statements........................ F-7
</TABLE>

         (2) FINANCIAL STATEMENT SCHEDULES

             None. All schedules have been included in the Consolidated 
Financial Statements or Notes thereto.

         (3) EXHIBITS

<TABLE>
<CAPTION>
Exhibit No.   Description
<S>           <C>

  3.1(a)*     Articles of Incorporation of the Company (incorporated by 
              reference to Exhibit 3.4(a) to the Company's Registration 
              Statement on Form S-4, Registration No. 333-31929).

  3.1(b)*     Bylaws of the Company (incorporated by reference to Exhibit 
              3.4(b) to the Company's Registration Statement on Form S-4, 
              Registration No. 333-31929).

  4.1*        Indenture relating to the Seven Year Notes, dated as of January 
              25, 1999, by and among the Company, the Guarantors and U.S. 
              Bank Trust National Association, as trustee.(incorporated by 
              reference to Exhibit 4.1 to the Company's Registration 
              Statement on Form s-4, Registration No. 333-71345).

  4.2*        Indenture relating to the Ten Year Notes, dated as of January 
              25, 1999, by and among the Company, the Guarantors and U.S. 
              Bank Trust National Association, as trustee. (incorporated by 
              reference to Exhibit 4.3 to the Company's Registration 
              Statement on Form s-4, Registration No. 333-71345).

  4.3*        Registration Rights Agreement relating to the Seven Year Notes 
              by and among the Company, the Guarantors and the parties named 
              therein. (incorporated by reference to Exhibit 4.5 to the 
              Company's Registration Statement on Form s-4, Registration No. 
              333-71345).

  4.4*        Registration Rights Agreement relating to the Ten Year Notes by 
              and among the Company, the Guarantors and the parties named 
              therein. (incorporated by reference to Exhibit 4.6 to the 
              Company's Registration Statement on Form s-4, Registration No. 
              333-71345).

 10.1(a)*     Satellite Construction Contract, dated as of February 6, 1990, 
              between EchoStar Satellite Corporation ("ESC") and Martin 
              Marietta as successor to General Electric, EchoStar, 
              Astro-Space Division ("General Electric") (incorporated by 
              reference to Exhibit 10.1(a) to the Registration Statement on 
              Form S-1 of Dish, Ltd. ("Dish") Registration No. 33-76450).

 10.1(b)*     First Amendment to the Satellite Construction Contract, dated 
              as of October 2, 1992, between ESC and Martin Marietta as 
              successor to General Electric (incorporated by reference to 
              Exhibit 10.1(b) to the Registration Statement on Form S-1 of 
              Dish, Registration No. 33-76450).

</TABLE>
                                       13
<PAGE>

<TABLE>
<S>           <C>

 10.1(c)*     Second Amendment to the Satellite Construction Contract, dated 
              as of October 30, 1992, between ESC and Martin Marietta as 
              successor to General Electric (incorporated by reference to 
              Exhibit 10.1(c) to the Registration Statement on Form S-1 of 
              Dish, Registration No. 33-76450).

 10.1(d)*     Third Amendment to the Satellite Construction Contract, dated 
              as of April 1, 1993, between ESC and Martin Marietta 
              (incorporated by reference to Exhibit 10.1(d)to the 
              Registration Statement on Form S-1 of Dish, Registration 
              No. 33-76450).

 10.1(e)*     Fourth Amendment to the Satellite Construction Contract, dated 
              as of August 19, 1993, between ESC and Martin Marietta 
              (incorporated by reference to Exhibit 10.1(e) to the 
              Registration Statement on Form S-1 of Dish, Registration 
              No. 33-76450).

 10.1(f)*     Form of Fifth Amendment to the Satellite Construction Contract, 
              between ESC and Martin Marietta (incorporated by reference to 
              Exhibit 10.1(f) to the Registration Statement on Form S-1 of 
              Dish, Registration No. 33-81234).

 10.1(g)*     Sixth Amendment to the Satellite Construction Contract, dated 
              as of June 7, 1994, between ESC and Martin Marietta 
              (incorporated by reference to Exhibit 10.1(g) to the 
              Registration Statement on Form S-1 of Dish, Registration 
              No. 33-81234).

 10.1(h)*     Eighth Amendment to the Satellite Construction Contract, dated 
              as of July 18, 1996, between ESC and Martin Marietta 
              (incorporated by reference to Exhibit 10.1(h) to the Quarterly 
              Report on Form 10-Q of EchoStar for the quarter ended June 30, 
              1996, Commission File No. 0-26176).

 10.2*        Master Purchase and License Agreement, dated as of August 12, 
              1986, between Houston Tracker Systems, Inc. ("HTS") and 
              Cable/Home Communications Corp. (a subsidiary of General 
              Instruments Corporation) (incorporated by reference to 
              Exhibit 10.4 to the Registration Statement on Form S-1 of Dish, 
              Registration No. 33-76450).

 10.3*        Master Purchase and License Agreement, dated as of June 18, 
              1986, between Echosphere Corporation and Cable/Home 
              Communications Corp. (a subsidiary of General Instruments 
              Corporation) (incorporated by reference to Exhibit 10.5 to the 
              Registration Statement on Form S-1 of Dish, Registration 
              No. 33-76450).

 10.4*        Merchandising Financing Agreement, dated as of June 29, 1989, 
              between Echo Acceptance Corporation and Household Retail 
              Services, Inc. (incorporated by reference to Exhibit 10.6 to 
              the Registration Statement on Form S-1 of Dish, Registration 
              No. 33-76450).

 10.5*        Key Employee Bonus Plan, dated as of January 1, 1994 
              (incorporated by  reference to Exhibit 10.7 to the Registration 
              Statement on Form S-1 of Dish, Registration No. 33-76450).

 10.6*        Consulting Agreement, dated as of February 17, 1994, between 
              ESC and Telesat Canada (incorporated by reference to Exhibit 
              10.8 to the Registration Statement on Form S-1 of Dish, 
              Registration No. 33-76450).

 10.7*        Form of Satellite Launch Insurance Declarations (incorporated 
              by reference to Exhibit 10.10 to the Registration Statement on 
              Form S-1 of Dish, Registration No. 33-81234). 

 10.8*        Dish 1994 Stock Incentive Plan (incorporated by reference to 
              Exhibit 10.11 to the Registration Statement on Form S-1 of 
              Dish, Registration No. 33-76450).

 10.9*        Form of Tracking, Telemetry and Control Contract between AT&T 
              Corp. and ESC (incorporated by reference to Exhibit 10.12 to 
              the Registration Statement on Form S-1 of Dish, Registration 
              No. 33-81234).

</TABLE>

                                       14

<PAGE>

<TABLE>
<S>           <C>

 10.10*       Manufacturing Agreement, dated as of March 22, 1995, between 
              Houston Tracker Systems, Inc. and SCI Technology, Inc. 
              (incorporated by reference to Exhibit 10.12 to the Registration 
              Statement on Form S-1 of Dish, Commission File No. 33-81234).

 10.11*       Manufacturing Agreement dated as of April 14, 1995 by and 
              between ESC and Sagem Group (incorporated by reference to 
              Exhibit 10.13 to the Registration Statement on Form S-1 of 
              EchoStar Communications Corporation ("ECC"), Registration 
              No. 33-91276).

 10.12*       Statement of Work, dated January 31, 1995 from ESC to Divicom 
              Inc. (incorporated by reference to Exhibit 10.14 to the 
              Registration Statement on Form S-1 of ECC, Registration 
              No. 33-91276).

 10.13*       Launch Services Contract, dated as of June 2, 1995, by and 
              between EchoStar Space Corporation and 
              Lockheed-Khrunichev-Energia International, Inc. (incorporated 
              by reference to Exhibit 10.15 to the Registration Statement on 
              Form S-1 of ECC, Registration No. 33-91276).

 10.14*       EchoStar 1995 Stock Incentive Plan (incorporated by reference 
              to Exhibit 10.16 to the Registration Statement on Form S-1 of 
              ECC, Registration No. 33-91276).

 10.15(a)*    Eighth Amendment to Satellite Construction Contract, dated as 
              of February 1, 1994, between DirectSat Corporation and Martin 
              Marietta (incorporated by reference to Exhibit 10.17(a) to the 
              Quarterly Report on Form 10-Q of ECC for the quarter ended 
              June 30, 1996, Commission File No. 0-26176).

 10.15(b)*    Ninth Amendment to Satellite Construction Contract, dated as of 
              February 1, 1994, between DirectSat Corporation and Martin 
              Marietta (incorporated by reference to Exhibit 10.15 to the 
              Registration Statement of Form S-4 of ECC, Registration 
              No. 333-03584).

 10.15(c)*    Tenth Amendment to Satellite Construction Contract, dated as of 
              July 18, 1996, between DirectSat Corporation and Martin 
              Marietta (incorporated by reference to Exhibit 10.17(b) to the 
              Quarterly Report on Form 10-Q of ECC for the quarter ended 
              June 30, 1996, Commission File No. 0-26176).

 10.16*       Satellite Construction Contract, dated as of July 18, 1996, 
              between EDBS and Lockheed Martin Corporation (incorporated by 
              reference to Exhibit 10.18 to the Quarterly Report on Form 10-Q 
              of ECC for the quarter ended June 30, 1996, Commission File 
              No. 0-26176).

 10.17*       Confidential Amendment to Satellite Construction Contract 
              between DBSC and Martin Marietta, dated as of May 31, 1995 
              (incorporated by reference to Exhibit 10.14 to the Registration 
              Statement of Form S-4 of ECC, Registration No. 333-03584).

 10.18*       Right and License Agreement by and among HTS and Asia 
              Broadcasting and Communications Network, Ltd., dated December 
              19, 1996 (incorporated by reference to Exhibit 10.18 to the 
              Annual Report on Form 10-K of ECC for the year ended December 31, 
              1996, as amended, Commission file No. 0-26176).

 10.19*       Agreement between HTS, ESC and ExpressVu Inc., dated January 8, 
              1997, as amended (incorporated by reference to Exhibit 10.18 to 
              the Annual Report on Form 10-K of ECC for the year ended 
              December 31, 1996, as amended, Commission file No. 0-26176).

 10.20*       Amendment No. 9 to Satellite Construction Contract, effective 
              as of July 18, 1996, between Direct Satellite Broadcasting 
              Corporation, a Delaware corporation ("DBSC") and Martin 
              Marietta Corporation (incorporated by reference to Exhibit 10.1 
              to the Quarterly Report on Form 10-Q of ECC for the quarterly 
              period ended June 30, 1997, Commission File No. 0-26176).

 10.21*       Amendment No. 10 to Satellite Construction Contract, effective 
              as of May 31, 1996, between DBSC and Lockheed Martin 
              Corporation (incorporated by reference to Exhibit 10.2 to the 
              Quarterly Report on Form 10-Q of ECC for the quarterly period 
              ended June 30, 1997, Commission File No. 0-26176).

</TABLE>

                                       15

<PAGE>

<TABLE>
<S>           <C>

 10.22*       Contract for Launch Services, dated April 5, 1996, between 
              Lockheed Martin Commercial Launch Services, Inc. and EchoStar 
              Space Corporation (incorporated by reference to Exhibit 10.3 to 
              the Quarterly Report on Form 10-Q of ECC for the quarterly 
              period ended June 30, 1997, Commission File No. 0-26176).

 10.23*       OEM Manufacturing, Marketing and Licensing Agreement, dated as 
              of February 17, 1998, by and among HTS, ESC and Philips 
              Electronics North America Corporation (incorporated by 
              reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q 
              of ECC for the quarterly period ended March 31, 1998, 
              Commission File No. 0-26176).

 10.24*       Licensing Agreement, dated as of February 23, 1998, by and 
              among HTS, ESC and VTech Communications Ltd. (incorporated by 
              reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q 
              of ECC for quarterly period ended March 31, 1998, Commission 
              File No. 0-26176).

 10.25*       Agreement to form NagraStar LLC, dated as of June 23, 1998 by 
              and between Kudelski S.A., ECC and ESC (incorporated by 
              reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q 
              of ECC for quarterly period ended June 30, 1998, Commission 
              File No. 0-26176).

 10.26*       Purchase Agreement by and among American Sky Broadcasting, LLC, 
              The News Corporation Limited, MCI Telecommunications 
              Corporation and EchoStar Communications Corporation, dated 
              November 30, 1998. (incorporated by reference to Exhibit 10.1 
              to the Form 8-K filed by ECC on November 30, 1998, Commission 
              File No. 0-26176).

 10.27*       Form of Registration Rights Agreement to be entered into among  
              EchoStar Communications Corporation, MCI Telecommunications  
              Corporation, and a to-be-named wholly-owned subsidiary of MCI 
              Telecommunications Corporation, American Sky Broadcasting, LLC, 
              and a to-be-named wholly-owned subsidiary of The News 
              Corporation Limited (incorporated by reference to Exhibit 10.2 
              to the Current Report on Form 8-K of EchoStar, filed as of 
              December 1, 1998).

 10.28*       Voting Agreement dated November 30, 1998, among EchoStar 
              Communications Corporation, American Sky Broadcasting, LLC, The 
              News Corporation Limited and MCI Telecommunications Corporation 
              (incorporated by reference to Exhibit 10.3 to the Current 
              Report on Form 8-K of EchoStar, filed as of December 1, 1998).

 27+          Financial Data Schedule. 

</TABLE>

-------------------

*    Incorporated by reference.
**   Constitutes a management contract or compensatory plan or arrangement.
+    Filed herewith.

     (b)  Reports on Form 8-K

          No reports on Form 8-K were filed during the fourth quarter of 1998.


                                       16

<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, EchoStar has duly caused this report to be signed on 
its behalf by the undersigned, thereunto duly authorized.


                                       ECHOSTAR DBS CORPORATION

                                       By: /s/ STEVEN B. SCHAVER
                                          ---------------------------
                                          Steven B. Schaver
                                          Chief Financial Officer

Date:  March 29, 1999

     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of 
EchoStar and in the capacities and on the dates indicated:

Signature                    Title                              Date
---------                    -----                              ----

/s/ CHARLES W. ERGEN         President and Director             March 29, 1999
------------------------     (PRINCIPAL EXECUTIVE OFFICER)
Charles W. Ergen    


/s/ STEVEN B. SCHAVER        Chief Financial Officer            March 29, 1999
------------------------     (PRINCIPAL FINANCIAL OFFICER)
Steven B. Schaver         


/s/ JAMES DEFRANCO           Director                           March 29, 1999
------------------------
James DeFranco


/s/ DAVID K. MOSKOWITZ       Director                           March 29, 1999
------------------------
David K. Moskowitz



* By: /s/ DAVID K. MOSKOWITZ
     ------------------------
        David K. Moskowitz
        Attorney-in-Fact

                                       17
<PAGE>

           INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>

COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS:
   Report of Independent Public Accountants............................   F-2
   Combined and Consolidated Balance Sheets at December 31, 1997 
     and 1998..........................................................   F-3
   Combined and Consolidated Statements of Operations and Comprehensive 
     Loss for the years ended December 31, 1996, 1997 and 1998.........   F-4
   Combined and Consolidated Statements of Changes in Stockholder's 
     Equity for the years ended December 31, 1996, 1997 and 1998.......   F-5
   Combined and Consolidated Statements of Cash Flows for the years 
     ended December 31, 1996, 1997 and 1998............................   F-6
   Notes to Combined and Consolidated Financial Statements.............   F-7

</TABLE>

                                       F-1

<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To EchoStar DBS Corporation:

         We have audited the accompanying combined and consolidated balance 
sheets of EchoStar DBS Corporation (a Colorado corporation) and affiliates 
and subsidiaries, as described in Note 1, as of December 31, 1997 and 1998, 
and the related combined and consolidated statements of operations and 
comprehensive loss, changes in stockholder's equity and cash flows for each 
of the three years in the period ended December 31, 1998. These financial 
statements are the responsibility of the Companies' management. Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

         We conducted our audits in accordance with generally accepted 
auditing standards. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the financial statements 
are free of material misstatement. An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements. An audit also includes assessing the accounting principles used 
and significant estimates made by management, as well as evaluating the 
overall financial statement presentation. We believe that our audits provide 
a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present 
fairly, in all material respects, the combined and consolidated financial 
position of EchoStar DBS Corporation and affiliates and subsidiaries as of 
December 31, 1997 and 1998, and the combined and consolidated results of 
their operations and their cash flows for each of the three years in the 
period ended December 31, 1998, in conformity with generally accepted 
accounting principles.


                                       ARTHUR ANDERSEN LLP


Denver, Colorado,
March 2, 1999.

                                       F-2

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
                    COMBINED AND CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                         DECEMBER 31,
                                                                                  ----------------------------
                                                                                      1997             1998
                                                                                  -----------      -----------
<S>                                                                               <C>              <C>
ASSETS
Current Assets:
   Cash and cash equivalents.................................................     $    62,059      $    25,308
   Marketable investment securities..........................................           3,906            7,000
   Trade accounts receivable, net of allowance for 
      uncollectible accounts of $1,347 and $2,996, respectively..............          66,045          107,743
   Inventories...............................................................          22,993           76,708
   Other current assets......................................................          28,264           24,823
                                                                                  -----------      -----------
Total current assets.........................................................         183,267          241,582
Restricted Assets:
   Insurance receivable (Note 3).............................................               -          106,000
   Interest escrow...........................................................         112,284           69,129
   Satellite escrow and other restricted cash and marketable investment      
      securities.............................................................          75,478            8,528
                                                                                  -----------      -----------
Total restricted cash and marketable investment securities...................         187,762          183,657
Property and equipment, net..................................................         859,284          853,818
FCC authorizations, net......................................................          99,220          103,266
Advances to affiliates, net..................................................           2,021                -
Deferred tax assets..........................................................          64,409           60,638
Other noncurrent assets......................................................          35,811           27,212
                                                                                  -----------      -----------
     Total assets............................................................     $ 1,431,774      $ 1,470,173
                                                                                  -----------      -----------
                                                                                  -----------      -----------

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
   Trade accounts payable....................................................     $    69,036      $    90,562
   Deferred revenue..........................................................         122,215          132,857
   Accrued expenses..........................................................          97,090          176,158
   Advances from affiliates, net.............................................               -           54,805
   Current portion of long-term debt.........................................          17,885           22,679
                                                                                  -----------      -----------
Total current liabilities....................................................         306,226          477,061

Long-term obligations, net of current portion:
   1994 Notes................................................................         499,863          571,674
   1996 Notes................................................................         438,512          497,955
   1997 Notes................................................................         375,000          375,000
   Mortgages and other notes payable, net of current portion.................          51,846           43,450
   Notes payable to ECC, including accumulated interest......................          54,597           59,812
   Long-term deferred satellite services revenue and other 
     long-term liabilities...................................................          19,500           33,358
                                                                                  -----------      -----------
Total long-term obligations, net of current portion..........................       1,439,318        1,581,249
                                                                                  -----------      -----------
     Total liabilities.......................................................       1,745,544        2,058,310

Commitments and Contingencies (Note 8)

Stockholder's Equity (Deficit):
   Common Stock, $.01 par value, 3,000 shares authorized, issued and                        -                -
   outstanding...............................................................
   Additional paid-in capital................................................         125,164          145,164
   Accumulated other comprehensive loss......................................              (8)               -
   Accumulated deficit.......................................................        (438,926)        (733,301)
                                                                                  -----------      -----------
Total stockholder's equity (deficit).........................................        (313,770)        (588,137)
                                                                                  -----------      -----------
     Total liabilities and stockholder's equity (deficit)....................     $ 1,431,774       $1,470,173
                                                                                  -----------      -----------
                                                                                  -----------      -----------

</TABLE>

   See accompanying Notes to Combined and Consolidated Financial Statements.

                                       F-3

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
    COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                          --------------------------------------------
                                                             1996             1997            1998
                                                          -----------     -----------     -----------
<S>                                                      <C>              <C>             <C>
REVENUE:
   DISH Network:
     Subscription television services.................    $   49,650      $  298,883      $  669,310
     Other............................................         8,238          42,925          12,799
                                                          -----------     -----------     -----------
   Total DISH Network.................................        57,888         341,808         682,109
   DTH equipment sales and integration services.......        77,390          90,263         253,841
   Satellite services.................................         5,822          11,135          22,304
   C-band and other...................................        56,003          32,696          27,655
                                                          -----------     -----------     -----------
Total revenue.........................................       197,103         475,902         985,909

COSTS AND EXPENSES:
   DISH Network Operating Expenses:
     Subscriber-related expenses......................        22,840         143,529         298,443
     Customer service center and other................        12,996          35,078          72,482
     Satellite and transmission.......................         6,573          14,563          26,067
                                                          -----------     -----------     -----------
   Total DISH Network operating expenses..............        42,409         193,170         396,992
   Cost of sales - DTH equipment and integration              
      services.....................................           75,984          60,918         174,615
   Cost of sales - C-band and other...................        42,345          23,909          16,496
   Marketing:
     Subscriber promotion subsidies...................        35,239         148,502         283,694
     Advertising and other............................        17,929          34,843          47,986
                                                          -----------     -----------     -----------
   Total marketing expenses...........................        53,168         183,345         331,680
   General and administrative.........................        48,693          66,060          94,824
   Amortization of subscriber acquisition costs.......        16,073         121,428          18,819
   Depreciation and amortization......................        27,296          51,408          83,338
                                                          -----------     -----------     -----------
Total costs and expenses..............................       305,968         700,238       1,116,764
                                                          -----------     -----------     -----------

Operating loss........................................      (108,865)       (224,336)       (130,855)

Other Income (Expense):
   Interest income....................................        15,111          12,512          10,111
   Interest expense, net of amounts capitalized.......       (62,430)       (110,003)       (172,942)
   Other..............................................          (345)         (1,451)           (618)
                                                          -----------     -----------     -----------
Total other income (expense)..........................       (47,664)        (98,942)       (163,449)
                                                          -----------     -----------     -----------
Loss before income taxes..............................      (156,529)       (323,278)       (294,304)
Income tax benefit (provision), net...................        54,853            (146)            (71)
                                                          -----------     -----------     -----------
Net loss..............................................    $ (101,676)     $ (323,424)     $ (294,375)
                                                          -----------     -----------     -----------
                                                          -----------     -----------     -----------
Change in unrealized gain (loss) on available-for-sale         
   securities, net of tax ............................          (263)              4               8
                                                          -----------     -----------     -----------
Comprehensive loss....................................    $ (101,939)     $ (323,420)     $ (294,367)
                                                          -----------     -----------     -----------
                                                          -----------     -----------     -----------

</TABLE>

   See accompanying Notes to Combined and Consolidated Financial Statements.

                                       F-4

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
     COMBINED AND CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                 ACCUMULATED
                                                                                                 DEFICIT AND
                                                                                                 UNREALIZED
                                                COMMON STOCK                COMMON   ADDITIONAL   HOLDING
                                             ----------------   PREFERRED   STOCK     PAID-IN      GAINS
                                              SHARES   AMOUNT     STOCK    WARRANTS   CAPITAL     (LOSSES)      TOTAL
                                             --------  ------   ---------  --------  ---------   ----------   ---------
                                             (Note 1)
<S>                                           <C>      <C>      <C>        <C>        <C>       <C>          <C>
Balance, December 31, 1994.................   33,544     $336    $15,991   $26,133    $62,197   $   (849)    $103,808
   Issuance of Common Stock................        2        -          -         -          2          -            2
   8% Series A Cumulative Preferred Stock          
     dividends (at $0.38 per share)........        -        -        616         -          -       (616)           -
   Exercise of Common Stock Warrants.......    2,731       26          -   (25,419)    25,393          -            -
   Common Stock Warrants exchanged for ECC         
     Warrants..............................        -        -          -      (714)       714          -            -
   Launch bonuses funded by issuance of            
     ECC's Class A Common Stock............        -        -          -         -      1,192          -        1,192
   Unrealized holding gains on                     
     available-for-sale securities, net....        -        -          -         -          -        251          251
   Net loss................................        -        -          -         -          -    (12,361)     (12,361)
                                             -------   ------   --------  --------  ---------   --------     --------
Balance, December 31, 1995.................   36,277      362     16,607         -     89,498    (13,575)      92,892
   Issuance of Common Stock (Note 1).......        1        -          -         -          2          -            2
   Reorganization of entities under common   
     control (Note 1)......................  (36,275)    (362)   (16,607)        -     16,969          -            -
   Income tax benefit of deduction for             
     income tax purposes on exercise of
     Class A Common Stock options..........        -        -          -         -      2,372          -        2,372
   Unrealized holding losses on                    
     available-for-sale securities, net....        -        -          -         -          -       (263)        (263)
   Net loss................................        -        -          -         -          -   (101,676)    (101,676)
                                             -------   ------   --------  --------  ---------   --------     --------
Balance, December 31, 1996.................        3        -          -         -    108,841   (115,514)      (6,673)
   Purchase price "pushed-down" to DBSC by         
     ECC (Note 1)..........................        -        -          -         -     16,323          -       16,323
   Unrealized holding gains on                     
     available-for-sale securities, net....        -        -          -         -          -          4            4
   Net loss................................        -        -          -         -          -   (323,424)    (323,424)
                                             -------   ------   --------  --------  ---------   --------     --------
Balance, December 31, 1997.................        3        -          -         -    125,164   (438,934)    (313,770)
   Contribution of satellite asset.........        -        -          -         -     20,000          -       20,000
   Unrealized holding gains on                     
     available-for-sale securities, net ...        -        -          -         -          -          8            8
   Net loss................................        -        -          -         -          -   (294,375)    (294,375)
                                             -------   ------   --------  --------  ---------   --------     --------
Balance, December 31, 1998.................        3     $  -   $      -  $      -   $145,164  $(733,301)   $(588,137)
                                             -------   ------   --------  --------  ---------   --------     --------
                                             -------   ------   --------  --------  ---------   --------     --------

</TABLE>

   See accompanying Notes to Combined and Consolidated Financial Statements.

                                       F-5

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
               COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                           ----------------------------------------
                                                               1996            1997         1998
                                                           -----------      ----------   ----------
<S>                                                        <C>              <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..........................................         $ (101,676)      $(323,424)   $(294,375)
Adjustments to reconcile net loss to net cash flows
  from operating activities:
   Depreciation and amortization..................             27,296          51,408       83,338
   Amortization of subscriber acquisition costs...             16,073         121,428       18,819
   Interest on notes payable to ECC added to      
   principal......................................                  -           5,215        5,215
   Deferred income tax benefit....................            (50,515)           (361)           -
   Amortization of debt discount and deferred     
      financing costs.............................             61,695          83,221      125,724
   Change in reserve for excess and obsolete      
      inventory...................................              2,866          (1,823)       1,341
   Change in long-term deferred satellite services 
      revenue and other long-term liabilities.....              5,949          12,056       13,858  
   Other, net.....................................                536             403            -
   Changes in current assets and current liabilities:
     Trade accounts receivable, net...............             (4,368)        (52,562)     (41,698)
     Inventories..................................            (36,864)         51,597      (55,056)
     Subscriber acquisition costs.................            (84,202)        (72,118)           -
     Other current assets.........................             (3,118)         13,359      (11,611)
     Trade accounts payable.......................             22,165          27,808       21,526
     Deferred revenue.............................            103,511          18,120       10,642
     Accrued expenses.............................             17,816          58,124       68,328
                                                           ----------       ---------    ---------
Net cash flows from operating activities..........            (22,836)         (7,549)     (53,949)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities.....           (138,328)        (36,586)      (8,970)
Sales of marketable investment securities.........            119,730          51,513        5,868
Purchases of restricted marketable investment                 (21,100)         (1,495)           -
  securities......................................
Funds released from escrow and restricted cash and 
  marketable investment securities................            235,402         120,215      116,468
Offering proceeds and investment earnings placed             (193,972)       (227,561)      (6,343)
  in escrow.......................................
Repayments from (advances to) affiliates, net.....            (33,105)          9,976            -
Purchases of property and equipment...............           (214,614)       (221,750)    (153,513)
Expenditures for FCC authorizations...............            (55,420)              -            -
Other.............................................              6,445            (391)       3,150
                                                           ----------       ---------    ---------
Net cash flows from investing activities..........           (294,962)       (306,079)     (43,340)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock............                  2               -            -
Proceeds from (repayment of) note payable to ECC..             12,000         (12,000)           -
Net proceeds from issuance of 1996 Notes..........            336,916               -            -
Net proceeds from issuance of 1997 Notes..........                  -         362,500            -
Advances from affiliates..........................                  -               -       77,090
Repayments of mortgage indebtedness and notes     
  payable.........................................             (6,631)        (13,253)     (16,552)
                                                           ----------       ---------    ---------
Net cash flows from financing activities..........            342,287         337,247       60,538
                                                           ----------       ---------    ---------
Net increase (decrease) in cash and cash          
  equivalents.....................................             24,489          23,619      (36,751)
Cash and cash equivalents, beginning of year......             13,951          38,440       62,059
                                                           ----------       ---------    ---------
Cash and cash equivalents, end of year............         $   38,440       $  62,059    $  25,308
                                                           ----------       ---------    ---------
                                                           ----------       ---------    ---------

</TABLE>

   See accompanying Notes to Combined and Consolidated Financial Statements.

                                       F-6

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
             NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BUSINESS ACTIVITIES

BASIS OF PRESENTATION

         EchoStar DBS Corporation ("DBS Corp," or the "Company"), is a 
wholly-owned subsidiary of EchoStar Communications Corporation ("ECC" and 
together with its subsidiaries "EchoStar"), a publicly traded company on the 
Nasdaq National Market. During March 1999, EchoStar received approval from 
the Federal Communications Commission ("FCC") to reorganize certain of its 
direct and indirect wholly-owned subsidiaries in order to streamline its 
organization and operations. During the first quarter of 1999, EchoStar 
intends to place ownership of all of its direct broadcast satellites and 
related FCC licenses into EchoStar Satellite Corporation ("ESC"). DirectSat 
Corporation and Direct Broadcasting Satellite Corporation ("DBSC"), which 
currently own EchoStar II and EchoStar III, respectively, will both be merged 
into ESC. EchoStar also intends to merge EchoStar Space Corporation ("Space") 
into ESC. Dish, Ltd., and EchoStar Satellite Broadcasting Company ("ESBC") 
will be merged into the Company. EchoStar IV and the related FCC licenses, 
which are currently owned by DBS Corp, and those satellites and FCC licenses 
to be acquired in the 110 Acquisition (defined herein), also will be 
transferred to ESC. The accompanying financial statements retroactively 
reflect the consolidated historical results of DBS Corp and its subsidiaries 
combined with the historical results of Space and DBSC. Substantially all of 
EchoStar's operating activities are conducted by subsidiaries of DBS Corp. 
DBSC and Space's assets consist principally of certain satellite and FCC 
authorization assets. There are no significant operating activities conducted 
by either DBSC or Space. (See Organization and Legal Structure below).

         DBS Corp was formed under Colorado law in January 1996 for the 
initial purpose of participating in an FCC auction. On January 26, 1996, DBS 
Corp submitted the winning bid of $52.3 million for 24 direct broadcast 
satellite ("DBS") frequencies at the 148DEG. West Longitude ("WL") 
orbital location. Funds necessary to complete the purchase of the DBS 
frequencies and commence construction of the Company's fourth DBS satellite, 
EchoStar IV, were advanced to the Company by ECC. In June 1997, DBS Corp 
completed an offering (the "1997 Notes Offering") of 12 1/2% Senior Secured 
Notes due 2002 (the "1997 Notes"). The 1997 Notes were retired on January 25, 
1999 upon completion of the Tender Offers (as defined herein). Prior to 
consummation of the 1997 Notes Offering, ECC contributed all of the 
outstanding capital stock (the "Contribution") of ESBC to DBS Corp. As a 
result of the Contribution, ESBC became a wholly-owned subsidiary of DBS 
Corp. This transaction was accounted for as a reorganization of entities 
under common control in which ESBC is treated as the predecessor of DBS Corp.

         During 1994, EchoStar acquired approximately 40% of the outstanding 
common stock of Direct Broadcasting Satellite Corporation ("Old DBSC"). Old 
DBSC's principal assets included an FCC conditional satellite permit and 
specific orbital slot assignments for a total of 22 DBS frequencies. Through 
December 1996, EchoStar advanced Old DBSC a total of $46 million in the form 
of notes receivable to enable Old DBSC to make required payments under its 
satellite (EchoStar III) construction contract. As of December 31, 1996, 
these notes receivable totaled $49 million, including accrued interest of $3 
million. On January 8, 1997, EchoStar consummated the merger of Old DBSC with 
a wholly-owned subsidiary of EchoStar, DBSC, as defined above. EchoStar 
issued approximately 650,000 shares of its Class A common stock to acquire 
the remaining 60% of Old DBSC that it did not previously own. This 
transaction was accounted for as a purchase and the excess of the purchase 
price over the fair value of Old DBSC's tangible assets was allocated to Old 
DBSC's FCC authorizations (approximately $16 million). Upon consummation of 
the merger, Old DBSC ceased to exist.

                                       F-7

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

PRINCIPAL BUSINESS

The operations of EchoStar include three interrelated business units:

     -    THE DISH NETWORk - a DBS subscription television service in the United
          States. As of December 31, 1998, EchoStar had approximately 1.9
          million DISH Network subscribers.

     -    ECHOSTAR TECHNOLOGIEs CORPORATIOn ("ETC") - engaged in the design,
          distribution and sale of DBS set-top boxes, antennae and other digital
          equipment for the DISH Network ("EchoStar receiver systems"), and the
          design and distribution of similar equipment for direct-to-home
          ("DTH") projects of others internationally, together with the
          provision of uplink center design, construction oversight and other
          project integration services for international direct-to-home
          ventures.

     -    SATELLITE SERVICEs - engaged in the delivery of video, audio and data
          services to business television customers and other satellite users.
          These services may include satellite uplink services, satellite
          transponder space usage, billing, customer service and other services.

          Since 1994, EchoStar has deployed substantial resources to develop 
the "EchoStar DBS System." The EchoStar DBS System consists of EchoStar's 
FCC-allocated DBS spectrum, DBS satellites ("EchoStar I," "EchoStar II," 
"EchoStar III," and "EchoStar IV"), digital satellite receivers, digital 
broadcast operations center, customer service facilities, and other assets 
utilized in its operations. EchoStar's principal business strategy is to 
continue developing its subscription television service in the United States 
to provide consumers with a fully competitive alternative to cable television 
service.

AGREEMENT WITH NEWS CORPORATION LIMITED AND MCI TELECOMMUNICATIONS 
CORPORATION/WORLDCOM

         On November 30, 1998, EchoStar announced an agreement with MCI 
Telecommunications Corporation/WorldCom ("MCI"), The News Corporation Limited 
("News Corporation") and its American Sky Broadcasting, LLC subsidiary (the 
"110 Acquisition"). Pursuant to the 110 Acquisition, EchoStar would acquire 
or receive:

     -    the rights to 28 frequencies at the 110DEG. WL orbital location
          from which EchoStar could transmit programming to the entire
          continental United States;

     -    two DBS satellites constructed by Space Systems/Loral, delivered
          in-orbit and currently expected to be launched during 1999;

     -    a recently-constructed digital broadcast operations center located in
          Gilbert, Arizona;

     -    a worldwide license agreement to manufacture and distribute set-top
          boxes internationally using News Data System, Limited's
          encryption/decoding technology;

     -    a commitment by an affiliated entity of News Corporation to purchase
          from ETC a minimum of 500,000 set-top boxes; and o a three-year, no
          fee agreement for the DISH Network to rebroadcast FOX Broadcasting
          Company owned-and-operated local station signals to their respective
          markets.

         EchoStar will not incur any costs associated with the construction, 
launch or insurance (including launch insurance and one year of in-orbit 
insurance) of the two DBS satellites. EchoStar and MCI also agreed that MCI 
will have the non-exclusive right to bundle DISH Network service with MCI's 
telephony service offerings on mutually agreeable terms. In addition, 
EchoStar agreed to carry the FOX News Channel on the DISH Network. EchoStar 
received standard program launch support payments in exchange for carrying 
the programming.

         By combining the capacity of the two newly acquired satellites at 
the 110DEG. WL orbital slot and EchoStar's current satellites at the 
119DEG. WL orbital slot (subject to FCC approval), EchoStar expects that 
the DISH Network will have the capacity to provide more than 500 channels of 
programming, Internet and high-speed data services and high definition 
television nationwide to a subscriber's single 18-inch satellite dish, and 
would be positioned to 

                                       F-8

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


offer a one-dish solution for satellite-delivered local programming to major 
markets across the United States. EchoStar also expects to be able to serve 
Alaska, Hawaii, Puerto Rico and the United States territories in the 
Caribbean from the 110DEG. WL orbital slot.

         Beneficial interest in substantially all of the assets and rights to 
be acquired by EchoStar in the 110 Acquisition will be transferred to the 
Company promptly after closing.

TENDER OFFERS

         On December 23, 1998, EchoStar commenced cash tender offers ("Tender 
Offers") as part of a plan to refinance its indebtedness at more favorable 
interest rates and terms. EchoStar offered to purchase any and all of the 
following debt securities:

     -    the 12 7/8% Senior Secured Discount Notes due June 1, 2004 issued by
          Dish, Ltd. (the "1994 Notes");

     -    the 13 1/8% Senior Secured Discount Notes due 2004 issued by ESBC (the
          "1996 Notes"); and

     -    the 1997 Notes issued by the Company.

         EchoStar also announced that it had sent to all holders of its 
issued and outstanding 12 1/8% Series B Senior Redeemable Exchangeable 
Preferred Stock due 2004 (the "Series B Preferred Stock") a notice to 
exchange all of the outstanding shares of Series B Preferred Stock into 12 
1/8% Senior Preferred Exchange Notes due 2004 (the "Senior Exchange Notes") 
on the terms and conditions set forth in the certificate of designation 
relating to the Series B Preferred Stock. The Senior Exchange Notes were 
issued on January 4, 1999. Immediately following the exchange, EchoStar 
commenced an offer to purchase any and all outstanding Senior Exchange Notes.

         The Tender Offers for the first three issues of notes were 
consummated on January 25, 1999. The Tender Offers were funded with proceeds 
from the offering of the 9 1/4% Senior Notes due 2006 (the "Seven Year 
Notes") and the 9 3/8% Senior Notes due 2009 (the "Ten Year Notes," and 
together with the Seven Year Notes, the "Notes") described at Note 4, with 
holders of more than 99% of each issue of debt securities tendering their 
notes and consenting to certain amendments to the indentures governing the 
notes that eliminated substantially all of the restrictive covenants and 
amended certain other provisions. The Tender Offer for the Senior Exchange 
Notes expired on February 1, 1999 and was funded by the Company with proceeds 
from the issuance of the Notes. More than 99% of the outstanding Senior 
Exchange Notes were validly tendered.

                                       F-9

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

PRO FORMA FINANCIAL INFORMATION

         The following table sets forth: (i) certain historical balance sheet 
data as of December 31, 1998, (ii) a balance sheet as of December 31, 1998 as 
adjusted to give effect to the consummation of the Tender Offers and the 
concurrent issuance of the Notes, and (iii) a balance sheet as of December 
31, 1998 as further adjusted for the pro forma effects assuming consummation 
of the 110 Acquisition.

<TABLE>
<CAPTION>
                                                                            AS OF DECEMBER 31, 1998
                                                                  ---------------------------------------------
                                                                                                   AS ADJUSTED
                                                                      ACTUAL      AS ADJUSTED     AND PRO FORMA
                                                                  ------------    -----------     -------------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                         (UNAUDITED)
<S>                                                               <C>             <C>             <C>
Cash, cash equivalents, and marketable investment securities....  $    32,308     $   292,674     $   292,674
Restricted cash and marketable investment securities............       77,657               -               -
                                                                  -----------     -----------     -----------
   Total cash, cash equivalents and marketable investment             
   securities...................................................      109,965         292,674         292,674
                                                                  -----------     -----------     -----------
                                                                  -----------     -----------     -----------
Total assets                                                      $ 1,470,173     $ 1,656,971     $ 2,826,971
                                                                  -----------     -----------     -----------
                                                                  -----------     -----------     -----------
Long-term debt (net of current portion):

   Mortgages and notes payable..................................  $    43,450     $    43,450     $    43,450
   Notes payable to ECC, including accrued interest.............       59,812               -               -
   1994 Notes...................................................      571,674           1,390           1,390
   1996 Notes...................................................      497,955             950             950
   1997 Notes...................................................      375,000              15              15
   9 1/4% Senior Notes due 2006.................................            -         375,000         375,000
   9 3/8% Senior Notes due 2009.................................            -       1,625,000       1,625,000
                                                                  -----------     -----------      -----------
     Total long-term debt.......................................    1,547,891       2,045,805       2,045,805


Stockholder's Equity (Deficit):

   Common Stock, $.01 par value, 3,000 shares                       
     authorized, issued and outstanding.........................            -               -               -
   Additional paid-in capital...................................      145,164         345,164       1,515,164
   Accumulated deficit..........................................     (733,301)     (1,244,417)     (1,244,417)
                                                                  -----------     -----------     -----------
Total stockholder's equity (deficit)............................     (588,137)       (899,253)        270,747
                                                                  -----------     -----------     -----------
Total liabilities and stockholder's equity (deficit)............  $ 1,470,173     $ 1,656,971      $2,826,971
                                                                  -----------     -----------     -----------
                                                                  -----------     -----------     -----------

</TABLE>

         Restrictions on cash held in escrow under the terms of indentures 
were removed as a result of the Tender Offers. The restricted cash balances 
as of December 31, 1998 have been reclassified and included in the "as 
adjusted" amount of cash, cash equivalents and marketable investment 
securities. The restriction on the insurance receivable of $106 million (not 
shown) was also removed.

         The increase in as adjusted and pro forma total assets includes a 
net increase in cash available to the Company for working capital of 
approximately $186 million as a result of the Notes offering, plus $1.17 
billion of assets to be acquired by EchoStar pursuant to the 110 Acquisition 
and contributed to the Company.

         The increase in additional paid-in capital consists of $200 million 
in cash to be contributed to the Company by ECC and additional assets valued 
at $1.17 billion, to be acquired by EchoStar in the 110 Acquisition and 
contributed to the Company.

         The increase in accumulated deficit results from (a) a distribution 
of the offering proceeds to EchoStar of approximately $269 million to retire 
the Senior Exchange Notes, including related costs of that tender offer, (b) 
interest expense of approximately $13.6 million from December 31, 1998 
through January 25, 1999, the date of consummation of the Tender Offers on 
debt repurchased and paid, and (c) the estimated extraordinary loss upon the 

                                       F-10

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

early retirement of the 1994 Notes, the 1996 Notes and the 1997 Notes 
pursuant to the Tender Offers of approximately $229 million (approximately 
$203 million of tender premiums and consent fees and approximately $26 
million associated with the write-off of unamortized deferred financing costs 
and other transaction-related costs) that the Company will report in 1999.

ORGANIZATION AND LEGAL STRUCTURE

         Certain companies principally owned and controlled by Mr. Charles W. 
Ergen were reorganized in 1993 into Dish, Ltd. (together with its 
subsidiaries, "Dish, Ltd."). In April 1995, ECC was formed to complete an 
initial public offering of its Class A common stock. Concurrently, Mr. Ergen 
exchanged all of his then outstanding shares of Class B common stock and 8% 
Series A Cumulative Preferred Stock of Dish, Ltd. for like shares of ECC. In 
December 1995, ECC merged Dish, Ltd. with a wholly-owned subsidiary of ECC 
(the "Merger"). Substantially all of EchoStar's operations are conducted by 
subsidiaries of Dish, Ltd. The following table summarizes the organizational 
structure of EchoStar and its principal subsidiaries as of December 31, 1998:


<TABLE>
<CAPTION>
                                                                REFERRED TO
LEGAL ENTITY                                                     HEREIN AS            PARENT
----------------------------------------------------------      -----------      ---------------
<S>                                                             <C>              <C>
EchoStar Communications Corporation                             ECC              Publicly owned
EchoStar DBS Corporation                                        DBS Corp         ECC
EchoStar Space Corporation                                      Space            ECC
Direct Broadcasting Satellite Corporation                       DBSC             ECC
EchoStar Satellite Broadcasting Corporation                     ESBC             DBS Corp
Dish, Ltd.                                                      Dish, Ltd.       ESBC
EchoStar Satellite Corporation                                  ESC              Dish, Ltd.
Echosphere Corporation                                          Echosphere       Dish, Ltd.
EchoStar Technologies Corporation (formerly HTS, a Texas        
   Corporation)                                                 ETC              Dish, Ltd.
Houston Tracker Systems, Inc., a Colorado Corporation 
  formed in 1998                                                HTS              Dish, Ltd.
  
DirectSat Corporation                                           DirectSat        Dish, Ltd.
EchoStar International Corporation                              EIC              Dish, Ltd.

</TABLE>

SIGNIFICANT RISKS AND UNCERTAINTIES

         SUBSTANTIAL LEVERAGE. The Company is highly leveraged, which makes 
it vulnerable to changes in general economic conditions. At December 31, 
1998, on a pro forma basis after giving effect to consummation of the Tender 
Offers and the concurrent issuance of the Notes, the Company's outstanding 
long-term debt (including both the current and long-term portions) would have 
been approximately $2.07 billion. Beginning in 1999, the Company will have 
semi-annual cash debt service requirements of approximately $94 million 
related to the Notes. The Company's ability to meet its debt service 
obligations will depend on, among other factors, the successful execution of 
its business strategy, which is subject to uncertainties and contingencies 
beyond the Company's control.

         EXPECTED OPERATING LOSSES. Since 1996, the Company has reported 
significant operating and net losses. Improvements in the Company's future 
results of operations are largely dependent upon its ability to increase its 
customer base while maintaining its overall cost structure, controlling 
subscriber turnover and effectively managing its subscriber acquisition 
costs. No assurance can be given that the Company will be effective with 
regard to these matters. In addition, the Company incurs significant 
acquisition costs to obtain DISH Network subscribers. The high cost of 
obtaining new subscribers magnifies the negative effects of subscriber 
turnover.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION AND CONSOLIDATION

    The accompanying financial statements present the combination of DBS 
Corp, Space and DBSC, each direct wholly-owned subsidiaries of ECC. All 
significant intercompany transactions between DBS Corp, Space and DBSC 
(consisting primarily of capital advanced by DBS Corp to Space and DBSC) and 
between DBS Corp and its 

                                       F-11

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

subsidiaries have been eliminated. Advances to affiliates are recorded at 
cost and represent the net amount of funds advanced to, or received from, 
unconsolidated affiliates of DBS Corp.

         The Company accounts for investments in 50% or less owned entities 
using the equity method. At December 31, 1996, 1997 and 1998, these 
investments were not material to the Company's combined and consolidated 
financial statements.

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally 
accepted accounting principles requires management 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. Actual results could differ from those estimates.

FOREIGN CURRENCY TRANSACTION GAINS AND LOSSES

         The functional currency of the Company's foreign subsidiaries is the 
U.S. dollar because their sales and purchases are predominantly denominated 
in that currency. Transactions denominated in currencies other than U.S. 
dollars are recorded based on exchange rates at the time such transactions 
arise. Subsequent changes in exchange rates result in transaction gains and 
losses which are reflected in income as unrealized (based on period-end 
translation) or realized (upon settlement of the transaction). Net 
transaction gains (losses) during 1996, 1997 and 1998 were not material to 
the Company's results of operations.

CASH AND CASH EQUIVALENTS

         The Company considers all liquid investments purchased with an 
original maturity of 90 days or less to be cash equivalents. Cash equivalents 
as of December 31, 1997 and 1998 consist of money market funds, corporate 
notes and commercial paper; such balances are stated at cost which equates to 
market value.

                                       F-12

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

STATEMENTS OF CASH FLOWS DATA

         The following presents the Company's supplemental cash flow 
statement disclosure (in thousands):

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                          -------------------------------------
                                                                             1996          1997          1998
                                                                          --------      --------       --------
<S>                                                                       <C>           <C>            <C>
Cash paid for interest...............................................     $ 3,007       $  5,953       $57,706
Cash paid for income taxes...........................................         383            209            83
Capitalized interest.................................................      31,818         43,169        21,619
Satellite launch payment for EchoStar II applied to 
  EchoStar I launch..................................................      15,000              -             -
Satellite vendor financing...........................................      31,167         14,400        12,950
Other notes payable..................................................           -          5,322             -
Contribution of satellite asset......................................           -              -        20,000
The purchase price of Old DBSC was "pushed-down" by ECC 
  to the Company as follows in the related purchase accounting:
    EchoStar III satellite under construction........................           -         51,241             -
    FCC authorizations...............................................           -         16,243             -
    Notes payable to ECC, including accrued interest of $3,382.......           -        (49,382)            -
    Accounts payable and accrued expenses............................           -         (1,279)            -
    Other notes payable..............................................           -           (500)            -
    Additional paid-in capital.......................................           -        (16,323)            -

</TABLE>

MARKETABLE INVESTMENT SECURITIES AND RESTRICTED CASH AND MARKETABLE 
INVESTMENT SECURITIES

         As of December 31, 1997 and 1998, the Company has classified all 
marketable investment securities as available-for-sale. The fair market value 
of marketable investment securities approximates the carrying value and 
represents the quoted market prices at the balance sheet dates. Related 
unrealized gains and losses, if material, are reported as a separate 
component of stockholder's equity, net of related deferred income taxes, if 
applicable. The specific identification method is used to determine cost in 
computing realized gains and losses.

         Restricted cash and marketable investment securities held in escrow 
accounts, as reflected in the accompanying combined and consolidated balance 
sheets, include cash restricted as of December 1997 and 1998 by the indenture 
related to the 1997 Notes, plus investment earnings thereon. Restricted cash 
and marketable investment securities are invested in certain permitted debt 
and other marketable investment securities until disbursed for the express 
purposes identified in the applicable indenture. The major components of 
marketable investment securities and restricted cash and marketable 
investment securities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                RESTRICTED CASH AND MARKETABLE
                                          MARKETABLE INVESTMENT SECURITIES          INVESTMENT SECURITIES
                                                    DECEMBER 31,                         DECEMBER 31,
                                          ---------------------------------  -----------------------------------
                                               1997              1998              1997               1998
                                          ----------------------------------  ----------------------------------
<S>                                      <C>                  <C>             <C>                   <C>
Commercial paper.......................        $ 3,906        $        -          $ 128,734         $   8,424
Corporate notes........................              -             7,000             38,093            54,360
Government bonds.......................              -                 -             16,695            14,517
Certificates of deposit................              -                 -              2,245                 -
Accrued interest.......................              -                 -              1,995               356
                                          ----------------------------------  ----------------------------------
                                               $ 3,906           $ 7,000          $ 187,762          $ 77,657
                                          ----------------------------------  ----------------------------------
                                          ----------------------------------  ----------------------------------

</TABLE>

         Marketable investment securities and restricted cash and marketable 
investment securities include debt securities of $85 million with contractual 
maturities of one year or less. As of December 31, 1998 the Company did not 
hold any debt securities with contractual maturities between one and five 
years or with contractual maturities of more 

                                       F-13

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

than five years. Actual maturities may differ from contractual maturities as 
a result of the Company's ability to sell these securities prior to maturity.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         Fair values for the Company's 1994 Notes, 1996 Notes and 1997 Notes 
are based on quoted market prices. The fair values of the Company's mortgages 
and other notes payable are estimated using discounted cash flow analyses. 
The interest rates assumed in such discounted cash flow analyses reflect 
interest rates currently being offered for loans with similar terms to 
borrowers of similar credit quality. The following table summarizes the book 
and fair values of the Company's debt facilities at December 31, 1997 and 
1998 (in thousands):

<TABLE>
<CAPTION>
                                               DECEMBER 31, 1997         DECEMBER 31, 1998
                                            -----------------------   ------------------------
                                            BOOK VALUE   FAIR VALUE   BOOK VALUE    FAIR VALUE
                                           -----------   ----------   -----------   ----------
<S>                                        <C>           <C>          <C>           <C>
1994 Notes................................  $ 499,863    $ 570,960     $ 571,674     $ 636,480
1996 Notes................................    438,512      488,650       497,955       580,000
1997 Notes................................    375,000      406,875       375,000       431,250
Mortgages and other notes payable.........     69,731       69,127        66,129        61,975

</TABLE>

INVENTORIES

         Inventories are stated at the lower of cost or market value. Cost is 
determined using the first-in, first-out method. Proprietary products are 
manufactured by outside suppliers to the Company's specifications. 
Manufactured inventories include materials, labor and manufacturing overhead. 
Cost of other inventories includes parts, contract manufacturers' delivered 
price, assembly and testing labor, and related overhead, including handling 
and storage costs. Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                                -------------------------
                                                                    1997          1998
                                                                ---------       --------
<S>                                                             <C>             <C>
EchoStar receiver systems..................................     $   7,649       $ 45,025
DBS receiver components....................................        12,506         27,050
Consigned DBS receiver components..........................         3,122          6,073
Finished goods - analog DTH equipment......................         2,116          2,656
Spare parts and other......................................         1,440          1,085
Reserve for excess and obsolete inventory..................        (3,840)        (5,181)
                                                                ---------       --------
                                                                 $ 22,993       $ 76,708
                                                                ---------       --------
                                                                ---------       --------

</TABLE>

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Cost includes interest 
capitalized of $26 million, $32 million and $16 million during the years 
ended December 31, 1996, 1997 and 1998, respectively. The costs of satellites 
under construction are capitalized during the construction phase, assuming 
the eventual successful launch and in-orbit operation of the satellite. If a 
satellite were to fail during launch or while in-orbit, the resultant loss 
would be charged to expense in the period such loss was incurred. The amount 
of any such loss would be reduced to the extent of insurance proceeds 
received as a result of the launch or in-orbit failure. Depreciation is 
recorded on a straight-line basis for financial reporting purposes. Repair 
and maintenance costs are charged to expense when incurred. Renewals and 
betterments are capitalized.

         The Company reviews its long-lived assets and identifiable 
intangible assets for impairment whenever events or changes in circumstances 
indicate that the carrying amount of an asset may not be recoverable. For 
assets which are held and used in operations, the asset would be impaired if 
the book value of the asset exceeded the undiscounted future net cash flows 
related to the asset. For those assets which are to be disposed of, the 
assets 

                                       F-14

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

would be impaired to the extent the fair value does not exceed the book 
value. The Company considers relevant cash flow, estimated future operating 
results, trends and other available information including the fair value of 
frequency rights owned, in assessing whether the carrying value of assets are 
recoverable.

FCC AUTHORIZATIONS

         FCC authorizations are recorded at cost and amortized using the 
straight-line method over a period of 40 years. Such amortization commences 
at the time the related satellite becomes operational; capitalized costs are 
written off at the time efforts to provide services are abandoned. FCC 
authorizations include interest capitalized of $6 million, $11 million and $6 
million during the years ended December 31, 1996, 1997 and 1998, respectively.

REVENUE RECOGNITION

         Revenue from the provision of DISH Network subscription television 
services and satellite services is recognized as revenue in the period such 
services are provided. Revenue from sales of digital set-top boxes and 
related accessories is recognized upon shipment to customers. Revenue from 
the provision of integration services is recognized as revenue in the period 
the services are performed.

SUBSCRIBER PROMOTION SUBSIDIES AND SUBSCRIBER ACQUISITION COSTS

         In August 1996, the Company began selling its EchoStar receiver 
systems below its manufactured cost to consumers conditioned upon the 
consumer's one-year prepaid subscription to the DISH Network's America's Top 
50 CD programming package. From August 1996 through September 1997, the 
excess of the Company's aggregate costs (equipment, programming and other) 
over proceeds from equipment sales and prepaid programming was expensed 
("subscriber promotion subsidies") upon shipment of the equipment. Remaining 
costs were deferred ("subscriber acquisition costs") and amortized over the 
term of the prepaid subscription (normally one year). Effective October 1997, 
promotional programs changed and new subscribers were not required to prepay 
for a year of programming. Consequently, the Company began expensing 
subscriber acquisition costs as incurred. As of December 31, 1998, all 
previously deferred costs were fully amortized.

DEFERRED DEBT ISSUANCE COSTS AND DEBT DISCOUNT

         Costs of issuing the 1994 Notes, the 1996 Notes and the 1997 Notes 
were deferred and are being amortized to interest expense over the terms of 
the respective notes. The original issue discounts related to the 1994 Notes 
and the 1996 Notes are being accreted to interest expense so as to reflect a 
constant rate of interest on the accreted balance of the 1994 Notes and the 
1996 Notes.

DEFERRED REVENUE

         Deferred revenue principally consists of prepayments received from 
subscribers for DISH Network programming. Such amounts are recognized as 
revenue in the period the programming is provided to the subscriber.

                                       F-15

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

LONG-TERM DEFERRED SATELLITE SERVICES REVENUE

         Long-term deferred satellite services revenue consists of advance 
payments from certain content providers for carriage of their signal on the 
DISH Network. Such amounts are deferred and recognized as revenue on a 
straight-line basis over the related contract terms (up to ten years).

ACCRUED EXPENSES

         Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                         -----------------------------
                                                           1997                1998
                                                         --------           ---------
<S>                                                      <C>                <C>
Royalties and copyright fees......................       $ 21,573           $  49,400
Programming.......................................         20,018              35,472
Marketing.........................................          4,660              33,463
Interest..........................................         24,621              24,918
Other.............................................         26,218              32,905
                                                         --------           ---------
                                                         $ 97,090           $ 176,158
                                                         --------           ---------
                                                         --------           ---------

</TABLE>

ADVERTISING COSTS

         Advertising costs, exclusive of subscriber promotion subsidies, are 
expensed as incurred and totaled $18 million, $35 million and $48 million for 
the years ended December 31, 1996, 1997 and 1998, respectively.

COMPREHENSIVE LOSS

         In June 1997, the Financial Accounting Standards Board issued 
Financial Accounting Standard No. 130, "Reporting Comprehensive Income" ("FAS 
No. 130"), which establishes standards for reporting and display of 
comprehensive income and its components (revenues, expenses, gains and 
losses) in a full set of general-purpose financial statements. The Company 
adopted FAS No. 130 effective as of the first quarter of 1998. FAS No. 130 
establishes new rules for the reporting and display of comprehensive loss and 
its components, however it has no impact on the Company's net loss or 
stockholder's equity. The change in unrealized gain (loss) on 
available-for-sale securities is the only component of the Company's other 
comprehensive loss. Accumulated other comprehensive loss presented on the 
accompanying combined and consolidated balance sheets consists of the 
accumulated net unrealized loss on available-for-sale securities, net of 
deferred taxes.

NEW ACCOUNTING PRONOUNCEMENTS

         In March 1998, the American Institute of Certified Public 
Accountants issued Statement of Position 98-1, "Accounting for the Costs of 
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"), which 
provides guidance that requires capitalization of certain costs incurred 
during an internal-use software development project. SOP 98-1 is effective 
for fiscal years beginning after December 15, 1998. The Company does not 
expect that adoption of SOP 98-1 will materially affect its combined and 
consolidated financial statements.

RECLASSIFICATIONS

         Certain prior year balances in the combined and consolidated 
financial statements have been reclassified to conform with the 1998 
presentation.

3.   PROPERTY AND EQUIPMENT

         Property and equipment consist of the following (in thousands):

                                       F-16

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                        --------------------------
                                                          1997            1998
                                                        ---------    ------------
<S>                                                     <C>          <C>
EchoStar I.......................................       $ 201,607    $   201,607
EchoStar II......................................         228,694        228,694
EchoStar III.....................................               -        234,083
EchoStar IV......................................               -        105,005
Furniture, fixtures and equipment................          92,170        182,717
Buildings and improvements.......................          22,114         42,121
Tooling and other................................           4,336          5,551
Land.............................................           1,636          1,640
Vehicles.........................................           1,321          1,288
Construction in progress.........................         393,189         18,329
                                                        ---------    ------------
    Total property and equipment.................         945,067      1,021,035
Accumulated depreciation.........................         (85,783)      (167,217)
                                                        ---------    ------------
    Property and equipment, net..................       $ 859,284    $   853,818
                                                        ---------    ------------
                                                        ---------    ------------

</TABLE>

         EchoStar III, which was launched in October 1997, commenced 
commercial operation in January 1998. EchoStar IV, which was launched in May 
1998, commenced commercial operation in August 1998. As of December 31, 1997 
construction in progress primarily consisted of EchoStar III ($234 million) 
and EchoStar IV ($120 million).

ECHOSTAR IV IMPAIRMENT

         As previously announced, the south solar array on EchoStar IV did 
not properly deploy subsequent to the launch of EchoStar IV on May 8, 1998. 
This anomaly has resulted in a reduction of power available to operate the 
satellite. In addition, an unrelated anomaly discovered during the third 
quarter of 1998 resulted in the failure of six transponders. The satellite is 
equipped with a total of 44 transponders. Only 24 transponders are necessary 
to fully utilize the Company's 24 frequencies at 148DEG. WL, where the 
satellite is located.

         The Company is currently able to use a maximum of only 20 
transponders as a result of the solar array anomaly described above. The 
number of available transponders will decrease over time, but based on 
existing data, the Company expects that approximately 16 transponders will 
probably be available over the entire expected 12 year life of the satellite, 
absent significant additional transponder or other failures. In September 
1998, the Company filed a $219.3 million insurance claim for a total 
constructive loss (as defined in the launch insurance policy) related to 
EchoStar IV. However, if the Company were to receive $219.3 million for a 
total constructive loss on the satellite, the insurers would obtain the sole 
right to the benefits of salvage from EchoStar IV under the terms of the 
launch insurance policy. While the Company believes it has suffered a total 
constructive loss of EchoStar IV in accordance with that definition in the 
launch insurance policy, the Company presently intends to negotiate a 
settlement with the insurers that will compensate the Company for the reduced 
satellite transmission capacity and allow the Company to retain title to the 
asset.

         Space originally contracted for the launch of EchoStar IV. 
Accordingly, all costs associated with the launch of EchoStar IV were 
recognized by Space. Funds necessary to pay for the launch of EchoStar IV 
were advanced to Space by ECC ($20 million) and DBS Corp ($64 million). 
However, because DBS Corp is the named insured under the terms of the 
EchoStar IV launch insurance policy, it will be entitled to all proceeds from 
any insurance settlement. Consequently, in September 1998, Space transferred 
its cost-basis in EchoStar IV to DBS Corp and ECC in settlement of prior 
advances. ECC then made a $20 million capital contribution of its basis in 
EchoStar IV to DBS Corp. As a result of these transactions (and prior to the 
impairment provision described below), all costs associated with the 
construction, launch and insurance of EchoStar IV are reflected on the 
Company's balance sheet.

                                       F-17

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         During the third quarter of 1998, the Company recorded a $106 
million provision for loss in connection with the estimated reduced 
operational capacity of EchoStar IV. This loss provision represents the 
Company's present estimate of the asset impairment attributable to lost 
transmission capacity on EchoStar IV resulting from the solar array anomaly 
described above. The Company also recorded a $106 million gain attributable 
to an anticipated insurance claim receivable that it believes is probable of 
receipt. While there can be no assurance as to the amount of the final 
insurance settlement, the Company believes that it will receive insurance 
proceeds related to EchoStar IV that will be sufficient to at least fully 
offset its asset impairment attributable to the reduction in capacity 
sustained by EchoStar IV. While the Company believes it has sustained a total 
constructive loss, insurers have requested additional information and may 
contest the claim. To the extent that it appears probable that the Company 
will receive insurance proceeds in excess of the $106 million currently 
recorded and that no further provision for loss is necessary, a gain will be 
recognized for the incremental amount in the period that the amount of the 
final settlement can be reasonably estimated. Likewise, if the satellite 
insurers obtain the right to salvage from EchoStar IV by payment to the 
Company of the $219.3 million insured amount, the Company will record an 
additional loss for the remaining carrying value of EchoStar IV.

ECHOSTAR III ANOMALY

         During 1998, three transponders on EchoStar III malfunctioned, 
resulting in the failure of a total of six transponders on the satellite. 
While a maximum of 32 transponders can be operated at any time, the satellite 
was equipped with a total of 44 transponders to provide redundancy. As a 
result of this redundancy and because the Company is only licensed by the FCC 
to operate 11 transponders at 61.5DEG. WL, where the satellite is 
located, the transponder anomaly has not resulted in a loss of service to 
date. The satellite manufacturer, Lockheed Martin, has advised the Company 
that it believes it has identified the root cause of the failures, and that 
while further transponder failures are possible, Lockheed Martin does not 
believe it is likely that the operational capacity of EchoStar III will be 
reduced below 32 transponders. Lockheed Martin also believes it is unlikely 
that the Company's ability to operate at least the 11 licensed transponders 
on the satellite will be affected. The Company will continue to evaluate the 
performance of EchoStar III and may be required to modify its loss assessment 
as new events or circumstances develop.

         The time for filing a claim for a loss under the satellite insurance 
policy that covered EchoStar III at the time of the transponder failures has 
passed. While the insurance carriers were notified of the anomaly, as a 
result of the built-in redundancy on the satellite and Lockheed Martin's 
conclusions with respect to further failures, no claim for loss was filed. 
During the anomaly investigation, the Company obtained a $200 million 
in-orbit insurance policy on EchoStar III at standard industry rates, which 
was renewed through June 25, 1999. However, the policy contains a 
three-transponder deductible if the satellite is operating at 120 watts per 
transponder, or a six-transponder deductible if the satellite is operating at 
230 watts per transponder. As such, the policy would not cover transponder 
failures unless transponder capacity is reduced to less than 26 transponders 
in the 120 watt mode or 13 transponders in the 230 watt mode, during the 
coverage period. As a result of the deductible, the Company could potentially 
experience uninsured losses of capacity on EchoStar III. Although there can 
be no assurance, the Company expects that in-orbit insurance can be procured 
on more traditional terms in the future if no further failures occur in the 
interim. If further failures do occur, the Company may not be able to obtain 
additional insurance on EchoStar III on commercially reasonable terms. The 
Company does not maintain insurance for lost profit opportunity.

                                       F-18

<PAGE>


            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

4.       LONG-TERM DEBT

         As described in Note 1, except for residual aggregate non-tendered 
debt of approximately $2.4 million, the 1994 Notes, 1996 Notes and the 1997 
Notes that were outstanding at December 31, 1998 were retired in connection 
with closing of the Tender Offers and the concurrent sale of the Seven and 
Ten Year Notes. Additionally, substantially all of the restrictive covenants 
contained in each of the respective indentures were removed upon closing of 
the Tender Offers. A brief summary of the terms of the residual notes 
outstanding follows.

1994 NOTES

         In June 1994, Dish, Ltd. issued the 1994 Notes, which consisted of 
12 7/8% Senior Secured Discount Notes due June 1, 2004 and Common Stock 
Warrants (the "Warrants") (collectively, the "1994 Notes Offering"). The 1994 
Notes Offering resulted in net proceeds to Dish, Ltd. of $323 million. The 
1994 Notes bear interest at a rate of 12 7/8% computed on a semi-annual bond 
equivalent basis. Interest on the 1994 Notes will not be payable in cash 
prior to June 1, 1999, with the 1994 Notes accreting to a principal value at 
stated maturity of $1,000 per bond (an aggregate of approximately $1.5 
million for the bonds not tendered) by that date. Commencing in December 
1999, interest on the 1994 Notes will be payable in cash on December 1 and 
June 1 of each year. The remaining balance of 1994 Notes matures on June 1, 
2004.

1996 NOTES

         In March 1996, ESBC issued the 1996 Notes which consisted of 13 1/8% 
Senior Secured Discount Notes due 2004 (the "1996 Notes Offering"). The 1996 
Notes Offering resulted in net proceeds to ESBC of approximately $337 
million. The 1996 Notes bear interest at a rate of 13 1/8%, computed on a 
semi-annual bond equivalent basis. Interest on the 1996 Notes will not be 
payable in cash prior to March 15, 2000, with the 1996 Notes accreting to a 
principal amount at stated maturity of $1,000 per bond (an aggregate of 
approximately $1.1 million for the bonds not tendered) by that date. 
Commencing in September 2000, interest on the 1996 Notes will be payable in 
cash on September 15 and March 15 of each year. The 1996 Notes that remain 
outstanding following the Tender Offers mature on March 15, 2004.

1997 NOTES

         In June 1997, the Company issued the 1997 Notes which consisted of 
12 1/2% Senior Secured Notes due 2002 (the "1997 Notes Offering"). The 1997 
Notes Offering resulted in net proceeds to the Company of approximately $363 
million. Interest accrues on the 1997 Notes at a rate of 12 1/2% and is 
payable in cash semi-annually on January 1 and July 1 of each year, 
commencing January 1, 1998. Approximately $109 million of the net proceeds of 
the 1997 Notes Offering was placed in the Interest Escrow to fund the first 
five semi-annual interest payments (through January 1, 2000). Additionally, 
approximately $112 million of the net proceeds of the 1997 Notes Offering was 
placed in the Satellite Escrow to fund the construction, launch and insurance 
of EchoStar IV. The 1997 Notes that remain outstanding following the Tender 
Offers mature on July 1, 2002.

SEVEN AND TEN YEAR NOTES

         On January 25, 1999, the Company sold $375 million principal amount 
of 9 1/4% Senior Notes due 2006 (the Seven Year Notes) and $1.625 billion 
principal amount of 9 3/8% Senior Notes due 2009 (the Ten Year Notes). 
Interest accrues at annual rates of 9 1/4% and 9 3/8% on the Seven Year and 
Ten Year Notes, respectively. Interest on the Seven and Ten Year Notes is 
payable semi-annually in cash in arrears on February 1 and August 1 of each 
year, commencing August 1, 1999.

         Concurrently with the closing of the Notes offering, the Company 
used approximately $1.658 billion of net proceeds received from the sale of 
the Notes to complete the Tender Offers for its outstanding 1994 Notes, 1996 
Notes and 1997 Notes. In February 1999, ECC used approximately $268 million 
of net proceeds received from the sale of the Notes to complete the Tender 
Offers related to the Senior Exchange Notes issued on January 4, 1999, in 
exchange for all issued and outstanding 12 1/8% Series B Senior Redeemable 
Exchangeable Preferred Stock. Following expiration 

                                       F-19

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

of the Tender Offers, and aggregate of approximately $2.4 million of 1994 
Notes, 1996 Notes and 1997 Notes remain outstanding.

         The Notes are general senior unsecured obligations, which (i) rank 
PARI PASSU in right of payment to each other and to all existing and future 
senior unsecured obligations, (ii) rank senior to all existing and future 
junior obligations, and (iii) are effectively junior to secured obligations 
to the extent of the collateral securing such obligations, including any 
borrowings under future secured credit facilities. With the exception of 
certain de minimis domestic and foreign subsidiaries, the Notes are fully, 
unconditionally and jointly and severally guaranteed by all subsidiaries of 
the Company, (collectively, the "Notes Guarantors").

         Except under certain circumstances requiring prepayment premiums, 
and in other limited circumstances, the Seven and Ten Year Notes are not 
redeemable at the Company's option prior to February 1, 2003 and February 1, 
2004, respectively. Thereafter, the Seven Year Notes will be subject to 
redemption, at the option of the Company, in whole or in part, at redemption 
prices decreasing from 104.625% during the year commencing February 1, 2003 
to 100% on or after February 1, 2005, together with accrued and unpaid 
interest thereon to the redemption date. The Ten Year Notes will be subject 
to redemption, at the option of the Company, in whole or in part, at 
redemption prices decreasing from 104.688% during the year commencing 
February 1, 2004 to 100% on or after February 1, 2008, together with accrued 
and unpaid interest thereon to the redemption date.

         The indentures related to the Notes (the "Indentures") contain 
restrictive covenants that, among other things, impose limitations on the 
ability of the Company to: (i) incur additional indebtedness; (ii) apply the 
proceeds of certain asset sales; (iii) create, incur or assume liens; (iv) 
create dividend and other payment restrictions with respect to the Company's 
subsidiaries; (v) merge, consolidate or sell assets; and (vi) enter into 
transactions with affiliates. In addition, the Company may pay dividends on 
its equity securities only if: (1) no default shall have occurred or is 
continuing under the Indentures; and (2) after giving effect to such dividend 
and the incurrence of any indebtedness (the proceeds of which are used to 
finance the dividend), the Company's ratio of total indebtedness to cash flow 
(calculated in accordance with the Indentures) would not exceed 8.0 to 1.0. 
Moreover, the aggregate amount of such dividends generally may not exceed the 
sum of the difference of cumulative consolidated cash flow (calculated in 
accordance with the Indentures) minus 120% of consolidated interest expense 
of the Company (calculated in accordance with the Indentures), in each case 
from April 1, 1999 plus an amount equal to 100% of the aggregate net cash 
proceeds received by the Company and its subsidiaries from the issuance or 
sale of certain equity interests of the Company or EchoStar. In the event of 
a change of control, as defined in the Indentures, the Company will be 
required to make an offer to repurchase all of the Seven and Ten Year Notes 
at a purchase price equal to 101% of the aggregate principal amount thereof, 
together with accrued and unpaid interest thereon, to the date of repurchase.

                                       F-20

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

MORTGAGES AND OTHER NOTES PAYABLE

         Mortgages and other notes payable consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                 ---------------------------
                                                                                    1997            1998
                                                                                 ------------    -----------
<S>                                                                              <C>             <C>
8.25% note payable for satellite vendor financing for EchoStar I due in equal
  monthly installments of $722, including interest, through February 2001......    $ 24,073       $ 17,137
8.25% note payable for satellite vendor financing for EchoStar II due in equal       
  monthly installments of $562, including interest, through November 2001......      22,489         17,416
8.25% note payable for satellite vendor financing for EchoStar III due in equal 
  monthly installments of $294, including interest, through October 2002.......      13,812         12,183
8.25% note payable for satellite vendor financing for EchoStar IV due in equal 
  monthly installments of $264, including interest, through May 2003...........           -         12,950
Mortgages and other unsecured notes payable due in installments through April  
  2009 with interest rates ranging from 8% to 10%..............................       9,357          6,443
                                                                                 ----------      ---------
Total.......................................................................         69,731         66,129
Less current portion........................................................        (17,885)       (22,679)
                                                                                 ----------      ---------
Mortgages and other notes payable, net of current portion...................       $ 51,846       $ 43,450
                                                                                 ----------      ---------
                                                                                 ----------      ---------

</TABLE>

         During 1995 and 1996, ECC advanced the Company $46 million in the 
form of notes payable to enable the Company to make required payments under 
its EchoStar III construction contract. The notes payable bear interest at 
11.25%, which is being added to principle.

         Future maturities of the Company's outstanding long-term debt, after 
consummation of the Tender Offers and issuance of the Notes on January 25, 
1999, are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   MORTGAGES     
                                                                   AND OTHER
                                 SEVEN YEAR        TEN YEAR           NOTES
                                    NOTES            NOTES          PAYABLE         TOTAL
                                 ----------      ------------      ----------    ------------
<S>                              <C>             <C>              <C>            <C>
YEAR ENDING DECEMBER 31,
   1999......................    $       -       $          -       $ 22,679     $    22,679
   2000......................            -                  -         20,314          20,314
   2001......................            -                  -         13,560          13,560
   2002......................            -                  -          5,855           5,855
   2003......................            -                  -          1,675           1,675
   Thereafter................      375,000          1,625,000          4,400       2,004,400
                                 ----------      ------------      ----------    ------------
Total........................    $ 375,000        $ 1,625,000       $ 68,483     $ 2,068,483
                                 ----------      ------------      ----------    ------------
                                 ----------      ------------      ----------    ------------

</TABLE>

SATELLITE VENDOR FINANCING

         The purchase price for satellites is required to be paid in progress 
payments, some of which are non-contingent payments that are deferred until 
after the respective satellites are in orbit (satellite vendor financing). 
The Company utilized $36 million, $28 million, $14 million and $13 million of 
satellite vendor financing for EchoStar I, EchoStar II, EchoStar III and 
EchoStar IV, respectively. The satellite vendor financing with respect to 
EchoStar I and EchoStar II is secured by substantially all assets of Dish, 
Ltd. and its subsidiaries (subject to certain restrictions) and a corporate 
guarantee of ECC. The satellite vendor financings for both EchoStar III and 
EchoStar IV are secured by an ECC corporate guarantee.

                                       F-21

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

5.       INCOME TAXES

         As of December 31, 1998, the Company had net operating loss 
carryforwards ("NOLs") for Federal income tax purposes of approximately $448 
million. The NOLs expire beginning in the year 2011. The use of the NOLs is 
subject to statutory and regulatory limitations regarding changes in 
ownership. Financial Accounting Standard No. 109, "Accounting for Income 
Taxes," ("FAS No. 109") requires that the potential future tax benefit of 
NOLs be recorded as an asset. FAS No. 109 also requires that deferred tax 
assets and liabilities be recorded for the estimated future tax effects of 
temporary differences between the tax basis and book value of assets and 
liabilities. Deferred tax assets are offset by a valuation allowance if 
deemed necessary.

         In 1998, the Company increased its valuation allowance sufficient to 
fully offset net deferred tax assets arising during the year. Realization of 
net deferred tax assets is not assured and is principally dependent on 
generating future taxable income prior to expiration of the NOLs. Management 
believes existing net deferred tax assets in excess of the valuation 
allowance will, more likely than not, be realized. The Company continuously 
reviews the adequacy of its valuation allowance. Future decreases to the 
valuation allowance will be made only as changed circumstances indicate that 
it is more likely that not the additional benefits will be realized. Any 
future adjustments to the valuation allowance will be recognized as a 
separate component of the Company's provision for income taxes.

     The temporary differences which give rise to deferred tax assets and 
liabilities as of December 31, 1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                       --------------------------
                                                                          1997            1998
                                                                       ----------      ----------
<S>                                                                    <C>             <C>
Current deferred tax assets:
  Accrued royalties...............................................     $    6,506      $   15,971
  Inventory reserves and cost methods.............................          1,180           1,759
  Accrued expenses................................................          6,391           9,845
  Allowance for doubtful accounts.................................            517           1,098
  Reserve for warranty costs......................................            270             101
  Unrealized holding loss on marketable investment securities.....              4               -
                                                                       ----------      ----------
Total current deferred tax assets.................................         14,868          28,774

Current deferred tax liabilities:

  Subscriber acquisition costs and other..........................         (6,846)              -
                                                                       ----------      ----------
Total current deferred tax liabilities............................         (6,846)              -
                                                                       ----------      ----------
Gross current deferred tax assets.................................          8,022          28,774
Valuation allowance...............................................         (5,081)        (22,065)
                                                                       ----------      ----------
Net current deferred tax assets...................................          2,941           6,709

Noncurrent deferred tax assets:
  General business and foreign tax credits........................          2,224           2,072
  Net operating loss carryforwards................................        122,515         164,123
  Amortization  of  original  issue  discount  on 1994 Notes 
    and 1996 Notes................................................         60,831         105,095
  Other...........................................................          7,571          12,999
                                                                       ----------      ----------
Total noncurrent deferred tax assets..............................        193,141         284,289
Noncurrent deferred tax liabilities:
  Depreciation....................................................        (17,264)        (24,115)
  Other...........................................................           (230)           (144)
                                                                       ----------      ----------
Total noncurrent deferred tax liabilities.........................        (17,494)        (24,259)
                                                                       ----------      ----------
Gross deferred tax assets.........................................        175,647         260,030
                                                                       ----------      ----------
Valuation allowance...............................................       (111,238)       (199,392)
                                                                       ----------      ----------
Net noncurrent deferred tax assets................................         64,409          60,638
                                                                       ----------      ----------
Net deferred tax assets...........................................     $   67,350      $   67,347
                                                                       ----------      ----------
                                                                       ----------      ----------

</TABLE>

                                       F-22

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

         The components of the benefit (provision for) from income taxes are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                       ------------------------------------------
                                                         1996            1997             1998
                                                       ---------      ------------     ----------
<S>                                                    <C>            <C>              <C>
Current benefit (provision):
  Federal........................................      $  4,596       $      (361)     $       -
  State..........................................           (49)               (9)             6
  Foreign........................................          (209)             (137)           (77)
                                                       --------       -----------      ---------
                                                          4,338              (507)           (71)
Deferred benefit:
  Federal........................................        48,043           108,598         97,819
  State..........................................         2,472             8,082          7,319
  Increase in valuation allowance................             -          (116,319)      (105,138)
                                                       --------       -----------      ---------
                                                         50,515               361              -
                                                       --------       -----------      ---------
     Total benefit (provision)...................      $ 54,853       $      (146)     $     (71)
                                                       --------       -----------      ---------
                                                       --------       -----------      ---------

</TABLE>

         The actual tax benefit (provision) for 1996, 1997 and 1998 are 
reconciled to the amounts computed by applying the statutory Federal tax rate 
to income before taxes as follows:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                      ---------------------------
                                                       1996      1997       1998
                                                      -----     ------     ------
<S>                                                   <C>       <C>        <C>
Statutory rate.....................................   35.0%      35.0%      35.0%
State income taxes, net of Federal benefit.........    1.8        1.6        1.6
Research and development and foreign tax credits...     -         0.7         -
Non-deductible interest expense....................   (1.4)      (0.5)      (1.3)
Other..............................................   (0.4)      (0.8)       0.4
Increase in valuation allowance....................     -       (36.0)     (35.7)
                                                      -----     ------     ------
Total benefit from income taxes....................   35.0%         -%         -%
                                                      -----     ------     ------
                                                      -----     ------     ------

</TABLE>

6.       STOCK COMPENSATION PLANS

STOCK INCENTIVE PLAN

         In April 1994, EchoStar adopted a stock incentive plan (the "Stock 
Incentive Plan") to provide incentive to attract and retain officers, 
directors and key employees. EchoStar has reserved up to 10 million shares of 
its Class A common stock for granting awards under the Stock Incentive Plan. 
All stock options granted through December 31, 1998 have included exercise 
prices not less than the fair market value of EchoStar's Class A common stock 
at the date of grant, and vest, as determined by EchoStar's Board of 
Directors, generally at the rate of 20% per year.

         During 1998, EchoStar adopted the 1998 Incentive Plan which provided 
certain key employees a contingent incentive that would be paid, at the key 
employee's election, in stock options, a cash award or a combination thereof. 
The payment of these incentives was contingent upon the achievement of 
certain financial and other goals of EchoStar. EchoStar did not meet any of 
the goals during 1998. Accordingly, no cash incentives were paid, all stock 
options granted pursuant to the Incentive Plan were cancelled and no 
compensation expense was recognized related to 1998 Incentive Plan. The Board 
of Directors has approved a similar plan for 1999. Any payments under this 
plan are contingent upon the achievement of certain financial and other goals.

                                       F-23
<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

         A summary of EchoStar's  incentive  stock option  activity for the 
years ended  December 31, 1996,  1997 and 1998 is as follows:

<TABLE>
<CAPTION>
                                            1996                       1997                        1998
                                   -----------------------   ------------------------   -------------------------
                                                WEIGHTED-                 WEIGHTED-                   WEIGHTED-
                                                 AVERAGE                   AVERAGE                     AVERAGE
                                                 EXERCISE                  EXERCISE                    EXERCISE
                                    OPTIONS       PRICE       OPTIONS       PRICE        OPTIONS        PRICE
                                   ---------    ---------    ---------    ----------    ---------     -----------
<S>                                <C>          <C>          <C>          <C>           <C>           <C>
Options outstanding, beginning
  of year......................    1,117,133      $ 12.23    1,025,273       $14.27     1,524,567      $ 14.99
  
Granted........................      138,790        27.02      779,550        17.05       698,135        18.78
Repriced.......................            -           -       255,794        17.00             -         -
Exercised......................     (103,766)       10.24      (98,158)        9.64      (188,182)       12.52
Forfeited......................     (126,884)       13.27     (437,892)       19.46      (587,505)       17.08
                                   ---------    ---------    ---------    ----------    ---------     -----------
Options outstanding, end of year   1,025,273      $ 14.27    1,524,567       $14.99     1,447,015      $ 16.29
                                   ---------    ---------    ---------    ----------    ---------     -----------
                                   ---------    ---------    ---------    ----------    ---------     -----------
Exercisable at end of year.....      258,368      $ 11.31      347,009       $12.15       482,303      $ 13.83
                                   ---------    ---------    ---------    ----------    ---------     -----------
                                   ---------    ---------    ---------    ----------    ---------     -----------

</TABLE>

         Exercise prices for options outstanding as of December 31, 1998 are 
as follows:

<TABLE>
<CAPTION>
                                      OPTIONS OUTSTANDING                           OPTIONS EXERCISABLE
                      -------------------------------------------------     ---------------------------------
                         NUMBER          WEIGHTED-                             NUMBER            
                      OUTSTANDING         AVERAGE                           EXERCISABLE          
                         AS OF           REMAINING         WEIGHTED-           AS OF            WEIGHTED-
    RANGE OF          DECEMBER 31,      CONTRACTUAL         AVERAGE         DECEMBER 31,         AVERAGE
 EXERCISE PRICES          1998             LIFE          EXERCISE PRICE         1998          EXERCISE PRICE
-----------------     ------------      -----------      --------------     -------------     ---------------
<S>                   <C>               <C>              <C>                <C>               <C>
$ 9.333 - $11.870       306,379              3.72          $  9.61             212,536           $  9.57
 17.000 -  18.290       937,546              6.19            17.04             265,271             17.03
 22.000 -  26.688       203,090              7.28            22.88               4,496             26.69
-----------------     ------------      -----------      --------------     -------------     ---------------
$ 9.333 - $26.688     1,447,015              5.82          $ 16.29             482,303            $13.83
-----------------     ------------      -----------      --------------     -------------     ---------------
-----------------     ------------      -----------      --------------     -------------     ---------------

</TABLE>

         On July 1, 1997, the Board of Directors approved a repricing of 
substantially all outstanding options with an exercise price greater than 
$17.00 per share of Class A common stock to $17.00 per share. The Board of 
Directors would not typically consider reducing the exercise price of 
previously granted options. However, these options were repriced due to the 
occurrence of certain events beyond the reasonable control of the employees 
of EchoStar which significantly reduced the incentive these options were 
intended to create. The fair market value of the Class A common stock was 
$15.25 on the date of the repricing. Options to purchase approximately 
256,000 shares of Class A common stock were affected by this repricing.

ACCOUNTING FOR STOCK-BASED COMPENSATION

         EchoStar has elected to follow Accounting Principles Board Opinion 
No. 25, "Accounting for Stock Issued to Employees," ("APB 25") and related 
interpretations in accounting for its stock-based compensation plans. Under 
APB 25, EchoStar does not recognize compensation expense on the issuance of 
stock under its Stock Incentive Plan because the option terms are fixed and 
the exercise price equals the market price of the underlying stock on the 
date of grant. In October 1995, the Financial Accounting Standards Board 
issued Financial Accounting Standard No. 123, "Accounting and Disclosure of 
Stock-Based Compensation," ("FAS No. 123") which established an alternative 
method of expense recognition for stock-based compensation awards to 
employees based on fair values. EchoStar elected to not adopt FAS No. 123 for 
expense recognition purposes.

                                       F-24

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

         Pro forma information regarding net income and earnings per share is 
required by FAS No. 123 and has been determined as if EchoStar had accounted 
for its stock-based compensation plans using the fair value method prescribed 
by that statement. For purposes of pro forma disclosures, the estimated fair 
value of the options is amortized to expense over the options' vesting 
period. All options are initially assumed to vest. Compensation previously 
recognized is reversed to the extent applicable to forfeitures of unvested 
options. 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:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                 -------------------------------------
                                                    1996         1997          1998
                                                 ---------     ---------     ---------
<S>                                              <C>           <C>           <C>
Risk-free interest rate.....................         6.80%         6.09%         5.64%
Volatility factor...........................           62%           68%           67%
Dividend yield..............................         0.00%         0.00%         0.00%
Expected term of options....................      6 years       6 years       6 years
Weighted-average fair value of 
  options granted...........................     $  16.96      $  10.38      $  12.03

</TABLE>

         The Company's pro forma net loss was $103 million, $325 million and 
$297 million for the years ended December 31, 1996, 1997, and 1998, 
respectively.

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

7.   EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK PURCHASE PLAN

         During 1997, the Board of Directors and shareholders approved an 
employee stock purchase plan (the "ESPP"), effective beginning October 1, 
1997. Under the ESPP, EchoStar is authorized to issue a total of 100,000 
shares of Class A common stock. Substantially all full-time employees who 
have been employed by EchoStar for at least one calendar quarter are eligible 
to participate in the ESPP. Employee stock purchases are made through payroll 
deductions. Under the terms of the ESPP, employees may not deduct an amount 
which would permit such employee to purchase capital stock of EchoStar under 
all stock purchase plans of EchoStar at a rate which would exceed $25,000 in 
fair market value of capital stock in any one year. The purchase price of the 
stock is 85% of the closing price of the Class A common stock on the last 
business day of each calendar quarter in which such shares of Class A common 
stock are deemed sold to an employee under the ESPP. The ESPP shall terminate 
upon the first to occur of (i) October 1, 2007 or (ii) the date on which the 
ESPP is terminated by the Board of Directors. During 1997 and 1998, employees 
purchased 4,430 and 15,776 shares of Class A common stock through the ESPP, 
respectively.

401(k) EMPLOYEE SAVINGS PLAN

         EchoStar sponsors a 401(k) Employee Savings Plan (the "401(k) Plan") 
for eligible employees. Voluntary employee contributions to the 401(k) Plan 
may be matched 50% by EchoStar, subject to a maximum annual contribution by 
EchoStar of $1,000 per employee. EchoStar also may make an annual 
discretionary contribution to the plan with approval by EchoStar's Board of 
Directors, subject to the maximum deductible limit provided by the Internal 
Revenue Code of 1986, as amended. EchoStar's cash contributions to the 401(k) 
Plan totaled $226,000, $329,000 and $314,000 during 1996, 1997 and 1998, 
respectively. Additionally, EchoStar contributed 55,000 shares of its Class A 
common stock in 1996 (fair value of $935,000) to the 401(k) Plan as a 
discretionary contribution. During 1998, EchoStar contributed 80,000 shares 
of its Class A common stock (fair value of approximately $2 million) to the 
401(k) Plan related to its 1997 discretionary contribution. During 1999, 
EchoStar expects to contribute 65,000 shares of its Class A common stock 
(fair value of 

                                       F-25

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

approximately $3 million) to the 401(k) Plan related to its 1998 
discretionary contribution.

8.   OTHER COMMITMENTS AND CONTINGENCIES

PURCHASE COMMITMENTS

         As of December 31, 1998, the Company's purchase commitments totaled 
approximately $59 million. The majority of these commitments relate to 
EchoStar receiver systems and related components. All of the purchases 
related to these commitments are expected to be made during 1999. The Company 
expects to finance these purchases from existing unrestricted cash balances 
and future cash flows generated from operations, if any.

THE NEWS CORPORATION LIMITED

         During February 1997, EchoStar and News Corporation announced an 
agreement pursuant to which, among other things, News Corporation agreed to 
acquire approximately 50% of the outstanding capital stock of EchoStar. News 
Corporation also agreed to make available for use by EchoStar the DBS permit 
for 28 frequencies at the 110DEG. WL orbital slot purchased by MCI for 
more than $682 million following a 1996 FCC auction. During late April 1997, 
substantial disagreements arose between the parties regarding their 
obligations under this agreement. Those substantial disagreements led the 
parties to litigation. In mid-1997, EchoStar filed a complaint seeking 
specific performance of this agreement and damages, including lost profits. 
News Corporation filed an answer and counterclaims seeking unspecified 
damages, denying all of the material allegations and asserting numerous 
defenses. Discovery commenced in July 1997, and the case was set for trial 
commencing March 1999. In connection with the pending 110 Acquisition, the 
litigation between EchoStar and News Corporation will be stayed and will be 
dismissed with prejudice upon closing or if the transaction is terminated for 
reasons other than the breach by, or failure to fill a condition within the 
control of, News Corporation or MCI.

         In connection with the News Corporation litigation that arose in 
1997, EchoStar has a contingent fee arrangement with its lawyers, which 
provides for the lawyers to be paid a percentage of any net recovery obtained 
in its dispute with News Corporation. Although they have not been specific, 
the lawyers have asserted that they may be entitled to receive payments in 
excess of $80 million to $100 million under this fee arrangement in 
connection with the settlement of the dispute with News Corporation. EchoStar 
intends to vigorously contest the lawyers' interpretation of the fee 
arrangement, which it believes significantly overstates the magnitude of its 
liability thereunder. If the lawyers and EchoStar are unable to resolve this 
fee dispute under the fee arrangement, the fee dispute would be resolved 
under arbitration. It is too early to determine the outcome of negotiations 
or arbitration regarding this fee dispute.

WIC PREMIUM TELEVISION LTD.

         On July 28, 1998, a lawsuit was filed by WIC Premium Television Ltd. 
("WIC"), an Alberta corporation, in the Federal Court of Canada Trial 
Division, against certain defendants which include: General Instrument 
Corporation, HBO, Warner Communications, Inc., John Doe, Showtime, United 
States Satellite Broadcasting Corporation, ECC and two of ECC's wholly-owned 
subsidiaries, Dish, Ltd. and Echosphere. The lawsuit seeks, among other 
things, an interim and permanent injunction prohibiting the defendants from 
activating receivers in Canada and from infringing any copyrights held by 
WIC. It is too early to determine whether or when any other lawsuits and/or 
claims will be filed. It is also too early to make an assessment of the 
probable outcome of the litigation or to determine the extent of any 
potential liability or damages.

         On September 28, 1998, WIC filed another lawsuit in the Court of 
Queen's Bench of Alberta Judicial District of Edmonton against certain 
defendants, which also include ECC, Dish, and Echosphere. 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 

                                       F-26

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

seeks, among other things, interim and permanent injunction prohibiting the 
defendants from importing hardware into Canada and from activating receivers 
in Canada and damages in excess of the equivalent of US $175 million. It is 
too early to determine whether or when any other lawsuits and/or claims will 
be filed. It is also too early to make an assessment of the probable outcome 
of the litigation or to determine the extent of any potential liability or 
damages.

BROADCAST NETWORK PROGRAMMING

         Section 119 of the Satellite Home Viewer Act authorizes EchoStar to 
substitute satellite-delivered network signals its subscribers, but only if 
those subscribers qualify as "unserved households", defined in the Satellite 
Home Viewer Act, those that, among other things, "cannot receive, through the 
use of a conventional outdoor rooftop receiving antenna, an over-the-air 
signal of Grade B intensity (as defined by the FCC) of a primary network 
station affiliated with that network." Historically, EchoStar obtained 
distant broadcast network signals for distribution to its subscribers through 
PrimeTime 24, Joint Venture ("PrimeTime 24"). PrimeTime 24 also distributes 
network signals to certain of EchoStar's competitors in the satellite 
industry.

         The national networks and local affiliate stations have recently 
challenged PrimeTime 24's methods of selling network programming (national 
and local) to consumers based upon infringement of copyright. The United 
States District Court for the Southern District of Florida has entered 
nationwide preliminary and permanent injunctions preventing PrimeTime 24 from 
selling its programming to consumers unless the programming was sold 
according to certain stipulations in the injunction. The preliminary 
injunction took effect on February 28, 1999, and the permanent injunction is 
set to take effect on April 30, 1999. The injunctions cover "distributors" as 
well. The plaintiff in the Florida litigation informed EchoStar that it 
considered EchoStar a "distributor" for purposes of that injunction. A 
federal district court in North Carolina has also issued an injunction 
against PrimeTime 24 prohibiting certain distant signal retransmissions to 
homes delineated by a contour in the Raleigh area. Other copyright litigation 
against PrimeTime 24 is pending.

         EchoStar ceased delivering PrimeTime 24 programming in July 1998, 
and began uplinking and distributing network signals directly. EchoStar has 
also implemented Satellite Home Viewer Act Section 119 compliance procedures 
which will materially restrict the market for the sale of network signals by 
EchoStar. CBS and other broadcast networks have informed EchoStar that they 
believe EchoStar's method of providing distant network programming violates 
the SHVA and hence infringes their copyright.

         On October 19, 1998, EchoStar filed a declaratory judgment action in 
the United States District Court for the District of Colorado against the 
four major networks. In the future, EchoStar may attempt to certify a class 
including the networks as well as any and all owned and operated stations and 
any independent affiliates. EchoStar has asked the court to enter a judgment 
declaring that its method of providing distant network programming does not 
violate the Satellite Home Viewer Act and hence does not infringe the 
networks' copyrights.

         On November 5, 1998, several broadcast parties, acting on prior 
threats filed a complaint alleging, among other things, copyright 
infringement against EchoStar in federal district court in Miami. The 
plaintiffs in that action have also requested the issuance of a preliminary 
injunction against EchoStar. The networks also filed a counter claim 
containing similar allegations against us in the Colorado litigation.

         On February 24, 1999, CBS, NBC, Fox, and ABC filed with the court a 
"Motion for Temporary Restraining Order, Preliminary Injunction, and Contempt 
Finding" against DIRECTV, Inc. ("DIRECTV") in response to an announcement by 
DIRECTV that it was discontinuing retransmission of the programming of the 
four networks received from PrimeTime 24 and would instead distribute its own 
package of network affiliates to its existing subscribers. On February 25, 
1999, the court granted CBS and Fox a temporary restraining order requiring 
DIRECTV and its agents and those who act in active concert or participation 
with DIRECTV, not to deliver CBS or Fox programming to subscribers who do not 
live in "unserved households." For purposes of determining whether a 
subscriber is "unserved," the court referred to a modified version of the 
Longley-Rice signal propagation model. The modifications in some respects 
reflect an order adopted by the FCC on February 2, 1999. On March 12, 1999, 
DIRECTV and the four major broadcast networks and their affiliates announced 
that they have reached a settlement of 

                                       F-27

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

that dispute. Under the terms of the settlement, DIRECTV, stations and 
networks have agreed on a timeframe to disconnect distant broadcast network 
signals from subscribers predicted to be ineligible based on a modified 
version of the Longley-Rice signal propagation model. Subscribers predicted 
to be ineligible who obtain consent from the affected affiliate stations to 
receive their signals via satellite will not lose receipt of their distant 
network signals. EchoStar is not sure what effect this development will have 
on its business.

         On March 24, 1999, we have a hearing scheduled in a Denver court on 
similar matters with similar parties. If we were to lose that hearing, it is 
likely that the broadcasters would move forward on their lawsuit filed in 
Miami and would seek similar remedies against us, including a temporary 
restraining order requiring us to stop delivering network signals to 
subscribers who do not live in "unserved households." Depending upon the 
terms, a restraining order could result in us having to terminate delivery of 
network signals to a material portion of our subscriber base, which could 
result in decreases in subscriber activations and subscription television 
services revenue and an increase in subscriber turnover.

         EchoStar is subject to various other legal proceedings and claims 
which arise in the ordinary course of its business. In the opinion of 
management, the amount of ultimate liability with respect to those actions 
will not materially affect the financial position or results of operations of 
EchoStar.

METEOROID EVENTS

         In November 1998 certain meteoroid events occurred as the earth's 
orbit passed through the particulate trail of Comet 55P (Tempel-Tuttle). 
While there can be no assurance, the Company believes that its DBS satellites 
did not incur any significant damage as a result of these events. Similar 
meteoroid events are expected to occur again in November 1999. These 
meteoroid events continue to pose a potential threat to all in-orbit 
geosynchronous satellites, including the Company's DBS satellites. While the 
probability that the Company's spacecraft will be damaged by space debris is 
very small, that probability will increase by several orders of magnitude 
during the November 1999 meteoroid events. The Company is presently 
evaluating the potential effects that the November 1999 meteoroid events may 
have on its DBS satellites. At this time, the Company has not finally 
determined the impact, if any, these meteoroid events may have on its DBS 
satellites.

9.       SUMMARY FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS

         With the exception of certain de minimis domestic and foreign 
subsidiaries (collectively, the "Non-Guarantors"), the Seven and Ten Year 
Notes are fully, unconditionally and jointly and severally guaranteed by all 
subsidiaries of the Company.

                                       F-28

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

         The combined assets, stockholders' equity, net loss and operating 
cash flows of the Non-Guarantors represent less than 1% of the combined and 
consolidated assets, stockholder's equity, net loss and operating cash flows 
of the Company, including the non-guarantors during both 1997 and 1998. 
Summarized combined and consolidated financial information for the Company 
and the subsidiary guarantors is as follows (in thousands):

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                   -----------------------------------------
                                                      1996            1997          1998
                                                   ----------     -----------    -----------
<S>                                                <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
   Revenue...................................      $  196,988     $  475,877     $   985,909
   Expenses..................................         305,705        700,104       1,116,733
                                                   ----------     ----------     -----------
   Operating loss............................        (108,717)      (224,227)       (130,824)
   Other income (expense)....................         (47,640)       (98,941)       (163,406)
                                                   ----------     ----------     -----------
   Net loss before taxes.....................        (156,357)      (323,168)       (294,230)
   Income tax benefit (provision), net.......          54,849           (146)            (72)
                                                   ----------     ----------     -----------
   Net loss..................................      $ (101,508)    $ (323,314)    $  (294,302)
                                                   ----------     ----------     -----------
                                                   ----------     ----------     -----------

</TABLE>

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                  ---------------------------
                                                                       1997         1998
                                                                  -----------    -----------
<S>                                                               <C>            <C>
BALANCE SHEET DATA:
   Current assets..............................................   $   183,215    $   241,464
   Property and equipment, net.................................       859,279        853,818
   Other noncurrent assets.....................................       388,934        374,421
                                                                  -----------    -----------
   Total assets................................................   $ 1,431,428    $ 1,469,703
                                                                  -----------    -----------
                                                                  -----------    -----------

   Current liabilities.........................................   $   305,656    $   476,296
   Long-term liabilities.......................................     1,439,318      1,581,249
   Stockholder's equity (deficit)..............................      (313,546)      (587,842)
                                                                  -----------    -----------
   Total liabilities and stockholder's equity (deficit)........   $ 1,431,428    $ 1,469,703
                                                                  -----------    -----------
                                                                  -----------    -----------

</TABLE>

10.  SEGMENT REPORTING

         The Company adopted Financial Accounting Standard No. 131, 
"Disclosures About Segments of an Enterprise and Related Information" ("FAS 
No. 131") effective as of the year ended December 31, 1998. FAS No. 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 and for related disclosures 
about products and services, geographic areas, and major customers.

         FAS No. 131 requires companies to use the "management approach" to 
reporting segment information, which focuses on the financial information 
that a company's chief decision maker uses to make operating decisions and to 
assess the company's performance. EchoStar's management reviews information 
for the Company to the extent necessary for debt compliance purposes. 
However, operational decisions are based on EchoStar's consolidated financial 
statements. Accordingly, in the following table EchoStar's consolidated 
segment information has been reconciled to amounts presented in the 
accompanying financial statements of the Company. "Other EchoStar Activity" 
includes the operations of EchoStar conducted through subsidiaries other than 
the Company. These operations consist primarily of direct equipment sales to 
subscribers, consumer products financing activities and niche programming 
revenue.

                                       F-29

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

BUSINESS UNIT DESCRIPTIONS

         The operations of EchoStar include three interrelated business units:

         -  THE DISH NETWORK - a DBS subscription television service in the 
            United States.

         -  ETC - the design, distribution and sale of EchoStar receiver
            systems for the DISH Network as well as for direct-to-home
            projects of other internationally, together with the provision
            of uplink center design, construction oversight and other
            project integration services for international direct-to-home
            ventures.

         -  SATELLITE SERVICEs - engaged in the delivery of video, audio and
            data services to business television customers and other
            satellite users. These services my include satellite uplink
            services, satellite transponder space usage, billing, customer
            service and other services.

         The accounting policies for the above business units are the same as 
those described in the summary of significant accounting policies for the 
combined and consolidated entity. Both EchoStar and the Company account for 
intersegment sales and transfers at cost. All other revenue and expenses from 
segments below the quantitative thresholds are attributable to sales of 
C-band equipment and other corporate administrative functions. Only those 
assets and measures of profit and loss that are included in the measure of 
assets and profit and loss used by EchoStar's chief operating decision maker 
are reported.

FINANCIAL DATA BY BUSINESS UNIT

<TABLE>
<CAPTION>
                                                                                                                    DBS CORP,
                                                                                      ECHOSTAR       OTHER         AFFILIATES
                                      DISH                  SATELLITE ELIMINATIONS  CONSOLIDATED    ECHOSTAR           AND
                                     NETWORK        ETC     SERVICES   AND OTHER       TOTAL        ACTIVITY      SUBSIDIARIES
                                    ---------    ---------  --------  ------------  ------------    ---------     ------------
<S>                                 <C>          <C>        <C>       <C>           <C>             <C>           <C>
YEAR ENDED DECEMBER 31, 1996
  Revenue......................     $ 142,913    $  18,930   $ 2,542   $  34,516     $   198,901     $  (1,798)    $  197,103
  Depreciation and amortization         2,356        1,143         -      39,915          43,414           (45)        43,369
  Total expenses...............       161,404       26,007     1,724     119,111         308,246        (2,278)       305,968
  EBITDA.......................       (16,135)      (7,685)      818     (42,929)        (65,931)          435        (65,496)
  Interest income..............         1,894          730         -      13,006          15,630          (519)        15,111
  Interest expense.............         2,015            3         -      59,469          61,487           943         62,430
  Income tax benefit, net......        34,117        3,708         -      16,868          54,693           160         54,853
  Net income (loss)............         3,541       (6,187)      818     (99,158)       (100,986)         (690)      (101,676)

YEAR ENDED DECEMBER 31, 1997
  Revenue......................     $ 378,377    $  82,609   $ 3,458   $  12,974     $   477,418     $  (1,516)    $  475,902
  Depreciation and amortization       158,992        1,659         -      12,625         173,276          (440)       172,836
  Total expenses...............       569,998       73,081       329      58,281         701,689        (1,451)       700,238
  EBITDA.......................       (32,629)      11,186     3,129     (32,681)        (50,995)         (505)       (51,500)
  Interest income..............        10,114          180         -       6,957          17,251        (4,739)        12,512
  Interest expense.............        27,503            -         -      76,689         104,192         5,811        110,003
  Income tax provision, net....            (7)         (32)        -        (107)           (146)            -           (146)
  Net income (loss)............      (231,223)       4,378     2,889     (88,869)       (312,825)      (10,599)      (323,424)

YEAR ENDED DECEMBER 31, 1998
  Revenue......................     $ 733,382    $ 251,958   $23,442  $  (26,116)    $    982,666    $   3,243     $  985,909
  Depreciation and amortization        85,107        2,097        26      15,406          102,636         (479)       102,157
  Total expenses...............       871,269      193,852     3,495      36,941        1,105,557       11,207      1,116,764
  EBITDA.......................       (52,781)      60,202    19,973     (47,649)         (20,255)      (8,443)       (28,698)
  Interest income..............         9,280            -         2      21,004           30,286      (20,175)        10,111
  Interest expense.............        49,042          282         -     118,205          167,529        5,413        172,942
  Income tax benefit                       
    (provision), net...........            17          (11)        -         (50)             (44)         (27)           (71)
  Net loss.....................      (199,356)      30,333    18,409    (110,268)        (260,882)     (33,493)      (294,375)


</TABLE>

                                       F-30

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

<TABLE>
<CAPTION>
                                                                       OTHER               
GEOGRAPHIC INFORMATION                 UNITED STATES    EUROPE      INTERNATIONAL      TOTAL
                                       -------------   --------     -------------    ---------
<S>                                    <C>             <C>          <C>              <C>
1996
Total revenue*.....................    $  159,611      $ 26,984     $ 10,508         $ 197,103
Long-lived assets..................       656,697         1,103          233           658,033

1997
Total revenue*.....................    $  446,461      $ 20,592     $   8,849        $ 475,902
Long-lived assets..................       957,166         1,217           121          958,504

1998
Total revenue*.....................    $  967,746      $ 18,163     $       -        $ 985,909
Long-lived assets..................       955,586         1,498             -          957,084

</TABLE>

*  Revenues are attributed to geographic regions based upon the location from
   which the sale originated.

TRANSACTIONS WITH MAJOR CUSTOMERS

     During 1998, export sales to two customers together totaled $210 million 
and accounted for approximately 21% of the Company's total revenue. Revenues 
for these customers are included within the ETC business unit. Complete or 
partial loss of one or both of these customers would have a material adverse 
effect on the Company's results of operations. 

11.  VALUATION AND QUALIFYING ACCOUNTS

     The Company's valuation and qualifying accounts as of December 31, 1996, 
1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                               BALANCE AT     CHARGED TO         
                                              BEGINNING OF    COSTS AND                   BALANCE AT
                                                  YEAR         EXPENSES    DEDUCTIONS     END OF YEAR
                                             -------------  ------------   ----------     -----------
<S>                                          <C>            <C>            <C>            <C>
YEAR ENDED DECEMBER 31, 1996:
  Assets:
    Allowance for doubtful accounts.......     $ 1,106       $  2,340       $ (1,952)      $ 1,494
    Loan loss reserve.....................          78            157            (94)          141
    Reserve for inventory.................       2,797          4,304         (1,438)        5,663
  Liabilities:
    Reserve for warranty costs and other..       1,105           (342)             -           763

YEAR ENDED DECEMBER 31, 1997:
  Assets:
    Allowance for doubtful accounts.......     $ 1,494       $  4,343       $ (4,490)      $ 1,347
    Loan loss reserve.....................         141              7            (87)           61
    Reserve for inventory.................       5,663          1,650         (3,473)        3,840
  Liabilities:
    Reserve for warranty costs and other..         763              -            (53)          710

YEAR ENDED DECEMBER 31, 1998:
  Assets:
    Allowance for doubtful accounts.......     $ 1,347       $ 10,692       $ (9,043)      $ 2,996
    Loan loss reserve.....................          61             31            (92)            -
    Reserve for inventory.................       3,840          1,744           (403)        5,181
  Liabilities:
    Reserve for warranty costs and other..         710              -           (435)          275

</TABLE>

12.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The Company's quarterly results of operations are summarized as follows 
(in thousands):

                                       F-31

<PAGE>

            ECHOSTAR DBS CORPORATION AND AFFILIATES AND SUBSIDIARIES
         (A COMBINATION OF CERTAIN WHOLLY-OWNED SUBSIDIARIES OF ECHOSTAR
               COMMUNICATIONS CORPORATION, AS DEFINED IN NOTE 1)
       NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                    ----------------------------------------------------------
                                     MARCH 31        JUNE 30      SEPTEMBER 30     DECEMBER 31
                                    ----------     ----------     ------------     -----------
<S>                                 <C>            <C>            <C>              <C>
Year Ended December 31, 1997:
    Total revenue...............    $  68,967      $  97,831       $ 129,662        $  179,442
    Operating loss..............      (43,328)       (43,503)        (91,202)          (46,303)
    Net loss....................      (63,303)       (66,067)       (119,567)          (74,487)

Year Ended December 31, 1998:
    Total revenue...............    $ 214,024      $ 246,165       $ 236,755        $  288,965
    Operating loss..............      (21,682)       (17,106)        (17,206)          (74,861)
    Net loss....................      (57,261)       (53,122)        (60,577)         (123,415)

</TABLE>

13.  SUBSEQUENT EVENTS

PRIMESTAR

         On February 26, 1999, EchoStar announced that it had sent a letter 
to the Board of Directors of PrimeStar expressing its desire and willingness 
to make an offer to purchase PrimeStar's high-powered DBS assets. These 
assets consist of two high-powered DBS satellites, Tempo I and Tempo II, and 
11 of the 32 DBS frequencies capable of coverage of the entire continental 
United States, located at the 119DEG. WL orbital position. EchoStar's 
letter stated that it was ready, willing and able to make an offer to pay 
$600 million of total consideration (including assumed liabilities) for these 
assets on terms, other than price, substantially the same as those contained 
in an agreement among PrimeStar, Hughes Electronics Corporation, and certain 
other persons dated January 22, 1999. The deadline for a response to this 
letter has subsequently expired. Finalization of a future offer would be 
conditioned on the ability of PrimeStar to enter into and perform its 
obligations under a definitive agreement with EchoStar without breaching any 
contract to which PrimeStar or any of its affiliates is a party or by which 
they are otherwise bound.

                                       F-32