Hughes, Nearly Oversubscribed, Has Longer Wait for Relief

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TOULOUSE, France — EchoStar Corp. on May 7 said its EchoStar 19/Jupiter 2 Ka-band broadband satellite, designed to relieve demand pressure on EchoStar’s Hughes consumer satellite broadband service, would not be launched until late 2016.

In a conference call with investors, EchoStar Chief Executive Michael T. Dugan referred only vaguely to the cause of the delay from early 2016, saying there were issues related to both the satellite’s construction, by Space Systems/Loral of Palo Alto, California, and the availability of its launch vehicle, the European Ariane 5.

Dugan said EchoStar 19/Jupiter 2 is “a high-capacity satellite, a generational change” compared to the EchoStar 17/Jupiter 1 satellite in orbit, also built by Space Systems/Loral. “There is a lot of disturbance” in the satellite’s development, he said, adding that while it may still be ready for launch by June 2016, prudence requires forecasting a launch later in the year.

A delay of a few months in a satellite’s launch is a common event. But in EchoStar’s case, the delay could be a problem for the company’s Hughes division, which has said EchoStar 17/Jupiter 1’s most-popular beams are filling up. While Hughes is trying to stimulate demand in rural America, whose beams are less used, company officials have said continued growth of the business will await the launch of the new spacecraft.

For the three months ending March 31, Hughes reported a 3.3 percent increase in subscribers, to 998,000. The addition of new subscribers to Hughes’s high-end Gen4 service more than offset the loss of subscribers in the company’s legacy consumer broadband service.

Hughes President Pradman P. Kaul declined to forecast subscriber take up for the rest of the year in detail, but warned investors that growth will slow and perhaps stop altogether for the rest of the year as the company manages an asset that is running out of capacity until the new spacecraft is in service.

“Strong growth will resume” once EchoStar 19/Jupter 2 is launched, Kaul said.

In a May 7 filing with the U.S. Securities and Exchange Commission (SEC), EchoStar said it had made payments totaling $365.8 million for EchoStar 19/Jupiter 2 as of March 31. The payments were mainly to manufacturer Space Systems/Loral and launch-service provider Arianespace of Evry, France.

Providing satellite broadband service and equipment to homes and small businesses in the United States and Canada is Hughes’s biggest business. The company also provides satellite broadband to enterprise customers worldwide.

Hughes has purchased the Ka-band payload aboard Paris-based Eutelsat’s Eutelsat 65 West B, scheduled for launch in the first half of 2016. Hughes will use the Ka-band to debut in Brazil a service similar to its U.S. consumer broadband business. As of March 31, the company had made $30.6 million in payments for this satellite.

For the three months ending March 31, Hughes reported revenue of $325.3 million, up 3.3 percent from the same period a year ago. EBITDA, or earings before interest, taxes, depreciation and amortization, was up 11 percent compared to last year and was 28 percent of revenue.

EchoStar is also planning to launch the EchoStar 23 satellite into the 45 degrees west slot over Brazil that the company had won at auction but has been unable to commercialize for direct-to-home television for lack of a Brazilian partner. EchoStar is proceeding with construction of the satellite, with a planned launch in late 2016.

The company is preparing a major new business in Europe, using an S-band license from the European Union that was secured by another company that was sold to EchoStar when its owners lost faith in the business model.

EchoStar is using a large S-band satellite that it purchased from a bankrupt U.S. company to meet its European Union license requirements. Exactly how EchoStar plans to develop a hybrid satellite-terrestrial mobile broadband business in Europe remains unclear.

Inmarsat of London has won a similar license and is preparing an aeronautical broadband service to start in 2016-2017.

EchoStar’s Dublin-based Solaris Mobile has since changed its name to EchoStar Mobile Ltd. Its satellite, the former TerreStar-2 renamed EchoStar 21, is scheduled for launch in the first half of 2016.

Anders N. Johnson, president of EchoStar Satellite Services, avoided saying how many European Union licenses EchoStar has procured. In addition to the European Union license, EchoStar and Inmarsat must secure satellite landing rights in each of the 28 European Union nations.

They must also secure licenses, in each nation, for the ground infrastructure needed to provide a signal when users are not in line-of-sight view of the satellite.

Johnson said EchoStar has some licenses, is working on others and is also discussing with the European Union’s executive commission on possible license-harmonization procedures.