WASHINGTON — EchoStar is not raising a new competitor by investing in and building technology for OneWeb’s low-Earth orbit constellation, a company executive said Nov. 10.
Pradman Kaul, president of Echostar’s Hughes Network Systems division, defended the company’s business relationship with OneWeb during a conference call with investors, saying that OneWeb’s goal of bringing connectivity to everyone doesn’t conflict with Hughes broadband business in the United States and elsewhere.
“When you look at our networking strategy, we plan to use the high-throughput GEO satellites to address markets where there is a relatively high density of subs, and we’ll use OneWeb to serve the more remote areas where we don’t have the density of the sales,” Kaul said. “And since we are helping design the system, we expect that the network design takes that into account.”
Hughes made an equity investment in OneWeb in 2015 alongside Intelsat, Coca-Cola and several other companies, agreeing to build gateways and terminals for OneWeb’s ground segment. Production of OneWeb gateways began this month, according to a Nov. 10 filing with the U.S. Securities and Exchange Commission, with completed units shipping in mid-2018.
OneWeb more than doubled the size of its Hughes contract Nov. 7, signing a new $190 million agreement for gateways capable of tracking multiple satellites and performing handoffs of traffic from one satellite to the next as they rise and set over the horizon. Hughes now has more than $300 million in OneWeb business.
The first launch of OneWeb satellites is now six months away in May 2018. Those 10 satellites, each with a mass of 150 kilograms, will start the build out of a constellation of 900 that goes live in 2019.
Hughes fields three satellites today — SpaceWay-3, EchoStar-17/Jupiter-1 and EchoStar-19/Jupiter-2 — and has leased capacity on satellites from Eutelsat and Telesat. In August EchoStar purchased EchoStar-24/Jupiter-3, a 500Gbps satellite capable of serving customers with 100 Mbps services once launched in 2021. Including the recently launched EchoStar-21 and EchoStar-105/SES-11, EchoStar’s total fleet numbers 20 satellites — owned and leased — in geostationary orbit.
Kaul declined to give specifics on how Hughes and OneWeb plan to target specific business sectors. OneWeb’s partnership with global fleet operator Intelsat covers a wide swath of verticals, including government communications, cellular backhaul, aviation, maritime and land vehicles, and some corporate networks.
Subscriber numbers
Hughes added 53,000 net subscribers during the third quarter of 2017 as the company puts new customers on EchoStar-19/Jupiter-2, which started operations in March. Prior to Jupiter-2 starting service, Hughes had little room to add new subscribers because nearly all of the capacity on Jupiter-1 was already in use. Total subscribers stood at 1.14 million as of Sept. 30, an increase of 96,000 since the end of last year.
Kaul said Hughes is supporting disaster relief in Puerto Rico and the U.S. Virgin Islands with SpaceWay-3 and Jupiter-2, providing 25 Mbps download speeds and 3 Mbps upload speeds through its Gen 5 service. Hughes installed “dozens of systems” for the Federal Emergency Management Agency, the U.S. Interior Department and others, and has more units going into service.
“We have established local warehousing and logistics support to move quickly and efficiently to meet demand,” he said. That demand accounts for some increase in business, but not much, he said.
Lost spectrum rights
EchoStar in its SEC filing said that Brazilian regulatory authority Anatel rejected the company’s request for an extension on the rights to Ka- and S-band frequencies awarded in 2012, and furthermore may penalize EchoStar for not using the spectrum.
Anders Johnson, president of EchoStar Satellite Service, said the loss of those bands was “unfortunate,” but “peripheral to our core interests.” Those core interests were for a Ku-band satellite broadcast license also from Anatel, which was validated by EchoStar-23’s entrance into service earlier this year.
M&A interests
EchoStar has access to $3.28 billion in cash, cash equivalents and current marketable investment securities, for which it has not publicly shared a plan. Company president and CEO Michael Dugan hinted during the call that the pace of change in the satellite industry will likely trigger some consolidation, and that EchoStar is ready to be an active player on the merger and acquisition scene.
“The satellite industry continues to go through a transformation driven by innovative technology and service offerings. We believe that consolidation is desirable and inevitable, and we believe that we will be a key participant in these transactions. We continue to explore M&A opportunities while we continue our organic growth,” he said.
EchoStar reported a net income from continuing operations of $35.9 million on revenues of $481.2 million for the quarter. The operator’s EBITDA, or earnings before interest, taxes, depreciation and amortization, was $219.9 million.
