EchoStar Shrugs Off HughesNet’s Modest Subscriber Growth

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PARIS — EchoStar Corp.’s Hughes division reported Feb. 20 a modest increase in subscribers to its U.S. satellite broadband service in 2012, but company officials said they remain confident that the new EchoStar 17/Jupiter high-throughput satellite is being well-received by the market.

Englewood, Colo.-based EchoStar, which purchased broadband satellite hardware and services provider Hughes in June 2011 for $2 billion, said its attempts to enter the satellite-television markets in Brazil and India appear bogged down by multiple factors.

In a filing with the U.S. Securities and Exchange Commission (SEC) and a conference call with analysts Feb. 20, EchoStar said its HughesNet consumer broadband service had 659,000 subscribers as of Dec. 31.

That is a 5.3 percent increase from a year ago, but up 7 percent from Sept. 30, which followed a monthslong dip in subscriber count due in part to Hughes’ decision to be stricter about removing nonpaying customers from its books.

“There’s still room for improvement,” EchoStar Chief Executive Michael T. Dugan said during the call, referring to the current HughesNet subscriber count.

EchoStar 17/Jupiter, which like competitor ViaSat Corp.’s ViaSat-1 is an all-Ka-band satellite capable of generating more than 100 gigabits per second of throughput, entered service in October, giving the company just three months to test the market’s reaction before 2012’s financial accounts closed.

Carlsbad, Calif.-based ViaSat, whose ViaSat-1 has been in service longer than EchoStar 17/Jupiter, reported a 9 percent increase in subscribers during the last three months of 2012, ending at 466,700.

HughesNet also uses the Spaceway 3 Ka-band satellite to offer new higher-speed packages to U.S. consumers who are not in the coverage area of EchoStar 17/Jupiter. The company leases bandwidth from other satellite operators to round out its U.S. consumer broadband offering.

In its SEC filing, EchoStar said that its current satellite capacity is enough to provide for the expected growth in the U.S. satellite broadband business, at least for now.

The broadband service is being provided directly by HughesNet for retail customers, and on a wholesale basis through various partners including dishNET, which is owned by U.S. satellite television provider Dish Network.

Dish Network and EchoStar are both majority-owned by Charlie Ergen and his family, but Dish Network nonetheless acts as a wholesaler for ViaSat’s Exede satellite broadband service, which is Hughes’ direct competitor.

EchoStar officials during the call said it mattered little whether customers arrived directly through retail sales or indirectly through wholesale partners. The former generate more monthly revenue for EchoStar/Hughes, but also more per-subscriber acquisition costs.

“Our objective is to fill the satellite as quickly as we can,” Dugan said.

EchoStar/Hughes has secured an agreement with satellite-television broadcaster DirecTV Group of Los Angeles, which despite being a direct Dish Network competitor has agreed to sell the Hughes broadband service. Pradman P. Kaul, Hughes’ chief executive, said the DirecTV partnership is expected to take effect “in the next few months.”

With Hughes’ broadband capacity now in house, EchoStar is weighing a combined satellite-television and broadband offering in Brazil. The company paid $80 million in September 2011 for rights to Brazil’s 45 degrees west orbital slot.

But despite having the orbital rights secured for more than a year and sufficient satellite capacity in orbit to start a business, EchoStar has not yet begun a business in Brazil.

“We are continuing to discuss with potential partners in Brazil to provide a DTH service,” Dugan said, referring to a direct-to-home satellite business. “The process is taking much longer than we would have liked. We continue to believe that Brazil presents a significant opportunity in the satellite-TV and broadband market.”

Hughes has long harbored ambitions to break into India’s satellite market, whose direct-broadcast television providers have complained of a lack of satellite bandwidth — in part because of India’s restrictions on the use of non-Indian satellites.

Kaul said Hughes is “first in line” in India among non-Indian applications to provide satellite capacity, and that India’s satellite telecommunications policy allows foreign ownership of spacecraft providing services in India.

The company is maintaining its applications with the Indian government “but we have not been able to break through the logjam yet.”

Other satellite operators have succeeded in selling bandwidth in India, but only through the Indian Space Research Organisation (ISRO), and on commercial terms set by ISRO. ISRO is also the builder of India’s domestic telecommunications satellites.