SES and EchoStar To Finance News Satellite for Mexico Slot

THE HAGUE
,
NETHERLANDS
— Satellite-fleet operators SES of Luxembourg and EchoStar Corp. of the
United States
have reached agreement on co-financing a large direct-broadcast television satellite to be placed in a Mexican orbital slot that both companies have been cultivating for more than three years.

The agreement, announced Nov. 26, follows the creation of a satellite-television joint venture between Englewood, Colo.-based EchoStar and MVS Comunicaciones, a Mexican telecommunications company, to launch the Dish Mexico satellite-television service. MVS already operates a pay-TV service called MASTV, which the company says has 570,000 subscribers in 11 Mexican cities.

MVS and EchoStar said in a Nov. 25 announcement that their joint satellite-television service “is expected to launch initially in the cities of
Puebla
and
Leon
and will be available across
Mexico
in the next few months.”

SES and EchoStar initially agreed in 2004 to join forces to augment the satellite capacity available to Dish Network using a Mexican orbital slot at 77 degrees west. EchoStar and Dish were split this year into separate companies, both publicly traded and majority-owned by Charlie Ergen.

A company, QuetzSat, S.R.L. de C.V., was created to bid at auction for the Mexican orbital position and in late 2004 won rights to develop the slot after paying 153 million Mexican pesos, or about $14 million at exchange rates of the time. The auction included a guarantee that the Mexican government would have free access to a certain amount of the future satellite’s capacity.

QuetzSat
is a joint venture between SES, which owns 49 percent of the company, and GrupoMedcom of
Mexico
.

With the approach of a regulatory deadline requiring that the 77-degree orbital slot be filled by July 2005, EchoStar moved its aging and damaged EchoStar 4 spacecraft into the position.

The satellite has remained there since, with little or no function aside from occupying the position. It remains unclear how much capacity it has available for satellite-television channels, and how much longer it can remain operational.

In June, EchoStar asked the U.S. Federal Communications Commission (FCC) for approval to move two more satellites to the Mexican position. The two satellites – EchoStar 2 and EchoStar 8 – would replace EchoStar 4, the company said.

EchoStar
2, launched in September 1996, had been expected to operate until 2011. But Dish Network told the U.S. Securities and Exchange Commission in July that the satellite had experienced “a substantial failure that appears to have rendered the satellite a total loss.” EchoStar 8, launched in August 2002, is designed to operate until 2017 and was originally located at 110 degrees west. EchoStar spokesman Marc Lumpkin said Nov. 26 that EchoStar 8 had arrived at the Mexican slot, and that the company was awaiting regulatory authority to begin operations.

In its FCC filing, EchoStar said the QuetzSat-1 satellite will be launched in 2011.

SES spokesman Yves Feltes said Nov. 26 that no QuetzSat-1 satellite construction contract had been signed. Industry officials had speculated that SES already had contracted with Space Systems/Loral of
Palo Alto
,
Calif.
, for the spacecraft. Loral had announced the signing of a contract with a major satellite-fleet operator this fall but has refused to name the customer.

Lumpkin said Nov. 25 that the QuetzSat-1 satellite procurement is SES’s job, not EchoStar’s.

QuetzSat
must provide a portion of the capacity at the Mexican slot to the Mexican government, but otherwise is free to beam programming for its sister company, Dish Network, to the
United States
from the 77-degree position.

EchoStar
already has excess satellite capacity over the
United States
, even after accounting for Dish Network’s growing high-definition programming lineup, which requires more satellite capacity per channel than standard-definition programs.

Despite this, EchoStar has agreed to lease 32 Ku-band transponders from SES on QuetzSat-1 for a 10-year period, and also agreed to make upfront payments on the satellite in addition to the monthly payments once the spacecraft is in service, EchoStar said in a Nov. 26 filing to the U.S. Securities and Exchange Commission. Dish Network has agreed to lease 28 Ku-band transponders on QuetzSat-1 from EchoStar, to be paid in monthly installments.

EchoStar
said in its SEC filing that Dish Mexico, the new subsidiary that will sell satellite capacity to broadcasters, has agreed to lease the remaining eight transponders on QuetzSat-1.

In their Nov. 25 announcement, EchoStar and MVS said their satellite-television service would feature 25 Spanish and English language channels for 139 Mexican pesos ($10.18) per month including tax.