PARIS
— Satellite fleet operator AsiaSat of Hong Kong and EchoStar Corp., a provider of direct-to-home satellite gear and satellite services, have agreed to create a joint-venture company to provide satellite television to
Taiwan
and perhaps its surrounding areas, the two companies announced June 2.
Each partner will contribute $17.5 million in cash and $18 million in in-kind contributions to the joint venture, whose formal creation is pending each company’s due-diligence review of the other, and the joint venture’s receipt of a license from
Hong Kong
authorities as a nondomestic pay-television service provider.
AsiaSat
will be providing the as-yet-unnamed joint venture with capacity on the AsiaSat 4 satellite at 122 degrees east in addition to half the cash the joint venture will be given at its outset.
Englewood, Colo.-based EchoStar will be providing EchoStar-built subscriber set-top boxes in addition to cash. It will also contribute a recently formed company, EchoStar Asia Multimedia Ltd. (EAML), whose principal asset is a license to provide direct-to-home satellite television in Taiwan. EAML was established in 2007 and registered in
Taiwan
in April 2008.
In a June 1 submission to the Hong Kong Stock Exchange, AsiaSat said the two partners will each contribute $8.25 million in cash to the joint venture for use as start-up capital. In addition, each will place $9.25 million in cash into an escrow account to be placed at the disposal of the joint venture.
Finally, AsiaSat and EchoStar will each provide an $18 million line of credit to be drawn on by the joint venture in the form of AsiaSat satellite-transponder capacity for AsiaSat’s share, and satellite receiver equipment and other components for EchoStar’s share.
AsiaSat
Chief Executive Peter Jackson said in a June 2 interview that the company elected to partner with EchoStar rather than branch out on its own because “we are not satellite-television strategy and marketing experts. That expertise resides with EchoStar. We expect EchoStar to make the big decisions” for the joint venture’s strategy.
Steve Schaver, president of EchoStar International Corp., said in a June 1 statement that the joint venture “makes it possible to enter the growing Asian market that seeks a popular lineup of all-digital television channels at an attractive price.”
AsiaSat
and EchoStar will each name two members to the joint venture’s four-member board of directors. EchoStar will select the company’s chief executive, while AsiaSat will select its chief financial officer.
EchoStar
has had trouble extending its reach from
North America
, where its Dish Network satellite-television business is well established, into
Asia
. The company has written off its investment in an S-band mobile satellite video venture in China following what EchoStar officials say is the refusal of China’s state-owned television regulator to honor its commitments. An EchoStar-financed satellite designed for the venture, called CMBStar, is nearly completed and a new owner is being sought.
EchoStar
also invested in
South Korea
‘s mobile satellite video service, but that business has struggled to find a profitable market despite an early success in winning subscribers.
Jackson
said the AsiaSat 4 beam to be used by the joint venture is concentrated on
Taiwan
,
Hong Kong
,
Macau
and southern
China
. Regulatory barriers make it difficult to enter the Chinese market in the near term, and the business is focused on Taiwan. Jackson said Taiwan has around 4.5 million pay-television subscribers distributed among five cable operators and one DSL provider. Digital penetration of this market remains low, providing an opportunity for satellite television.
In its Hong Kong Stock Market filing, AsiaSat said the joint venture allows it to leverage its core satellite-lease business into an adjacent field.
“Instead of complete reliance on the satellite transponder capacity leasing business, the investment will allow AsiaSat to diversify into the growing DTH business,” AsiaSat said. “In addition, the investment will help to increase the utilization rate for AsiaSat’s existing transponders, since capacity will be provided to the [joint venture] company.”
