PARIS — Satellite fleet operator EchoStar on Feb. 24 reported a better than 20 percent increase in revenue from its satellite bandwidth-leasing business, with the growth coming almost equally from its dominant customer, sister company Dish Network, and from selling capacity elsewhere.
The Englewood, Colo.-based company, which was spun off from Dish Network in 2008, is nonetheless struggling to find its footing in a North American market that is viewed by most satellite fleet operators as among the least promising in the coming years.
In addition to its overall demand, which is growing more slowly than in South America, Central and Eastern Europe, India and parts of East Asia, the North American market is facing pressure because one of its biggest customers, Hughes Communications of Germantown, Md., is gradually winding down its leases of more than 100 transponders as it transfers its consumer broadband business to its own Ka-band spacecraft.
EchoStar, which has agreed to purchase Hughes in a $2 billion transaction expected to close by midyear, may be able to capture some of Hughes’ remaining Ku-band lease business, EchoStar officials said in a Feb. 24 conference call.
EchoStar reported that its satellite services business, which the company had hoped would become a competitive threat to established operators in the United States including Telesat of Canada and Intelsat and SES, both of Luxembourg, is still dominated by the Dish Network business.
In 2010, Dish Network’s satellite television business accounted for nearly 88 percent of EchoStar’s satellite leasing revenue, which totaled $534.4 million, EchoStar said in a Feb. 24 filing with the U.S. Securities and Exchange Commission (SEC). The Dish business increased by 26 percent over 2009, in part because Telesat’s Nimiq 5 satellite, which EchoStar has leased on behalf of Dish Network, entered operations in late 2009. Its full cost and revenue effect were not visible until 2010.
But while EchoStar’s non-Dish satellite services revenue remained relatively small, at $64 million in 2010, it grew by 21 percent over 2009. The company said it had been able to increase lease rates on certain of its satellites. EchoStar also benefits from regular business from satellite-television broadcasters Bell TV of Canada and Dish Mexico, which in 2010 accounted for 9.8 percent and 3.9 percent, respectively, of EchoStar’s satellite services revenue according to the SEC filing.
EchoStar owns six satellites in orbit and leases four spacecraft. It has one satellite of its own, EchoStar 16, under construction. SES’s QuetzSat satellite, also under construction, has been leased to EchoStar for 10 years to serve the Latin American market at 77 degrees east in geostationary orbit.
EchoStar’s CMBStar satellite, an S-band spacecraft that was nearing completion when China’s state radio and television authority canceled an agreement to use CMBStar for mobile video, remains in storage. EchoStar said it continues to investigate other uses for the satellite.
Construction of CMBStar has been suspended. In the SEC filing, EchoStar said its outstanding payments for QuetzSat as of Dec. 31 totaled $163 million. For EchoStar 16, the figure was $100 million.
EchoStar in late 2009 established a joint venture to sell direct-to-home television programming in Taiwan, in which it had invested $18 million in cash and offered an $18 million line of credit to purchase EchoStar-built set-top boxes for subscribers. The company said it took a $14 million charge in 2010 “to fully impair this investment.”
