EchoStar Stops Work on CMBStar; New Owner Could Finish It

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  Space News Business

EchoStar Stops Work on CMBStar; New Owner Could Finish It

By PETER B. de SELDING
Space News Staff Writer
posted: 19 May 2008
01:48 pm ET





PARIS
�- EchoStar Corp. Chairman Charlie Ergen said he thinks construction of the CMBStar S-band video mobile broadcasting satellite for China eventually will be restarted and the mission launched despite EchoStar’s recent decision to suspend construction at Space Systems/Loral in Palo Alto, Calif.

 

In a May 13 conference call with investors, Ergen said the satellite, which was to be launched this year, also could be reconfigured – with fresh investment – and put to use by some other satellite operator that wants to build an S-band mobile satellite business.

 

In the United States, ICO Global and TerreStar Corp. are building separate S-band satellite systems. Space Systems/Loral is building the satellites for both of those ventures. ICO’s first satellite is now in orbit, but the company will need a second spacecraft if it sticks with plans to deploy an ATC (ancillary terrestrial component) network to relay signals where the satellite signals cannot reach.

 

TerreStar has two satellites under construction at Loral.

 

S2M of Dubai, which plans a satellite-based mobile video system in the Middle East, has signed study contracts with Loral for an S-band system but has not yet signed a hardware-construction contract.

 

In a May 13 filing with the U.S. Securities and Exchange Commission (SEC), Littleton, Colo.-based EchoStar, which in January was spun off as a separate company from satellite-television provider Dish Network Corp., said it informed the State Administration of Radio, Film and Television of China in April that work on the CMBStar satellite was being suspended.

 

The company said the decision was made because the satellite’s performance specifications are not being met. Negotiations are under way to determine whether to relax those specifications, make the investment needed to meet them or abandon the project. It said abandoning the project could result in a charge against earnings of up to $100 million.

 

In the conference call, Ergen said a $100 million charge is a worst-case assessment. “Most likely [CMBStar] will be used for its intended purpose,” he said. “The specifications can be fixed,” but EchoStar would need to assess whether the cost in time and money would be acceptable.

 

Ergen said the large S-band reflector antenna under construction for CMBStar would be similar to what any other S-band mobile system operator would need, meaning that piece of the satellite – among the most complicated to build – could be transferred to another owner. But other portions of the CMBStar payload would need to be modified for a new owner, he said.

 

Ergen said most satellites abandoned by their original owners eventually find a new buyer. He declined to specify what specific issues had arisen that forced the suspension of work on CMBStar.

 

The CMBStar project was intended to be ready for introduction in China in time for the Beijing Olympics, which begin in August. Industry officials said the schedule for construction and launch of the satellite was tight from the beginning, and made impossible with the March failure of Russia’s Proton-M rocket.

 

CMBStar is scheduled for launch on a Proton rocket but is not first in the queue of operators awaiting launches. Industry officials say that even if EchoStar restarts the program immediately, the satellite is unlikely to be launched before late autumn, if not later.

 

Industry officials said it could be the schedule issue, and not any technical problem with the satellite, that EchoStar is referring to when it evokes “specifications” that have not been met.

 

In response to Space News inquiries about CMBStar’s status, Loral President John Celli said May 15: “The satellite construction is complete and 90 percent of the system testing has been successfully completed and progress payments have been paid accordingly. We expect that it will be fully compliant with mission requirements.” Loral said the satellite’s delivery date is not part of its mission specifications.

EchoStar operates six satellites of its own for its former sister company, Dish Network. In addition it leases the full capacity of the AMC-15 and AMC-16 satellites from the SES Americom division of SES of Luxembourg.

 

But three of these satellites – EchoStar 9 and both AMC spacecraft – are far from fully used by Dish Network. One of EchoStar’s two business lines now is to sell satellite capacity in the Americas, in competition with SES, Intelsat of Bermuda and Washington and Telesat Canada.

 

Ergen said the company has only modest ambitions near term in competing in the satellite capacity-lease market against the entrenched competition. “The market is relatively soft for the capacity that [EchoStar] has,” Ergen said. “We need to build a sales force and [that] typically takes about a year’s lead time. It will be kind of a slow build.”

 

EchoStar’s revenue for the three months totaled $554.6 million, of which nearly 84 percent were sales to Dish Network. Satellite lease sales to companies other than Dish Network totaled $16 million during the period, EchoStar said in its SEC filing.

 

EchoStar in March contracted with Telesat Canada to lease 16 transponders on Telesat’s Nimiq-5 satellite, scheduled for launch in 2009. Dish Network has agreed to lease capacity from EchoStar for 15 years.

Ergen said the AMC-16 satellite has experienced an onboard failure on its solar arrays that has reduced the satellite’s available capacity. While this will not affect EchoStar’s Dish customers because the satellite is not being fully used, it will result in EchoStar reducing its monthly lease payments to SES.

 

AMC-16, a Lockheed Martin A2100 model satellite, was launched in December 2004 into the 85 degrees west orbital slot. It carries
�Ku- and Ka-band payloads.

SES spokesman Yves Feltes said May 14 that SES and EchoStar are renegotiating their lease contract in light of the AMC-16 problem, and that the reduced payments will not have a material effect on SES’s financial performance.

Comments: pdeselding@gmail.com