PARIS — Satellite broadband services provider Hughes Network Systems LLC, which expects to begin commercial service on its all-Ka-band Spaceway 3 satellite in April, said it will approach the new owners of satellite-television provider DirecTV Group in hopes of purchasing one of DirecTV’s two Spaceway satellites, Hughes officials said.
In a March 3 conference call with investors, Germantown, Md.-based Hughes officials said they intended to use a planned $300 million equity or debt offering to purchase the DirecTV satellite, or to buy a new broadband satellite on their own.
Hughes Chief Executive Pradman P. Kaul said the company would be in a transition year in 2008 as it begins operations of Spaceway 3, and incurs related costs associated with that, while continuing to pay for the Ku-band capacity Hughes leases on about a dozen satellites.
As its existing Ku-band satellite-lease contracts expire, Hughes gradually will transition customers to the Spaceway 3 satellite. But this will require that customers install new equipment.
said once Spaceway 3 is fully commercial, the company expects to be booking new consumer and small-business subscribers at a rate of 40,000 per quarter, if not better. While the HughesNet consumer broadband service continues to expand, it is not growing at that rate now. The company said it added 15,200 subscribers to the service in the three months ending Dec. 31, bringing the total to 379,900.
Total consumer-broadband subscribers were up 16 percent in 2007 compared to 2006.
declined to speculate on how fast the Spaceway 3 satellite would be able to add subscribers, saying much depended on the level of incentives, including subsidies for the consumer hardware, Hughes would offer to new subscribers.
“We believe the market is robust,” Kaul said. “I think our uptake is going to be very strong.”
Hughes Chief Financial Officer Grant Barber said the company registered for a $300 million debt or equity offering to give it financial flexibility to complete the purchase of one of the two DirecTV-owned Spaceway satellites, or to order its own new spacecraft.
Liberty Media Corp. in late February completed its purchase of 41 percent of DirecTV, and Kaul said Hughes now would enter into talks to determine whether DirecTV is willing to sell a satellite to Hughes. The two companies used to be under the same corporate roof.
said Hughes had not yet begun negotiations with DirecTV on the proposed transaction.
Spurred in part by contracts for ground-based, beam-forming networks for mobile satellite services companies, Hughes reported increased revenue and profit for 2007. Revenue totaled $970 million, up 13 percent from 2006. EBITDA, or earnings before interest, taxes, depreciation and amortization, was 14.3 percent of revenue. Net profit was up 161 percent, to $50 million.
New orders booked in 2007 set a company record, totaling $1.1 billion, which was a 30 percent increase over the previous year.