Hughes Credits Broadband Stimulus Funds for Subscriber Boost

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PARIS — Satellite broadband service provider Hughes Communications on May 5 said it has continued to add subscribers to its U.S. consumer broadband satellite service this year without sacrificing profitability and that the U.S. government’s broadband-stimulus program is generating more business than expected.

Germantown, Md.-based Hughes, which has agreed to be acquired by EchoStar Corp. for about $2 billion, also said the delayed launch of its competitor’s high-throughput consumer broadband satellite will take pressure off Hughes to compensate with special offers of its own.

In a conference call with investors, Hughes Chief Executive Pradman P. Kaul said the one-year time-to-market advantage that ViaSat Corp. expected to have with the launch of its ViaSat-1 Ka-band satellite early this year has “obviously been reduced, which is good from a competitive point of view. We don’t need to be as aggressive with high-speed [subscription] plans as we would have had to be.”

Carlsbad, Calif.-based ViaSat’s WildBlue competes with Hughes’ HughesNet service in providing satellite broadband to consumers in the United States. WildBlue’s growth has been stunted in recent months because of a lack of satellite capacity in those areas of the United States where demand is strongest.

The ViaSat-1 satellite, whose throughput capacity will solve that problem, will not launch before late this summer following a factory incident in which a small amount of hydraulic fluid from a machine working on the satellite leaked onto the spacecraft.

As a result, ViaSat-1 will be in orbit less than a year before Hughes’ nearly identical Jupiter broadband satellite.

Hughes reported that as of March 31, its HughesNet consumer broadband service had 613,000 subscribers, a 6 percent increase from Dec. 31. Revenue per subscriber held steady at $75 per month.

In August 2010, Hughes was awarded a $58.7 million contract under the U.S. government’s broadband stimulus program. The company began delivering the service last October, offering subscribers a $551 discount in return for one-year commitments. The result, Kaul said, “has far exceeded our expectations” and is a big factor in the subscriber additions HughesNet has booked since last fall.

Hughes is gradually reducing the amount of Ku-band satellite transponders it leases from other operators for HughesNet, with most new subscribers being placed on Hughes’ own Ka-band Spaceway 3 satellite. Each Ku-band transponder lease it lets expire saves Hughes $1 million or more per year, meaning subscriber growth immediately swells the gross profit line.

Hughes estimates that, depending on the mix of subscriber packages, it can load 600,000 subscribers onto Spaceway 3. The company is adjusting the speed at which it places new customers on the Ka-band satellite so that it is not fully loaded before Jupiter is operational. Jupiter, which in terms of raw throughput is 10 times the size of Spaceway 3, is expected to accommodate between 1.5 million and 2 million subscribers, Kaul said, given the fact that average bandwidth demand per subscriber is increasing.

The company reported revenue of $264 million for the three months ending March 31, up 9 percent during the same period a year earlier. EBITDA, or earnings before interest, taxes, depreciation and amortization, was a record $58 million.

It was not only the consumer business that grew during the quarter. Hughes’ North American enterprise business, which is centered on selling two-way satellite communications terminals and related services to corporate networks, reported revenue of nearly $63 million, up 3.7 percent from a year ago. Its international broadband segment was up nearly 19 percent, to $51.7 million.

The company’s mobile satellite systems and terrestrial microwave segments were both sharply down but are not viewed as core businesses.