Hughes Posts Modest Increase in Subscribers and Revenue

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PARIS — Satellite broadband provider Hughes reported May 7 modest growth in subscribers and revenue for the three months ending March 31 compared to the same period a year ago but said its HughesNet business so far has not been affected by the launch of competitor ViaSat’s ViaSat-1 broadband satellite.

In a conference call with investors and a filing with the U.S. Securities and Exchange Commission (SEC), Hughes owner EchoStar Corp. also said the Brazilian government has cleared EchoStar’s $80 million purchase at auction of rights to the orbital slot of 45 degrees west.

In the SEC filing, EchoStar said it is required to make “significant additional investments” to develop the slot under the terms of its Brazilian license.

EchoStar Chief Executive Michael T. Dugan said the company would be deciding shortly how best to develop the Brazilian slot and was seeking partners in Brazil to do so. Among other considerations, he said, is whether the QuetzSat satellite that EchoStar has leased from fleet operator SES of Luxembourg might be placed there instead of its originally intended location of 77 degrees west.

EchoStar has leased 32 Ku-band transponders on QuetzSat for 10 years. The satellite, launched in September 2011, has been in service since late last year but has been stationed at 67.1 degrees west as EchoStar and its intended customer, Dish Network, determine how to move forward.

In its SEC filing, EchoStar said it would recognize Dish revenue from QuetzSat only once the satellite is at 77 degrees west.

EchoStar’s $2 billion purchase of Hughes in mid-2011 has reshaped the company’s profile, giving it more orientation toward services revenue than it was before. Englewood, Colo.-based EchoStar sells set-top boxes for satellite television reception to Dish Network. EchoStar operates 11 satellites in orbit, including one for Hughes’ broadband business, with most of its leased capacity going to Dish Network and to Canada’s Bell TV satellite television provider.

EchoStar has been trying to break into the satellite services market on its own, separate from Dish, in recent years, with only modest success.

EchoStar reported revenue of $764.8 million for the three months ending March 31, up 59 percent over the same period a year ago. Stripping out the Hughes revenue, the growth rate over the year for EchoStar’s pre-existing business was 2.4 percent.

The Hughes business generated revenue of $274.2 million for the three months ending March 31, up 3.9 percent from a year ago. Subscribers to the HughesNet broadband service totaled 634,000 on March 31, an increase of 3.4 percent over a year ago.

Pradman P. Kaul, Hughes’ chief executive, said the company’s broadband business is not suffering from the entry into service in January of the ViaSat-1 satellite owned by ViaSat of Carlsbad, Calif., Hughes’ principal consumer broadband rival in the United States.

Hughes’ EchoStar 17/Jupiter satellite, which is nearly identical to ViaSat-1, is scheduled for launch aboard a European Ariane 5 rocket in late June. The all-Ka-band satellite will offer more than 100 gigabits per second of throughput, which is 10 times the output of Hughes’ Spaceway 3 satellite.

Kaul said Hughes has purchased an insurance policy valued at about $330 million for EchoStar 17/Jupiter, which does not cover the full cost of the satellite’s construction, launch and insurance but is an amount that “made sense for what the market was willing to sell us at a reasonable price.”

EchoStar in the past has not elected to insure its satellites. But under its current debt covenants it is obliged to maintain insurance for EchoStar 17/Jupiter, as well Spaceway 3 and the EchoStar 16 Ku-band telecommunications satellite scheduled for launch in late 2012. EchoStar 16, scheduled to operate from 61.5 degrees west, has been fully leased to Dish Network.

As of March 31, EchoStar had cash and equivalents amounting to nearly $1.7 billion. EchoStar Chief Financial Officer Kenneth G. Carroll said during the conference call that the company is retaining the sizable cash position as it reviews potential strategic investments.