Hughes Raises Subscribers, Per Capita Payments

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  Space News Business

Hughes Raises Subscribers, Per Capita Payments

By PETER B. de SELDING
Space News Staff Writer
posted: 13 August 2009
03:56 pm ET






PONTE VEDRA, Fla. — Hughes Network Systems posted a 15 percent increase in U.S. consumer satellite broadband subscribers in the first half of 2009 compared to a year earlier and said the business continues to grow, and is getting more profitable, despite the recession.

New subscribers are purchasing more services associated with the satellite system, including hardware rentals and support agreements.

Germantown, Md.-based Hughes said as of June 30, its North American consumer broadband business had 473,000 subscribers, up 15 percent from a year earlier. Average monthly revenue per subscriber increased to $70 from $68 a year earlier. Subscribers that elect to rent gear needed to access the service pay around $10 more per month than those who buy the hardware.

Further increasing profitability is Hughes’ gradual shift of most new subscribers to the Spaceway 3 Ka-band satellite launched last year, allowing Hughes to retire Ku-band capacity leases.

In an Aug. 6 conference call with investors, Hughes Chief Executive Pradman P. Kaul said the company had reduced the number of transponders it leases by
3.5 in
the three months ending June 30.

About 170,000 subscribers were using Spaceway 3 as of June 30, according to Hughes. The company’s monthly churn – the number of subscribers quitting the service – was 2.3 percent, also an improvement. For the three months ending June 30, Hughes signed up 50,000 new subscribers. When those quitting the service are factored in, the net subscriber addition was 18,000, or about a 4 percent increase for the quarter.

“To get 50,000 gross adds in the second quarter is pretty darn good,” Kaul said. “We’re pleased with it.”

Hughes has ordered an all-Ka-band satellite to enter service in 2012 alongside Spaceway3, an investment that Kaul said is validated with every quarter’s new subscriber count.

Kaul
said the
U.S.
broadband stimulus economic package could generate subscriber growth, but not much, and not immediately.

The first round of grants made under the stimulus package “are not very favorable toward satellites, which is different from the congressional act, which was passed to make the grants very technology-neutral,” Kaul said. Hughes continues to investigate making proposals for some of the stimulus money, but the company is unclear whether it will have any material impact on its business.

Hughes also reported continued growth in its business that sells satellite links to businesses linking corporate headquarters to field offices. This helped increase Hughes’ backlog by 9 percent, to $879 million, as of June 30 compared to the same period a year ago. Hughes does not include its consumer broadband business in North America in the backlog count.

As expected, Hughes’ telecommunications business, which has benefited from the start of several large mobile satellite services projects, especially in the
United States
, is declining rapidly as work on these projects comes to a close. Given the financial difficulties these projects have encountered, it is unclear whether a new generation of mobile satellite services will appear anytime soon. Kaul said investors should not count on this business returning to past levels of activity.

Hughes reported total revenue of $496 million for the six months ending June 30, down from $503 million a year earlier but up 2 percent after the foreign-exchange effects of the U.S. dollar are removed from the equation. The dollar’s appreciation versus other currencies reduced the dollar-denominated value of contracts Hughes has outside the
United States
.

The company reported an operating loss of $20.6 million for the six months ending June 30, compared to operating income of $27.2 million a year earlier, in part because of a $44.4 million charge against earnings following the Chapter 11 bankruptcy filing of Sea Launch Co. of Long Beach,
Calif.

An arbitration panel agreed that Sea Launch owes Hughes a refund of advance payments made to launch Spaceway 3 aboard Sea Launch before Hughes decided to use
Europe
‘s Arianespace launch-service provider. The Sea Launch bankruptcy filing – made in part because of the arbitration ruling – will complicate Hughes’ efforts to secure a full refund.