— Consumer and enterprise satellite broadband provider Hughes Communications said its business is not feeling the effects of the economic downturn and that its own hesitation, and not market softening, has prevented it from ordering a second Ka-band satellite.
In a Feb. 26 conference call with investors, Germantown, Md.-based Hughes said that despite its own foot-dragging, it expects to sign a contract for new satellite capacity now that it is satisfied that its consumer-broadband business is not collapsing in line with the broader economy.
Hughes said its consumer and small-business broadband business grew by about 3 percent in the last three months of 2008, bringing its subscriber total to 420,000. The company reported that it had loaded 86,000 new subscribers onto Spaceway 3, Hughes’ Ka-band spacecraft where all of the company’s new consumer broadband customers are being sent.
Hughes Chief Executive Pradman P. Kaul said that in recent weeks the Spaceway 3 subscriber total had exceeded 100,000.
As each new subscriber is put onto Spaceway 3, Hughes is gradually reducing the amount of Ku-band capacity it leases from other satellite operators. The company had purchased leases on some 120 transponders covering North America, and is letting these leases run out in cadence with its monthly 2.4 percent subscriber-cancellation rate.
Each transponder lease that is canceled saves Hughes around $1.5 million per year.
Kaul said Spaceway 3 can carry anywhere from 600,000 to 1 million subscribers, depending on the mix of subscription plans. The company offers subscribers a choice of subscription types, with prices varying according to the bandwidth selected.
In addition to preparing for the day when Spaceway 3 is full, Hughes is under pressure to secure additional Ka-band capacity in the event of a problem on the satellite. Kaul said the company still intends to do this, but had hesitated before ordering another spacecraft in late 2008, preferring to see whether the souring economy would slow Spaceway 3 subscription growth.
That has not been the case, and Kaul said a new satellite likely will be ordered in the next couple of months. He said Hughes could share a satellite with someone else. ViaSat Inc. of , has ordered a large Ka-band satellite for delivery in 2011 and is looking for partners in its development, although ViaSat would prefer a partner that uses ViaSat’s ground-terminal equipment. Hughes builds its own gear.
“It is very clear based on the take-up rate we are seeing on Spaceway, that our consumer business is still moving forward very nicely,” Kaul said. “We’ve seen very little, if any, negative impact [from the economic slump]. All indications are that we will continue to weather the storm very well.”
He said 20 percent growth in 2009 is the company’s goal.
Kaul said new subscribers appear to be migrating toward the high-end subscriptions with their guaranteed higher transmission speeds, resulting in a slight increase in average monthly subscriber revenue in 2008 – to $65.40 from $62.45 in 2007.
Hughes subscriptions range from $60 per month for 1-megabit-per-second service, to $350 per month for 5 megabits per second. Kaul said Hughes sees no reason to offer a lower-end product to compete with satellite-broadband provider WildBlue Communications of Denver, which offers subscriptions starting at $40 per month.
