SES, EchoStar Negotiate Deal for Mexican Satellite Slot

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SES Global and EchoStar Communications Corp. want to move a damaged EchoStar satellite into a Mexican orbital slot in time to meet the Mexican government’s July deadline for an SES-backed company to start operations from that orbital slot, according to industry officials and documents EchoStar filed with U.S. regulators.

The companies are running out of time. Under the conditions of a Mexican government license that the SES-backed QuetzSat, S De R.L. De C.V. won in late 2004, QuetzSat must begin operating a direct-broadcast television satellite from Mexico’s orbital slot at 77 degrees west longitude by July 10 or face lengthier, and costlier, regulatory procedures.

QuetzSat, a Mexico-registered company created by SES Global, paid Mexican authorities 153 million Mexican pesos ($14 million) for the license, and agreed that a portion of the capacity to be provided from the Mexican slot will be reserved for Mexican government use, free of charge.

EchoStar has agreed to use its damaged EchoStar 4 satellite, now located at 157 degrees west longitude, to provide Luxembourg-based SES Global and QuetzSat with a placeholder satellite, giving SES and its QuetzSat partners time to fully assess the market, line up customers and order a new satellite for the position if market conditions warrant.

EchoStar 4, launched in 1998, has suffered multiple on-board failures and in March was declared a total loss by an arbitration panel after seven years of dispute between Littleton, Colo.-based EchoStar and its insurance underwriters. Insurers have since paid EchoStar $240 million under a negotiated settlement that leaves EchoStar with title to the satellite.

EchoStar was able to declare the satellite a total loss even if only 50 percent of its capacity was unusable following on-board propulsion and other failures. EchoStar 4 remains operational.

Following an agreement with SES Global, EchoStar will move EchoStar 4 to the Mexican slot and continue to own the satellite. EchoStar will temporarily lease EchoStar 4 to QuetzSat, which will then lease it back to EchoStar.

In documents submitted to the U.S. Federal Communications Commission (FCC), EchoStar says it will be able to use Mexico’s 77 degrees west location to provide local-into-local high-definition ethnic and other television programming in the United States.

EchoStar is urging expedited FCC approval. The company says it will take 45 days to drift EchoStar 4 along the geostationary orbital arc from its current location to the QuetzSat slot, and that it needs to be in place at the new location on July 1. EchoStar told the FCC that it must begin moving EchoStar 4 by May 15 at the latest.

One industry observer familiar with EchoStar’s request said the relocation probably could occur in less than 45 days without using much of EchoStar 4’s remaining on-board fuel. In addition, the Mexican government deadline is July 10, not July 1, according to the Feb. 2 Mexican Federal Telecommunications Commission license granted to QuetzSat.

EchoStar and SES also are negotiating the use of another EchoStar satellite to fill a Canadian direct-broadcast television orbital slot recently won by Ciel Satellite Communications, which like QuetzSat is a start-up operator created by SES Global. Under the Canadian license, Ciel has until Aug. 25 to place an interim satellite into operation at the 129 degrees west longitude orbital slot.

SES Chairman Romain Bausch said May 9 that SES would not comment on the Canadian or Mexican licenses until it had lined up satellites and customers for both locations. In the past, Bausch has sought to minimize SES’s role in both operations, saying SES has only a minority stake in QuetzSat and Ciel.

An EchoStar filing at the FCC makes reference to an agreement with QuetzSat and SES under which none of the three companies are permitted to make public statements about their Mexican arrangement unless the other two companies agree.

The FCC said it wants more information about the status of the EchoStar 4 satellite, and EchoStar’s plans for the temporarily abandoned 157 degrees west orbital slot, before granting EchoStar approval for the maneuver.

The agency also said it wants to EchoStar to detail “any and all additional agreements between EchoStar and SES and between either or both of these parties and QuetzSat” before granting approval.