Solar Array Power Failure Limits Use of EchoStar 12 Satellite

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PARIS — EchoStar Corp. said it will be unable to continue current use of its EchoStar 12 satellite because of additional solar array power failures, but that the extent of the operating limitations will depend on how the satellite is integrated into the commercial strategy of EchoStar’s principal customer, Dish Network.

In an Aug. 10 filing with the U.S. Securities and Exchange Commission (SEC), Englewood, Colo.-based EchoStar said the latest problems with EchoStar 12’s solar array circuits occurred in May. The failure was an extension of a previously disclosed defect on the satellite, which was launched in 2003 and named Rainbow-1 before being purchased by EchoStar from Cablevision in 2006.

EchoStar 12, located at 61.5 degrees west, needs 22 of its 24 solar array circuits to provide sufficient power to operate as intended over 12 years. Eight circuits had previously failed wholly or in part. The most recent failure means the satellite cannot be used to its optimal capacity.

EchoStar has been using the spacecraft in a hybrid mode that includes a wide beam over the continental United States and separate spot beams for localized transmissions. That form of operation will not be possible for the full 12-year life of the satellite, EchoStar said.

EchoStar was separated from satellite television provider Dish Network in January 2008. Its main business is selling digital set-top satellite television boxes to Dish, which in recent months has been purchasing fewer units.

EchoStar also leases satellite capacity to Dish Network on eight spacecraft, six that the company owns and two others — AMC-15 and AMC-16 — that are leased from SES of Luxembourg.

SES and EchoStar have entered into a similar satellite lease arrangement in Mexico. The QuetzSat-1 satellite, under construction by Space Systems/Loral of Palo Alto, Calif., is scheduled for launch in 2011 and will operate from the Mexican slot of 77 degrees west. Dish Network has leased 24 of the 32 transponders on the satellite, with the remaining capacity to be used by a new joint venture called Dish Mexico.

EchoStar has committed to provide $112 million in goods and services to Dish Mexico over 10 years, $46 million of which has already been spent. Of the remaining $66 million to be injected into the Mexican venture, $28 million will be in cash, EchoStar said.

EchoStar in June entered into a joint venture with satellite operator AsiaSat of Hong Kong to use the AsiaSat 4 satellite, located at 122 degrees east, to provide a satellite television service in Taiwan and the surrounding region.

AsiaSat has agreed to incorporate its 80 percent-owned Skywave TV Ltd. subsidiary into the Taiwan project. EchoStar will provide set-top boxes for the new venture and has agreed to spend a total of $36 million over three years — $18 million in cash, the rest in the form of a loan — subject to regulatory approval.

The current satellites owned and leased by EchoStar have more capacity than is needed for Dish Network. EchoStar so far has been unable to make substantial inroads into the North American fixed satellite services market, which is dominated by the world’s two largest commercial satellite fleet operators, SES and Intelsat.

For the first six months of 2009, EchoStar reported that revenue from satellite services outside of contracts with Dish Network totaled $19.7 million, down 29 percent from the first six months of 2008.

EchoStar is seeking to increase its satellite services revenue by providing satellite telemetry, tracking and control services to third parties. For now, it is leasing its available transponders to government agencies, Internet service providers including satellite broadband provider WildBlue Inc. of Denver, and news organizations for limited-duration special events coverage.