LONDON — EchoStar Corp’s Hughes satellite consumer broadband division reported increased revenue and gross profit for the three months ending Sept. 30 and maintained its estimate that The U.S. market has 18 million householders that should adopt satellite broadband on is merits.
With Hughes and its competitor, ViaSat Inc., together serving a bit less than 2 million subscribers now, that leaves an untapped market of 16 million in regions where cable and fiber don’t reach, and where DSL is no longer competitive.
One of the surprises of EchoStar’s financial results, issued Nov. 8, was the fact that despite the sales and marketing push on behalf of Hughes’s HughesNet Gen5 service, which began six months ago, Hughes has been able to improve is financial performance.
For the three months ending Sept. 30, Hughes reported revenue of $380.1 million, up 6.8% from a year ago. EBITDA, or earnings before interest, taxes, depreciation and amortization, was 35% of revenue, up from 34% a year ago.
As of Sept. 30, Hughes had 1.14 million subscribers in the United States and Brazil, up 5% from where the subscriber count was as of June 30.
Among these customers were more than 340,000 Gen 5 subscribers. Hughes President Pradman P. Kaul, in a Nov. 8 investor call, said the company was meeting its internal targets, and that customer disconnects, or churn, in North American “has been trending down very nicely.”
Hughes did not present figures on churn or on subscriber counts elsewhere in the Americas because these are often satellite capacity leases.
Not for the first time, Kaul was asked to explain how it was that satellite broadband had a future in a United States with wireless 4G, and eventually, 5G broadband coming everywhere, and cable and fiber well-developed.
His response: Satellite broadband will not battle 4G/LTE/5G on its home field, which is high-density metropolitan and near-suburban areas. Instead, Hughes will focus on the less-connected areas.
Hughes’s Gen 5 service offers up to 25 Mbps downlink and 3 Mbps uplink. That beats many DSL connections, which is why Hughes is reporting successes in areas with high-speed DSL.
For 4G/LTE/5G wireless, Kaul said Gen5 is competitive because so-called “unlimited” data plans on many wireless contracts is in fact a “soft” data ceiling of around 23 gigabytes per month. Using an LTE device as a home hotspot will result in lower data limits or higher prices, Kaul said, adding that Hughes is also moving to soft data caps.
Ground infrastructure for SES, Thales aero connectivity
Kaul said Hughes had completed certification of a broadband aeronautical modem and had also completed the build-out of the ground infrastructure for an in-flight-connectivity service being offered by fleet operator SES and in-flight-entertainment provider Thales.
SES has contracted capacity aboard EchoStar/Hughes satellites and will combine that with SES-owned capacity to provide Thales’s FlytLive system with sufficient North American capacity. SES is also purchasing Hughes gateway Earth stations to manage FlytLive over Hughes’s Jupiter aeronautical platform.
Hughes was among the original lineup of strategic investors in the OneWeb satellite constellation to provide global internet from low Earth orbit, with a $50 million cash investment.
OneWeb recently confirmed the second of two payments to Hughes for OneWeb gateway Earth stations that allow for high-speed handoffs of user traffic from one OneWeb satellite to another . The two payments combined total $300 million — in cash, Kaul said.
Here’s how he drew the future user map: Fiber/cable in cities, alongside LTE and 5G, with some deployment in dense suburbs, Hughes’s Jupiter high-throughput satellites covering mid-density areas, and OneWeb in the most isolated areas. All this presumes that OneWeb can make good on its promise of low-cost, easy-to-install terminals and sufficient broadband speed to each subscriber to make the sale.
OneWeb is still a long way off from full system deployment and a time when its chief financial officer can say, as EchoStar CFO Dave Rayner did Nov. 8: “[We’ve] got very, very strong margins in the consumer business. That’s where we’re seeing the most growth, and that’s overcoming the drag that the sales and marketing costs will have.”
Losing S-, Ka-band rights at 45 degrees west with Brazil’s Anatel ruling
EchoStar Satellite Services (ESS) sells bandwidth to sister company Dish Network for satellite broadcasting and other customers who become available.
ESS President Anders Johnson said commercial service from EchoStar Mobile of Europe, using the S-band EchoStar 21 satellite, should start before the end of the year, using British internet service provider Bentley Walker as a prime distributor.
Johnson said EchoStar’s long-standing effort to build a satellite-broadcast business in Brazil from an orbital slot it purchased at a Brazilian regulatory auction is still the subject of negotiations with potential partners.
That’s for Ku-band. But EchoStar also purchased Ka- and S-band rights at this slot, located at 45 degrees west longitude.
The use of all three frequencies required meeting in-service milestones by June 30. EchoStar did this for Ku-band, but not for S- or Ka-band owing to what Johnson said was a difficult coordination at the International Telecommunication Union, which regulates broadcast frequencies and orbital slots.
Johnson said Brazil had “relatively junior priority at the ITU,” and that EchoStar had asked Brazil’s regulator, Antatel, for additional time. Anatel refused and EchoStar has now lost its rights to S- and Ka-band at 45 degrees west.
In a Nov. 8 filing with the U.S. Securities and Exchange Commission (SEC), EchoStar said its Brazilian license for 45 degrees west had a carrying value of $38.4 million as of Sept. 30.
The company may take an impairment charge as a result of the Anatel ruling, although the main value of the Brazilian license to ESS was the Ku-band.