EchoStar Corporation ( SATS)

Q2 2011 Earnings Conference Call

August 9, 2011 1:30 PM ET


Deepak Dutt – VP, IR

Dean Manson – Acting General Counsel

Michael Dugan – CEO

David Rayner – CFO


Anthony Klarman – Deutsche Bank

Jason Bazinet – CITI

James Ratcliffe – Barclays Capital

Amy Yong – Macquarie

Adrian Mele – Eagle Capital

Kenneth Miller – Nokomis Capital



Good morning. My name is Stephanie and I will be your conference operator today. At this time I would like to welcome everyone to the EchoStar Corporation Q2 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) Thank you. Mr. Deepak Dutt, Vice President of Investor Relations, you may begin your conference.

Deepak Dutt

Thank you, Stephanie and good day everybody. Welcome to EchoStar’s second quarter 2011 earnings call. I’m joined today by Mike Dugan, our CEO, Dave Rayner, CFO, Pradman Kaul, President of Hughes, Mark Jackson, President of EchoStar Technologies, Anders Johnson, President of EchoStar Satellite Services, Grant Barber, CFO of Hughes, Dean Manson, Acting General Counsel, Paul Orban, Controller, and Ken Carroll, Executive Vice President, International Business Development.

As you know, we invite media to participate in a listen-only mode on the call and ask that you not identify participants or their firms in your reports. We also do not allow audio taping and ask that you reflect that. Let me now turn this over to Dean Manson for the Safe Harbor disclosure. Dean?

Dean Manson

Thank you, Deepak and hello everyone. All statements we make during this call that are not statements of historical facts, constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q.

All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements.

Let me now turn it back to Deepak.

Deepak Dutt

Thanks, Dean. With that, now with comments by Mike Dugan. Mike?

Michael Dugan

Okay, thank you, Deepak and welcome everybody to today’s call. We are pleased to have delivered a solid second quarter with strong growth in profits. I would like to highlight some important events from the second quarter. As many of you are aware, we closed on the Hughes transaction on June 8, 2011. We continue to be very excited about this acquisition; this combination with Hughes improves our revenue diversity and strengthens our competitive position domestically as well and more importantly internationally.

The huge fast growing North American consumer service business as well as our managed network business when combined with the Hughes global presence in over a 100 countries, greatly enhance our growth opportunities in the coming years. Hughes has a strong engineering organization and the technology portfolio that is first rate, leading edge and has a proven track record of innovation. These attributes combined with our existing satellite expertise and fleet presence, our industry-leading set-top box technology and engineering and our cutting-edge services from Sling and Move networks makes for a powerful combination.

Integration activities are well underway between the two organizations with the key objectives of maximizing efficiencies and acceleration of growth in all aspects of the combined company progressing well. In connection with the Hughes transaction, we also closed a $2 billion debt issue in the quarter comprised of $1.1 billion senior secured 6 1/2% notes and 900 million senior unsecured 7 5/8% notes. The issue was oversubscribed and we are very grateful with the strong investor response to the EchoStar and Hughes combined story and are very pleased with the attractive pricing on the notes.

At the Cable Show in Chicago in June, EchoStar launched a new US cable operator solution called Aria. Aria is an innovative solution for US cable operators that will allow them to utilize their existing cable plan and offer subscribers premium features and services like video on-demand via their DOCSIS data networks.

Aria utilizes EchoStar's expertise in digital set-top box design and video distribution to create an innovative ecosystem. That launched the ecosystem includes digital set-top boxes transactional VOD, TV everywhere utilizing Sling technologies and system operation and maintenance.

Hughes’ new order input was 36% ahead of last year’s pace on a year-over-year basis through June of 2011. Significant orders in Q2 included Safeway, Wyndham hotels, ExxonMobil, Beverage and More, CDs and Cracker Barrel in the North American business units. Key international orders were from Avante, Fintex, Nigeria, TIM and Telemar Brazil, Central Bank of India, and National Telecom Corporation of Ecuador.

Hughes also recorded a large order in Q2 from Boeing for their MEXSAT project. This strong order activity resulted in a non-consumer order backlog of over $1.1 billion, going into Q2. This, together with another $1.1 billion of contracted backlog and our EFS business puts us in a strong position with significant visibility in the future revenues.

Hughes also ended the quarter with a consumer base of approximately 626,000 subscribers or grown over 15% over the base at the end of Q2 ’10. Of the 626,000 subscribers, approximately 464,000 were on Spaceway 3 and the rest on leased KU band transponders.

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