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Edited Transcript of SATS earnings conference call or presentation 20-Feb-20 4:00pm GMT

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Q4 2019 EchoStar Corp Earnings Call ENGLEWOOD Mar 4, 2020 (Thomson StreetEvents) -- Edited Transcript of EchoStar Corp earnings conference call or presentation Thursday, February 20, 2020 at 4:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Anders N. Johnson EchoStar Corporation - Chief Strategy Officer & President of EchoStar Satellite Services L.L.C. * David J. Rayner EchoStar Corporation - Executive VP, CFO, COO & Treasurer * Dean A. Manson EchoStar Corporation - Executive VP, General Counsel & Secretary * Michael T. Dugan EchoStar Corporation - CEO, President & Director * Pradman P. Kaul EchoStar Corporation - President of Hughes Communications & Director * Terry Brown EchoStar Corporation - VP of Finance ================================================================================ Conference Call Participants ================================================================================ * Christopher David Quilty Quilty Analytics, Inc., Research Division - Research Analyst * Richard Hamilton Prentiss Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the EchoStar Earnings Conference Call for Fourth Quarter or Year-end of 2019. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to Mr. Terry Brown. Thank you. Please go ahead. -------------------------------------------------------------------------------- Terry Brown, EchoStar Corporation - VP of Finance [2] -------------------------------------------------------------------------------- Thank you. Good morning, everybody, and welcome to our earnings call for the fourth quarter of 2019. I'm joined today by Mike Dugan, our CEO; Dave Rayner, COO and CFO; Pradman Kaul, President of Hughes; Anders Johnson, Chief Strategy Officer and President of EchoStar Satellite Services; and Dean Manson, General Counsel. As usual, 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 report. We also do not allow audio recording, which we ask that you respect. Let me now turn this over to Dean for the safe harbor disclosure. -------------------------------------------------------------------------------- Dean A. Manson, EchoStar Corporation - Executive VP, General Counsel & Secretary [3] -------------------------------------------------------------------------------- Thanks, Terry. All statements we make during this call other than statements of historical fact constitute forward-looking statements that 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 the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K filed today with the SEC. All cautionary statements we make during the 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 any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. I'll now turn the call over to Mike Dugan. -------------------------------------------------------------------------------- Michael T. Dugan, EchoStar Corporation - CEO, President & Director [4] -------------------------------------------------------------------------------- Thanks very much, Dean. Good morning, everyone, and welcome to our earnings call. Overall, I'm very pleased with our performance in 2019. We delivered solid financial results by growing revenue and adjusted EBITDA compared to 2018. We completed a transformative transaction with DISH that has simplified our organization and allows us to focus on expanding broadband and connectivity markets. We also closed our joint venture with Yahsat in Brazil as well as acquired Helios Wire Corporation, which holds global spectrum rights for S-band mobile satellites services and systems. Let me now turn it over to Pradman who will talk about Hughes. He'll be followed by Anders who'll follow-up with ESS and S-band EML. And then finally, Dave will provide an overview of the actual financials. Pradman? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [5] -------------------------------------------------------------------------------- Thank you, Mike. I'm pleased with our financial performance. Fourth quarter revenues increased 11% year-over-year despite relatively full beams in North America on our Jupiter satellites. And in 2019, our orders increased by 49%. In the consumer Internet business, we ended the fourth quarter with approximately 1,477,000 HughesNet subscribers with net adds of approximately 20,000 in the quarter and approximately another 20,000 subscribers acquired as part of the closing of our joint venture in Brazil with Yahsat. Our international consumer subscriber base is now approximately 237,000. As announced earlier this year, we are up and running with our consumer service in Mexico, which began in October 1. With 23 beams dedicated to Mexico, our services reached 95% of the population. Our focus in Mexico in the fourth quarter was to solidify our operations while investing in our brand awareness. Our service, now in 7 countries in Central and South America, should continue to provide international subscriber growth. Since our capacity in North America is relatively full, we'll continue to look for ways to generate higher yields in our beams and grow revenue. We are focused on managing churn, and when churn does occur, replacing these customers with higher ARPU plans. We continue to believe there is an extremely large addressable market of unserved and underserved households within the United States. We are monitoring the FCC activities related to the Rural Digital Opportunity Fund, but do not anticipate any material impact on our target market or existing customer base due to that program. As mentioned in November, we closed our joint venture with Yahsat, which expands our ability to provide Internet services and enterprise solutions in Brazil. The integration of the Hughes Brazil and Yahsat Brazil operations is progressing well. The mainstreams are the installation of a Jupiter gateway pointed to the Al Yah 3 satellite, the migration of the existing Yahsat Brazil subs to the HughesNet platform and the absorption of Yahsat's distribution network by Hughes Brazil. The new organization will help us achieve scale in the consumer business by gaining access to new capacity, new coverage areas and new distribution channels. We will also better position Hughes Brazil to pursue new applications, specifically cellular backhaul and community WiFi. We continue to work on closing our joint venture agreement with Bharti Airtel in India, which will help us bring greater scale, operational efficiencies and market reach to Indian customers. This is still subject to regulatory approvals that are expected to be received later this year. We continue to explore and discuss other joint venture opportunities elsewhere in the world. Our community WiFi service offering or Hughes Express Wi-Fi is expanding rapidly throughout Latin America. This service, in partnership with Facebook, has now been deployed in approximately 800 locations. We plan to continue to expand our network of rural WiFi hotspots that users can access the Internet on a prepaid per use basis, making it more affordable and accessible. A keystone to our strategy is our use of a single broadband platform, the Jupiter platform, that enables all our applications in every region of the world. This broad coverage reduces recurring and nonrecurring costs and helps improve our margins. In addition, the same platform serves various applications and market segments from consumer to government, mobility and enterprise. As we continue to innovate, any enhancements of one segment becomes available to the benefit of all segments. Our North American enterprise business also had a very strong quarter with new orders. Significant enterprise orders include signing a new customer named Town Sports International, for a fully managed network at their athletic clubs as well as a 7-year extension with retail platform customer, QuickChek. Our franchise business, which primarily addresses the gas station and quick service, casual dining markets also saw continued bookings from operators with British Petroleum, Phillips 66 and Exxon. In the energy sector, we extended our relationship with Marathon Pipe Line and Buckeye Pipe Line. And in the in-flight connectivity market, we signed a deal with SES to deploy the Hughes Jupiter system. That contract provides for the initial implementation of an aviation connectivity platform across the Americas, Caribbean and the Atlantic Ocean, utilizing the SES-17 satellite starting in 2021. In the international enterprise, we are pleased to announce that a major telecom service provider in Brazil has selected us to provide Internet services to approximately 1,600 schools in rural areas. Our Indian entity completed the deployment of over 20,000 sites in oil retail automation for Indian Oil, Bharat Petroleum and Nayara and Hindustan Petroleum using Jupiter technology. Hughes India, which was the first in the country to receive licenses for offering maritime and broadband services, is now in the process of deploying maritime services to their first 2 customers. We are also in the process of deploying the Jupiter system for the Eutelsat Konnect new generation high throughput satellite for Western Europe and Africa, which was recently launched. In Indonesia, the BAKTI program, where we are providing the Jupiter system to all 5 selected service providers, continues to roll out successfully with now over 1,000 cellular backhaul sites operational. Speedcast, a trusted provider of remote communications and IT services, has also chosen the Jupiter system to power 3,000 community WiFi locations in the Philippines. Our defense and government business continues their strong performance with several awards during the quarter. These included a satcom system for a military airborne drone and a contract with the U.S. Postal Service to provide a VSAT network connecting hundreds of postal service facilities across the United States and Puerto Rico. We expect to see continued orders and revenue growth in this business in 2020. As you probably have heard, OneWeb second launch occurred on February 6, and like its first launch last year, was a success. This launch included 34 production satellites. Our work on their ground infrastructure continues to progress extremely well as we continue to deliver gateways, 7 of which have been shipped to date. We continue to believe that GEO and LEO systems will be complementary, and as new systems come online and mature, the optimal solution will be a hybrid of both. We believe GEO satellites will continue to provide the lowest cost per bit and lowest cost per terminal for high-capacity density applications. LEOs will provide wide coverage and enable low latency applications as well as work for mobility in areas that are less populated. In the future to reach everyone and ensure that everyone is connected, we'll need every type of data transport, including terrestrial, GEO and NGSOs. All in all, a very strong quarter and year, and I'm looking forward to another exciting year in 2020. Let me now hand it over to Anders. -------------------------------------------------------------------------------- Anders N. Johnson, EchoStar Corporation - Chief Strategy Officer & President of EchoStar Satellite Services L.L.C. [6] -------------------------------------------------------------------------------- Thanks, Pradman. Good morning. Fourth quarter ESS continuing operations revenue was $4 million, which was consistent with the fourth quarter of last year. We continue actively exploring opportunities to lease our available Ku-band capacity. However, the environment for commercial FSS services remains challenging. In other developments, the 2019 World Radiocommunications Conference, also known as the WRC, while held with the ITU every 3 to 4 years, concluded this last November. The EchoStar regulatory team successfully protected our existing and planned operations in both Ka- and Q- and V-bands, ensuring the spectrum can be used for Jupiter 3 and future broadband satellites and also provided for expansion in S-band, protecting flexibility to provide both terrestrial mobile and MSS services. With regard to the S-band development, as we mentioned last quarter, our EchoStar global subsidiary acquired Helios Wire and its Australian subsidiary, Sirion Global, pursuant to which we acquired global spectrum rights for S-band mobile satellite services. Construction and launch of our first flight of S-Band LEO satellites remains on track with launches targeted for next month. EchoStar global's broader mission is the continuing exploration of opportunities to develop S-band platforms that we expect will reduce the cost of satellite-delivered IoT services, including machine-to-machine communications, public protection and disaster relief and other end-to-end services. We continue to work with a number of strategic partners in designing a future system architecture, which will support all these products and applications. We also continue to make good process with our European platform, EchoStar Mobile. Our new Hughes 4500 omnidirectional terminal has been well received since its November launch, and we've seen a lot of enthusiasm for our new terminal road map from several new distribution partners. Our 4510 terminal, a hybrid MSS terrestrial version of the 4500 terminal, should be available in mid-2020, and we are pushing forward with plans to develop new technologies that will enable us to offer devices that will greatly increase the potential addressable market for global satellite-delivered M2M and IoT services. Full integration of the S-band satellite services into 5G networks remains our longer-term strategic goal, and we also continue to explore ways to integrate our complementary ground component authorizations into these and other developments. I'll now turn it over to Dave. -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [7] -------------------------------------------------------------------------------- Thank you, Anders. Like last quarter, I will be speaking to our adjusted EBITDA measurement. The measurement excludes from EBITDA certain nonrecurring items as well as gains and losses on our investments and unrealized gains and losses on foreign exchange. More details are in the GAAP to non-GAAP reconciliation in our earnings release. We believe that adjusted EBITDA more closely represents our operating efficiency and financial performance. Before I discuss our results, I'd like to address a few items that impacted our financials in the fourth quarter. As discussed in more detail on our 10-K and press release, the Supreme Court of India issued an order affirming certain license fee assessments, interest, penalties and interest on penalties imposed by the Indian Department of Telecommunications, related to a license fee dispute with the Government of India that dates back over a decade and has affected the entire Indian telecom industry. On February 14, 2020, the Supreme Court of India denied the petitions filed by us and other telecommunications service providers asking the court to modify the order to permit the DOT to calculate the final amount due and extend the payment deadline. As a result of the Supreme Court decisions and based on the DOT's current methodology for assessing penalties and interest, we booked an additional accrual of $61 million during the quarter. This accrual impacted SG&A expenses by $2 million and interest expense by $59 million. Net income attributable to noncontrolling interest had a corresponding offset of $9 million. Adjusted EBITDA excludes all activity related to this dispute. We now have $80 million accrued for this matter as of December 31, 2019. Any eventual payments made with respect to the ultimate outcome, may be different from our accrual, and such differences could be significant. We also made a change to our accounting process on how we report our equity method investments by shifting reporting to a 3-month lag. We believe this will remove some of the variability from our reporting due to periodic adjustments within the organization to the entities we've invested in. Because of this change, our Q4 results and equity in earnings of unconsolidated affiliates line excludes Q4 '19 activity. Finally, with the closing of the Yahsat joint venture in Brazil, Q4 includes December operational activities for the new organization with the assumption of assets and liabilities that were part of the transaction. As Pradman mentioned, we are excited about the conclusion of this transaction and the new opportunities it will provide. Now to the financial results. Consolidated revenue in the fourth quarter was $499 million, a growth of 10% over the same period last year, driven primarily by growth in our Hughes segment. Consolidated adjusted EBITDA in the fourth quarter was $156 million compared to $131 million last year. Our net loss from continuing operations was $56 million in Q4, the loss declining by $73 million from last year. This change was primarily due to the impact of an asset impairment in Q4 2018, higher net gains on investments and higher operating income excluding the asset impairment. This was partially offset by higher interest expense, which increased by $45 million due to the impact of the $59 million from the Indian license fee dispute. Capital expenditures in the quarter were $104 million compared to $140 million in Q4 of last year. The decrease was primarily due to lower spend on construction and infrastructure associated with satellites. Free cash flow, defined as adjusted EBITDA minus CapEx, was $52 million during the quarter. With regards to our capital spend in 2020, we anticipate it will be higher than the $418 million total that we spent in 2019, primarily driven by continued spend on the Jupiter 3 satellite program and associated infrastructure as well as consumer premise equipment in South America. Turning to the segment. Hughes revenue in Q4 was $492 million, an 11% increase over last year, driven primarily by growth in Hughes consumer service and enterprise hardware sales, offset partially by lower enterprise services. Hughes adjusted EBITDA in Q4 was $177 million, a 17% increase over Q4 last year, primarily from the higher margin associated with our consumer business, which grew twice as fast as our other business groups in 2019. ESS revenue in Q4 was $4 million, flat to the same period as last year. Adjusted EBITDA was $2 million in Q4, also flat year-over-year. Adjusted EBITDA in the corporate and other segment in Q4 was a loss of $23 million compared to a loss of $22 million last year. Corporate overhead and other spending increased primarily due to continued investment in corporate development activities such as EchoStar Mobile. We are also seeing the impact of certain real estate that was transferred to DISH as part of the BSS transaction, which was not treated as discontinued operations. These unfavorable impacts were offset by lower losses in equity in earnings of affiliates, impacted by the change in our equity accounting that I discussed previously. We ended the quarter with $2.5 billion of cash and marketable securities. We continue to invest in opportunities that we believe have attractive returns and are constantly evaluating ways to foster growth, both organically and inorganically. This includes potential investments in technology services or joint ventures that can expand our footprint or product road map. We constantly evaluate our capital structure and like the optionality our balance sheet provides. Let me turn it back over to Mike. -------------------------------------------------------------------------------- Michael T. Dugan, EchoStar Corporation - CEO, President & Director [8] -------------------------------------------------------------------------------- Thanks a lot, Dave. Our goal in 2020 is to continue to operate the business in an efficient manner and pursue ways to increase the yield on our revenue-generating assets. We're also very focused on managing the build of Jupiter 3, selecting a launch provider and implementing the associated ground infrastructure. We will continue to explore opportunities in pursuit of our strategy of being a global connectivity provider of people, enterprises and things. These are extremely exciting times for our industry, and we're well positioned from a technology and financial standpoint to continue to be a global leader in broadband satellite networks and services while expanding into new areas. With that, let me close by saying I'm looking forward to an exciting 2020. Let me now turn it over to the operator to start the question-and-answer session. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Ric Prentiss of Raymond James. -------------------------------------------------------------------------------- Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [2] -------------------------------------------------------------------------------- Couple of questions. First, within the fourth quarter, Dave, were there any onetime items to call out as far as what might have helped revenues and EBITDA? And if I read the 10-Q quick on a busy day, looked like the Yahsat JV might have contributed less than $1 million in the quarter. But just wondering, any other one-timers we should be thinking about? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [3] -------------------------------------------------------------------------------- No. I don't think there was anything specific. I'll ask Pradman if he -- anything that comes to mind. The Yahsat, the operational impact and financial impact in Q4, obviously, it was only 1 month and it was relatively minor, as you point out. There was probably an acceleration of some of the OneWeb shipments in Q4 that probably helped a little bit, but we anticipate that's going to be ongoing now with the launch of their satellites. Pradman, is there anything else that you can think of? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [4] -------------------------------------------------------------------------------- No. I think I agree with you, what you said. -------------------------------------------------------------------------------- Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [5] -------------------------------------------------------------------------------- Okay. And then, I think, I saw the Jupiter 3 launch is looking like 2021. Still need to select a launch provider. But any update as far as what timing you're looking for, for the satellite to be completed construction and targeting for launch and service? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [6] -------------------------------------------------------------------------------- Yes. Ric, as you know, I mean, these are complex builds and over an extended period of time. 2021, I understand it's pretty broad range. But given how far we are out still on it, we feel comfortable saying a launch in 2021, but really are not comfortable getting more specific than that. -------------------------------------------------------------------------------- Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [7] -------------------------------------------------------------------------------- Okay. And I think probably the top question we've been getting, really, this whole calendar year has just been, how does the Hughes business compare to what's happening with all the new LEOs that are being launched? Pradman, you mentioned that there's a hybrid future maybe between GEOs, LEOs and terrestrial. But a lot of people are just wondering what does Starlink mean? What does OneWeb mean? What does it mean from an addressable market, but also competitive dynamics? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [8] -------------------------------------------------------------------------------- Sure. The basic premise here is, of course, that what LEO brings to the party is coverage and latency. The fact that you don't have the delay problem that the GEOs have. So those are the 2 advantages of the LEOs. The GEOs bring to play the fact that you can address high-density areas with a lot of capacity at the lowest possible cost. And so that's the advantage of the GEO. So the idea is when we are providing network services globally by creating a hybrid configurations between the LEOs and the GEOs, we are able to, first of all, cover every square inch of the globe, not only with our GEOs, but with the LEOs. And then we have the capacity and the cost efficiencies of the GEOs to address high-density areas like beams over New York or San Francisco or the major metropolitan area and where a lot of our customers still come from. So by creating a hybrid structure based on the application and where the latency comes into play and based on the geography between the 2, we'll have a very strong service offering to the market. -------------------------------------------------------------------------------- Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [9] -------------------------------------------------------------------------------- And if people think about the ground equipment costs, what are you seeing out there as far as the cost curve for some of the LEOs from their user equipment side versus yours? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [10] -------------------------------------------------------------------------------- Well, there are 2 models there: One is a model for the enterprise market, like for cellular backhaul, et cetera, where the phase array antenna, which is the main cost element, is today higher than what it would be 2, 3 years from now. So currently, the phase array antenna probably is around -- was going to be around $1,000. But it's rapidly decreasing in price over the next 3, 4 years. The consumer market will obviously not be able to support $1,000 antenna. So the initial applications of LEOs will primarily be for the enterprise market, where that price is a reasonable number to be able to meet the business requirements. But to get to the residential market as the largest volumes, the cost has to be driven down to the next level, which I think will happen as technology moves on in the next 2 or 3 years. -------------------------------------------------------------------------------- Richard Hamilton Prentiss, Raymond James & Associates, Inc., Research Division - Head of Telecommunication Services Equity Research [11] -------------------------------------------------------------------------------- Last one for me, just a quick one. David, any thought about disclosing more financials now that you've done the transaction with DISH, maybe U.S. versus LatAm, besides subscribers or enterprise like Pradman was just talking about versus consumer. Any thoughts about how you run the business and any other financials that might help us model the company? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [12] -------------------------------------------------------------------------------- Yes, that's an ongoing conversation, Ric. Part of the issue that we have is our accounting systems aren't set up to accommodate that. But we're continuing to work and look at ways to do it. Obviously, if we start defining different segments, we have to be able to allocate cost to those segments, and many of those operations today are combined. And those cost allocations, obviously, have to be in a format and enough discipline behind it that they could be audited to allow us to disclose different segments. So it's something we're interested in doing. It's something that is constantly on our mind. But certainly, for the end of Q4, we chose to stay with the traditional segments that we have. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from Chris Quilty of Quilty Analytics. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [14] -------------------------------------------------------------------------------- I didn't have time to go through the 10-K in full, but it looks like the quarterly net adds were sort of restated with -- from what they had previously been for the consumer business. And I was wondering, can you well, a, clarify whether that I'm, in fact, correct on that? And b, give us a sense of what the underlying changes were that resulted to the new numbers? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [15] -------------------------------------------------------------------------------- Yes, Chris, we're all looking at each other with a questioning look. We're not aware of any changes that we made in how we disclose those numbers relative to historical numbers. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [16] -------------------------------------------------------------------------------- Okay. That's fine. I must have hit upon an incorrect section there or my read of it. Second question here is, how are you going to account for the JV subscribers on a go-forward basis? Do those all accrue fully to Hughes and then you've got a minority interest back on the partnership? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [17] -------------------------------------------------------------------------------- Yes. I mean the combined joint venture operations will be fully consolidated. We'll account for everything on that basis and obviously, minority interest from a financial statement standpoint. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [18] -------------------------------------------------------------------------------- And the subscribers that you brought in, was that the whole sum of their existing installed base? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [19] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [20] -------------------------------------------------------------------------------- Yes, in Brazil. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [21] -------------------------------------------------------------------------------- Okay. So they've got a lot of room to grow, presumably. Or can you remind us what... -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [22] -------------------------------------------------------------------------------- Yes, absolutely. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [23] -------------------------------------------------------------------------------- And when did the satellite, if you could remind me, come online? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [24] -------------------------------------------------------------------------------- The one in Brazil, it came about a year ago. -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [25] -------------------------------------------------------------------------------- About a year ago, yes. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [26] -------------------------------------------------------------------------------- Al Yah 3? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [27] -------------------------------------------------------------------------------- Yes. Al Yah 3 came onboard about a year ago. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [28] -------------------------------------------------------------------------------- Okay. So -- and I think was the number 20,000 subscribers that they've brought on in the first year? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [29] -------------------------------------------------------------------------------- Yes. That's the number of subs that we -- that we're reporting as acquired. Yes. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [30] -------------------------------------------------------------------------------- Understand. And were the subscriber plans similar to what you've been offering through your Hughes Brazil subsidiary? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [31] -------------------------------------------------------------------------------- Yes. Very close. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [32] -------------------------------------------------------------------------------- Okay. Okay. Shifting over to India, I mean, what are your expectations for the potential growth there in the maritime market? And I guess, for Dave, how does that all get reported as enterprise revenues? Or does that flow through also in the consumer side? -------------------------------------------------------------------------------- David J. Rayner, EchoStar Corporation - Executive VP, CFO, COO & Treasurer [33] -------------------------------------------------------------------------------- Well, I'll let Pradman talk about the prospects. From an accounting standpoint, pretty much everything in India is enterprise. -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [34] -------------------------------------------------------------------------------- Yes. I think it's -- this maritime market is a brand-new market for us and for our Indian subsidiary. We've got initial 2 customers and this is addressing primarily the coastal market around India. If you're familiar with the geography of India, it has a large coast line that goes from the west to the east side. And so this will -- this market is going to address the ships that ply that line. So it's right now just 2 customers and a few ships, but we are hoping that as we develop the service that it will generate some decent revenues for us. And then we are also taking that same kind of technology into potentially other international markets, which have similar applications. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [35] -------------------------------------------------------------------------------- Understand. So is this intended as a regional-only coastal service? Or it sounds like you're indicating that perhaps you would look for ways to integrate that service with a roaming or global-type capability, either that you build or partner with others? -------------------------------------------------------------------------------- Pradman P. Kaul, EchoStar Corporation - President of Hughes Communications & Director [36] -------------------------------------------------------------------------------- Yes. Initially, it's clearly a regional service because the satellite that covers India goes a little bit outside so we can cover the coastal areas. If you had a ship that was going from India to Europe, it obviously wouldn't have the same satellite, so you'd have to develop roaming relationships. It's a bit premature for us to address that market. That's the market that Inmarsat and some of the larger maritime satellite carriers address. But we'll see how it develops. But right now, it's focused as a regional service provider. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [37] -------------------------------------------------------------------------------- Okay. A question for Anders. I think you indicated that there were some perhaps hardware product announcements this year. Is there a particular trade show or event that we should look to for those announcements? -------------------------------------------------------------------------------- Anders N. Johnson, EchoStar Corporation - Chief Strategy Officer & President of EchoStar Satellite Services L.L.C. [38] -------------------------------------------------------------------------------- Well, the EML teams have been participating in sort of the relevant trade shows across Europe. I know that their -- recently, there was a utility show, I believe it was based in the U.K., at which they introduced some of the product road map to the market. I guess, we're targeting a couple of different verticals initially and are only starting to participate in the respective industry conferences and the like. So I think you'll see more and more of our presence at those, and it would be through those venues that we would be targeting and rolling out specific products and applications. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [39] -------------------------------------------------------------------------------- Great. And it sounds like you've reserved a launch slot for the LEO satellites. When would you expect those to be in service? And can you give us an idea of what the sort of prototyping, testing, customer beta/rollout to services will look like over the course of the next year or 2? -------------------------------------------------------------------------------- Anders N. Johnson, EchoStar Corporation - Chief Strategy Officer & President of EchoStar Satellite Services L.L.C. [40] -------------------------------------------------------------------------------- We haven't spoken much about that publicly. I think the only things that we've discussed is the fact we have a number of satellites in the manufacturing process, 2 of them are nearing completion. And as I stated previously, we're going to launch 2 next month on 2 different launch vehicles. -------------------------------------------------------------------------------- Christopher David Quilty, Quilty Analytics, Inc., Research Division - Research Analyst [41] -------------------------------------------------------------------------------- And with a number in production, what would theoretically be the size of the constellation? -------------------------------------------------------------------------------- Anders N. Johnson, EchoStar Corporation - Chief Strategy Officer & President of EchoStar Satellite Services L.L.C. [42] -------------------------------------------------------------------------------- We haven't disclosed any of that. And I don't think this is the appropriate time to do so. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- And we have no questions at this time. Presenters may continue. -------------------------------------------------------------------------------- Terry Brown, EchoStar Corporation - VP of Finance [44] -------------------------------------------------------------------------------- Okay. Thank you, operator. We thank you, everybody, for joining, and we look forward to talking to you next quarter. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you, everyone, for participating. You may now disconnect.