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EchoStar praised, forecast raised

November 17, 2020

The bulk of EchoStar’s business these days is focussed on its wholly-owned subsidiary Hughes Network Systems which itself is a major supplier of satellite-based broadband to consumer and business users.

Last week EchoStar – itself controlled by Charlie Ergen – reported better than expected results on revenues and EBITDA.  The results have prompted a significant reappraisal and raising of expectations for 2021 from analysts at Quilty Analytics.

Quilty say that despite ongoing coronavirus headwinds and capacity constraints in North America, EchoStar delivered solid ~9 per cent y-o-y growth in its core consumer broadband business, led once again by international demand.  International net adds nearly doubled y-o-y to 43,000, driven primarily by Latin American capacity on EchoStar’s joint-venture satellites.

“Meanwhile, EchoStar’s enterprise business has been slower to recover, with equipment sales declining 29 percent and service revenues down for the sixth consecutive quarter (down ~7 per cent).  We expect this trend to reverse in 2021, as OneWeb equipment orders resume [as OneWeb exits bankruptcy] and EchoStar’s Indian JV with Bharti opens a “reasonably huge” opportunity in cellular backhaul,” suggests Quilty.

The report admits that they are somewhat disappointed, but not surprised, by the delayed launch of Jupiter-3, “which we are now projecting to come online in Q3/22.  EchoStar’s decision to partner with Inmarsat on the North American IFC market will help to accelerate the satellite’s fill rate and profitability, while also complicating the path of its arch competitor, Viasat,” says Quilty.

The analysts do not expect the Covid headwinds to vanish next year saying that the virus-related problems should “diminish” as 2021 evolves and helped by valuable recent contract “wins”.

As to revenue forecasts Quilt expects Consumer broadband to grow an estimated 9 per cent y-o-y, while Equipment sales will rebound positively by some 19 per cent with potential upside if OneWeb gateway shipments resume at volume.

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