Advanced Television

Analyst: EchoStar FY below expectations

March 15, 2022

By Chris Forrester

Charlie Ergen’s EchoStar finished the year “with a thud” according to a report from Quilty Analytics.

EchoStar has as a subsidiary a fast-growing business in Hughes Network Systems. But despite this benefit the end-of-year results were a disappointment.

Hughes service revenues decline some 2 per cent and representing the first fall since EchoStar acquired Hughes back in 2011. There was also further subscriber falls on the consumer side of the business (down some 4 per cent, net loss 48,000) and having fallen for the 5th successive quarter. US subs stayed firm but international losses are widening.

“Despite favourable results throughout 2021, EchoStar finished the year with a thud, reporting revenue, subscriber, and margin trends that were well below expectations. The key issue is satellite capacity, which is not only impacting Hughes’ North American business but now also their (previously growing) international business. The long-delayed Jupiter-3 satellite, now scheduled to launch in 4Q22 will resolve these capacity constraints, but not until 2023. In the meantime, subscriber losses are likely to grow,” warns Quilty.

“Meanwhile, the enterprise equipment business, which had been a bright spot for the company, was dealt an unfortunate blow with OneWeb’s abruptly paused launch campaign, and is now likely to decline in 2022 rather than grow,” adds Quilty.

EchoStar’s CEO Mike Dugan is retiring after some 30 years in the business.

“New CEO Hamid Akhavan comes from outside the traditional satellite industry and will surely bring some new perspectives on growth (and perhaps acquisition) opportunities, but absent dramatic new moves, EchoStar will likely move sideways in 2022, at best,” adds Quilty.

The report also updates EchoStar’s ‘S-band’ strategy, saying: “Following the failure of two prototype S-band satellites in early-2020, EchoStar successfully launched its EchoStar Global III satellite on SpaceX’s Transporter-2 mission in June 2020 and brought the satellite into use (BIU) during Q3, thereby securing its Sirion-1 spectrum filing with the ITU. EchoStar does not anticipate deploying a full LEO network until 2023 or 2024.”

But 2023 should be better. “2023 should be a turnaround year for EchoStar, with the addition of new Jupiter-3 capacity and the resumption of OneWeb gateway sales. We expect the Hughes business to add 31,000 subs in 2023 (as compared to a loss of 142,000 in 2022) and also benefit from improved ARPUs. These gains come with a note of caution, however. We expect Hughes’ EBITDA margins to decline 3-4 points following the launch of Jupiter-3, as Hughes ramps up sales and marketing activities and previously capitalised costs are expensed. Notably, our model does not reflect any substantial (incremental) contribution from the ESS business or OneWeb broadband sales to India, both of which we view as 2024 event.”

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