EchoStar Corp (SATS) 2007 Q4 法說會逐字稿

Good afternoon. My name is Cara and I will be your conference operator today. This time, I would like to welcome everyone to the EchoStar Corporation 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)

Mr. Kiser, you may begin your conference.

Thanks, Cara. It is Jason Kiser with DISH -- or with EchoStar Corporation, actually. Joined today by Charlie Ergen, our Chairman and CEO; Carl Vogel, our Vice Chairman; Bernie Han, our CFO; and Stanton Dodge, our General Counsel. We need to start by doing our Safe Harbor disclosures.

Thanks, Jason. Good morning, everyone. As you know, we do invite media to participate in a listen-only mode on this call, so we ask that the media not identify participants and their firms in your reports.

We also do not allow audio taping of the conference call and we ask that you respect that. All statements we make during this call that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements.

I'm not going to go through a list of all the factors that could cause our actual results to differ from our historical results or forward-looking statements. Instead I ask you to take a look at the front of our 10-K for a list of those factors. In addition we may face other risks described from time to time in other reports we file with the SEC.

All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements, wherever they appear. You should carefully consider the risks described in our reports and should not placed undue reliance on any forward-looking statements that we make.

Additionally we assume no responsibility for updating any forward-looking statements that we make. With that out of the way, I'll turn it back over to Jason.

Thanks, Stanton. Cara, we're just going to go straight into Q&A, so you can open up the lines.

(OPERATOR INSTRUCTIONS) Kit Spring, Stifel Nicolaus.

Can you talk a little bit about your rationale for the spin and whether it had anything to do with AT&T whatsoever?

Can you talk about who you think your most realistic targets for new customers are on both the set-top box and fixed satellite services? Thanks.

This is Carl. Our rationale for the spin I think was lined out in our Form 10. That is, from a DISH and a SATS standpoint, DISH is a consumer product company. Its valuation is essentially predicated, in our view, based on its revenue growth, its subscriber metrics, its ability to generate free cash flow.

We came to the conclusion that we really were not seeing any particular value into owning infrastructure. Therefore we thought there was an opportunity to not only focus investors on that infrastructure business, but to grow that business as well in terms of leasing capacity to DISH and to others over time. And time will tell whether that is a successful premise.

I'm not going to comment on whether AT&T was in mind or not. I think we think there's plenty of opportunities for both DISH and SATS with and without AT&T.

In terms of what customers do we think are out there for us, I think there's plenty of people that are looking for MPEG-4 IP-based delivery solutions. They're MBU operators, they're regional telcos, they're new entrants that we have not even heard of yet today.

We think that EchoStar Corporation or SATS can provide a turnkey opportunity there in delivering satellite capacity, integration services, proven set-top boxes with good technology, and the ability to integrate all that in a seamless situation and demonstrated it historically at DISH.

In terms of customers for our set-top boxes going forward, I think that will be a process that will take time. We have -- we think the digital transition plays well into that strategy.

We have announced some of what we call our TR-40 and 50 projects, which are digital analog converters. We think there's an opportunity there.

We think again the combination of our leading DVR technology, our ability to integrate MPEG-4 technology, the ability to have a Sling product where you can have some ability to transport content to other devices -- all give us some market factors that will allow ETC to potentially expand its subscriber base beyond DISH.

But only time will tell if that's successful. But that is effectively the logic.

On the fixed satellite services side?

Well, the fixed satellite services side, I think again we're going to have to develop that business. We've got government contracts there today. We've got people that are looking to -- I'm not going to go into our customer list -- but that deliver a product kind of in a closed-circuit-like environment.

We also think there's opportunity again in the IP space. That could be small telcos, that could be MDUs, that could be a lot of different things. Again time will tell whether or not we're successful in expanding into those markets.

We also think -- we may be wrong -- that the existing FSS providers are highly leveraged without maybe the willingness or financial capacity to invest in next-generation satellites. Whereas SATS has some capacity, has a pretty good balance sheet to date, and we will just again see how market opportunities present themselves over time.

Okay. Then related to the fixed satellite services business, what was the rationale for keeping just nine instead of all of the satellites from DISH?

The rationale is effectively we've got a full-CONUS BSS business today with satellites that have been up in the air for a while. We looked at numerous scenarios including spinning all of our satellites off.

But we just came to the conclusion that, A, it was better to retain the full CONUS BSS capacity of DISH and migrate the other capacity essentially in the Eastern Arctic over to SATS.

Okay, I have some others, but I will let someone else try for a while.

Benjamin Swinburne, Morgan Stanley.

I will try not to blow up the power grid this time. A couple of questions, guys.

I think it is around $330 million you're getting from DISH on the FSS side. I was trying to actually count up the number of usable transponders on the satellites that were spun out, and we are getting pricing numbers that just seems way too high. You talk about using spot pricing to set those deals.

So maybe any numbers you can give us to help us understand what is the available transponder count on the satellites that have been spun out to SATS; and what the utilization is on those? Because that would tell us a lot about what the incremental revenue opportunity is.

Then along that same lines, you talked about the IT business, Carl, delivering to rural telcos. Are you guys able to use your DISH Network programming cost structure to price that stuff out? Because obviously that that would give you a huge advantage over other rural telcos, or your customers who to have to go direct to the content guys.

I'm not going to comment on what rights we may or may not have just because those contracts are confidential. I think we believe we have an advantage certainly in the marketplace.

To the extent those contracts would be used for the benefit of SATS, DISH would have to be paying for that. But again I'm not going to comment on specific agreements or specific rights that we have.

But we do believe that we certainly can deliver at a minimum of fully-integrated system. Whether or not we can pass our discounts is again something that I'm not prepared to comment on.

Any help on the transponder capacity side, on the current existing fleet?

(multiple speakers) I don't have those.

You can probably piece together a good chunk of it if look in the back part of the 10-K, where there's a footnote that is called the statement of net assets that's contributed by DISH Network. In there we go through satellite by satellite and talk about how many transponders are being utilized in each of those cases.

Okay. Maybe I'll just try one more attempt. Back when we looked at PanAmSat before it was acquired, they were I believe getting somewhere in the ballpark of $1.5 million to $2 million in revenue per transponder per year.

Is that close to where spot rates are in the market today? Or have they significantly gone up from a couple years ago?

You are comparing to apples to oranges. This is Charlie. FSS capacity is typically less expensive than DBS capacity. So it depends on what capacity you are leasing. But the prices that DISH is paying for SATS are market prices for DBS capacity.

But typically that is a little higher than FSS because your cost in the ground is a lot less, right? Because your dish is smaller.

Then it also depends on what orbital slots. A DBS orbital slot is a limited resource, 9-degree spacing. There's not very many of them.

The FSS spots that PanAmSat had, for example, are every 2 degrees, so there's a lot of them. So those are the factors.

Okay, that makes sense. Thanks.

Adrian Meli with Farley Capital.

Have you guys talked about whether you're going to be putting the Sling technology into your set-top boxes that DISH will be selling and you'll perhaps be selling to other operators?

A second question on the digital conversion. I saw that you guys were going to price your lower-end box at $40. It looked like you were going to be taking a loss on that. In your commentary it suggests that you see advantages to perhaps sell customers maybe DISH services down the road.

So will there be some agreement where DISH will pay SATS, or how will that work?

I will start with the Sling question. We announced at CES that we had plans to integrate Sling technology into the DISH Network MPEG-4 box sometime in the latter portion of 2008.

We have had some conversations with some operators about their interest -- other operators, independent of DISH -- about that particular product or that particular application. But DISH would certainly be at the lead edge of that particular implementation.

In terms of digital conversion, I'm not quite sure I understood the question.

I think I understood it. Digital conversion, if SATS just sold $40 boxes, they will -- we expect we would lose money. But SATS also has a product that actually won best of the show in CES. It was called TR-50, which is a digital box with a hard drive. That box we think we see as a revenue opportunity.

We think just as almost everybody in the pay-TV business ultimately is going to have a DVR or some DVR functionality, we think that even people who don't pay for TV are going to want to be able to record TV. Right? So we think that product even for the 13 million to 15 million homes has a lot of legs in that space, and it is a very good product.

So we think the total digital transition is a potential place that SATS can play a role. It is possible that people like DISH or others might want to become customers of SATS' products. But again there is no guarantee of that.

Obviously any economics trading between -- SATS is not in the business, would not be in the business of losing money if SATS was getting -- if DISH was getting a customer out of it, you know. So there would have to be some kind of price, economic incentive for SATS to participate in that.

Thank you.

[Vijay Pat], Ivory Capital.

A couple quick questions. On the set-top box business, can you say if the gross margin you're showing on a pro forma basis is pretty much in line with what you would expect to get with the new customers?

I think -- I don't know what we're going to get with new customers until we see what new customers get. I think there are some public comps that you could look at where others have higher margins than what we have known in the pro forma.

But I think again until we get out and get a customer, it would be speculation as to whether it's higher or lower and to what degree. I think, again, we may accept lower margins in return for longer commitments and larger commitments. But again until we get some tangible contracts in place it would be pure speculation.

But we think there certainly are examples out there where set-top box manufacturers can earn 25 to 30 points. Clearly our pro formas show larger margins than that.

But again until we get some traction in the business, it is speculative. It would be speculative on our part.

Okay. I mean in '07, the margin that you are showing for the equipment that you sell to DISH, is that actually reflective of the margin you're actually getting? Do you expect that to ramp with DISH over time?

That margin reflects the agreement that is now in place between the two companies for receivers as well as other (inaudible) equipment.

Okay. So is that kind of a -- is that a fixed margin for a period of time?

That is a two-year agreement; and at the end of the two-year period there's going to be a renegotiation between the two parties. The two parties will agree to whatever ultimately makes sense for the two or not.

Okay, great. Then I know when you put out your Form 10, you guys gave some commentary on directional pricing and volume for the set-top boxes. Can you talk about that for '07? Maybe also can you given numbers of set-top boxes for the last few years?

I don't know what you are referring to in the Form 10 about directional pricings and volumes. I don't recall doing that, other than talking about what had been the DISH business and what had been sold to third parties.

Obviously DISH is the largest customer of SATS; and its volumes for the most part will be driven on the success of the DISH gross adds, at least in the short run.

But I don't think we have said much more than that, unless I am missing something.

I think the commentary was, I think you guys said that -- our box volumes to the DISH Network were variously up or down; and the pricing was variously up or down in 2005 and 2006.

But I think that commentary was not there for '07. So if you don't have that, that's fine.

Yes. I don't think we have that.

Okay. Do you guys expect the number of boxes you sell to DISH to increase, say, next year, or just over time?

That would be tantamount to giving you gross adds guidance for DISH, so I don't think we are prepared to do that.

I think we talked about what we think the prospects are for DISH going forward. But we are not going to put any specificity around that at this point.

The box volume will be driven not just by DISH gross adds, but also upgrades, upgrade events at DISH Network as well. Those two events will drive ultimately the volume growth in that one particular customer.

Okay. Then just one more question to squeeze in. But when you look at your satellites, the ones that are currently being used to service DISH Network, I think those are referred to as BSS or DTH satellites.

But I was wondering what the alternative uses for the satellites are; and at what point are you guys planning to have DISH transition away onto their own satellites?

Well, again, DISH transitioning away from their own satellites or from SATS satellites, again as I said at the outset, we're not sure that DISH may not own its satellites over time.

DISH may decide that its (inaudible) model is going to look more like for example the BSkyB model, where a third party owns the satellites and the subscription television company merely leases capacity from a third party. That third party may be SATS. That third party may be somebody else.

But I am not quite sure. Again, I understand the question; but I think we left the satellites that we left in DISH just because it was simpler. Those satellites had been in place for quite a long period of time, and it just made for a simpler transition.

Again, how we lease up capacity going forward will be a function of how effective we are in the market. I don't think there's any negative to have a BSS capacity to lease, because of the spacing requirements or the spacing advantages that Charlie mentioned a minute ago.

So I think we are reasonably well positioned. Who the clients will be again for that SATS capacity could vary from, as I mentioned, regional telcos, people that want in the IPTV business, significant MDU providers, etc.

Okay. So I guess the current DISH business that you guys have on your satellites, you do not expect that to go away over time?

There are three satellites we talked about in our Form 10 that are again in our 10-K, which we do talk about, that were utilized by DISH Network in 2007 and as such were reflected in our pro forma numbers. They being AMC-15, AMC-16, and Echo IX.

We talked both in the Form 10 and the 10-K that those are satellites that DISH Network may not perhaps have a need for over the long run. But there is some needs [back to the last] capacity with new business on the SATS side going forward.

Okay, but there are other satellites you guys have that are being used by DISH that will continue to be used?

Right.

The new AMC-14 that is being launched will be leased by DISH. I think -- what else is -- AMC? Echo III and Echo X11 are being leased, correct?

Those are all the 61.5 degree slots. So they have capacity for high-definition, local, international channels, and so forth. So those are all being leased by -- we expect those are being -- well, AMC-14 is going to be leased for I believe 10 years. Other two were leased for at least two years.

Correct.

So if we just look at those three satellites that you guys are talking about, what percentage of your sales in '07 did that account for?

We don't talk about it in the disclosures. Again in the Form 10 and the 10-K we talked about a scenario where if we didn't backfill that capacity it would probably -- we would probably be exposed for a write-down of up $250 million I think is what we said.

That is AMC-15, -16, and Echo IX.

Right, correct. That is the only thing we talked about there.

Unfortunately the picture will be a lot clearer after the first quarter, because you will see an actual Company. Right now we just don't have the kind of --

It's all hypothetical.

-- detail on pro forma that is going to get you where -- I know from a modeling perspective I think it's difficult, because you just don't have that information.

So it really is going to be like next quarter when you kind of all I think will come to make sense, and you will a her real good idea where we are leasing capacity, where we're selling (multiple speakers) receivers and so forth.

Then this is the very last thing but I just want to make sure I asked correctly. But if you look at DTH or BSS transponder capacity, if you don't use it for DTH services, you need to use it for something else?

I think potentially yes. I mean, DTH, if it is FSS capacity, I think everybody pretty well knows the uses from just as, you know, Intelsat or SES Americom, and so forth.

The BSS capacity just in some cases has an advantage where you have multiple locations for an install, or you want a smaller DISH, or you want less interference. Right? Or you want to increase power. Right?

So it has some advantages in certain cases. So that capacity in my opinion has always been a little bit more viable than the standard FSS capacity that Intelsat and SES Americom have.

Okay. Great, that's all really helpful. I appreciate that.

Chris Sommers, Greenlight Capital.

I noticed in your 10-K on page F-38 where you talk about the property and equipment that was contributed, there's $521 million of furniture and fixtures and equipment being depreciated over one to seven years. What are some of the major things included in there?

That's mostly equipment at our uplink centers in Cheyenne and in Gilbert.

Why is that equipment depreciated over seven years instead of like 10 or 15?

Those are the historical depreciable lives that we have used at DISH. So those lives carried over to SATS.

Because some of that equipment is digital processing signal equipment that amortizes over a faster rate than you might otherwise see. I think we have historically taken the position that we will depreciate things over a shorter life rather than a longer life, rather then stringing out a depreciation schedule on equipment the may become obsolete.

What is in these uplink facilities are satellite dishes and digital signal processing equipment, and they just have shorter useful lives than you might otherwise see in other things.

You have MPEG-2 compression equipment that (multiple speakers) quickly going to MPEG-4. You have got amplifiers that broadcast up to a satellite that continue to get more efficient. You actually upgrade those occasionally because you save on power. So you have got the -- so your equipment just [laps] -- it is more like computers than is like buildings.

Got it. Then secondly could you describe the history of your relationship with the executive officers and the Board of Directors of TerreStar prior to the investment? I was just wondering how that came into fruition.

We have said prior to spin we look at all sorts of opportunities and various spectrum plays, and certainly that was on our radar screen. We did not have any relationship with anybody, other than we went and looked at all sorts of different opportunities and saw an opportunity here to invest in something that we thought made sense for us in the long run. And therefore made the investment. But we didn't have any particular relationship with them.

Got it. Then one final thing. In the 10-K your 2008 satellite-related obligations are now $315 million. In the Form 10 they were only $180 million. I was just wondering why 2008 and thereafter increased so much from the Form 10.

The 2008 amounts include the commitments to DISH Network for satellite capacity.

They are obligations you have to DISH Network where you have to pay them cash?

What page are you looking at?

Hold on. On page 55, satellite-related obligations. You have an identical line in your Form 10, and they are very different.

Let us look into that and come back to that.

Hopefully we can come back on this call. You have the Form 10 in front of you? We will come back.

So let us come back to that.

Okay, in the Form 10, on your most recent Form 10 it is on page 70. So it is page 55 in the 10-K and page 70 in the Form 10. In the form 10 (multiple speakers) --

Is that your last question?

Yes.

Okay. We will take another question and we will answer that as soon as the (multiple speakers)--

That is satellite-related obligations?

Yes, sir. Thank you so much.

Adam Ritzer, CRT Capital.

Just a couple quick questions. Have you done anything in terms of your stock buyback yet? You said in the Form 10 you were going to initiate that fairly quickly. I'm just wondering if anything has been done yet.

Nothing has been done yet.

Okay. Can you help me understand how you guys look at your CapEx, let's say over a longer period of time, 5 to 10 years? Since it is going to be lumpy in terms of when you have new satellite builds, how would you look at that at an average?

You know, I think depends on where we have opportunities within SATS. So some of that could be satellite, and you know that -- satellites hope we don't get too lumpy. You've got three-year build plans, and so you look at those opportunities.

A lot of that depends on what competitors do and how much competitors reduce capacity or they continue to build satellites. I think it depends on where else you can invest. What other opportunities you have in the other side of the business.

So just an example, had we been a separate company, SATS is who acquired Sling; that was a 300 plus acquisition. A million dollar acquisition. So we are just going to spend money where we get a chance to make money at it.

Satellites is one of the things we like. But satellites are a bit more of a utility, it's a bit more of a -- some of them are for particular customers. So it's just a fixed-rate of return kind of thing.

Some of them you can go out and take a little bit more risk. If you see the CMB satellites that's for mobile TV in China, that is a bit riskier because there's lots of regulations and approval processes and so forth and so on that can't possibly be done before you start building the satellite.

So even though you have a customer, you have got a lot of risk in going through that. Well, there you hope to make a better return than a basic utility return, but you're taking more risk. We try got to balance that out.

Yes, we will do very few satellite projects, quote unquote, on spec. So I think you'll see us disclose as we contract satellites, which will then allow you over time to see the stream of CapEx going forward.

Keep in mind that it takes two and a half to three years to build and launch a satellite. So I think you'll see plenty of visibility as we see opportunities to again maybe build satellites in other parts of the world for other subscription companies.

But the way we look at it is we really don't say we're going to spend $1 billion a year going forward for the next 10 years on satellites. We look at it more -- where do we have an opportunity to take the integrated assets that we have and [staff], in terms of delivering a set-top box, integration of the engineering, and financing of the satellite, to build a business opportunity principally on a leasing basis in other parts of the world.

Let me answer the question a bit more generally. Within SATS we have a high degree of technical expertise to build and launch satellites with any number of vendors around the world. In fact we are one of the few companies that probably launched with everybody and darn near built with everybody.

We have a unique set of skills for uplinking signals to satellites around the world, particularly in the United States, with two main uplink centers, I think eight regional uplink centers. We have fiber conductivity between all those centers to 174 local markets.

We have world-class digital compression. Digital set-top box engineers with encryption and conditional access experience. We have a service network that knows how to service that product. We know how to build that product.

So we have got a lot. We have got, as Carl mentioned earlier, we essentially have some programming rights that would not be typical in certainly relationships with programmers for a long period of time, for opportunities that we think can help them. Whether that be in Sling or some other way. We have tremendous DVR and Sling and other technologies inherent in that digital engineering group.

We have an international expertise of complex projects around the world. While we have not focused internationally as much, that is certainly an area -- given the U.S. economy and given the value of the U.S. dollar -- that appears to be much more attractive than it was, say, two or three years ago. So that is an area that we continue to spend a bit more focus.

Those deals are long lead deals. The stuff you're working on internationally today may not bear fruition for two or three years.

So there is a tremendous amount of core competency in SATS. The key then is -- how do you manage that? How do you take your cash, how do you take your expertise, and how do go out and try to build that into a bigger Company?

It is probably a situation where we have again more kinds of opportunities than we could possibly do, and we will have to pick the best ones based on limited resources of personnel and limited resources of capital.

I appreciate your response. It sounds like you're excited. Just another question. You had talked about I think two satellites that are going to be launched in '08. You mentioned the China JV and one other. Can you update us what the status of those launches are?

Well, the first launch we have is AMC-14, which is going to be leased to DISH Network. So that is more of a utility. It is a fair return on our investment.

That launches -- that one is scheduled to launch in March, so not too distant future. The satellite is in Kazakhstan ready to launch.

The second launch that we have is CMB sat which is scheduled or anticipated to be late this year. That is for a Chinese customer, where it is primarily used for mobile video within China.

That one still doesn't have a definitive launch date. It still has regulatory approvals and other things that have to be accomplished before it can be launched. But it is designated to be -- it has got more risk and it has got a little bit higher return then a more utilities return.

The last question I had, I think another person asked you a question about the availability of your transponder capacity, what percentage you can still lease. Did you ever answer that? Or you don't want to answer that? I just want to touch on that again.

I think what I can say is we have excess capacity particularly in the fixed satellite service, AMC-15 and -16. We have excess capacity. DISH has some capacity that's not long-term but if it frees up would present additional capacity. Is that fair? Bernie?

Yes.

I appreciate that.

I guess that is an interesting question because if you look at it from an investor perspective, we have room to grow because we have capacity that we could lease. On the other hand, we have obligations for that capacity that if we don't lease it could be a liability.

So how that right -- how you lease that long-term versus the cost that you already have for that long-term committed will be an interesting dynamic going forward. So we have both an opportunity and a risk.

Okay, well I'm sure you'll do an excellent job. I appreciate your answering the questions. Thank you.

Do you have an answer to (multiple speakers) question?

Yes, getting back to the gentleman's question about our future satellite obligation, payment obligations, he pointed out that on page 55 of our 10-K in a pro forma schedule we are estimating what the satellite-related obligations are over the next four or five years.

You can see in that schedule there's a total of $916 million of payments, of which $316 million reside in 2008. As you back to the Form 10, which was again a pro forma statement, but as of an earlier point in time, it showed that total satellite-related obligations over the next five years would be $987 million.

So the decrease since the time of we filed the Form 10, the decrease overall since the time we filed the Form 10, reflects payments that have been made in the interim period.

The reason that the 2008 amount increase was in the Form 10 schedule, there were payments -- it reflected payments to be made in 2007. And I think as we've talked about, some of the satellite deliveries and corresponding payments have been delayed versus what we had previously anticipated.

So hopefully, that answers the question. If it doesn't, let us know. We will try to handle that.

[Michael Bavey], Yorkville Management.

It seems to me there is significant overlap and duplication in the things that SATS is doing and the things that DTV is doing. I know Charlie has talked about maybe the opportunity to have some more cooperation, given the competitive environment.

Could you, Charlie, talk about the opportunities to do more with them, maybe from their economic perspective? Given your strengths at SATS in the context of the spinoff and the way things are set up now.

I am not sure I understood the premise. I don't think is a lot of duplication between what SATS does and what DTV does today. In fact I think there's probably fairly little.

Having said that, I think that obviously SATS I would expect would try to -- I mean, DTV buys set-top boxes from any number of people. They have always bought, I believe, from NDS, which was a sister company of Newscorp. But I don't think that Liberty owns any of NDS.

So I think it is an opportunity for SATS to perhaps at least have a discussion in terms of selling set-top boxes that can meet a price point and a spec for their product.

In terms of satellite capacity, obviously SATS would be happy to lease capacity to DTV if they needed it. It appears to me they have a fair amount of capacity within the satellite scheduled to launch next month. So I am not sure they need any, but that is certainly something SATS can talk to them about.

I don't think that DTV need any -- is lacking any experience in conditional access or integration. They certainly know how to do those kind of things. So there may be some opportunities in the set-top box, maybe peripherally on the satellite side over time.

Okay, thanks very much.

James Ratcliffe, Lehman Brothers.

Two questions. First of all, when you are looking at Frontier wireless in the 700-megahertz entity, I understand you can't talk about the progress within that. But would it make sense to have all the spectrum holdings of the former EchoStar contained under one roof?

Secondly, there is a [section] in the Q of a Class C of shares that appear to be standard vote except for a change of control for supervotes. Are those actually issued? If so, who has them?

Those Class C shares I don't believe are issued or held by anybody. That was a carryover of many, many, many years ago of potential transactions that never took place. I believe they are not in either DISH or SATS. My attorneys are nodding in the right manner.

There was a question about spectrum, whether it makes sense to put --

Put all our spectrum holdings in one place.

I would say if you really look at the difference between DISH and SATS, and Carl kind of alluded to this earlier, but DISH is more of a retail kind of company and it deals with consumers and all the things that go along with that. That is a little bit different company than a wholesale Company.

So it is hard to know exact answer to that question, but there are certainly cases where spectrum might end up -- on a wholesale basis it most likely would seem to want to fit into SATS, and if was spectrum that was being [used] on a retail basis it potentially could be in DISH.

Or it could be in SATS, and then [at] a wholesale business to DISH itself. A lot it depends on kind of risk-return, what -- where DISH wants to spend their money and so forth.

Most people around the world who have done it have put spectrum in companies and then leased them out. BSkyB and almost all of Europe and much of Asia, South America.

I think (inaudible) through the United States is probably the only place where you have got owner-operators doing it all themselves.

So a little bit depends on the marketplace. There was a day when the fixed satellite service multiples were 4 and 5; and all of a sudden they have gone up to 10 -- they went up to 10 and 11. They actually went higher than the DBS retail business. So the marketplace is going to make -- may drive some of those judgment calls.

All right, thank you.

Jason Bazinet with Citi.

Maybe this is an example of me having a firm grasp of the obvious, but I will embark on the question anyway. It seems like there's a very narrow way to define what Slingbox does today -- where you're traveling and you want to get access to your TV programming when you are in a hotel room.

Given what is going on with CMBStar, the investment with TerreStar with its attendant ATC regulatory relief, and the fiber connectivity you alluded to earlier, is it fair to say that you are sort of laying the groundwork for a wholesale mobile TV initiative within SATS?

I think that is -- I think that you could put those building blocks together in some form or fashion, although I don't know that you need all those assets to do that.

I think it is safe to say that in China the purpose of CMB sat is in fact for mobile TV. My understanding with TerreStar is that it is not a mobile TV satellite. So I don't want to mix people up. But in China certainly the potential to be involved in a mobile television product to 1.22 billion or 1.4 billion or 1.6 billion, depending on who you are talking to, is an interesting proposition.

But understand that the environment there is not necessarily one to necessarily make money. The government does things a little different. So it depends on which branches of the government are involved and so forth and so on.

So I think -- and the broad answer to the question is mobile television is probably something that is going to have some starts and fits and failures and successes around the world. Whether SATS can be a player in that remains to be seen.

Okay, thank you.

Benjamin Swinburne, Morgan Stanley.

I just want go back to a comment, Carl, you made about the BSkyB model. Actually, Charlie, you made a similar comment, which is you don't need to own the hard assets underneath it to be a successful operator.

Why not go that route when you created SATS in the first place and spin the entire fleet out into that separate entity? Was there a reason from a timing or legal perspective that you would need to do that in necessarily two steps that I am missing? Any additional color along those lines.

I think this is a question that was also posed, which is a similar vein. Which is if you think about -- and I am sure you guys have -- the same programming, video programming that is being uplinked and downlinked in the United States by yourselves, Direct, or by DISH Network primarily, DIRECTV, PanAmSat, and SES Americom -- I mean, it is a pretty inefficient model from that perspective.

Is SATS in any way a vehicle to try to create value by pulling some of that stuff together and eliminating some redundant assets?

It could be, Ben. I think that most of the delivery cable has today is C-band capacity. Most of what we have is Ku-band capacity. But certainly as things maybe get more efficient, that could be an opportunity for us.

I think that it was just in terms of spinning all the satellites to SATS, it was certainly something we looked at. But if you look at some of our indenture agreements, etc., we just felt it was appropriate to leave at this point some of the BSS capacity inside of DISH.

Therefore that is kind of the logic that we followed. We put satellites into SATS that -- both AMC-15 and -16, for example -- that are not used by DISH, as well as some satellites that are outside the full CONUS ring.

That was the logic. Whether it remains like that forever, time will tell. But that is principally the logic that we used at the time.

I think we wanted DISH to be able to control their own destiny (multiple speakers). They totally can do that. SATS has got to go figure out how to create other opportunities that other people may not want to invest in because longer-term things, it's a longer-term proposition. Or to create new -- invent new things that perhaps certainly on the DISH side they don't have the engineering expertise to do.

So that was -- we've been able to do -- there were a lot of ways to do it. That just seemed it ultimately would given -- and also be fair to investors and bondholders and so forth and so on.

The total package was -- how do you feel as an investor? How do you manage two companies that have different objectives long-term and make sure that we can provide growth opportunity on both sides?

Charlie, could you -- in a hypothetical world where every rural telco in the U.S. and AT&T and everybody else wanted to lease capacity from SATS, as you launch Echo XI and XIV and [CL-2] at DISH, could you move all the programming that they are using on the SATS fleet over to their fleet and free up all that capacity for your own business? Or is does that scenario not make sense from an overall capacity perspective?

I'm not sure I totally understand the question, but SATS certainly is interested in providing video, perhaps in a video IP format, as opposed to the way we do it at DISH, to any MDU or rural telco or urban telco or whatever.

I think SES Americom has talked about that kind of business plan. Intelsat I think has a customer who has talked about that kind of business plan.

We think we're better positioned because we have uplink centers, we have fiber connectivity. We have potential local channels via satellite that nobody else has.

We have set-top boxes. We have engineering to invent set-top boxes if somebody needs it. We have Sling technology.

So we have a lot of things that we think -- if that's a business that we are very well positioned for it. It is unclear whether that is a business yet. But certainly we have the satellite capacity to do that.

You know, other people have different ideas about how they do it. I think there is some inefficiencies. I am not sure. Some people went out and built uplink centers for VIPTV for probably tens or hundreds or millions of dollars of costs. That already existed in Cheyenne, Wyoming. It already exists in Phoenix, Arizona. Right?

It didn't make -- to us it didn't make a lot of sense to do that, but that is what competition is all about. If it comes down to competition, we would be very, very well positioned, and we bring a lot more to the party than just satellite capacity.

In the vast majority of those situations, the ultimate customer is going to have to have a direct relationship with the programmers. What we're going to provide is transport in a very efficient way.

Okay. Thanks, guys.

Gerard Hallaren, JRPG.

Last question covers some of your spectrum. First of all, can you explain the ancillary terrestrial component? How that resides between the two companies and what your plans or ambitions for using that might be.

I am not so sure I again understand the question. If you're talking about ATC, that exists in TerreStar, and we don't have any terrestrial components that I'm aware of.

The only (multiple speakers) we have is fiber.

We have fiber backbones that --

Fiber backbones.

Like you said come from -- as Charlie said I believe 174 cities back into both our Gilbert and our Cheyenne uplinks. But again those are dedicated again today for the DISH business.

But we certainly have excess capacity where we could backhaul or move content from one place to another, or [bytes]. But I don't know if that answers your question, but that's as (multiple speakers).

Let me try to come to the second part of my question and maybe then you can answer a third question that will make sense to all of us.

You've got a bunch of -- what is it? The 1.4 gigahertz spectrum covering roughly two-thirds of the United States with a gigantic 2 megahertz.

Yes.

How much of that is TerreStar taking?

We contributed that spectrum for equity in TerreStar.

Okay, so you no longer own that spectrum and it has gone to TerreStar?

That is correct. I believe it is more than 2 megahertz; I think it is 6 total.

Total of 6 megahertz? Okay.

I may have that -- it may be -- I may have it just a little off.

And that is a lease initially.

Oh, yes. We actually leased it to them.

So you leased to them, you did not give it up. How long is that leased?

We leased it to them. We may or may not give it up. That (inaudible). Those are nine-year lease, and that may or may not convert to equity over time.

Okay. You had said it is not for mobile video. Yet if I look at TerreStar, they are looking to provide a pretty general and pretty powerful all IP broadband network that mixes, that blends both terrestrial and satellite capacity. What is it going to be used for if video is to be excluded?

You'd have to ask TerreStar that question. Again, we made an investment in TerreStar. We have got a couple of board seats where we have people that worked and sat on those boards. That is going to be a question that TerreStar is going to have to answer over time.

I think in fairness to TerreStar, they have looked more -- they are really a disaster backup and perhaps government contracts. Obviously their satellite so far is not one that can be shot down. It is not one that has hurricanes. It is not one that is a subject of terrorism. So it is a backbone backup.

I think the potential customers come out of the 700-megahertz auction for them. They have talked about they talked with the government. It is not really a satellite that was -- at least my understanding, it was designed for video.

That doesn't mean that it maybe can't be used for video. I think that just wasn't the way that they are going. They have -- they are pretty far down the path on their business plan.

Whether we can add anything there or not remains to be seen. But we were interested enough in their business plan as we understand it that we -- to make investment.

Okay, then last question. You talk about your codec engineers, your compression engineers. Last I heard, you were using 19.6 megahertz to do an HD channel. Is that still about right?

No, it is considerably less than that today. It really depends on how the broadcast is being received by us. But I would say that -- I will put it in a little different terms for you.

I would say compression today on a satellite transponder is probably in the neighborhood of 10 to 12-to-1 compression. For a standard definition channel you probably get 2 HD channels in that, in that space. Right? (multiple speakers) other things, you can improve that. Are you with me?

I'm sorry, you get 2 HD channels for each standard channel?

No, no, for every five -- every about five standard channels you get about one HD channel.

Now I understand.

It takes 5 times the capacity for an HD channel. Then MPEG-4 improves all those metrics. Right? Then different modulation schemes can improve those metrics.

Yes, there's a --

(multiple speakers) [new] power on satellites can improve those metrics. It's all physics, right? Power on the satellite, size of the antenna, transmit antenna from the satellite, size of the antenna on the ground, what frequency you are at, what compression, and what modulation, and what (inaudible) error correction. So you get about, what, a half a dozen variables to tell you what you can get.

But today for the most part at SATS we run between 10 and 12 channels on a transponder; and we run about two HD channels on a transponder; and in some cases we run considerably better than that in MPEG-4.

Okay, thank you very much.

All right, we will be back again in May, right? I think May will be a little bit more interesting because you will have real numbers for the quarter. So I think it will be a little bit simpler to understand what we're trying to do here. So thanks for joining us.

This concludes today's EchoStar Corporation's conference call. You may now disconnect.