EchoStar Corp (SATS) 2010 Q1 法說會逐字稿

Good afternoon. My name is Beth and I'll be your conference operator today. At this time, I would like to welcome everyone to the EchoStar Corporation first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

Mr. Jason Kiser, you may begin your conference.

Thanks, Beth. Thanks for joining us. My name is Jason Kiser . I'm joined by Charlie Ergen, our Chairman; Mike Dugan, our CEO; Mark Jackson, President of EchoStar Technologies; Dave Rayner, our Chief Administrative Officer; Bernie Han, our CFO; Paul Orban, our Controller; and Dean Olmstead who heads up our EchoStar Satellite Services Group; and Stanton Dodge, our General Counsel.

Before we open it up for Q&A, we do need to do Safe Harbor disclosures. So for that, I'll turn it over to Stan.

Thanks, Jason, and good morning everyone. Thank you for joining us. As you know, we invite media to participate in listen-only mode on the call and ask that you not identify participants or their firms in your reports. We also do not allow audio taping and ask that you respect that.

All statements that we make during this call that are not statements of historical factor constitute forward-looking statements which involve known and unknown risks, uncertainties and other factors that can cause our actual results to be historically different from historic results and from any future results expressed or implied by such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q. All cautionary statements that we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements..

With that out of the way, I'll turn it back over to Jason.

Thanks, Stan. And, Beth, we're going to go straight to Q&A, so we're ready for the first question.

(Operator Instructions). Your first question comes from the line of Jason Bazinet from Citi. Your line is open.

Thanks so much. The emerging consensus, from what I can tell, on the buy side is that you guys are actually doing quite well and gaining some traction in international markets with new contract wins outside of DISH. Without commenting on specific contracts that might be in the pipeline, just qualitatively would you say that you feel better than you've felt over the last 12 or 18 months in terms of potential new contract wins either on the set top box side or on the satellite side? Thank you.

I certainly can't comment in quite the time frame that you mentioned since I recently rejoined the Company. But I will tell you since I rejoined, and today, we're feeling a lot better. Certainly the successes with DISH Mexico from the set top box side, we had good progress on some of the services that Dean has been working on. And I would say both internationally and even in the US, to a certain extent, we're starting to have a little bit more success than we did just a couple months ago.

Okay. Thank you.

Your next question comes from the line of Jon Friedland, Porter Orlin. Your line is open.

Good morning to you all. I have a general question on FSS and sales to others specifically. So FSS sales to others. I'm hoping you can talk about the supply-demand dynamics in the market currently. And not to put Dean on the hot spot but whether it's reasonable to expect that Dean would get AMC 15 and 16 leased up to industry averages in the 80% range within the next two to three years. And within that answer, I was hoping that you could specifically address -- I understand you received some authorizations to sell capacity on AMC 15 and 16 into Mexico. And if so, if you could provide some details on that and talk about how Mexico may change the size of your addressable markets for those satellites.

This is Dean. I'll try to address those quickly. Generally, as Mike was saying, the market qualitatively has been improving. We're meeting with more success. I would say in terms of sectors and where that is coming from, it's predominately from the US government right now. And we're doing very well selling to companies that manage networks for the US government. And that's really driving demand. I believe a lot of that is coming from unmanned aerial vehicles. And we just happen to have capacity that's well-positioned for that. Specifically, 16-16 is basically full. As you know we run our VIP TV platform on that, or our IP TV platform. So that is pretty well taken care of. And 9 is almost full. So it's really 15 that we're working on presently and it looks pretty good.

And, as you mentioned, we do now have the concession for 15 and 16 in Mexico, and I would say we're optimistic about that, but we haven't geared up fully to sell that into Mexico yet. We're still watching to see what SATMEX is doing on their replacement satellite for SATMEX 5. But we think that will create some opportunities for us.

And where do things stand with SATMEX? Have they found a better alternative to your offer as far as you can tell or is that still alive for SATS?

I'm sure there is no better alternative than our offer, our prior offer. But they continue to look around at other alternatives, and I can't tell you exactly what they're looking at presently.

Okay. And unrelated FSS to others, but as I understand on the Nimiq 5 there are eight transponders that another paid TV operator may be interfering with now and that you will or should try to claw those back. Is that accurate and is there some time frame over which you expect all of the capacity on Nimiq 5 to be available for sale by you?

Just I think a minor correction. There's not interference on that capacity. We simply don't have rights to it at this point. And we're working hard to modify that over time.

Okay. And a question on the set top box side. Jason touched on this a little bit but perhaps I could ask the question again or more broadly. If you could just please describe some of the progress that may have been made since the last call.

This is Mark. We have orders from a European cable company which at this time we're not allowed to disclose. We made some progress over there. And we continue to work other guys throughout Europe and Latin America pretty heavily today. And we've also reengaged with a company we were doing business with in South America. We've gotten orders from them. Again, we're not disclosing who that is yet. We're continuing to make head way. And what's nice is the European guy is also looking at our Sling product.

Okay. I'll get back in the queue. Thank you.

(Operator Instructions). Michael Gerstner, MSB Capital, your line is open.

Hi, guys. It's Mike at MSB. How are you? One of the things you mentioned on the last call I just wanted to get a little more insight into some of the business development efforts while you guys are on. You had mentioned that you were working on some pilot programs, I think, with not just the European guys but some of the domestic cable operators or MSOs. Are those still in progress or are you still looking to progress sales efforts on the domestic side or is it more focused on international at this point?

I think the definition of pilot programs is very broad, but we certainly have a number of products out under evaluation in the US market as well as internationally. And some of that relates to Sling. Some of that relates to possible replacement cable set top boxes. So, yes, I think we're at least much more active, let's say, today than we were three or four months ago on the previous call in the US market, if that's the question.

DISH launched the Sling loaded DVR in April, right?

Correct.

How is that going for DISH, as far as you can tell?

I think that's hard for me to comment. As far as orders, they have given us additional orders for the product. We're not suffering any kind of field failures or complaints to my knowledge. In general the reviewers have been positive on the product. I will say that there's additional upgrades going to go into the product that will make it much more user friendly and exciting to deal with all of the new ventures that DISH and EchoStar pursue on IPTV and some of the new capabilities there.

Has having the product out there on DISH now, has that changed the dynamic or been a catalyst for more discussions with other domestic guys?

I think Sling-loaded capability is very exciting to the industry, and I certainly believe that the 922 and DISH shipping that product is certainly helping EchoStar, yes.

Okay. And Mike I know you've been on the job now since the previous quarter and you were new to the call last quarter, as you mentioned. But just to step back to a higher level, can you talk about now that you've immersed yourself in the Company, some of the observations you've made, some of the things that might have surprised you, any changes to the priorities that you've assessed?

I don't think I've suffered too many surprises. I think I've struggled getting up to speed on Dean's part of the business. That was the place I was the least familiar with. It was very easy for me to step back into EchoStar's business with DISH and I probably overly focused on that. And so I'm working, really been spending a lot of time with Dean in the last few weeks and trying to get up to speed on that. I've made some recommendations to potentially pursue some other business ventures for EchoStar that would be outside the set top box business and we're starting to work on that. But we have a lot of work to do. That's a fair statement.

Okay. Thank you, guys.

Your next question comes from the line of [Brian Goodsite] from Sound Partners. Your line is open.

I was hoping you could elaborate on the increase in the cash balance. The 10-Q talks about $103 million coming from the assignment of a launch contract with DISH. Can you elaborate on what that is?

DISH purchased a launch contract to be used for one of their satellites and the purchase price was $103 million.

Okay. So is $103 million revenue essentially that you're going to recognize over time?

No. The way the accountant rules work on that, you're not allowed to, because it's a unique transaction, it's not normal course, we're not allowed to have revenue recognition on that. So what occurred and you would have seen it in the 10-K is the difference between our book value and the price that they paid actually was shown as an equity transaction in our statement of stockholders' equity for the year ended 12-31-09.

Got it. Okay. That's very helpful.

Your next question comes from the line of Jon Friedland, Porter Orlin. Your line is open.

My questions were answered, thank you.

There are no further questions at this time.

Okay. We'll terminate the call then. Thank you very much. .

This concludes today's conference call. You may now disconnect. Thank you.