EchoStar Corp (SATS) 2011 Q3 法說會逐字稿

Good afternoon, my name is Adrienne and I'll be your conference operator today. At this time, I would like to welcome everyone to the EchoStar Corporation Q3 2011 earning's 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)

Deepak Dutt, Vice President of Investor Relations, you may begin your conference.

Thank you, operator, and good day, everyone. Welcome to EchoStar's third quarter 2011 earnings call. I'm joined today by Mike Dugan, our CEO, Dave Rayner, CFO, and his successor Ken Carroll, Pradman Kaul, President of Hughes, Mark Jackson, President of EchoStar Technologies, Anders Johnson, President of EchoStar Satellite Services, Grant Barber, CFO of Hughes, Steve Manson, General Counsel, and Paul Orban, Controller.

As you know, we invite media to participate in listen-only mode on the call and ask that you not identify participants or their phones in your reports. We also do not allow audio taping, which we ask that you respect. Let me now turn this over to Dean Manson for the Safe Harbor disclosure. Dean?

Thank you, Deepak, and good day, everyone. All statements we make during this call that are not statements of historical fact constitute forward-looking statements, which 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 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 any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. Let me now turn it back to Deepak.

Yes, thank you, Dean. And, we will now start with comments by Mike Dugan. Mike?

Thank you, Deepak. Welcome, everybody, to today's call. We're pleased to have delivered a solid third quarter, with use results now included for the full quarter. While revenue increased significantly from last year, as would be expected with the inclusion of Hughes, it was somewhat dampened by the continued weak sales to Dish Network.

Equipment sales to Dish in Q3 were down about 14% from last year, but were a 25% improvement over Q2. Even with the Dish decline, EchoStar continues to see improved sales from other customers and we'll talk about that in a little bit. We recorded a net loss for the quarter, as compared to net income for last year, primarily as a result of higher interest expenses related to the Hughes acquisition, as well as tax provisions related to tax gains on our TerreStar investment.

As many of you are aware, we closed on the Hughes transaction on June 8 of this year. Their strong North American consumer service business combined with global presence in over a hundred countries greatly enhances our growth opportunities in the coming years.

These attributes, combined with our existing satellite expertise and fleet presence, our set top box technology, Sling and Move networks capabilities all make for a very powerful combination. Integration activity is well under way with the objectives of accelerating growth in our Company and improved profitability. Now, let's address a few other highlights.

On September 29, the Ket Sat satellite was launched successfully on schedule and we expect that it will be placed in service in the near future. All testing today has been extremely positive. We also have 2 satellites currently under construction, EchoStar 16 and Jupiter 1.

EchoStar 16 is a BSS satellite, scheduled for launch second half of 2012, and will be leased to DISH Network. Construction of Jupiter 1, our new high throughput Ka band satellite is progressing very well and on schedule. Spacecraft Thermal Vac testing is in process.

The project, in total, is on schedule and we expect to launch in the first half of 2012. We will use Jupiter to expand and enhance our Usenet consumer subscriber broadband internet service in North America, and to service future enterprise customers. Use new order input continued its strong pace in Q3.

Significant orders in North American business included Murphy Oil, the Social Security Administration, US Government Education Training Network, or GETN, Rite Aide, Row 44, TJ Maxx, and various other orders from defense and intelligence agencies. Key international orders were from the African Development Bank, Avanti, Camelot, BP, Telemar Brazil, and SCT Mexico.

This strong order activity resulted in a non-consumer order backlog of $1.1 billion going into Q4. In addition, we had another $1.1 billion of contracted backlog in our ESS business, thus continuing our strong visibility into future revenues.

Hughes also ended the quarter with 12% growth in the consumer base over the end of third quarter last year. Hughes announced significant enhancements to Hughes net service to bring faster speeds and a richer internet experience to existing customers. This included boosting browsing and download performance for improved online customer experience and an increase in the daily download allowance for all service plans.

We've also introduced various EBT Hughes tools and services to help subscribers take advantage of all these improvements and maximize the online experience. We also announced the new Hughes Cloud services and hosting solution for businesses of any size in any industry.

This turn key offering brings EchoStar's decades of experience managing huge data streams and broadband services to Cloud computing across the entire business platform. Hughes announced its first shipment of advanced Ka band gateway equipment and satellite terminals to Al Yah Satellite Communications Company, Yahsat, based in Abu Dhabi.

The shipment of 4 system gateways, network control center, initial order of Ka-band terminals will be used by Yahsat to provide it's YahClick next generation high speed satellite internet service. That's expected to launch in early 2012. The new service has been specifically developed to bring high performance broadband access to unserved and underserved regions of the Middle East, Africa, and Southwest Asia, and is on target to reach 26 countries.

Through the Hughes Brazilian subsidiary, EchoStar was selected as the highest bidder for the right to select 2 out of 4 orbital positions in the recent Brazilian orbital slot auction. Both of these selections are subject to ongoing challenges by other bidders and we expect those challenges to be resolved in the coming weeks. With this win, the company looks forward to expanding its video and data service offerings in one of the fastest growing regions of the world.

While EchoStar Technologies business continues to experience reduced sales to our largest customer, DISH Network, we're seeing progress with sales to other customers. Our relationship with unity media, the German cable operations of Liberty Global continue to be strong and we have several trials under way and are in development with US-based cable companies and telcos.

In addition, Sling launched the latest Sling player retail app in the Android market. And, Slingbox owners can now extend their living room TV experience to their Android devices and take advantage of the higher performance screen resolutions and video quality related the latest Android devices can deliver.

We also received $552 million of cash from TerreStar in Q3, representing repayment of various debt facilities. In addition, we received $77 million subsequent to September 30, 2011, further strengthening our cash position, enabling us to aggressively pursue some of the growth opportunities we talked about before.

Before we open it up for questions, I want to take a moment and thank Dave Rayner for his long and extended service to DISH Network, and also EchoStar, in various capacities from CFO at Dish to the integrated companies, to taking over the CFO role here at EchoStar in the last month. Dave worked very hard with me on the acquisition of Hughes and the road show and so on, and he's certainly going to be missed.

However, we got a great replacement in Ken Carroll, who will succeed Dave as CFO in the following few days. Ken is well known in the satellite industry. He joined EchoStar in August 2010 as COO of our EchoStar Satellite Services, and since June has served as Executive Vice President of Business Development and International for EchoStar.

Ken's a 20-year veteran in the satellite TV and satellite broadband industry, and has previously served as CFO of Liberty Satellite and Technology and direct home satellite TV provider Prime Star. Immediately prior to joining EchoStar, Ken was President and COO of WildBlue Communications.

I'm certain that Ken's vast experience provides him with the skills and capacity to take on the CFO role here, and I'm looking forward to continuing to work with Ken as we also deal with some of the business development work that Ken's got under way.

We are now ready for the question and answer part of the call, and I'll turn the call over to the operator to conduct the Q&A.

(Operator Instructions) The first question comes from the line of Amy Yong from MacQuarie. Your line is open.

Hi, thanks. It seems like margins were a bit weaker in the FSS business. Does this have anything to do with your decision to shut down the IP [De La Rue] service in the summer? Also, can you talk about your 2 orbital spots that won in Brazil? What kind of challenges are you facing? And, is the idea to replicate a Dish Mexico model in that region?

Well, as to Satellite Services, I think there's several factors. 1, is we've renegotiated some of our agreements with DISH Network, we're bringing new satellites into play, and although VIPTV I think you're talking about that we announced we'd terminate service, had a minor impact in that. I don't believe it was significant. As to Brazil, we're certainly looking to partner with strong partners in the Brazilian market to do something very similar to what was done in Mexico, with Dish Mexico, that is the model that we'll be pursuing. And again, there's been some objections raised on both the filings in Brazil. But, the team is working through that and I really don't have anything further to be able to announce at this time on that.

Okay, thanks.

And, the next question comes from the line of Jason Bazinet from Citi. Your line is open.

Thanks. I just have 3 quick questions. Was there anything unusual that happened on the SG&A line in the quarter related to integration costs, or do you feel like this is a one-time -- or a good recurring number? Second question is on the Hughes consumer side, it didn't look like you added any customers. I was just wondering, is that -- at least sequentially, is that correct, and is anything unusual going on there? Then third, do you guys provide any updates, I don't know if you do, on the number of Dish Mexico subs that you have? Thanks.

Jason, this is Dave Rayner. Let me try and answer some of those. I'll let Pradman answer the Hughes consumer question in a second.

Sure.

But, in regards to the Dish Mexico subscribers, we have never disclosed a Dish Mexico number. That's up to Dish Mexico to do. And, they will do in the normal course through their regulatory filings.

Okay.

But, they continue to have strong subscriber growth. On the SG&A, there's nothing specific for the quarter that's high, necessarily. There's certainly some opportunities, I think, we have as we continue the transition to drive that number down. The big increase, if you look at it, there's been some increases in sales and marketing expense, specifically, at Hughes, as well as at ETC, as we've gone through some sales efforts in regards to continuing to grow the business. I think there's an opportunity to get some synergies there, but I don't think there's anything unusual. And, Pradman, do you want to answer the Hughes consumer question?

Sure, Dave. So, you're right. At the end of Q3, our total sales were essentially flat compared to the second quarter. We are very pleased with our gross adds in Q3, they were close to the highest we've seen so far. But we saw -- although we saw strong growth of 16% in consumer services revenue in Q3 in 2011 over Q3 2010. However, our churn in the third quarter was higher than in the past. Primarily because of involuntary service terminations for credit reasons, which we believe has been driven by the very difficult macroeconomic climate. So, we've introduced several enhancements to the pre-activation process, including more detailed credit assessment, and beginning to see churn beginning to decline. And so, we are very positive on our future growth in this business.

Great. Thank you, very much.

The next question comes from the line of Michael Gerstner. I don't have their company, but your line is open.

Hi, guys, how are you?

Good.

Good morning, Michael.

Hi. Yes, I guess to start, I wondered if you could provide any clarity along the lines of what Jason was asking about on the SG&A. But, it seems like there might have been some nonrecurring or maybe some acquisition-related effects running through operating income and net income, maybe especially some significant purchase accounting adjustments in Q3. And also, I wondered if there might be some fees and expenses related to both the TerreStar and Hughes deals that might still be flowing through. And further, I think I heard, Mike, you mentioned TerreStar affected the tax rate, but maybe you guys could give a little more clarity onto the tax situation of the company on a more normalized basis.

Michael, this is Dave Rayner. On a couple of things, there weren't any material deal-related costs for either Hughes or TerreStar that got included in the third quarter. But clearly, going forward, there are items related to purchase accounting specifically, the cost of the acquisition into the intangibles, and a significant increase in amortization of those intangibles, which obviously will be a recurring item going forward.

In regards to TerreStar taxes, obviously we had a taxable event with the repayment of the debt components that we got repaid in the third quarter, and obviously that will happen again in the fourth quarter as we continue to receive payments. From a tax standpoint, we had bought quite a bit of the debt at significant discount to face. So, there was quite a bit of gain related to that. And, with the taxable event of that being repaid, we had a tax provision that was required.

On a more normalized basis going forward, yes, you're going to have fluctuations quarter over quarter, just given the complexity of the business. But, from a cash pay standpoint, I don't anticipate having any cash taxes, other than maybe some capital gains related that we can't shield, for quite a bit of time, probably at least another 4 to 5 years before we're back into a cash taxpayer on the normal course. And, I'm speaking there obviously federal. That doesn't cover state nor foreign.

Is that due toNOL, Dave, or is that also due to the accelerated depreciation for all the new satellites that you guys will be launching?

Both the above.

Okay. I guess on a related question, trying to understand the normalized earnings power here, on that theme, you mentioned you have launched Ket Sat and you also have EchoStar 16 and Jupiter 1 going up next year. Is there a way that you can help investors dimension broadly the earnings power incrementally from these various launches that should begin to express itself and also how the new satellites fit into the overall deployment of the fleet?

Yes, if you think about Ket Sat, Ket Sat is designed as a replacement satellite. Although, as we put in the Q, we're currently looking at alternative uses of Ket Sat, given the slots that we have acquired and we'll continue to acquire. So, we're always going to be looking at the fleet in comparison to the orbital slots that we have and the business opportunities that we have to generate revenue and maximize value.

And so, in the case of Jupiter, obviously the Jupiter expansion of revenue and earnings power is pretty straightforward. It gets into the acquisition of additional consumer subscribers. In the case of Echo 16, it will be purely incremental. That satellite has been fully pre-leased to DISH Network. And, when that goes into service next year, we clearly expect a step-up in revenue and earnings as a result of that.

Okay, and can you help us maybe dimensionalize how significant of a step-up that might be, Dave, or is there a way for us to have a framework to evaluate that?

It -- no. To answer your question, I don't think -- (multiple speakers).

How many incremental transponders and maybe we can make our own estimate (multiple speakers).

The contract is based on a rate of return that's guaranteed from DISH. And so, based on the final constructed and launch costs, we will generate an agreed upon rate of return on that expenditure. And, I don't know -- I don't think we have disclosed what that rate of return is. But, it is fairly typical kind of return for the satellite industry.

Okay, and I guess you mentioned Ket Sat as a replacement. That you have some opportunity as you're exploring in the redeployment of some satellites there?

Yes, Ket Sat is pretty flexible, and Anders can certainly chime in here. But, Ket Sat, just because of the design, has a lot of flexibility and we could put it into any number of different places. So, as we look at our Latin America strategy, it certainly makes sense to explore all opportunities in terms of where we deploy specific assets. Anders, I don't know if there's anything else you want to say on that.

No, I think Dish Mexico is currently being provided service off of other EchoStar assets. And, with Ket Sat now becoming available, we are examining alternative missions for it. Whereas the interim assets that are currently providing the service have significant life left in them. So, therefore that opens the door for us to evaluate other opportunity.

Understood. I guess, to fill in the blank there may be something where it fits with some of the orbital slots you have been acquiring, possibly.

Right.

Correct.

Understood. Okay. I mean, maybe what I'll do, if I have 1 or 2 more questions, I'll jump back in the queue so other people can ask some questions, too.

Thank you.

Thank you, Michael.

Thank you.

The next question comes from the line of Chris Little from Longfellow Capital. Your line is open.

Hi, guys. Could you disclose what the gross adds were and/or the churn was for the Hughes broadband business, number 1? And then, could you also provide some commentary, you recently filed with the FCC to potentially use EchoStar 3 in Latin America. Could you give a little more detail on what that might look like? And then, number 3, could you also provide a little more detail on the renegotiation of DISH contracts that hurt the margins at EchoStar Services in the quarter? Will that be one-time and you'll return to more historical margins, or should we look for lower margins going forward? Thank you.

In regards to the last one, while the renegotiations -- there are some things that have happened in the quarter that are more one-time in nature that really affect that margin more than anything else. So, if you think about the overall mix, I would not expect the margins to really change long-term, or even short-term, from that standpoint. Other than those that are impacted by the launching and utilization of additional capacity, Ket Sat being a perfect example.

Regarding the FCC filings for Echo 3, we are exploring a number of expansion opportunities for the video business in South America. Echo 3 is currently available for redeployment and we've commenced a discussion with the FCC about their willingness to allow us to use US flag space station in a non-US slot serving non-US territory. That's really the -- that filing with the FCC was intended to start a discussion. We are still considering various options for various assets in that part of the world.

And, could we look at it as a similar situation to the Dish Mexico situation? In other words, is there enough capacity on EchoStar 3 that would allow SES Astra, or you, to provide similar capacity to what Astra is providing for Dish Mexico? And then, just, again, if we could have the gross adds and/or churn for Hughes broadband.

Yes, I think the Dish Mexico has worked well for us and it's an -- it's a structure that we are considering replicating in other parts of the world. The assets through which we'll do it, we obviously have a preference to use our own assets first. And, a lot of the development activities allow us to use older, more mature assets to start services in advance of, say, ordering a new satellite for a slot-specific mission.

In regards to gross adds and churn, as Pradman said, gross adds were very strong for the quarter and churn was up resulting in essentially flat subs. In terms of specific numbers, no, we're not going to be disclosing those.

Then, just a last question for Pradman. Can you give us maybe a timeframe you expect to get back to normalized levels of churn?

We're working hard on figuring out how to reduce it, as I mentioned. So far, the first month's results have been encouraging. We're beginning to show improvement. But, it's very difficult to project and predict when we'll get back to normal. But, we're working hard at it.

Thank you.

(Operator Instructions) The next question comes from the line of Kenneth Miller. Your line is open.

Hello. I know you've gotten a couple of questions about this already, but I wanted to ask again about SG&A because it was quite a bit higher than the previous combined run rate of the 2 companies. In your notes on the Hughes acquisition in your 10-Q, you mentioned $17 million of accruals for unvested stock option award liability and another $11 million in change of control bonuses. Were those not part of SG&A this quarter because you didn't mention them in your last Q? And, based on your SG&A expenses in the last quarter, they didn't seem to be there. I didn't know if it was capitalized on (inaudible) or if they were part of SG&A this quarter.

In regards to SG&A overall, as I said, when you look at the combined companies, and obviously this is not something that we would do officially given that we didn't own Hughes last year, but certainly it's logical if somebody goes back and looks at the SG&A numbers for Hughes last year, compare and add those into our historical. As I said, the primary reason that it's up is sales and marketing expense at Hughes is the biggest single change in SG&A between -- for the 2 companies on a more or less combined basis. In regards to the accounting for the unvested option, I'm going to let Paul Orban address that.

Excuse me, this is Paul Orban. In the quarter, we would have had the amount that would have been earned expensed. So, those are being expensed over the life of those bonuses.

Okay. If you accrued for them, that means they either had to be capitalized or expensed. So, the $28 million --.

They are expensed.

What's that?

They are expensed. They are expensed as earned.

So, there was $28 million of what should be one-time change of control and stock option investing related to payments to former Hughes executives, correct?

Correct, but there's an earnout provision on those. So, they did not go into purchase price accounting since there has to be service provided, they are being expensed over the term of those bonuses and options.

Okay. I'm getting a little confused. Was the $28 million entirely in SG&A this quarter or not?

No.

How much of it was in the quarter?

It would have been a relatively small amount compared to the overall number of SG&A.

Okay, so directionally, this is going to be a consistent level of SG&A going forward?

It's -- I think the SG&A number that you have for the quarter is a fairly consistent number, which is what I said earlier. Certainly, you're going to have fluctuations over time. I would fully expect that sales and marketing expense would go up from the launch of Jupiter and Hughes gets very active in terms of its marketing expenses. But, for -- other than those kind of events and the incurrence of synergies as we continue to be able to achieve them, I don't think it's totally out of line, no.

Okay, that's helpful. And, on Jupiter on your last call, you said there's a possibility you could be launching before the end of Q1 2012. Today you mentioned you expect it in the first half of 2012. Can you give us any further granularity and any kind of opinion on whether a launch towards the end of Q1 2012 is still possible?

No, Q -- if that was said, it was a mistake. As we stated in this call, it's the end of Q2. You have launch, you have in-orbit tests, you have service launch, all those add together, you won't see a service launched off of Jupiter until the end of Q2, beginning of Q3. Total service, everything complete.

I think it will launch before then.

Typical satellite launch.

Pardon me?

I meant the actual physical satellite launch.

it will be definitely Q2 unless we see some delay that we don't know about right now. Which has been pretty consistent. I don't think we've ever said that it's going to be Q1.

Okay. I meant just the rockets blasting off into space, not the actual service bring-up.

No, I understand what you're saying. What I'm saying is I don't believe we've ever said that there was a launch scheduled in Q1.

Okay.

If it happened, it was a mistake. That's all I can tell you. The Space Craft's never been planned for Q1.

Okay. Next question is any thoughts on what you're going to do with your cash, since you're getting quite a bit back from TerreStar?

Well, again, I think you see us acquiring slots, moving fairly aggressively into South America and Brazil. A lot of that will -- if we clear those slots and we find the right partner, we will require significant cash to put a satellite under construction and start to build a business, distribution and business plan there. We're also looking at several other areas of the US. We're looking at options to build a second Jupiter Space Craft for South America and potentially for some additional service in the US. There's a lot of activities under way that we're considering use of the cash.

You're planning on not, essentially, making more financial investments like TerreStar, but more satellite construction investments?

I think it's safe to say that we will continue to evaluate all uses of our cash, including, as Mike said, expansion of the business internationally, as well as potential acquisitions and any other uses of the cash, which we will evaluate based on the focus of generating long-term shareholder value.

Okay, and last question--

I totally agree with Dave.

Last quick question, your DISH Network set top boxes was up sequentially after being down quite a bit, but DISH, in their call, still referenced having excess inventory. Any kind of directional comments on whether you think the inventory correction has passed or still to come in terms of your business with DISH?

Well, I think we've been relatively consistent on this. Mark, I don't know if you want to put it in color, but--

Well, a lot of their excess inventory is older generation stuff in their primary sale and HD. DISH continues to look for homes for some of their older boxes that they're recycling from the field which gives them a great cost savings. How they are going to do, I think, is going to be dependent on their first quarter promotion and how that's going to affect our business on Hughes set top box sales. Now, the other thing that is interesting, the industry is talking about, is we do have some flooding in Thailand that has caused a lot of heartburn throughout the industry, especially in regards to getting hard drives in and other components based on that. We're continuing to keep our eye on that to see if that's going to affect our sales at all in the coming quarters.

I think I can say we're pretty encouraged by the current forecasting going on, but there's a lot unknowns. Their success and some of these component issues. We're just going to have to see how it goes.

Okay. That's all for me. Thanks very much.

And the next question comes from the line of Michael Gerstner. Your line is open.

Hi there, guys. I hope you don't mind one more, then.

Absolutely not.

Okay. We recently read some comments by your Chief Product Officer as reported in Cable Industry Press, I guess I'll call it one of the cable mags, regarding a new network DVR being developed by EchoStar and it mentioned it being placed with the first customer for the new product maybe in late 2011. I guess we also read about, as you mentioned earlier on the call, about the Time Warner Cable Sling application, and I think our understanding there is you're actually embedding the Sling technology in their boxes perhaps instead of selling them Sling boxes for some sort of royalty type arrangement. I wondered if you could describe, or maybe give us a little more color, on these type of initiatives? And, if there's anything else like this going on with the company right now.

Well, I would like to take the first one, then Mark will take the second one.

Sure.

The first one, first of all, the gentleman that discussed the technology being deployed is part of our advanced development organization and his title is referenced to that organization, not EchoStar in total, so let's be clear. And, he is out building a business. We are, in fact, continuing to do trials. We believe that over the top video and server based video is a very important enhancement to what we do on a day-to-day basis for DISH Network and for other customers and even the cable areas that we're moving into. So, we've got a lot of visible acquisitions, including Move networks and so on that you guys know about.

We are combining those assets, along with Sling and along with some of the other activities to move very aggressively there. And, we are working on several trials, but nothing to be -- nothing really to ship this year I guess I would say. As to the discussion on embedding Sling, I would like Mark to take that one. It's his organization working with the cable guys.

Yes, the Time Warner did announce a trial with Sling boxes externally. So, they went off and launched that trial. We've heard they've got good results on it. I think it's fair to say we're working with Time Warner to see how we're going to move forward and possibly other companies throughout the US cable industry. But, that's all we have to report today, until Time Warner makes any further announcements.

Understood. I guess to step away from it, it seems like a lot of these kind of products are being discussed from your historical customer, DISH, or at least in addition to them.

I'd say in addition to them.

Is it fair to say that a reasonable uptick in the interest in receptively of potential other customers?

Well, I think, yes, we are seeing a lot of interest in the Sling technology. And, I think you guys are well aware, because you're very knowledgeable, about the lawsuits of streaming video outside the household. And, the programmers are taking very serious actions against that and I think Sling doesn't really do that. Sling allows you to view the video in your home over an IP connection, it's a totally different approach. And, all of a sudden a lot of the people being challenged have decided that Sling is a very good concept, both from a legal standpoint and from a technical standpoint.

That's helpful. Last question, if I might then. You mentioned that you're going to evaluate other Dish Mexico type opportunities perhaps in South America, or as a way to maybe pursue your structure in South America. I guess, when we look at the financials of the Company, we hear about the number of subscribers that Dish Mexico has, yet it's hard to see where that shows itself, either on the income statement or on the balance sheet with DISH Network, at least in a way that expresses the operational progress there financially within the EchoStar financial statement. Do you feel that there is -- do you feel you have good avenues to essentially realize that value over time, either through longer-term cash distribution as this business matures or through piecing it together with other components of your business opportunities?

Yes, Michael, I understand, I think I understand your question. I'm not sure I've got a good answer for you. Certainly in the Q we disclose what we're selling to that related party, Dish Mexico, in terms of their actual operations. Obviously, we're picking up our proportionate share of net income below the EBITDA line.

But yes, I understand how it's difficult to try and identify that value creation there. And, I'm not sure I've got a good answer. It's something that Ken and I will discuss. And, he can see if there's a way we can do something on a going forward basis. But, just from an accounting standpoint, it's tough to disclose. We don't have operational control. So, we really don't have the ability to start disclosing their numbers for them other than what they have to do through regulatory filings in Mexico.

Understood, thanks, Dave. Does that perhaps influence at all the way you'll think about setting up these structures going forward in other countries, too?

Yes, I think we're going to set up the structures, and Ken, since he's actually been involved in this, he can add onto this. We're going to set up the structures, they're going to maximize value creation. Whether that value creation shows up on a recurring basis in the financial statements or whether it's something that's a longer term value that gets distributed in the form of cash upon a dissolution or some other event of debenture, I think we're fairly open to. But, I'll let Ken address that more if he chooses.

No, I think Dave's exactly right. I think a lot of it depends on what the market is like and who the potential partners are that we're looking to do business with. And, what their needs are. So, I think, again, we're going to try to structure any type of venture or agreement with other partners that basically maximizes the opportunity for success in that marketplace.

And, to be clear, we're faced with multiple regulation environments that have little similarity to necessarily the way we do business in the US. So, each opportunity has to be assessed based on the country's requirements and regulations.

That's helpful, thank you, Mike. Last question, if I can, just to ask Pradman something before we have to go. Pradman, I know -- I guess when the acquisition of Hughes was announced by EchoStar, I know the EchoStar team and both you were pretty enthusiastic about the opportunities ahead for what both companies could do together, of what Hughes could do as a part of EchoStar. In the last 6 months since the acquisition has closed, how do you feel that opportunity set has evolved or changed? Do you feel like it's grown? Or has the market gone in a way that you feel like there's fewer opportunities? Just trying to get a sense of your level of enthusiasm for the opportunities ahead of you with Hughes.

Well, the level of enthusiasm is as high as it's ever been. There's a number of things that we are doing together that I think we could have been able to do by ourselves. Clearly, we are all excited about Jupiter 1, we want to get Jupiter 1 launched. But, because of our association with EchoStar, once we do, we hope to have a wholesale deal with DISH, which could generate significant subscriber additions.

And also, as Mike mentioned a little earlier, with the combined companies, the products and services and financial clout, we are looking very aggressively at some international markets like Brazil and 1 or 2 other parts of the world where we have the potential to launch Jupiter-like satellites and services. These things obviously take time. They don't occur in zero time. But, if you take the international opportunities to enter consumer businesses with high throughput capacity slots, you look at the Jupiter 1 potential, multiply it by our association with DISH, and then, in addition, we also are working together on some products and services for Blockbuster, Blockbuster Digital, and some enterprise opportunities in digital cinema, which all of it will pan out over the next 12 months or so. But all in all, I think, all the promises that we thought were possible are being, I think fulfilled, it's just going to take a little time to see the results.

Thank you, you guys. Thank you for taking all of our questions, too.

Thank you, Michael.

Yes, I think this -- if there aren't anymore questions, I believe this brings us to the end of the call. Thank you all for participating. And, have a good day.

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