EchoStar Corp (SATS) 2012 Q4 法說會逐字稿

Good afternoon. My name is Jackie and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter and Fiscal Year 2012 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)

I would now like to turn the call over to Deepak Dutt, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good day, everyone. Welcome to EchoStar's fourth quarter and full year 2012 earnings call. I'm joined today by Mike Dugan, our CEO; Dave Rayner, CFO; Pradman Kaul, President of Hughes; Mark Jackson, President of EchoStar Technologies; Anders Johnson, President of EchoStar Satellite Services; Ken Carroll, EVP, Corporate and Business Development; Grant Barber, CFO - Hughes, Dean Manson, General Counsel, and Tom McElroy, 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 firms in your reports. We also do not allow audiotaping, which we ask that you respect. Let me now turn this over to Dean Manson for the Safe Harbor disclosure. Dean?

Thank you, Deepak. 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 these forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K filed in connection with our earnings. 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. I'll now turn the call over to Mike Dugan.

Thanks, Dean and Deepak. Welcome, everybody, to today's call. I'll start with a few comments on our operational performance for the quarter and the overall year and then we'll turn it over to Dave, who can give some financial highlights. On October 1, 2012, we launched our HughesNet Gen4 consumer internet service, using our Ka-band EchoStar 17/JUPITER satellite, which was launched in the July timeframe. EchoStar 17 has a capacity of over 100 gigabits and our HughesNet Gen4 offering provides consumers much faster download speeds of up to 15 megabits per second and significantly increased data download allowances of up to 40 gigabytes per month.

In addition to continuing our traditional retail offerings, we also launched wholesale offerings through DISH Network and Frontier Communications. We ended the year with a total of 659,000 subscribers, which was an increase of 43,000 subscribers in the fourth quarter of 2012 compared to a decrease of 10,500 in the first three quarters of 2012. Our gross additions were up sharply, as you would expect, with the launch of the Gen4 service, and while improved over the previous quarter, still has room for improvement. We would expect churn to decline going forward as we gain additional new subscribers and upgrade existing ones. We are very pleased with the early results of Gen4 and look for the consumer business to be a primary growth factor going forward.

Hughes' non-consumer new order input in the fourth quarter 2012 continued at a strong pace, with 329 million of new orders; a 16% increase over the fourth quarter of 2011. Significant orders in our North American enterprise business included Hess Oil, ConocoPhillips, Sherwin Williams, XplorNet, Young Companies, Row 44, and Shell Pipeline. Key international orders were with SCT in Mexico, Nextel and Telefonica in Brazil, Avante and Camelot in Europe, [Nabard] and HDFC Bank in India. This strong order activity resulted in an order backlog of $1.1 billion at the beginning of 2013, which, together with the $1.4 billion of contracted backlog in our satellite service business, further strengthens our visibility into future revenues. These backlog numbers do not include our consumer and set-top box business.

Switching to ETC, as you'll recall, last year DISH Network announced the introduction of the Hopper product line. This was developed by EchoStar Technologies. Hopper is a high powered, high-definitional, whole home DVR that provides full DVR functionality, actually, HD DVR functionality to every TV in a consumer's home by communicating with multiple Joeys, compact thin client receivers that can be located anywhere in the home, including behind the TV set. In January of this year, Dish announced Hopper with Sling, which further advances the concept of whole home DVR and adds TV anywhere capabilities built into the set-top.

In addition to many of the exciting features available on Hopper, Hopper with Sling integrates Sling technology for TV anywhere, it provides data Wi-Fi integration and that not only provides the integration of Sling, but allows the consumer to be connected to the internet. We've also developed technology that allows the transfer of recorded content to mobile devices such as an iPad for viewing when the consumer is not internet connected in travel. The Consumer Electronics Association awarded Hopper with Sling a co-winner of the 2013 Best of Show in the CES awards program. The CEA also designated Hopper with Sling a 2013 Design and Engineering award honoree at CES.

In addition, ETC announced two new models of our retail Slingbox. The Slingbox 350 and 500; two completely redesigned retail Slingbox products that deliver best in class, up to full 1080p HD quality live streaming of our favorite TV shows, sporting events, recorded programming and premium content to smartphones, tablets, laptops and any other connected device. In addition, the Slingbox 500 introduces new features including Wi-Fi and HDMI, as well as a platform delivering personal content to the TV; a first for any Slingbox product. We are aware of the consumers' growing desire to access the content that the consumers paid for and have it accessible to the consumer on any device he or she owns, any time and in any location. To this end, EchoStar/Sling is actively marketing the pay TV operators directly and through set-top box OEM suppliers with sales and licensing of our Sling technology around the world.

Switching again, we are continuing to discuss with potential partners in Brazil to provide a DTH service. The process has taken much longer than we would have liked, but efforts continue. We continue to believe Brazil presents a significant opportunity in the satellite, pay TV, and broadband market. We are also continuing to explore other international opportunities to leverage our expertise in DTH and broadband platform design and operations.

Our latest satellite, EchoStar-16, launched successfully in November and is on station at the 61.5 degree orbital location. It's fully leased to DISH Network and will begin generating revenue for us in the first quarter. With the successful launch of Echo 16, [Ketsat] has now been also deployed to its intended location at 77 degrees and has taken over the primary provider service to our Dish Mexico joint venture. We now have several limited life space assets available to deploy on short-term missions that ESS business also secured new orders in the fourth quarter of 2012 for [Artel,] Harris CapRock Government Services, Whitenet, Sprint, and [Unisat] for satellite capacity.

Before handing it over to Dave, in summary, I would like to say I'm pleased with our overall results this year and that I appreciate the hard work of all of our employees in the EchoStar family. We will continue to focus on growing our existing business lines while leveraging our unique capabilities and skills to address new market opportunities. I'll now turn it over to our CFO, Dave Rayner.

Thank you, Mike. I will keep my comments brief so that we can get to Q&A. First, I'd like to remind everyone the full year results included in our recently filed 10-K and my comments may not be directly comparable year-over-year. While 2012 included a full 12 months of results for Hughes, the 2011 results only include results subsequent to our acquisition of Hughes in June of 2011. With that said, 2012 revenue was $3.1 billion, a growth of 13% over 2011. Revenue in the fourth quarter of 2012 was $786 million compared to $834 million in the fourth quarter of 2011. The primary driver of the change in Q4 was primarily lower set-top box revenue from our international customers.

EBITDA in 2012 was $794 million, a growth of 64% over 2011, and $170 million in the fourth quarter of 2012 compared to $141 million in the fourth quarter of 2011. Included in the fourth quarter of 2012 is $52 million of other income, which consists primarily of gains on sale of investments, as well as a dividend we received from an investment. Also in the fourth quarter, we impaired certain assets totalling $33 million, of which the largest was a vendor contract right associated with the Hughes acquisition. The fourth quarter 2011 also included a $33 million impairment of assets.

In addition, the fourth quarter of 2012 saw higher [sat] than 2011 due to the impact of purchase accounting treatment related to Hughes in 2011 and higher gross additions in 2012. Net income for the full year 2012 was $211 million and diluted earnings per share was $2.40 compared to $3.6 million and $0.04 in 2011. We generated $505 million of cash from operating activities in 2012 and ended the year with $1.5 billion of cash and marketable securities that we can use in future investments to grow the company. We are now ready for the Q&A part of the call and with that, I'll turn the call back over to the operator.

(Operator Instructions)

Jason Bazinet, Citi.

On the Hughes side, I think one thing the buy side is struggling with a bit is a right, an appropriate mix between retail and wholesale and what implications that has on your margins, so any color you can give on that would be great. Second, you mentioned lower international set-top box sales in the quarter. Do you view that as just normal undulations in the business or is something more material going that we should think about going on for '13? Thanks.

First of all, let's answer the second part with Mr. Jackson can talk a little bit about international set-top boxes. Then I'd like to have you restate your first question because you asked a question about ViaSat and this is a Hughes EchoStar call. I'm not sure --

I just meant about your broadband product at SPACEWAY and JUPITER. I think what the buy side is struggling with is the right retail/wholesale mix in terms of your ads and what implications that may have for margins.

I'm not sure the right word would be struggle. I think that we're constantly ensuring that we have the right financials involved with our wholesale partners, as well as the right offers at the retail level. Our objective is to fill the satellite as quickly as we can and the quicker it fills, the better cash flow we have and the better return on investment. We're going to continue to explore additional wholesale partnerships if they're available to us and we're going to try to get every subscriber we can onto JUPITER/EchoStar 17 as quickly as possible.

Jason, let me just add to that before we hand it over to Mark to answer the set-top box question. Specifically, I think it's too early in the game right now to really predict where the retail/wholesale mix is going to come out. We're still evolving those relationships. Certainly, we are seeing, based on fourth-quarter results, strong progress on both wholesale and retail activity. Clearly, the margin is going to be lower on the wholesale business.

We're not incurring the SAC, so we've got much lower up-front costs and in return for that, we're going to have much lower margins, obviously. But as Mike said, the focus is getting revenue and cash flow coming off of as much of the satellite as quickly as we can. That's how we maximize the returns on that asset. With that, I'll ask Mark to address the set top box question.

Sure. Jason, basically on the international set-top box side, we are very focused on Europe and we're basically reflecting this still downward turn of the overall European economy and that's basically what we're seeing. We're looking to try to expand out of Europe as much as possible, especially in Latin America. But also, our Canadian business is also down a little bit, too. Overall, the focus at Bell ExpressVu has not been on our satellite business as much as it's been on their IP-delivered system.

Okay. Thank you very much.

Amy Yong, Macquarie.

In the same line of questioning, can you talk about ARPU expectations going forward with the wholesale/retail mix? Michael, you talked about how there's still room for improvement on a subscriber ramp. Can you talk about what a reasonable ramp assumption is going forward? The last question is, can you talk about what this radio -- there's some color in the 10-K on a radio access network. Can you just talk about what that is and what the economics are? Thanks.

Dave, why don't you talk about EBITDA and then I'll try to clarify--

I'll talk about the ARPU expectations. Amy, as you can imagine, consistent with the wholesale arrangement and lower margins, that lower margin is really going to be driving down ARPU also. You're not going to get the same revenue on wholesale customer that you are in the retail customer, so we would certainly expect ARPU to decline over time as a result of that mix. How far it declines really depends on where the mix is between retail and wholesale. With one quarter under our belts, I'm not ready to start predicting exactly where ARPU goes.

You asked about the 10-Q, the radio contract, and I believe that's related to initial work that Hughes/EchoStar is doing under contract to DISH Network in preparation for some of the wireless work. So that's what that's all about.

Any sense on what the economics of that agreement looks like?

Just what's been announced publicly.

Yes, this is very early stage work that we're doing to the benefit of DISH as they think about their wireless plans. Where that could go would be highly speculative.

Okay. Can you just give us a sense of what a reasonable ramp assumption looks like?

You're talking about on the consumer sales?

Yes.

Pradman, do you want to try and address that?

Sure. You're talking about this wireless work, right, Amy?

No, she's asking about Gen4 subscriber growth. I don't know how much we can accurately provide, but --

We haven't disclosed any projections on subscriber growth, as you know, Amy. But I think, as Mike and Dave have said, we're very pleased with the new acquisition numbers that we had in the fourth quarter and the first quarter continues to be good. We are very optimistic about the future.

Okay. Thank you.

Tim Quillin, Stephens Inc.

First question is on the $33 million impairment charge. Am I right, bucketing this up by segment, that $22 million would be Hughes and $7 million was in EchoStar Technologies, and $4 million or so is unallocated to the segments?

Yes, you would be correct in that distribution.

Just to be clear, the derived Hughes EBITDA based on the 10-K filing was $51 million, but really it was closer to $73 million, if you exclude out that write-down.

Once again, I agree with your math.

Okay. Just wanted to confirm. We'll just go along like this the whole conversation. A couple quarters back, I think you said on the set-top box that DISH might be ready for a refresh of some kind. Would you expect, first of all, that to happen in 2013? Does that mean that the set-top box business can stay at least flat in 2013?

The refresh is related to capacity between MPEG-2 and MPEG-4 boxes. I think we've talked to that several times in the past. We do believe that they are continuing down a path to refresh that reasonably aggressively, but there are some hard stops due to the way that the network is being configured that most customers will have to be MPEG-4 by specific point in time. I don't know what disclosures DISH has made on that, so I've got to be really careful about what we can say.

We're optimistic, first of all, with the success of Hoppers and Joeys and the new products that they have us developing for them. They continue to want to move customers to the DVR platform. They still have a large customer base of non-DVR customers that they are trying to upgrade. Right now, we look at the DISH set-top box probably their demands to be flat or probably a little bit up. Other than that, I can't really say too much about the conversion, but it is going the way we talked about a couple quarters ago.

Okay. With regards to EchoStar 16, my understanding is that maybe it will take some of or absorb some of the capacity that was on EchoStar 12, which would free up capacity on EchoStar 12, but I think also in the 10-K, you said there was some degradation there with some anomalies. My overall question is, with the launch of EchoStar 16, would you expect an uptick in satellite services revenue or is it really more of a replacement and you have some capacity that might be available for future projects down the road?

16 is a from ground-up designed to both enhance the spot beam capacity on the eastern arc from the 61.5 degree location, to replace an asset that's not fully functional, which is Echo 12, so we've actually now moved all that traffic to 16. We've also moved all the traffic off of Echo 15 to allow it to take a mission elsewhere in the arc. 16, we've been very happy with 16, the abnormalities on 16 are relatively minor.

On 12.

No, he talked about -- on 12?

Yes.

Okay. Well, the 12 stuff has been exposed in the past where we had some limitations that were, have been replaced by 16. 16 has better spot beam coverage, an expanded spot beam map, and certainly, significant power improvement into a number of spot beams. Now the assets, as we talked about earlier, can be allocated to bring other slots into use either for us or for partnerships and so on.

In terms of uptick on revenue, as Mike said, it's replacing Echo 15, which is a DISH bird and we would expect an increase in ESS revenue with Echo 16 going into service.

Right. From the Echo 15, got it.

Right.

On the Hughes subgrowth, would you be able to say on the 43,000, how much of that net addition came from retail versus wholesale?

We haven't disclosed that at this point and I'm not inclined to do so because whatever the number is, I don't want it used as an indicator that's where it's going to be going forward. We're still trying to understand where the mix is going to be between retail and wholesale as we continue to develop the platform and I don't believe it's meaningful information at this point.

Okay. How should we think about incremental margins now? You're in a ramp mode, presumably a lot of the costs that you might have incurred have been incurred, but you're going to advertise, you're going to have SAC, it would be 50% plus incremental margins on the growth at Hughes consumer? How should we think about that?

Grant, do you want to try and address that?

We just launched the offering October 1, as you know, so the retail business has always been our strength. It's the wholesale partners, including DISH, that is the new piece. I think Dave had mentioned to you earlier that we expect the wholesaler to cover the SAC, which we normally would have had on our books, but that the ARPU will be more what you would picture in a traditional wholesale ARPU close to ours. Depending on the scaling and the mix of the wholesale and retail that we are working through, as this is relatively -- we're into our fourth month of the new service on the culmination of two plans to see what that mix is going forward.

Right, okay. How about the non-consumer business on Hughes? The bookings looked pretty good in the fourth quarter. Would you expect the non-consumer business to grow in 2013?

Pradman, do you want to address that?

We were very pleased with the enterprise business growth, both in North America and international. We have a heavy backlog going into 2013, so we would expect to see some modest growth in those areas in the next year.

It's also important to note that Pradman's team's been hard at work in enhancing the product that they have to offer the enterprise business and we think that's going to provide some growth as well.

Very good. Brazil, I understand it's moved a little bit slower than you might have expected, but would you think that some time this calendar year you'd be able to nail things down or how do you think about timelines there?

I can only say internally we're working very hard to come up with a business plan and a return on investment that makes sense. We're obviously internally working to get something done this year, but it's complex. It's international market. Everything from the currencies to the people in control are changing on us, so, I can't tell you for sure one way or the other. I know we want to get it done.

What's your capital expenditure plan for 2013?

That's going to be highly dependent on satellite builds. As we disclosed in the K, we have signed a multi-launch agreement with Arianespace and presumably we'll be building some satellites to use those launch vehicles. As those plans become crystallized, obviously, that is a big driver of our capital expenditures. On the non-satellite side, I would expect that CapEx to be, for the most part, relatively flat year over year, with the exception of an increase in SAC-related CapEx at the Hughes segment.

Okay. Is there a good number we should use excluding satellites? I can probably look in the 10-K what the number is, but what should we be looking at including CPEs without new satellite builds?

I don't remember what the number was without that, but I'm sure you can derive that from the K.

Okay. What are you going to use your cash for other than satellite builds over the next couple of years?

Yes, certainly satellites are going to be a significant portion of that. We're going to continue to look for international investments in platform, that's both DTH and broadband plays. And there may be other opportunities that we identify to expand the markets and the opportunity for our existing products and products that we may develop.

The SG&A was down quite a bit quarter over quarter, year over year. R&D, on the other hand, was up quarter over quarter and year over year. Are those indicative numbers of how we should think about SG&A and R&D spending next year or was there anything anomalous there?

SG&A, there were some one-time credits that impacted the fourth quarter. R&D, I don't recall a significant change quarter over quarter. I think it changed a little bit, but we're obviously going to continue to invest in R&D, developing the existing products and new products. But SG&A, specifically, I would expect to get back on a more traditional run rate after absorbing those fourth-quarter credits.

Okay. Can you quantify those?

I would say go back and look at the run rate for Q1 through 3, which was pretty consistent and that's where I would expect it to be going forward.

Chris Quilty, Raymond James.

A follow-up on the Hughes business a little bit, you did not mention DIRECTV in your list of wholesale partners. I think you had expected that relationship to kick in either end of last year, early this year?

Pradman, do you want to address that?

Sure. As we had indicated earlier, we had publicly announced that we've signed a sales agency agreement for DIRECTV. It was not a wholesale agreement like the agreement we have with DISH. We've been working the interfaces and we expect that agreement to kick in the next few months.

So you would, for an accounting purpose, treat that as retail customers in your mix between retail/wholesale?

Exactly. We would treat that just like any of our other sales agents.

Got you.

We have a whole bunch of them.

You didn't give it in the quarter, but assuming that relatively small number of wholesale customers have been added, would the ARPU have been still around the same level you last reported?

I think it's safe to say that ARPU would be down from what was last reported because there are wholesale customers in there. I'm not going to comment on how far it would've gone down, but obviously, there's a dilutive impact on ARPU because of the wholesale.

Okay. A final question on the Hughes, when you look at the customer migration issue of customers that are on a traditional HughesNet Gen3 service, how are you handling that? Is it moving as expected?

Grant, do you want -- or Pradman, go ahead.

Yes. We've had an upgrade program and that has been budgeted and was working out pretty much according to plan. There seems to be a healthy demand for people to upgrade from existing space (inaudible) and platforms to the JUPITER platform.

Okay. Pradman, normally the March quarter tends to be one of your strongest quarters for subscriber adds, should that seasonal trend hold?

The first quarter is always the strongest and yes, it looks like that trend should continue.

Okay. Shifting to the electronic technologies group, you mentioned targeting other geographies beyond Europe. I think you mentioned Latin America and you tend to have a pretty high-end product. Is there a sufficient market for the class of product that you provide in that market?

We have some very aggressive low end boxes that EchoStar Technology builds for DISH Mexico and some other partners, so Mark can talk about that.

We try to focus on the higher-end stuff, where the margins are better and we have a market differential to do stuff, like the Hopper and Joeys. We still do play in that market. It's predominantly in Latin America, where we're selling into low-end products and we also do some stuff for our service down in Mexico.

Okay. Mark, a generic thought on traditional set-top boxes versus some of the moves we've seen towards gateway products in the last year or two?

I think that's where we show a lot of leadership is in the gateway-type product, the Hopper and the Joey. I would say it's best in class. I don't want to beat my chest too much, but that's what reviews say. If you read the PC Magazine review, it basically says hands down, the best DVR on the market.

It is a network-based system where you have one centralized system that can feed four slave-type units and it's packed with features and functionalities. Our goal is to try to sell that functionality, not only to DISH, but to other customers around the world. But everybody's demands is different. Everybody's cost that they will absorb is different, so we have to take all of those into account and try to balance that for our customer needs.

Okay. On the service side, am I correct that EchoStar 16 was not operational for the fourth quarter in terms of being reclassified into PP&E?

16 was actually in orbit and in orbit testing and it's been put into service since the -- except for some minor service offerings in December, which just effectively were slightly more than testing. 16's gone into service from January to now.

For accounting purposes, it was in service late in the fourth quarter and there wasn't any meaningful, if any, revenue generated in 2012 and, again, in first quarter.

Okay.

It was a little bit delayed in its launch and we focused very heavily on a short in-orbit test. We combined in-orbit test with providing some minor capacity as quickly as we could.

Tom McElroy just corrected me. It was still in CIP at the end of the year.

Okay.

Because we had to generate revenue up, but yes.

Correct.

Got it. In the fourth quarter, you had about a $10 million sequential increase in your interest expense. I'm assuming some of that was the capitalized interest for JUPITER EchoStar 17, excuse me.

Exactly.

Can you give us a sense of what the -- I can run the number here, but what the full run rate interest expense would look like with both 16 and 17 no longer capitalizing interest?

Cash interest?

P&L. Yes.

I'm just trying to clarify that's what you're asking.

Yes.

Good question. I should have that at my fingertips and I don't. We'll come back to you in a second with that.

Okay, great. Thank you very much.

Josh Rosen, Act II.

Just on HughesNet, I think you guys increased legacy speeds on the SPACEWAY product. I don't know if it was in Q1 or in Q4. Is that something that's had a big impact? You talked about churn coming down in the future? Is that something that's going to have an effect on that?

Obviously, that was a planned improvement that would allow us to move subscribers to the JUPITER platform that are within JUPITER's footprint, which is a majority of the customers. Then we take that capacity and Pradman and his guys have applied that to better plans on what we call the infield. I don't know if you have anything you want to add to that, Pradman.

No, that's exactly what we're doing. We're freeing up capacity on SPACEWAY from the JUPITER footprint to increase the capability of Gen4 in the mountain states where we don't have the JUPITER capability available. We are upgrading customers on SPACEWAY who can't get Jupiter to a [five-one] plan and that gives them a much superior, more superior offering than what they were getting under the old SPACEWAY plan.

Has that already happened throughout the country or is that still being rolled out?

It's really focused on the parts of the country where Jupiter doesn't have coverage. Because in the parts where JUPITER has coverage, we've moved the customer to JUPITER. So, the parts where JUPITER doesn't have coverage, which is the infield, as we call it, yes, we have been already moving customers to this new plan.

I see.

Realize that bandwidth had to come from customers we moved from SPACEWAY to JUPITER. That's why the launch of that service was about 60 days after JUPITER came online because we needed to move those customers and get us the bandwidth to improve the plans on SPACEWAY, because SPACEWAY was very full.

Got it. So the capacity on SPACEWAY is dynamic, so if you open up capacity on the West Coast, it could be moved into the middle of the country?

Exactly.

That's one of the great advantages of the SPACEWAY design.

I see.

Chris, total gross interest expense is about $192 million.

Just on DISH Network, is there any color you could give on when and how they're choosing to use the Hughes product versus the Viasat product?

You'd have to ask them.

Okay. You guys talked about having plan for migrations. Is that something you expected to peak the first quarter out and then that should decrease as you get more gross adds on or has that number stayed constant since you launched the product?

Pradman, can you answer that? I didn't understand the question.

Yes, I think the question you're asking is what's our plan for upgrades to migrate people from the existing --

I was going to say, has it remained, like, 30% or has that come down, or whatever the number may be?

We're running at a pretty steady pace. We ran at a certain pace in the fourth quarter and we're continuing to run at that pace now and we'll continue to evaluate the pace on a quarter-by-quarter basis to decide if we want to continue to try to accelerate it. But right now, any customer that wants an upgrade, we are very happy to upgrade them.

Okay. In the K, it mentioned that non-consumer backlog on Echo 17 was $250 million, which I assume is enterprise. Can you just give some color on what type of customers or use cases are taking capacity on JUPITER versus any other kind of FSS satellite?

The only backlog we would have for enterprise customers on Echo 17 would be the small and medium enterprise customer.

Is that what that $250 million --

Yes, we have a large customer in Canada that purchased a piece of that backlog on Echo 17 for the life of the satellite.

I see.

(inaudible - multiple speakers) reflected in the $250 million backlog. Typically, we do not have enterprise customers on Echo 17 as of yet. Primarily focused at the consumer.

Okay. Hopper with Sling, is there much of a difference in ASP for that?

Yes, there is.

That should obviously drive revenue, but is there going to be an upgrade cycle from DISH that you expect as they try to push that product?

They'll have a certain number of customers that will upgrade, but they charge the customers, existing customers to upgrade, so that's going to limit it. Volume is somewhat speculative right now.

We would expect that Hopper with Sling is being installed primarily in new customers.

Okay. You mentioned for Echo 16 there was incremental revenue over 12, because 12 was a DISH satellite and obviously, this was an Echo satellite. Could you remind us of how you book revenues when it's a DISH-owned satellite?

I'm sorry. You were breaking up there. Can you repeat that question?

Yes, you said that there would be an increase in revenue as you move capacity from Echo 12 to 15 because 12 is a DISH satellite. Can you talk about how you book revenue for a DISH-owned satellite?

Yes, we've got a lease in place with them and there will be monthly recurring revenue associated with that.

(multiple speakers) owned satellite?

I'm sorry, on a DISH-owned satellite?

Yes, yes.

Okay. On a DISH-owned satellite, we don't book any revenue. There will be some management fees associated with it. There will be some orbital slots, rental fees, if you will, depending on where it's at. If it's at 61.5, obviously, it's our satellite, or I'm sorry, our slot, so DISH would be paying us a modest fee there associated with the slot. But for the most part, there's not a lot of significant revenue coming off of a DISH-owned satellite for us other than, as I said, the slot fee and some management fees.

Okay, and then for [Ketsat] where is that positioned now? I think I read it had taken over DISH Mexico. Is there incremental revenue that's attached to that or is that just replacement for what was --

Primarily Ketsat is replacing EchoStar 8, which is another one of our satellites, and so the incremental revenue on cat sat will be minimal, because it's replacing other revenue. We then have Echo 8 that we can deploy into other potential short-term missions that may or may not generate revenue.

Okay. Lastly, in terms of Brazil, if you were to sign the JV in the next 6 to 12 months, would you have capacity on a satellite to move to that orbital slot or would you need time to launch a new satellite?

With the recent introduction of Echo 16, as well as Ketsat now at 77 degrees, we have a small inventory of satellites that could be redeployed for many different missions, including a mission at 45 west.

Okay. All right, thank you.

Jimmy Schaeffler, Carmel Group.

My question is mostly for Pradman. Pradman, looking at digital signage today and into the future, how important is digital signage is as a part of your business and what will it be in the future?

It's turning out to be an interesting addition to an enterprise product line. As we address the stores of the future and the hospitality business, et cetera, the technology that the digital signage folks have added to our enterprise product line has given us an edge over the competition. We like it. It's not going to be hundreds of millions of dollars, but I think it helps us in running an enterprise sale as an add-on feature.

Great. Thank you.

Tim Quillin, Stephens Inc.

Dave, you talked about the gross interest of $192 million. I just want to be clear on that. Would that be a GAAP interest if you're not capitalizing any interest associated with satellites?

That would be the cash interest associated with non-capitalized.

Is there a delta between the cash and the GAAP?

Tom, why don't you try and address that?

What you see on the face of the income statement, our interest expense and net of the capitalized portion is a little over $153 million.

Right. Okay. I was just trying to project what it might look like in 2013. That's okay. So how about--

The problem we have is it really depends on the timing on new satellites and what might be capitalized against that, since we're not ready to talk about potential new satellites that we may start in 2013. It's hard for me to predict what that interest would be.

Okay. Fair enough. How about GAAP tax rate for 2013? For modeling purposes, we use zero?

Yes, I think from a cash standpoint, certainly that's the case. Other than some nominal foreign taxes and some state taxes, we would not be expecting to pay federal income tax in 2013.

Right. How about on diluted share count, the way you report in your 10-K, I'm not able to back into what the share count was at the end of the year for fourth quarter, or either for fourth quarter or for end of year. Where is diluted share count right now?

Let me take that offline. You and I can discuss that later.

Okay. It might be interesting for others, but thank you.

Chris Quilty, Raymond James.

I forgot one for Pradman. The announcement you had a couple of months ago, maybe it was in January, for the UniSat project in Punjab was a pretty large number, I think it was around $250 million. Presumably that's the multi-year full value of the contract?

I apologize, Chris. I don't know -- UltiSat? Is that what you're talking about?

It was the government of Punjab, a couple thousand schools?

Yes, but that wasn't $250 million.

No, it wasn't.

I know that job with schools, but those are typically in the $5 million to $10 million range.

Right. Unless it was put in rupees or something else in the press release.

The other one we had was the banking in India, which was like $35 million.

Okay. It must have been a misprint on the press release, then. You might want to check that.

We can take it offline, but I don't recall any contract worth $250 million.

That's why I was asking.

I wish we had one.

The broader question, still very difficult getting orbital slots and access in India. Any changes in the opportunity set there, either for fixed satellite services or broadband?

Yes, it's still very difficult, although the Indian Satellite Telecom Policy Act allows foreign ownership of private satellites in India. They still have -- and we have applications in. We are first in line, but we have not been able to break through the logjam yet. But we are keeping on working on it diligently and hopefully, one of these days, we'll bust through. But as of now, we have not succeeded.

Okay, thanks a lot.

Chris, it's Grant. Just to comment on the last one, if you're looking at press releases on the Indian jobs, they'll be released by our Indian group. They quite often refer them rupees, which would INR54 to $1, which gets you to a relatively large number, a $5 million contract would be INR250 million.

It would. I'm looking at it now and there is a little RS in front of the million. You are correct. I was wondering why you weren't highlighting that one, Pradman. All right. Thank you.

At this time, you have no further questions.

Yes, which brings us to the end of the conference call, so thank you very much. If you have some additional questions, I'll be happy to address them offline. Operator, we can close the call now.

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