Dean Olmstead is well known in satellite circles, building a career in high-profile positions at companies such as SES Americom and Loral Space & Communications.

So it makes sense that when EchoStar CEO Charlie Ergen, another star in the industry, was looking for someone to run EchoStar’s satellite services unit, Olmstead would be at the top of the list.

Olmstead joined EchoStar in January, shortly after Ergen split the satellite services operations from EchoStar’s more well-known direct-to-home (DTH) operations. EchoStar Corp. includes certain satellites, uplink and satellite transmission assets and the digital set-top box business formerly held by EchoStar Communications.

Olmstead most recently worked as an advisor to Loral Space and Communications as well as serving as president of Arrowhead Global Solutions. However, the lure of working alongside Ergen proved too strong to turn down. Olmstead says it is "tremendous" to work with one of the satellite industry’s most enigmatic characters.

As president of EchoStar Satellite Services, Olmstead’s challenge is to "build a viable business" using EchoStar satellites, digital broadcast centers and fiber-optic capacity to serve multiple markets

Olmstead discusses the challenge ahead, working with Ergen and how he will create a strong business for EchoStar in the satellite sector.

 

VIA SATELLITE: What is EchoStar’s role in the satellite industry?

OLMSTEAD: EchoStar Satellite Services is the oldest "new" satellite company on the block. We have eight satellites in orbit presently. Five of those are DTH satellites or operating in the BSS (broadcast satellite services) spectrum. Three of those are in the FSS (fixed satellite services) spectrum. In addition, we have one satellite on the ground in the mobile satellite S-band spectrum. We have investments in two mobile satellite companies, Tu Media and TerreStar. We are a little bit different than the other satellite operators: I like to say we are the first satellite triple play. We have FSS, BSS and [mobile satellite services].

 

VIA SATELLITE: What are the major targets for EchoStar Satellite Services? How do you see the opportunities to generate revenues from the broadcast market?

OLMSTEAD: One of the segments we will tackle is the broadcast segment. We bring 27 years of heritage of providing video services. We are going to concentrate on video and video-related services. As we think about all of the segments, we think about how we can exploit our video background, and then particularly, we have targeted looking at how to bring together the BSS and FSS into a single antenna to provide a new class of services.

So while our job is to build non-Dish Network business, we also want to exploit that Dish Network relationship. To do so, we have created a new type of service we call FSS Sidecar, which refers to an FSS installation placed alongside the standard Dish LNBs (low noise block downconverters). The Sidecar enables video content providers who want to reach a very specialized audience to put their signal up on the FSS while also reaching Dish subscribers. We believe this will deliver a new class of attractive residential video services.

 

VIA SATELLITE: How do you view the challenge at EchoStar and does your role differ from others you have had in the industry?

OLMSTEAD: The challenge is similar. Charlie has given me the challenge to create a viable business: "Here is a set of satellites and tools, now go and make that into a viable business." In some ways, that challenge was the same with SES when I started there. We were a DTH operator in Europe, and the question was where could we go from there. My job was to create a viable global business for SES, ultimately leading to the Americom merger. At Loral, it was somewhat similar. We had the residuals of the Skynet fleet after the U.S. piece had been sold to Intelsat and Loral came out of bankruptcy. The question was what do you with those assets and how do you create a viable business. We found the answer in the Telesat merger.

Now Charlie has separated the satellites out of Dish into this exciting new EchoStar Satellite Services company, and we have to develop it into a viable business. We want to grow beyond our services to Dish. How do we do that? I have just mentioned one initiative, but we have another half a dozen in our kitbag here we are working on.

Those are the similarities. In terms of differences, I would say it is really about having the opportunity to work for Charlie. He is an incredible visionary. He has a tremendous passion for this business. He is very involved in it. Clearly, he does not have to work. He works because he loves to work. It is a real pleasure working more closely with him. I have worked with him in terms of Americom and Loral, but this is the first time I have worked this closely with him, and it is tremendous.

 

VIA SATELLITE: What are some of your other ideas?

OLMSTEAD: That is a little bit tricky. The FSS Sidecar is the one I can talk about today. We still have to keep a lid on some of the other ideas. The cycle time for closing deals in this business is relatively long, but we are now reaching that point in terms of some of those ideas. Over the next three-to-six months, you will see quite a number of deals being announced as some of those come to fruition. I think 2009 is going to be a very good year for us.

 

VIA SATELLITE: How important an element is this side of the business compared to other parts of EchoStar’s business?

OLMSTEAD: The residential DTH business has its own economics and dynamics. In that market, Dish Network competes with DirecTV as well as the cable providers and now the telcos. I believe Charlie’s ambitions in terms of separating out some of these activities into EchoStar was to focus energies on high growth markets where he could take more risks. The two main activities in EchoStar are the technology business and the satellite business. We also have an international side.

The technology/box piece provides the largest portion of the revenues, but for now, it is effectively a production business with typical manufacturing margins. Their biggest customer is Dish, and they have a similar mandate to me: Grow the non-Dish business. The satellite business today is a pretty small revenue contributor but consistent with the typical financial characteristics in the satellite business, we will tend to be a very high EBITDA (earnings before interest, taxes, depreciation and amortization) producer. We will be smaller in revenues but relatively large on the EBITDA side. We both hope to be rapidly growing businesses.

 

VIA SATELLITE: What levels of revenues are you hoping to generate from this part of the business?

OLMSTEAD: We will grow. There is no question about that, but I would not want to forecast financial metrics at this point. We don’t do that. What I would say is our shareholders are more interested in growing the business than focusing on other financial metrics.

 

VIA SATELLITE: What do you see as your competitive advantages?

OLMSTEAD: In the more classical areas such as transponder leasing, you have SES, Intelsat and, to a lesser extent, Telesat. It is complicated in that for both SES and Telesat, EchoStar is also one of their largest customers. We are both a customer and are competing, and we do that in a professional fashion. We are looking to grow into new areas, and that is where the mobile satellite investments come into play.

We see the other operators moving a little bit in that direction. You have seen the SES-Eutelsat Solaris [joint venture]. As mobile video develops, the competitive field changes a bit. Our advantage is that firstly, we are video experts, not just in leasing transponders but in providing video services. We are able to bring our heritage to bear in terms of creating innovative services. Secondly, we are also not shackled by the past, so we can be a bit different.

 

VIA SATELLITE: What does "not shackled by the past" mean?

OLMSTEAD: We have not been through a range of buyouts the way some of our competitors have, leaving them with a whole set of revenue yield constraints they have to operate under. SES has a different set of financial characteristics which they have to operate under and bring to the game. We are entrepreneurial, energetic, and I think that gives us a real freedom to address requirements and create new opportunities in the marketplace.

 

VIA SATELLITE: What government and enterprise opportunities do you see?

OLMSTEAD: We bring the same mindset I referred to in the broadcast market, which is that we really are historically video players. As we approach the enterprise market, we are trying to look to identify ways we can bring that video knowledge to bear. If you think about corporate networks and enterprises, it is not about doing the same things as everyone else. It is more about what can we bring to the table which provides a new wrinkle with new technologies. Similarly, that applies to the government segment. This does not mean we won’t do straight transponder leases. We will do that. There is a bit of a shortage of Ku-band over the United States, and we can and will provide short-term leases to the U.S. government. But generally, in terms of building the business from a strategic standpoint, we are looking at how we can integrate video services and do something different.

 

SATELLITE NEWS: In Japan, Toshiba announced that Mobile Broadcasting Corp. will cease operations. Have satellite operators perhaps overstated the opportunities in the mobile broadcast market?

 

OLMSTEAD: Absolutely not. In some ways, it is good to see. We always talk about competitive markets. Some people make it and some people don’t. It is great when you see Charlie Ergen make it with Dish, but that is only one story. On the Japan side, Toshiba gave it a try and it did not work out.

If we look at the Korean side, where we have investments, subscriber ramp-up has been slow for a period of time, but that was after Tu Media had grown to 1.3 million mobile video subscribers. We are very excited about some changes taking place in that business and very bullish about it. Korea is a dense market and satellite has been going head to head with terrestrial. Terrestrial had significant advantages and satellite still captured 1.3 million paying subscribers. When we look at Korea and Japan, what this tells us is that there is tremendous opportunity out there for mobile video, but you have to get it right and it won’t be guaranteed.

 

SATELLITE NEWS: Are there going to be more investments in new satellites?

OLMSTEAD: What I can say is our shareholder wants to grow the business. There are lots of opportunities to grow the business. I would expect that between replacement satellites and growth satellites, you will see we will continue to buy satellites on a fairly regular basis.

 

VIA SATELLITE: How do you view the Ka-band and broadband opportunity?

OLMSTEAD: We are engaged in satellite broadband in a couple of ways. Dish is a pretty good distributor of WildBlue today. Dish is happy to offer the additional capability to Dish subscribers who are typically not in DSL areas. The broadband business has been moving along at a pretty steady pace. We are well pleased with it. We think that it has good legs going forward. In addition, on all three of our classic FSS satellites, we have Ka-band payloads. One of those is not very good for residential broadband services, but the other two are. You should expect to see those being better utilized in the future. We will continue to monitor broadband. We think it is a viable market. We will participate in it, at least in one part of the value chain, maybe in multiple ways.

 

VIA SATELLITE: How do you see the traditional broadcast market developing in the United States?

OLMSTEAD: What we are seeing is that as technology facilitates it, people are willing to consume video anytime and anywhere…. At EchoStar we are trying to make that possible for them.