[Satellite News 04-02-10] EchoStar is planning to expand its broadcast interests in Mexico following a capacity deal with SES and the launch of the EchoStar 14 satellite.
    SES announced March 19 that it leased satellite capacity to EchoStar after the Mexican government granted SES subsidiary Sistemas Satelitales de México (SSM) approval to offer fixed Ku-band satellite capacity into Mexico via the AMC-15 and AMC-16 satellites. EchoStar said it would use the capacity to offer full-time and occasional use space segment to authorized entities in Mexico through SSM while supporting broadcast services for the Dish Mexico DTH service in Mexico and for the Dish Network DTH service in the United States.
    The deal is EchoStar’s second attempt at expansion in Mexico after the operator filed with the U.S. Securities Exchange Commission (SEC) March 16 to terminate its $374 million stock purchase agreement to acquire Satmex. EchoStar told the SEC that it required Satmex to solicit consent to amend its outstanding debt and waive all defaults and to enter into lockup agreements with the holders of at least a majority of its debt within 17 days of the execution of the purchase agreement. Satmex also was asked to redeem or repurchase a sufficient percentage of its existing debt due in 2011 and 2013.
    However , Satmex is also moving forward with its plans for Satmex 8 by paying $2 million to authorize Space Systems/Loral (SS/L) to manufacturer the satellite, according to documents the company filed April 1 with the U.S. Securities and Exchange Commission (SEC).
    Satmex told the SEC that while it has no authority from its creditors to sign a full construction contract, the authorization to proceed would expire in June if it is not followed up by a full-scale Satmex 8 contract.
    Satmex 8, which includes 64 C- and Ku-band transponders, would replace Satmex 5 at 116.8 degrees West. According to a Satmex statement, the damaged Satmex 5 satellite must be replaced within 31 months to maintain coverage over the region after experiencing an unexpected shutdown of its primary propulsion system in January 2009. The total cost of the new satellite is about $350 million, with a $65 million down payment due to the manufacturer by September.
    Satmex, which is partially owned by Loral Space & Communications and the Mexican government, currently has a principal amount of about $523 million of debt in default.
    EchoStar CEO Dean Olmstead believes recent developments show Mexico as a vibrant and interesting market. "The United States is such a dominant economy, not just globally, but in the region, so Mexico can’t help but be heavily influenced by what is going on in the United States. Mexico does, however, have its own dynamics. It has a continually growing, emerging middle class that is demanding more consumer services. We see that in the success of Dish Mexico. In the United States, our multi-channel video market is a bit more saturated. Various providers are trying to steal market share from one another. The nice thing about the market in Mexico is that there is a lot of untapped consumer demand, so we are very bullish about Dish Mexico and similar types of projects,” said Olmstead.
    EchoStar, in the meantime, will use capacity on QuetzSat’s QuetzSat-1 satellite, scheduled to be placed at 77 degrees West in 2011, to provide additional coverage for these services. “This initiative brings together the strengths of SES and EchoStar in extending the reach and capability of AMC-15 and AMC-16 to accommodate new growth markets, as well as the experience of SSM in the Mexican market,” said Rob Bednarek, SES World Skies CEO.
    The EchoStar 14 satellite, built by Space Systems/Loral and launched by International Launch Services (ILS), will join Dish Network’s fleet of satellites at 119 degrees West. Dish Network said the satellite would allow the company to continue expanding its HD offering in the United States, where it broadcasts more than 160 national HD channels as well as local HD channels in 152 markets.
    According to Olmstead, EchoStar’s overall ambition is to branch out from Ku-band and provide a variety of services to Mexico. “In South America, you have a diversity of markets. There is diversity in the sense of third party revenues. You also have emerging demand for satellite broadband. We have Ka-band capacity in the United States and we believe strongly in the consumer satellite Internet market. We believe there are tremendous opportunities to help and grow with the economies in Latin America. With Dish Mexico, we will now have multiple complementary businesses in Mexico, so we are not just a single string,” Olmstead said, adding that his bullish take on Ka-band comes from his experiences in the industry. “When I was at Loral, I sponsored the development program that eventually became Viasat-1. I see broadband as a tremendous opportunity for the satellite industry and for users. We think satellites are the right answer for reaching these non-fibered populations, and there are a lot of these underserved populations. There is a continually emerging middle class around the world that wants broadband access but cannot get it. Satellite can deliver that capability quickly and cost-effectively. It does not have to be Ka-band, but it makes sense on a cost-effective basis.”
    However, some industry analysts disagree over Ka-band’s potential in the region. Andrea Maleter, technical director of Futron, believes that the demand is not strong enough to match the investment it will take to overcome other challenges. The Latin American market “has enough issues with getting into use of Ku-band because of rain attenuation, so Ka-band faces even greater issues. There hasn’t been sufficient demand or new application capacities. Now the capacity is getting tight in Latin America, both C- and Ku-band, and there isn’t actually as much capacity planned for launch to the region over the next years as there is for other parts of the world. But it is not likely a Ka-type of market, not for the foreseeable future,” she said.
    Commercial companies, however, believe that it is only a matter of time before the demand for Ka-band and broadband services takes hold in Mexico. MSS operator Iridium partnered with Spacenet Communications Services de Mexico SA de CV, a Mexican telecommunications company, to provide its services to the country. Iridium CEO Matt Desch hailed the deal as essential to the company’s worldwide portfolio. “Mexico is a market requiring broader services than are available today given the country’s extensive, open land masses that have no telecommunications infrastructure, expansive coast lines, growing remote industries and the need for effective response tools in natural disasters,” said Desch.
    Olmstead said EchoStar is confident in the Mexican Ku- and Ka-band markets. “We are definitely looking to bring Ka-band capacity to Latin America. We think it particularly fits with EchoStar’s capabilities. As with Dish Mexico, we want to be exposed to the retail consumer market. We know how to do that. Broadband is very similar to pay-TV, so we understand the segment.”