Hughes Network Systems wrote the book on satellite data and Internet access network services. The pioneering company is a leading provider of broadband satellite network equipment and services to the very small aperture terminal (VSAT) business market. It is also a leading provider of satellite Internet access to consumers in North America serving about 575,000 subscribers with its HughesNet service. Hughes sells communications equipment for mobile satellite-based voice and data network operators and cellular mobile network operators, as well as other users of terrestrial microwave technology. Hughes Network Systems is the primary operating subsidiary of Hughes Communications, which was acquired by EchoStar in 2011.
EchoStar's interest in Hughes Communications stemmed from the company's efforts to diversify its business (which is overwhelmingly drven by sales of digital television set-top boxes to former parent DISH Network), while extending its ability to offer satellite services. Hughes' overseas operations also gave EchoStar, which makes the vast majority of its sales in the US, a broader international footprint.
Hughes Communications financial performance in 2010 was hampered by higher selling, general, and administrative expenses, as well as impairment losses. The company did return to profitability for the year, however, due mainly to sales growth in its consumer segment, after a loss the previous year. The red ink in 2009 was caused by a lost $44.4 million deposit paid to Sea Launch Company for the contracted launch of Hughes' SPACEWAY 3 satellite. The rocket did not leave the ground before Sea Launch filed for Chapter 11 bankruptcy.
A settlement agreement established in mid-2010 stipulates that Sea Launch will issue two $22.2 million vouchers to Hughes Communications for a future launch before the end of 2015. In the meantime, Hughes next satellite is slated to be launched by Arianespace. Known as Jupiter, the satellite is being constructed by Space Systems/Loral, and should launch in 2012. It will have 10 times the capacity of the SPACEWAY 3, launched in 2007.
Hughes Network Systems generates the majority of its revenue from its VSAT operations. The company markets its products and services worldwide (with systems in use in more than 100 countries), but the majority (75%) of its sales are made in North America. Broadband satellite Internet services are also marketed to government agencies; in 2010 it won contracts to provide services to agencies in Oregon, South Carolina, Virginia, and Texas. In addition, the company was one of four that were awarded contracts to provide high-speed satellite Internet service under The American Recovery and Reinvestment Act of 2009. Hughes Network Systems received $58.7 million to expand broadband access to rural and underserved parts of the country.
The company isn't ignoring the international market, however. In 2010 it established HughesNet China Co. Ltd., a joint venture with China UnifiedNet to provide managed network services to corporate customers and government agencies in China. Hughes Communications India Ltd. (HCIL) set up its third satellite hub in the country that year to serve its hundreds of corporate customers, including the Allahabad Bank, Bharat Electronics, and the State Bank of India.
Brazil, the UK, and the India are the company's biggest international markets in terms of sales. It also has operations in China, Germany, Italy, Mexico, Russia, and the UAE. Hughes' growth strategy for its VSAT business includes focusing on the domestic consumer market and overseas network service providers.
In 2009 Hughes initiated its Hughes Utility Solutions service for the electrical power generation industry, helping utilities to improve real-time communications and monitoring of distributed transmission and substation facilities. Electrical utilities are implementing "smart grid" measures to increase the efficiency of their distribution networks, meeting industry mandates set by the North American Electric Reliability Corporation.
Parent Hughes Communications was spun off from SkyTerra Communications (now LightSquared) in 2005. The companies trace their roots to entities owned by 20th century industrialist Howard Hughes. – less