EchoStar Corporation (SATS) Q4 2012 Earnings Report, Transcript and Summary

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. [Operator Instructions] Thank you. 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, Corporate -- 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 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. 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 can 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 and risks, please refer to our annual report on form 10-K filed in connection to 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 report and should not place undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. Let me now turn the call over to Mike Dugan.

Thanks, Dean and Deepak, and welcome, everybody, to today's call. I'll start with a brief 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 XVII/JUPITER satellite, which was launched in the July time frame. EchoStar XVII has a capacity of over 100 gigabits and our HughesNet Gen4 operating 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 3 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 nonconsumer 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 S-Oil, ConocoPhillips, Sherwin-Williams, Xplornet, Yum! companies, Row 44 and Shell pipeline. The international orders were with SCT in Mexico, Nextel and Telefonica in Brazil, Avanti 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, which was developed by EchoStar Technologies. Hopper is a high-power, high-definition, 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 this year, DISH announced Hopper with Sling, which further advances the concept of whole-home DVR and adds TV anywhere capabilities built in to 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 WiFi integration and it 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 and 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 2 new models of our retail Slingbox, the Slingbox 350 and 5000 -- to completely redesign retail -- I'm sorry 500, to completely redesign 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 WiFi and HDMI, as well as a platform of delivering personal content to the TV, a first for any Slingbox product. We are aware of the consumer's growing desire to access the content that the consumer's 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 to pay-TV operators directly and through set-top box OEM suppliers with sales and licensing of our Sling technology around the world. We are continuing our discussions with -- switching again, we are continuing to discuss with potential partners in Brazil to provide a DTH service. The process is taking 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, QuetzSat has now been also deployed to its intended location of 77 degrees and has taken over the primary provider service to our Dish Mexico joint venture. We now have several limited-life [ph] space assets available to deploy on short-term missions. The ESS business also secured new orders in the fourth quarter of 2012 from ARTEL, Harris CapRock, government services, RiteNet, Sprint and EDUSAT 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 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 that 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 12 -- a full 12 months of results for Hughes, the 2011 results only included 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 were -- 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 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 from sales and investments, as well as the dividend we received from an investment. Also in the fourth quarter, we impaired certain assets totaling $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 2012 saw higher SAC 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're 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] Your first question comes from the line of Jason Bazinet with Citi.

I just had 2 quick questions. On the Hughes side, I think one thing the buy side is struggling with a bit is sort of a right -- an appropriate mix between retail and wholesale and what implications that has on your margins. And then second -- so any color you could give on that would be great. And then second, on the -- you mentioned lower international set-top box sales in the quarter. Do you view that as just sort of normal undulations in the business? Or is something more material going on that we should think about for '13?

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 Hughes EchoStar call, so 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 sort of the right retail wholesale mix in terms of your ads and what implications that may have for margins.

Well -- this is Mike Dugan. I think that -- I'm not sure the right word would be struggle. I think that we are 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. So we're going to continue to explore additional wholesale partnerships if they are available to us, and we're going to try to get every subscriber we can onto JUPITER/EchoStar XVII 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 the 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, and so we've got much lower upfront 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 of off of as much of the satellite as quickly as we can. That's how we maximize the returns on that asset. And with that, I'll ask Mark to address the set-top box question.

Sure. Jason, so basically on the international set-top box side, we are very focused on Europe and we're basically reflecting the 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 is knocking on our satellite business as much as it's been on their [ph] IP delivery system.

Your next question comes from the line of Amy Yong with Macquarie.

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

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

Well, let's talk about the ARPU expectations. I mean, Amy, as you can imagine, once again, consistent with the wholesale arrangement and lower margin, that lower margin is really going to be driven -- driving down ARPU also. You're not going to get the same revenue on the wholesale customer that you are on the retail customer. So we would certainly expect ARPU to decline over time as a result of that mix. And how far it declines, once again, 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 of what the economics of that agreement looks like?

Just what's in the -- what's been announced publicly.

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

Okay. And 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, you want to try and address that?

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 then it's...

Yes. We haven't disclosed any projections on the 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. So we are very optimistic about the future.

Your next question comes from the line of Tim Quillin with Stephens Inc.

First question is on the $33 million impairment charge. Am I right in kind of 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.

And so -- and just to be clear, so 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. And then on -- a couple of 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? And 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 MPEG-4 by a specific point in time, and I don't really know what disclosures DISH has made on that. I got to be really careful about what we can say. But we're optimistic, first of all, with the success of Hoppers and Joeys and the new products that they have us developing for them. And they continue to want to move customers to the DVR platform. They still have a large customer base of non-DVR customers that they're trying to upgrade. So right now, we look at the DISH set-top box, probably their demand to be flat or probably a little bit up. But other than that, I can't really say too much about the conversion. But it is going the way we talked about a couple of quarters ago.

Okay. And then with regards to EchoStar XVI, I guess my understanding is that maybe it will take some of or absorb some of the capacity that was on EchoStar XII, which would free up capacity on EchoStar XII. But I think also in the 10-K, you said there was some degradation there with some anomalies. And so my overall question is with the launch of EchoStar XVI, 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?

So XVI is -- was a design -- from ground up design 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 XII. So we've actually now moved all that traffic to XVI. And then we've also moved all the traffic off of Echo XV to allow it to take a mission elsewhere in the arc. So XVI, we've been very happy with XVI. The abnormalities on XVI are relatively minor.

On XII.

No, he talked about -- on XII?

Yes.

The XII stuff has been exposed in the past where we had some limitations that were -- have been replaced by XVI. XVI has better spot beam coverage, an expanded spot beam map and certainly significant power improvement into a number of stop beams. So 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.

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

Right. So from the Echo XV, got it. On the Hughes sub growth, would you be able to say on that 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, 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 it's-- I don't believe it's meaningful information at this point.

Okay. And then how should we think about incremental margins now? So you've -- it's -- 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, would be 50%-plus incremental margins on the growth at Hughes consumer. Or how should we think about that?

Grant, you want to try and address that?

So I think the -- well, we just launched the offering, October 1, as you know. So the retail business has always been our strength. And it's the wholesale -- for 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 [indiscernible] close [ph] to ours. So 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 and the combination of 2 plans to see what that mix is going forward.

Right, okay. And how about the nonconsumer business on Hughes? I mean, the bookings looked pretty good in the fourth quarter, would you expect the nonconsumer business to grow in 2013?

Pradman, you want to take that?

We were very pleased with the enterprise business growth, both in North America and international. And we have a healthy backlog going into 2013, and 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 has 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 sometime this calendar year, you'd be able to nail things down? Or how do you think about time lines there?

Well, I can only say internally, we're working very, 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 there -- it's complex, it's international markets, 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. So if 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? And that said, I could 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, okay. And 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.

Okay, okay. And then I apologize for a long list of questions, but I got to a few...

Let's just do one more then we'll turn it over, let the others have a chance.

Okay, and I'll get back on the queue, I just know that there's not a lot of sell-side analysts. So -- and just the modeling questions -- or so 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?

Yes. SG&A, there were some onetime 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.

Your next question comes from the line of Chris Quilty with Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: A follow-up on the Hughes business a little bit. You did not mention DIRECTV in your list of wholesale partners, and I think you had expected that relationship to kick in either end of last year, early this year?

Pradman, you want to address that?

Sure. As we had indicated earlier, we had publicly announced that we've signed a sales agency agreement with DIRECTV. It was not a wholesale agreement like the agreement we have with DISH. And we've been working the interfaces and we expect that agreement to kick in, in the next few months. Chris Quilty - Raymond James & Associates, Inc., Research Division: So you would, for an accounting purpose, treat that as retail customers in your mix between retail, wholesale?

Exactly. They will be treated just like any of our other sales agents. We have a whole bunch of them. Chris Quilty - Raymond James & Associates, Inc., Research Division: And you didn't give it in the quarter, but assuming that relatively small number of wholesale customers have been added, would the ARPU have still have been 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. So I'm not going to comment on how far it would have gone down. But obviously, there's a dilutive impact on ARPU because of the wholesale. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And final question on the Hughes. When you look at the customer migration issue of customers that are on a traditional HughesNet 3 service -- Gen3 service I guess, how are you handling that? And is it moving as expected?

Grant, you want to talk about -- or Pradman, go ahead.

Yes. We've had a good -- we've had an upgrade program, and that has been budgeted and it was working out pretty much according to plan. There seems to be a healthy demand for people to upgrade from existing SPACEWAY [ph] Ku-band platforms to the JUPITER platform. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And 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. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. Shifting to the electronic technologies group, you mentioned targeting other geographies beyond Europe. I think you mentioned Latin America. And I guess the question, 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?

Mark, do you want to talk about that? I mean, 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.

Yes. I mean, 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. But we do still 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. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And Mark, just I guess a generic thought on traditional set-top boxes versus some of the moves we've seen towards Gateway products in the last year or 2.

Well, I think that's where we show a lot of leadership is in the Gateway-type product, the Hopper and the Joey. I mean, it's -- I would say it's best in class. I don't want to beat my chest too much but that's kind of what the review says. If you read the PC Magazine review, it just basically says, hands down the best DVR on the market. And it is a network-based system where you have 1 centralized system that can feed [ph] 4 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 demand is different. Everybody's costs that they will absorb is different. So we have to take all those into account and try to balance that for our customer needs. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. And on the service side, am I correct that EchoStar XVI was not operational for the fourth quarter in terms of being reclassified into PP&E?

No, XVI was actually in-orbit -- in 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. XVI has 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 that will begin in the first quarter. It was a little bit delayed in its launch, and we focus very heavily on a short in-orbit test. So we combined in-orbit test with providing some minor capacities as quickly as we could.

And Tom McElroy just corrected me, it was still in CIP at the end of the year. So we hadn't started generating revenue off of it yet. Correct. Chris Quilty - Raymond James & Associates, Inc., Research Division: Got it. And 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 XVII, excuse me.

Exactly. Chris Quilty - Raymond James & Associates, Inc., Research Division: So what -- 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 XVI and XVII no longer capitalizing interest?

Cash interest? Chris Quilty - Raymond James & Associates, Inc., Research Division: P&L, yes.

I'm just trying to clarify if that's what you're asking. Chris Quilty - Raymond James & Associates, Inc., Research Division: Yes.

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

Your next question comes from the line of Josh Rosen with Act II.

Just on the on HughesNet, I think you guys increased the 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? Is that -- you talked about churn coming down in the future. Is that something that's going to have an effect on that?

Well, obviously, that was the 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. And 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 want to -- have anything you want to add to that, Pradman.

Yes. 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 –- out in states where we don't have the JUPITER capability available. So we are upgrading customers on SPACEWAY who can get JUPITER to a 5 -- 5 1 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 in -- throughout the country? Or is that still being rolled out?

The main -- 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 move the customer to JUPITER. So in the parts where JUPITER doesn't have coverage, which is the infield, as we call it, yes, we're already moving customers to this new plan.

Realize that bandwidth had to come from customers that 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 of 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. And Chris, total gross interest expense is about $192 million.

On the -- just on DISH net, is there any color you could give on when and how they're choosing to use the Hughes product versus the ViaSat product?

You have to ask them.

Okay. And then just -- I guess just one last one on this. I mean, you guys talked about having a plan for migrations. I mean, is that something that you expected to peak kind of the first quarter out, and then that should kind of decrease as you get more gross adds on? Or has that number kind of stayed constant since you launched the product?

All right. Mark, can you answer that? I didn't understand the question.

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

Yes, as a remainder, I'm just like -- sorry, go ahead.

Sorry, go ahead.

I was just saying is that remains like 30%, or does come down? Or whatever the number may be.

Well, 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. 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're very happy to upgrade them.

Okay. In the K, it mentioned that nonconsumer backlog on Echo XVII was $250 million. So I assume this is enterprise. Could 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?

Pradman?

I think the only backlog we would have for enterprise customers for -- on Echo XVII would be the small and medium enterprise as to the...

Is that where that $252 million...

Yes. We have a large customer in Canada that purchased a piece of that backlog on Echo XVII for the life of the satellite. [indiscernible] is reflected, and it's in backlog. Typically, we do not have enterprise customers on Echo XVII as of yet. We're primarily focused at the consumer.

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

Yes, there is.

And is that -- that should, obviously, drive revenue. But I mean, is there going to be kind of an upgrade cycle from DISH that you expect as they kind of try to push that product?

They will 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 that for Echo XVI, there was incremental revenue over '12 because '12 was a DISH satellite. And obviously, this one is an Echo satellite. Could you just remind me or remind us of how you book revenues when it's a DISH-owned satellite?

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

Yes. You said that there would be an increase in revenues from -- as you move capacity from Echo XII to XV because XII is a DISH satellite. Could you just talk about how you book revenue for a DISH-owned satellite?

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

Well, that's then an owned satellite?

I'm sorry. On a DISH-owned satellite?

Yes, yes, yes.

Okay. So 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 slot, rental fees, if you will, depending on where it's at. If it's at 61.5, obviously, it's our satellite -- 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 QuetzSat, what's -- where is that positioned now? I think I read that it's taking over Dish Mexico. Is there incremental revenue that's attached to that? Or is that just replacement for what was...

QuetzSat -– primarily, QuetzSat is replacing EchoStar VIII, which is another one of our satellites. And so the incremental revenue on QuetzSat will be minimal because it's replacing other revenue. We then have Echo VIII that we can deploy into other potential short-term missions that may or may not generate revenue.

Okay. And then just lastly, in terms of Brazil, I mean, if you were to sign a JV in the next 6, 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?

Yes. With -- this is Anders Johnson. With the recent introduction of Echo XVI as well as QuetzSat, 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.

Your next question comes from the line of Jimmy Schaeffler with the Carmel Group.

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

It's starting out to be an interesting addition to our 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. So we like it. It's -- I mean, 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.

Your next question comes from the line of Tim Quillin with 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-GAAP loss.

And is there a delta between the cash and the gap?

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

So 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 P&L interest would be.

Okay, fair enough. How about GAAP tax rate for 2013? I guess, for modeling purposes, we use 0?

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

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

Tim, this is Deepak. Let me take that offline. You and I can discuss that later.

Okay, it might be interesting for others.

Your final question comes your final question comes from the line of Chris Quilty with Raymond James. Chris Quilty - Raymond James & Associates, Inc., Research Division: I forgot one for Pradman. The announcement you had a couple of months ago, maybe it was in January for the EDUSAT project in Punjab. Was a pretty large number, I think it was around $250 million. Presumably that's the multiyear full value of the contract.

I don't know what your -- I apologize, Chris, I don't know what -- Alti-Sat [ph], is that what you're talking about? Chris Quilty - Raymond James & Associates, Inc., Research Division: It was the government of Punjab, a couple of thousand schools?

Yes, but that wasn't $250 million.

No, it wasn't.

No. I mean, I know that job with schools -- the program is typically in the $5 million to $10 million. Chris Quilty - Raymond James & Associates, Inc., Research Division: Right. Unless it was put in rupees or something else in the press release.

[indiscernible] I think in India, it was like $35 million. Chris Quilty - Raymond James & Associates, Inc., Research Division: Okay. It must have been a misprint on the press release, then. So you might want to check that.

We can take it offline. I don't recall any contract worth $250 million. Chris Quilty - Raymond James & Associates, Inc., Research Division: That's why I was asking.

I wish we had one. Chris Quilty - Raymond James & Associates, Inc., Research Division: So I guess 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. But 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 burst through. But as of now, we've not succeeded.

And Chris, this is Grant. Just to comment on the last one, if you're looking at press releases that on the Indian jobs that will be released by our Indian group, they quite often refer them in rupees, which should be INR 54 to the $1, which gets you relatively large number. A $5 million contract would INR 250 million. Chris Quilty - Raymond James & Associates, Inc., Research Division: I'm looking at it now, and there is a little RS in front of the million. You are correct. I'm wondering why you weren't highlighting that one, Pradman.

At this time, you have no further questions.

Deepak? If there are no -- yes, no further questions, Deepak.

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

Thank you, and this concludes today's conference call. You may now disconnect.