Good afternoon. My name is Therese, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2013 earnings conference call. [Operator Instructions] Thank you. I would now turn the call over to Deepak Dutt. Go ahead, Deepak.

Thank you, operator, and good day, everyone. Welcome to EchoStar's First Quarter 2013 Earnings Call. I'm joined today by Mike Dugan, our CEO; Dave Rayner, CFO; Pradman Kaul, President of Hughes; Mark Jackson, President EchoStar Technologies; Anders Johnson, President of EchoStar Satellite Services; Ken Carroll, Executive Vice President, 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, and hello, everyone. 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 such forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K and our quarterly report on Form 10-Q 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 thanks, everybody, for joining the call. I'll start with a few highlights of our operational performance for the quarter and then I'll turn it over to Dave Rayner, who will give some insight into our financials. Starting with the Hughes business unit. As you are aware, we commenced our HughesNet Gen4 consumer Internet service on our Ka-band EchoStar XVII satellite on October 1, 2012. It has much faster download speeds of up to 15 megabits and significantly increased monthly data download allowances. In addition to continuing to offer our traditional retail offerings, we also launched significant wholesale offerings through DISH Network and Frontier Communications. We added a net of 56,000 subscribers in our first quarter of 2013, continuing a strong performance as demonstrated in the fourth quarter. This strong market demand did become a key driver in our decision to build EchoStar XIX, which is codenamed Jupiter 2 for the next satellite build. This satellite will have over 160 gigabits of throughput and the new Ka-band satellite will have approximately or is targeted to have 60% greater capacity than EchoStar XVII. It's expected to be the world's highest capacity broadband satellite when launched. It is planned for launch in mid-2016 and will cover all of the continental U.S. and much of Mexico and Canada. Hughes non-consumer order input in the first quarter of '13 also continued at a strong pace, 123 million of new orders, a 3% increase over first quarter 2012. Significant orders in our North American enterprise business included Xplornet, Row 44, Yum! brands, Rite Aid, Kmart and Shell. The key international orders were from the Saudi Ministry of Foreign Affairs, these international Row 44 for Russia and Europe, Yahsat, African Development Bank, Camelot, Asmin [ph] Electronics, Telemar Brazil, the Bombay Stock Exchange and State…

Thank you, Mike. I'll provide just a couple of brief highlights on our financial performance in the first quarter 2013 before we get into the Q&A session. Revenue in Q1 of 2013 was $795 million, a 4% growth over the first quarter of 2012. EBITDA was $172 million in the first quarter 2013 compared to $276 million last year. Net income was $3.5 million and diluted earnings per share was $0.04 compared to net income of $126.5 million last year and diluted earnings of 1.4 -- I'm sorry, $1.45. The declines in EBITDA and earnings were primarily due to approximately $109 million of lower gains from sale of market securities this year than we had in the first quarter of 2012. All of our operating units reported increased revenue over the first quarter of 2012. ETC revenue for the quarter was $427 million, an increase of 5%. This increase was primarily driven by an increase in equipment sales and services to DISH Network, partially offset by lower sales to Bell TV. EBIT for the quarter was $30 million, an increase of 22%, driven by the higher revenue and improved operating margin. EchoStar Satellite Services revenue for the first quarter was $74 million, relatively flat from the first quarter of 2012, but EBITDA was up $65 million, an increase of 24%, driven primarily by lower satellite lease expense and a onetime gain of $7 million associated with the reduction in our lease obligation on our AMC-16 satellite. Hughes revenue for the first quarter was $289 million, an increase of 6% from the first quarter of 2012. This increase was primarily driven by strong consumer and enterprise growth, somewhat offset by lower nonrecurring revenue in other areas. EBIT for the quarter was $64 million, a decrease of $5 million or 8%, driven…

[Operator Instructions] Our first question comes from Jason Bazinet with Citi.

I just had a quick question on the Hughes segment. If I look at the fourth quarter and then the first quarter, the EBITDA was down year-over-year, but the magnitude of the decline was less pronounced. You talked about the sales and marketing expenses causing some of that in the first quarter. As we think about the trajectory of EBITDA over the course of the year, do you think it's reasonable that, that can grow from here? Or do you see sort of continued sales and marketing or other outlays that might cause the EBITDA to remain sort of depressed even if the sub numbers are quite healthy?

Yes, Jason, let me try and address that. This is Dave. Clearly, you're going to see less of an impact Q4 to Q1 of sales and marketing because obviously, we were doing extensive sales and marketing also in Q4. We're going to continue that marketing effort going forward. But as we add subscribers, you're going to be adding gross margin that's going to start offsetting it. So I would expect to see EBITDA growth on the Hughes business going forward.

Your next question comes from Tim Quillin with Stephens Inc.

So I just want to make sure I understand kind of the apples-to-apples subscriber addition number in the fourth quarter. So it sounds like the [indiscernible]-related subs actually worked against you in the fourth quarter in terms of additions. So is 46,000 the right net add number in 4Q?

In Q4, on an apples-to-apples basis compared to how we're reporting subs now, it would be about 40,000 net adds in Q4. And really, the transition happened effectively in Q1. The third party started selling on the Echo XVII on the capacity lease late in Q4. So you really start seeing a bigger impact going into Q1.

Right. So the end-of-period subscribers apples-to-apples at the end of September would've been 596,000?

I'll take your word on that because I don't have that in front of me. But, yes, since you have 40,000 net adds and we -- yes, so that would be correct.

That's correct, Dave. That's the right number.

Yes. And so 56,000 is a big number in Q1. Is that an unsustainable pace? Would you expect to come down or would you expect that to go up because maybe, over time, you're going to work through some internal migrations on the retail side and maybe accelerate from those levels?

Pradman, do you want to take that?

Yes, I think that's a sustainable number. Just keep in mind the seasonality in our subscriber acquisition. So Q1 is usually the one -- best quarter that we have. From a seasonality perspective, Q2 goes down and then Q3 and 4 comes back up. But we think we can sustain that level.

And how pronounced would the seasonality be or how much different would you expect 2Q to be versus 1Q?

Well we don't really give guidance by quarter in terms of number of subs. But there has always been a certain amount of seasonality. If you look at our numbers in the last couple of years, you'll see that trend.

Okay. And just one other question and I'll step back into the queue. But what impact might you see based on the ruling that MVSs can keep their spectrum, I guess, essentially? But how might that impact either the growth at DISH Mexico or the value of DISH Mexico?

Yes, well I think -- this is Ken. We certainly view that as a positive outcome for MVS. As you know, we are in partnership with them in DISH Mexico, essentially at 50% level. So we view it positive for MVS and frankly positive for the joint venture. I'd be pure speculation at this point in time to say what is the positive outcome, how does it impact the growth of DISH Mexico at this point in time. I'd say probably more favorable or more direct impact is the recent Mexican Telecom Reform Act, which gives, we believe, in talking to DISH management, gives -- DISH Mexico management, gives them the ability to carry the local channels. And today, they're actively working on augmenting uplink capabilities and broadcast capabilities in anticipation of probably carrying around 13 local channels in their platform. And that will be -- that has been, in the past, a key competitive advantage of the other providers. So we should even the playing field somewhat with that aspect.

Your next question comes from Amy Yong with Macquarie Capital.

This is Andrew for Amy. I just wanted to get a little more color on the timing around Brazil. Are you guys still confident to launch service by year end? And secondly, I know that DISH Net added about 66,000 in the quarter. And I was just kind of wondering if you guys on the wholesale/retail mix, was it still mostly wholesaler -- wholesale as far as your net adds are concerned?

We'll take the second question.

Yes, so let me take -- this is Dave. I'll take the second question and ask Mike or Ken to address Brazil. Yes, I mean, the mix is not predominantly wholesale. The mix is probably closer to 50-50. When you look at what DISH has reported from a net add standpoint, you've got to remember that there's a mix of Hughes and other product in there, plus given the base that they're selling off of, which is essentially 0, that they've got minimal churn. And so the net add mix is different than the gross add mix. And I think this also goes back to conversation we've had in the past, a number of people on the call and myself and Deepak have had in the past, in terms of additional metrics that we can provide. The metrics are still in a state of flux as we absorb the wholesale business. And as things settle out, I think we'll be able to give a little bit better visibility as to what's going on. But no, I would not say the majority of the gross adds were wholesale at this point.

Okay. I'm sorry to interrupt, but the -- as far as the Jupiter 1, is this -- is most of the net adds at this point, I mean, would you say the vast majority is coming from that satellite?

Echo -- yes, Echo XVII, I think that's fair, although we do -- we have offered higher performance services on SPACEWAY in the areas not covered by JUPITER. Most of the growth in the -- in fact, virtually all of the growth in the area that JUPITER covers U.S., those subs are all going on JUPITER, and we are bringing subs off of SPACEWAY to JUPITER in those areas. But in the SPACEWAY territories, there's still some growth and there's still a new program that's been addressed to give better performance for people that need that service.

Great. And I'm sorry, on Brazil?

On Brazil? I think I stated we continue to be optimistic. We're moving a spacecraft to the slot. We're going to start demonstrating capability and testing delivery into Brazil. And I guess you would say that our confidence continues that it's a great slot and it's a great market. And we've got some unique capabilities to build a service there. And we're working very hard to get an in-country partner. And we did a demonstration of our commitment by moving the satellite and so on because it takes things a big way towards getting it done.

So would it be sort of accurate to say that moving of satellite over Brazil is sort of giving you -- you're more confident that something will happen soon?

Well I think we're just demonstrating that we're very serious about the Brazil market. And we're going to figure it out one way or the other, I guess, is our internal plan. So that's where we're going. I can't say a whole lot more than what we've said.

Your next question comes from Craig Baum with Harvest Capital.

I have 2 questions for you. First is a follow-up to Tim's question on DISH Mexico. There are some news reports floating around that Carlos Slim, or American Movil, has an option to purchase a controlling stake in that entity. I realize that you guys can't speak specifically and are somewhat limited in what you can disclose. But can you just comment on whether there's a third party that has an option to buy either a portion or all of that asset from us?

Yes, I do think we can really comment on that at this point in time.

Yes, your earlier statements were quite good about us not being able to comment.

All right, fair enough. And then one other question -- one quick question regarding the capital structure. If you look at it on a net-debt basis, you guys are about 1x levered. Given the visibility for the FSS segment and then Hughes, where you generate the vast majority of your earnings, you're arguably pretty significantly under levered. Can you just talk through the rationale for the current capital structure and then your priorities to either return cash to shareholders or put that capital to work with the cost of capital effectively 0 today?

Yes, as both Ken and Mike have commented on, we -- 1 in Brazil and 2 in other locations that we haven't specified. We're continuing to look at opportunities to deploy assets, including cash and resources, to develop additional platforms on an international basis. We've got the capital structure today that would allow us to do that. Clearly, the building of Echo XIX is a commitment of cash into the North American broadband market. From a capital structure standpoint, I think you're correct. Today, I think we still have some room to add leverage if we need to. I don't see an absolute need to do so unless there are opportunities that present themselves that are greater than the cash resources. In terms of returning capital to shareholders, we have no plans at this point in time. We still believe that there's opportunities to deploy that cash into operating entities that will return better than, I should say, acceptable returns to shareholders through the operation of the business versus the return of cash.

Okay. But so fair to think that if there are opportunities to put cash to work that would require additional leverage, you guys would absolutely consider that?

Yes, if we can -- if the cost of that capital is less than the returns that we believe that we could generate on those ventures, yes, we would be willing to take additional capital.

Your next question is a follow-up question or comment and it comes from Tim Quillin with Stephens Inc.

On Brazil, is part of what's going on here is that you're demonstrating the value of your assets? And I think you have great orbital slot there and you're moving your satellite there. Is it -- for you, is it a matter of getting the right economics on the partnership that you ultimately pick?

Well, that'd better be our goal. That's all I can say. I mean, we're not going to do a deal that doesn't make sense. And I think some of the past negotiations people have questioned whether we're honestly serious or if we were just setting on the slot as an investment or something. And the answer is we're serious. We're going to demonstrate the seriousness by bringing up this test system on a live satellite with very good coverage in Brazil. We think it's a very important market. And we're chasing it pretty hard. There's not a lot more to say about it.

Right. No, I just was kind of wondering if there's a bid-ask around the economics. It doesn't sound like it's that simple where it's just the partners wanting better economics or you wanting better economics. There's more to it than that.

Well, we don't consider the satellite we're putting there the final solution for a long-term DTH business. So it's a fairly complicated deal because we've got to come up with a capital structure and start the construction of a Brazil-specific satellite. And when you have to start off of JV with that kind of an investment, you've got to be serious about it and...

Yes, I think to Mike's point, I think we've got to align with the right fundamental in-country partner that's willing to -- that can provide the sales and marketing capabilities and expertise, that can provide the distribution platforms to get -- to reach on a national basis and frankly, is willing to invest the time, effort and capital to do so. We're willing to put the investment in. I mean, you're familiar with DISH or any of the pay TV, satellite pay TV markets, it's a substantial investment to grow that subscriber base quickly and efficiently. So I think those are kind of -- those would be the complicating factors to be able to get to an agreement with the right partner.

Got it. And then in the set-top box business, you were up pretty strongly with DISH and I think in the past, you talked about DISH maybe needing a refresh this year; down elsewhere, but if you could talk about the factors that are driving DISH up and other customers down, and if you think that overall, that business can grow for the year.

I think the DISH business -- hopefully, you listened to some of their call. Again, I think Hopper's been a successful product. It brings HD to all places in the home, which is a huge step forward of the shared DVR experience within the home, so you get HD on every set, plus you get the same content, whether it be satellite content or Internet content available in any room. So it's an industry-setting system. On the other hand, it does have a little bit higher SAC and we're working hard on that, and there's some additional features we can bring to bear to make it even more exciting in the next 12 to 14 months. So I would believe they're going to -- they've been successful with the product and it's the core feature that they're offering going forward. The rest of the providers, I think, are just a little bit delayed from DISH. You can look at the history. And we took a delay at DISH where they ran older product and so on for a little bit longer period of time, while we got the right solution done for them. And I think the other providers are going to be following suit on that in the near future. I can't really comment on the trends on their specific business, but I can only say we've got the best product to offer them to help them drive the business if they choose to do it.

Right, right. And just lastly, I mean the Hopper with Sling is a great set-top box business. I'd like to have it and I'm not a DISH customer, but there's got to be international opportunities to sell that box or maybe to sell the Sling technology. Where are you in terms of other -- maybe winning other partners there or customers?

Well, I think we're excited about the Sling product refresh, which is a standalone. It's not the DISH product we're talking about. I think that product line was well done and well thought out. And we're pretty happy with it and it has taken hold in some international markets, where we were a little bit off in the past. Hopper with Sling, as we all know, the European Community has been fairly constrained because of financial issues. That goes directly into the direct-to-home business and people that are trying to compete there where there's definitely some economic struggles. So I won't say Hopper with Sling at this instant in time is the exact right solution in some of those markets. But I'm sure there's some that are going to develop.

[Operator Instructions] Okay, we're done compiling. There are no further questions.

Okay, Deepak.

Okay, thank you, everybody, for joining in this conference today, and have a good day. That brings us to the end of the call.

Ladies and gentlemen, thank you for joining today's conference. Thank you for your participation. You may now disconnect.