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Telecommunications equipment industry

EchoStar Secures Deal with Philips for DBS Receivers, Prepares for Fall Launch

Strategic Insights

— 2 min read

EchoStar Communications Corp., a direct broadcast satellite (DBS) licensee, has signed a letter of intent with Philips Consumer Electronics Co. to develop DBS satellite receivers. Under the agreement, DBS receivers would be manufactured and distributed under the Magnavox or Philips brand names, and gain access to Philips' distribution channels. This partnership is expected to boost EchoStar's DBS service, allowing subscribers to use 18-inch satellite dishes to receive programming within 60 days of the launch of the company's high-powered EchoStar 1 satellite scheduled for this fall.

Key Takeaways:

  • EchoStar has signed a letter of intent with Philips Consumer Electronics Co. to develop DBS satellite receivers for distribution under the Magnavox or Philips brand names.
  • The DBS receivers would gain access to Philips' distribution channels, expanding EchoStar's reach in the market.
  • EchoStar's DBS service is expected to allow subscribers to use 18-inch satellite dishes to receive programming within 60 days of the launch of the company's high-powered EchoStar 1 satellite scheduled for this fall.
  • EchoStar would purchase the DBS receivers from Philips beginning in the third quarter of 1996 and continue buying them at least through 1997.
  • EchoStar already has deals with Sagem Group and SCI Systems Inc. to build DBS receivers due for delivery in late 1995, continuing through 1997.
  • EchoStar has sold more than 575,000 of the 2.1 million DTH receivers purchased in the United States and another 670,000 receivers internationally.
  • EchoStar plans to raise $61 million through its initial public stock offering, down from $80 million.
  • The EchoStar 1 launch has been delayed at least one month due to a revised launch contract with China Great Wall Industry Corp.
  • EchoStar has agreed to pay Liquidated damages of up to $500,000 to Lockheed Martin Corp. if EchoStar 1 is not delivered by August 31, with additional penalties of $33,333 a day up to a maximum of $4.5 million.
  • A separate launch on a Long March 2E for EchoStar 2 is slated to occur next year between July and September, pending the resolution of the recent launch failure.

Statistics:

  • Estimated 600,000 units of DBS receivers have been sold since their roll-out last June with the launch of DBS service in the United States by DirecTv and USSB.
  • Over 2.1 million DTH receivers have been purchased in the United States, with EchoStar selling more than 575,000 of those units.
  • EchoStar intends to raise $61 million through its initial public stock offering.
  • EchoStar 1 is scheduled for launch on a Long March 2E rocket between October 30 and November 30, with a revised launch contract covering a one-month delay.
  • The Long March 2E rocket failed in mid-air shortly after launch on January 26, with no cause identified.
  • At least two commercial launches using the Long March 3C are planned prior to the scheduled launch of EchoStar 3 between September and November 1997.

Sources:

  • EchoStar prospectus filed with the Securities and Exchange Commission (SEC)
  • Revised EchoStar prospectus dated May 25
  • An estimated 600,000 units DBS receivers sold since their roll-out last June with the launch of DBS service in the United States by DirecTv and USSB.

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