Market Watch

EchoStar Acquires Hughes Communications


Display Driver IC Forecast

EchoStar has acquired broadband satellite company Hughes Communications for $1.3bn. The deal (worth $2.0bn when taking into account debt) will give EchoStar access to Hughes Communications' two-way broadband satellite services.

Dish Network, EchoStar's biggest customer, currently offers its subscribers satellite broadband through a number of providers including Hughes Communications and ViaSat.

EchoStar owns a number of satellites which are run as managed services for direct-to-home (DTH) operators. EchoStar also supply set-top boxes (STBs) and digital video recorders (DVRs) to the pay TV industry.

Analysis
This acquisition is best viewed in light of EchoStar's relationship with Dish Network. In 2010, Dish made up 82.5 per cent of EchoStar's total revenue. Therefore, for the time being at least, EchoStar's strategy will be heavily influenced by Dish's requirements. In particular, Dish's multiscreen offering is likely to be a key driver behind this acquisition.

Hughes Communications will put EchoStar in a position where they own and control each part of Dish's multiscreen ecosystem. In the home, content is delivered to digital video recorders (DVRs) via EchoStar satellites. Dish then offer multiscreen via EchoStar's Slingbox technology. This technology pushes DVR content to tablets, mobiles and PCs via the open internet. With this acquisition, EchoStar will also control the upstream internet connection used to push content from the DVR.

Additionally, EchoStar will look to leverage its strong sales relationship with Dish to increase Hughes Communications' market share within the satellite broadband market. As noted, Dish currently offer satellite broadband to their subscribers through a number of partners. With the growth of multiscreen, satellite broadband will become increasingly important as DTH operators look to integrate their services within a single branded ecosystem. Therefore, multiscreen will tie into EchoStar's ability to leverage its sales relationship to increase Hughes Communications' market share.

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