Why Hughes is betting on a powerful satellite to turn things around

Echostar-controlled Hughes Network Systems is rubbing hands as it awaits its breakthrough Jupiter 3 Americas-focused satellite to lift off next year.

The Maryland-based company, which provides satellite broadband equipment and services, managed services through software-defined networking, and overall satellite network operation for consumers, businesses, governments and communities, has dealt with intense competition and adverse macro conditions, especially on its flagship internet service, HughesNet.

Hughes’ broadband subscribers were 1.28mn at Q3-end, declining 61,000 from June 30, Echostar reported. 

Current capacity limitations, as well as competitive pressures, have impacted consumer subscriptions. In Latin America, where the bulk of HughesNet’s clients are, subscriber levels were hit by adverse economic conditions, more selective customer screening, and capacity allocation to higher economic value enterprise and government applications, according to Echostar.

But the perspectives for 2023 are overall good as Hughes prepares to launch one of the most powerful satellite next year, with extensive dedicated coverage over Latin America. 

This month, low Earth orbit (LEO) satellite communications company OneWeb ordered 10,000 Hughes LEO Terminals to serve for enterprise and government customers. Hughes is also readying new plans to customers and has successfully advanced on backhauling 5G via satellite, which will be key as the technology evolve across Latin America.

In this interview, Daniel Losada, VP of international sales at Hughes, talks about the competitive pressures, 2023 perspectives, LatAm opportunities and more.

BNamericas: How has 2022 played out overall for Hughes in Latin America and what are the first expectations approach 2023?

Losada: As a company, 2022 has been a very good year for us. Our biggest challenge was certainly in the consumer business. We’re waiting for our new satellite, Jupiter 3, to enter into operation next year and kind of get us back to a growth path in the consumer part.

[Editor's note: Hughes is scheduled to launch Jupiter 3 in the first half of 2023. It will cover the Americas and serve the consumer, small business, enterprise, government, service provider and mobility sectors. With 2-3 times the Ka-band capacity of Jupiter 2, Jupiter 3 is expected to be the world’s largest commercial communications satellite when it launches.]

In 2021, we started laying out a vision that we had in terms of balancing our business between the residential business and the enterprise business, so we could get a more balanced cash flow between the two segments. 2022 was really the consolidation of that plan. At the end of September, approximately 60% of Hughes’ revenue was attributable to consumer and approximately 40% to enterprise.

We are readdressing the consumer business to focus on better quality-subs, people that stay on longer and have better ARPUs [average revenue per user], at the same time rebalancing cash flow with augmenting [the weighting] within the enterprise [segment], namely in our managed services area.

Our managed services over satellite for the most part is in the Americas, which is where we have our own space segment, our own satellites.

Other parts of the enterprise business that we do, such as SD-Wan, and other managed networks which can be kind of transport-agnostic, we did continue developing product, gaining new logos [clients], and reinforcing our position. We have established ourselves within [Gartner's technology recommendation service] Magic Quadrant for a few years in a row.

So, 2022 was kind of a transition year for the company. Not only in terms of the focus of residential versus enterprise, but also leadership. Our restructuring is focusing on growth and new opportunities, organic and inorganic.

[Editor's note: Hughes’ CEO, Pradman Kaul is retiring at the end of the year.]

BNamericas: How about 2023?

Losada: For 2023 we expect some pressure because, again, we’re waiting for Jupiter 3 to come in terms of top-line. 

But because of the work we’re doing on cost control, on continuing to focus on cash flow generation and looking at new or improving product lines that we have, including expanding into new markets, the perspectives are fairly good.

We have two parts of the satellite industry business: the hardware business and the managed services one, where we are the provider of the satellite space 

In the hardware business, we've captured some of the largest opportunities and so we'll see now the consolidation of that into growth using terminals and other types of equipment as those networks mature. We’re now seeing more recurring revenue coming from there.

In the managed services or the satellite space segment over 2023, regarding satellite capacity sales, we'll see the new entry of competitors in the market and, of course, with that, some pressure both on pricing and quality. 

But we’re strongly committed to our plan, we’re connecting new interfaces for 5G deployments, putting our products, our solutions, basically ready for 5G deployments.

We’re not just a connectivity provider, but an optimization platform for these telcos to roll out 5G in the cities and also to extend 4G boundaries. You’ll see us addressing this competition by focusing on technology, innovation and bringing new products to the market.

BNamericas: Back on ARPU, how are you working to sustain and bring that up given the challenging macro backdrop?

Losada: In principle, everybody wants more connectivity and more data. We start from that point. There are more platforms, new content that is being pushed out, so people need more services. If you start from there, you’ll want to make sure your product addresses that and focuses on people that give the proper value for, basically, the bits you’re delivering. 

We’re focusing on people that can cover the ARPU that we want to get to, that will stay with us and we’ll basically ‘reward’ them for being with us and staying with us in different ways, through different plans.

In the enterprise, we do have some higher-end plans that raise the ARPU overall because these are applications that consume a lot of data. Mines, hospitality, schools, government programs, things that tend to be very bandwidth-hungry, which also helps us raise the overall yield on the capacity that we have.

We have an asset that is our capacity and we’re trying to create the most yield out of it, with consumers or enterprises. 

Certainly, with the bringing online of Jupiter 3 and new plans that have higher throughput and more capacity and things like that, you’ll naturally see that our ARPUs will rise because people want to consume more.

BNamericas: Satellites are crucial to take connectivity to hard-to-reach regions, namely those with difficult topology and vast remote lands such as Latin America. At the same time, many still see satellite as more expensive and bandwidth-limited as opposed to ground, mobile connectivity. How do you respond to that?

Losada: That is the old view of satellite communications. It’s very well-documented and demonstrated now that satellite communications is where a lot of the telecom funding is going to. 

Why? Because you’re ubiquitous, you reach everywhere, you have immediate access to provide connectivity to these places that need it. Through innovation, you’re seeing very powerful satellites coming into service. Jupiter 3, for example. Satellites that are over 500Gbps of capacity, with immense capacity density over certain areas. 

We also see terrestrial connectivity complementary to satellite communications. There are places that are not necessarily unserved, but rather underserved. A lot of places that are still using copper wiring and have its limitations, the pole passing, etc. 

And for enterprises, there’s a very interesting niche of satellites being able to bring that security, which is a key aspect of network topologies today. You get to the most connected places in the world and you'll also [have] satellite dishes in those locations. Because you cannot match some of the reliability and security satellite connectivity can bring to that.

Partners of ours, like OneWeb and others, are also launching LEO satellites that are complementary to GEO [geostationary orbit] satellites. So now you have not only a low-latency solution, but also a low cost per bit solution all in one single platform.

I think satellite is now actually very competitive versus other terrestrial connectivities. Of course, if you can get an optical fiber to a location, who can match that. But certainly there are places where you just can’t cross with cabling.

BNamericas: What are you doing in terms of backhauling 5G and 4G with satellite in Latin America?

Losada: Because 5G has this edge computing vision, you only send back [in terms of data] what you have to send back. Only the data that needs to be available to the user, that comes from the remote site, has to be sent over, which is a new architecture compared to the traditional 4G, 3G. In these cases, everything needs to go back to the core [of the network]. With 5G, again, you only send what you need to send. It's very effective that way. So 5G can be optimized through transfer over satellite. 

For the most part you’re going to see those 5G deployments happening at urban or perhaps suburban areas. All that equipment that was deployed as 4G is going to have to find a place and so you're going to start seeing more upgrades elsewhere of 2G, 3G to 4G. These are going to require a lot more capacity. Guess what? The satellite connectivity is already there.

I just put a dish there and that place can now have 20, 30, 100mbps of connectivity. Maybe later they get fiber to it, that tower gets fibered, but that will take a long time. It might never actually [happen]. Meanwhile, that location gets 4G connectivity, without waiting for this big, long infrastructure development. 

In essence, all those equipment that it's going to be 4G will be moving further out into the rural areas, and we'll backhaul connectivity to it. 

Digging a trench just for the sake of digging a trench for the last-mile [cabling] in all those places, when there's equivalent or better capacity solutions using satellite, would not be the best usage of a budget.

ALSO READ: Latin America’s path to 5G 

BNamericas: In enterprises, what is driving Hughes in Latin America?

Losada: Obviously government, digital-divide programs, is a big part of what we do in the region. We've won these big school connectivity programs in Colombia, Peru, Mexico. 

We’re covering the expansion of cellular backhaul. There's a lot of requirements telcos have acquired in the spectrum auctions where they have to reach all those locations. So that's another way.

And then comes the other groups in enterprise which are hospitality, mining, oil and gas. Upstream and downstream. Gas stations, for example.

Satellite in those areas is relevant for backup, for sure, but not only that. 

So you'll be seeing growth of satellite in hospitality, in ecotourism, for example, in remote areas. There's also a lot of opportunity in mining, and not only in mining itself.

BNamericas: What do you mean?

Losada: In Peru, for example, mining companies in order to set up a mine in a particular location also have to provide services to the surrounding areas, connectivity.

And like I said, satellite is a very secure form of communications. You never, or almost never, see security incidents in satellite, as opposed to other networks.

I think there's going to be some very interesting applications for us to run secure traffic in banking transactions and a few others.

One of the areas that in the US we do really, really well with is retail, supermarket chains. That's an industry I don't think we've tapped really well in the Americas and that I want to work on next year.

BNamericas: How are you faring with national oil companies in Latin America? Companies like Petrobras are using Gilat and Sencinet for their operations.

Losada: All of Pemex's network is ours. They use our own technology for platforms, sites, you name it.

Elsewhere, all of Saudi Aramco satellite communications are met with our technology, for example. There's a host of oil companies around the world that are using our technology mostly for their own private networks, because of the features that we offer.

Ecopetrol and Petrobras have picked to outsource a lot of this. They don't run it directly, but outsourced to Sencinet, or Ecopetrol in Colombia which uses Claro for most of it. 

As far as it comes to managed services into those state oil companies, sure, we are talking to them a lot about it. Some are very concerned about outsourcing their management connectivity. 

We also have discussions with the providers. A lot of the contractors that serve these companies, like Halliburton and Schlumberger, use us for those connectivity solutions.

BNamericas: What are your main geographies in terms of business in Latin America?

Losada: México has the Internet para Todos program to connect people through CFE. Earlier this year, CFE deployed 6,000 sites, and just now another 6,000 sites they are looking to connect. And CFE, and as you know, picked up Altán as well. We already have sites with Altán. 

And there's a large RFP that's coming out pretty soon by CFE for another 1,000 or 2,000 backhaul locations. So Mexico will be a very active market for us next year for sure.

In Brazil, although I don’t cover it directly, I know there's a lot of backhaul opportunities that will be coming into play with 5G. Chile also has seen growth with the expansion of 5G networks.

There's going to be a strong growth in Colombia next year, because of the 5G auction scheduled to take place in that country.

Peru is an amazing market, we have a lot of capacity over there. But there has been, as you may know, some issues regarding the continuity of some government programs there. Corporate is probably what we’ll focus on.

And then the new Jupiter 3 satellite has a lot of capacity particularly over Argentina, which has been a market we haven't really been able to address very well, because our current satellite only has some coverage over the Western part of the country.

But now we’ll get coverage of the whole country. We have a partnership with Arsat to monetize and really ramp up that capacity and do some really interesting things in Argentina.

They are launching their own satellites and we’re working with them as a stopgap. They can use our new satellite over the next five years or so until their new satellites come live. When their satellite goes up, hopefully, it will be complementary with ours – provided they use our technology.