No More DirecWay? I Believe the writing is on the wall...

As one who has been directly involved in selling DirecWay satellite internet products, sold competitive Enterprise Satellite internet products, has a background in financial analysis and business information reporting.... and studied HNS for over 4 years, I’ve come to the conclusion that the end might be near for DirecWay satellite internet in the U.S. Bear with me now......this ownership stuff gets a bit convoluted....keep in mind, this in no way affects DirecTV customers.

Last December DirecTV Group (Part of News Corporation - a Rupert Murdock company) which is the parent of HNS (Hughes Network Systems)-which, in turn owns DirecWay, decided to sell 50% of the operation to Sky Terra, which is owned by Apollo Management Group, a New York based private investment company with holdings in chemical, furniture and real estate companies in addition to it's Satellite holdings. DirectTV Group cited the main reason for the sale of HNS/DirecWay was to focus on the core satellite TV business, DirecTV. DirecTV Group will treat the 50% they retain as an investment on their books and hand over the day to day management of the operations of HNS/DirecWay to Sky Terra-a VERY important revelation.

My bet is that Sky Terra will utilize the HNS/DirecWay assets in Europe to further Cable TV and internet operations they control there and systematically dismantle the U.S. operations ....ie DirecWay U.S. But who will buy a company losing 10’s of millions a year and sells a product that doesn't work very well all too often? Nobody....but they will buy the leasees on transponders DirecWay has control of. And that is part of how they will make this highly leveraged transaction work.
I believe Sky Terra is laying the groundwork for dismantling DirecWay in this report filed with the SEC on April 5th: http://www.sec.gov/Archives/edgar/data/756502/000119312505069877/dex991.htm

In the report they speak of one potential event after another that could easily undermine the inferred plans to continue to operate HNS…as if to tell the investing world, new plans are on the horizon.
The point of this opinion piece is to put DirecWay consumer and even commercial internet customers on notice.......seriously consider a change while the “gettin's good”. As soon as they contractually can, I believe Sky Terra will put the assets of HNS to work in profitable niches like vsat commercial applications, sell Ku bandwidth to the highest bidder and try to get in on the balance of Homeland Security business still out there. Up to the present time DirecWay has been poorly directed and a complete financial disaster – just ask Rupert Murdock!
If you work for HNS and don't have your resume' on the street.......you might want to start typing!

If WildBlue and the others in the Ka Band internet business are remotely successful it will bring this to fruition even faster. Why? Sky Terra has control of a Ka band satellite under construction for launch in 2007(SpaceWay 3) - too far out for DirecWay/Sky Terra to have any impact on the market. They have the rights to another DirecWay Ka band satellite which is still on the drawing boards and I believe they are betting they can sell both of them for a handsome profit to one of the four active major Ka players: Telesat, WildBlue, SES Americom or EchoStar. This could be a very interesting year for the satellite internet business.

About the Author:

Randy Scott has been involved in the bi-directional satellite internet industry from it’s beginning as a Sr. Sales Engineer, consultant and business owner. Randy is the founder of VSAT U.S., a consulting and sales organization, representing the most prestigious satellite internet providers in the America’s. For more information about current VSAT satellite internet offerings including Ka band, visit http://www.vsatus.com or email randy@vsatus.com .

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