Dish Network 2001 Annual Report Download - page 53

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approximately $60 million if one or two satellites are so leased or transferred, and by an additional material amount
if a third satellite is leased or transferred. We believe we have in-orbit satellite capacity sufficient to expeditiously
recover transmission of most programming in the event one of our in-orbit satellites fails. However, the cash
reserved for satellite insurance is not adequate to fund the construction, launch and insurance for a replacement
satellite in the event of a complete loss of a satellite. Programming continuity cannot be assured in the event of
multiple satellite losses.
We may not be able to obtain commercial insurance covering the launch and/or in-orbit operation of
EchoStar VIII at rates acceptable to us and for the full amount necessary to construct, launch and insure a
replacement satellite. In that event, we will be forced to self-insure all or a portion of the launch and/or in-orbit
operation of EchoStar VIII. The manufacturer of EchoStar VIII is contractually obligated to use their reasonable best
efforts to obtain commercial insurance for the launch and in-orbit operation of EchoStar VIII for a period of in-orbit
operation to be determined and in an amount of up to $225 million. There is no guarantee that they or we will be
able to obtain commercial insurance for the launch and in-orbit operation of EchoStar VIII at reasonable rates and
for the full replacement cost of the satellite.
We utilized $91 million of satellite vendor financing for our first four satellites. As of December 31, 2001,
approximately $14 million of that satellite vendor financing remained outstanding. The satellite vendor financing
bears interest at 8 1/4% and is payable in equal monthly installments over five years following launch of the satellite
to which it relates. A portion of the contract price with respect to EchoStar VII is payable over a period of 13 years
following launch with interest at 8%, and a portion of the contract price with respect to EchoStar VIII and EchoStar
IX is payable following launch with interest at 8%. Those in orbit payments are contingent on the continued health
of the satellites. The satellite vendor financings for both EchoStar III, EchoStar IV and EchoStar VII are secured by
an ECC corporate guarantee.
During 2002, we anticipate total capital expenditures of between $500-$750 million depending upon the
strength of the economy and other factors. We expect approximately 25% of that amount to be utilized for satellite
construction and approximately 75% for EchoStar receiver systems in connection with our Digital Home Plan and
for general corporate expansion. These percentages, as well as the overall expenditures, could change depending on
a variety of factors including Digital Home Plan penetration and the extent we contract for the construction of
additional satellites.
In addition to our DBS business plan, we have licenses, or applications pending with the FCC, for a two
satellite FSS Ku-band satellite system and a two satellite FSS Ka-band satellite system. We will need to raise
additional capital to complete construction of these satellites. We are currently funding the construction phase for
two satellites. One of these satellites, EchoStar VIII, will be an advanced, high-powered DBS satellites. The second
satellite, EchoStar IX, will be a hybrid Ku/Ka-band satellite.
During November 2000, one of our wholly owned subsidiaries purchased a 49.9% interest in VisionStar,
Inc. VisionStar holds an FCC license, and is constructing a Ka-band satellite, to launch into the 113 degree orbital
location. In February 2002, we increased our ownership of VisionStar to 90%, for a total purchase price of
approximately $2.8 million. In addition, we have made loans to VisionStar totaling approximately $4.6 million as of
December 31, 2001. Pegasus Development Corporation filed a petition for reconsideration of the FCC's approval of
that transaction. There can be no assurance that the FCC will not reconsider its approval or otherwise revoke
VisionStar’s license, rendering our investment worthless. Furthermore, VisionStar’s FCC license currently requires
construction of the satellite to be completed by April 30, 2002 and the satellite to be operational by May 31, 2002.
We will not complete construction or launch of the satellite by those dates and will have to ask for an extension.
Failure to meet the milestones or receive an extension, of which there can be no assurance, will make the license
invalid unless the milestones are extended by the FCC. In May 2001, the FCC already denied an earlier request by
VisionStar to extend its milestones. In October 2001, upon granting the acquisition of VisionStar by us, the FCC
conditioned the license transfer on our completion of construction of the satellite by April 2002, launching the
satellite by May 2002, and reporting any change in the status of the spacecraft contract. In the future we may fund
construction, launch and insurance of the satellite through cash from operations, public or private debt or equity
financing, joint ventures with others, or from other sources, although there is no assurance that such funding will be
available.