Dish Network 2012 Annual Report Download - page 87

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-64
17. Segment Reporting
Operating segments are components of an enterprise for which separate financial information is available and
regularly evaluated by the chief operating decision maker(s) of an enterprise. Operating income is the primary
measure used by our chief operating decision maker to evaluate segment operating performance. We operate three
primary business segments.
x DISH. The DISH branded DBS pay-TV service had 14.056 million subscribers in the United States as of
December 31, 2012. The DISH branded pay-TV service consists of FCC licenses authorizing us to use
DBS and FSS spectrum, our owned and leased satellites, receiver systems, third-party broadcast operations,
customer service facilities, a leased fiber network, in-home service and call center operations, and certain
other assets utilized in our operations. In addition, we market broadband services under the dishNET
brand.
x Blockbuster. On April 26, 2011, we completed the Blockbuster Acquisition. The financial results of our
Blockbuster operations are included in our financial results beginning April 26, 2011. Blockbuster primarily
offers movies and video games for sale and rental through multiple distribution channels such as retail
stores, by-mail, digital devices, the blockbuster.com website and the BLOCKBUSTER On Demand
service.
x Wireless Spectrum. In 2008, we paid $712 million to acquire certain 700 MHz wireless spectrum licenses,
which were granted to us by the FCC in February 2009 subject to certain build-out requirements. On
March 9, 2012, we completed the acquisitions of 100% of the equity of reorganized DBSD North America
and substantially all of the assets of TerreStar, pursuant to which we acquired, among other things, 40 MHz
of 2 GHz wireless spectrum licenses held by DBSD North America and TerreStar. The financial results of
DBSD North America and TerreStar are included in our financial results beginning March 9, 2012. The
total consideration to acquire these assets was approximately $2.860 billion. This amount includes $1.364
billion for the DBSD Transaction, $1.382 billion for the TerreStar Transaction, and the net payment of
$114 million to Sprint pursuant to a settlement agreement. We are evaluating our options to commercialize
these assets. See Note 10 for further information.
We currently generate an immaterial amount of revenue and incur operating expenses associated with
certain satellite operations and regulatory compliance matters from our wireless spectrum assets. As we
review our options for the commercialization of this wireless spectrum, we may incur significant additional
expenses and may have to make significant investments related to, among other things, research and
development, wireless testing and construction of a wireless network.
On March 21, 2012, the FCC released a Notice of Proposed Rulemaking (“NPRM”) proposing the
elimination of the Mobile-Satellite Service (“MSS”) “integrated service,” spare satellite and various
technical requirements attached to the 2 GHz licenses. On December 12, 2012, the FCC approved rules
that eliminated these requirements and gave notice of its proposed modification of our 2 GHz
authorizations to, among other things, allow us to offer single-mode terrestrial terminals to customers who
do not desire satellite functionality. On February 15, 2013, the FCC issued an order, which will become
effective on March 7, 2013, modifying our 2 GHz licenses to add terrestrial operating authority. The
FCC’s order of modification has imposed certain limitations on the use of a portion of the spectrum and
also mandated certain interim and final build-out requirements for the licenses. See Note 10 for further
information.
DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-65
2012 2011
Total assets:
DISH................................................................................................. 13,568,087$ 9,614,097$
Blockbuster....................................................................................... 357,267 453,661
Wireless Spectrum............................................................................ 4,062,383 2,113,946
Eliminations...................................................................................... (608,129) (711,473)
Total assets........................................................................................ 17,379,608$ 11,470,231$
All
Other & Consolidated
DISH Blockbuster (1) Eliminations Total
Year Ended December 31, 2012
Total revenue.................................................................................... 13,198,447$ 1,087,661$ 1,427$ (21,043)$ 14,266,492$
Depreciation and amortization.......................................................... 921,593 19,506 41,950 - 983,049
Operating income (loss) ................................................................... 1,321,284 (35,333) (64,116) - 1,221,835
Interest income.................................................................................. 99,522
Interest expense, net of amounts capitalized..................................... (536,879)
Other, net.......................................................................................... 148,291
Income tax (provision) benefit, net................................................... (307,029)
Less: Net income (loss) attributable to noncontrolling interest........ (10,947)
Net income (loss) attributable to DISH Network.............................. 636,687
Year Ended December 31, 2011
Total revenue.................................................................................... 13,073,088$ 974,875$ 430$ -$ 14,048,393$
Depreciation and amortization.......................................................... 911,663 10,410 - - 922,073
Operating income (loss) ................................................................... 2,928,695 (1,171) 430 - 2,927,954
Interest income.................................................................................. 34,354
Interest expense, net of amounts capitalized..................................... (557,910)
Other, net.......................................................................................... 6,186
Income tax (provision) benefit, net................................................... (895,006)
Less: Net income (loss) attributable to noncontrolling interest........ (329)
Net income (loss) attributable to DISH Network.............................. 1,515,907
Year Ended December 31, 2010
Total revenue.................................................................................... 12,640,744$ -
$ -$ -$ 12,640,744$
Depreciation and amortization.......................................................... 983,965 - - - 983,965
Operating income (loss).................................................................... 1,940,828 - - - 1,940,828
Interest income.................................................................................. 25,158
Interest expense, net of amounts capitalized..................................... (454,777)
Other, net.......................................................................................... 30,996
Income tax (provision) benefit, net................................................... (557,473)
Less: Net income (loss) attributable to noncontrolling interest........ 3
Net income (loss) attributable to DISH Network.............................. 984,729
Wireless
Spectrum (2)
As of December 31,
(In thousands)
(In thousands)
(1) The year ended December 31, 2011 reflects Blockbuster results from the acquisition date of April 26, 2011
through December 31, 2011.
(2) The year ended December 31, 2012 reflects Wireless Spectrum results from the acquisitions of DBSD North
America and TerreStar on March 9, 2012 through December 31, 2012.