by Pradman Kaul, Chairman and CEO, Hughes

This was a great year for Hughes and for the satellite industry, overall. Demand for broadband is exploding at double-digit rates globally, as evidenced by our own positive financial results and those of other technology and service providers. Indeed, we experienced healthy growth across all sectors, with our consumer and mobile satellite segments leading the way, and with significant new business in our core enterprise markets, both domestically and internationally.

An important trend fueling the growth is that customers in all sectors are beginning to unlock greater value from broadband applications beyond connectivity alone, which has become a commodity. New applications, such as digital signage and business-based IPTV, for example, are opening up revenue opportunities for enterprises both large and small. Distance learning and ecommerce offerings are helping close the so-called digital divide in thousands of towns and villages in developing countries. And emergency preparedness, broadband on the move and high availability VPN services are enabling government agencies to better serve their citizens and respond to disasters.

By the end of 2007, Hughes will have shipped cumulatively more than 1.5 million satellite terminals to customers in over 100 countries, with more than 300,000 shipped in 2007. This confirms our continuing market leadership worldwide. Key strategic wins in 2007 include:

• We expanded our enterprise customer base for HughesNet Managed Network Services, and were recently awarded a multi-year contract by Camelot, one of the UK’s leading lottery providers. The Camelot agreement covers more than 27,000 sites, solidifying Hughes as the leader in delivering managed network services to enterprises. The Yankee group recognized this leadership in a 2006 report, documenting more than 110,000 sites managed by Hughes in the US alone¹.
• Hughes pioneered consumer Internet access by satellite and we continued to maintain the leading market share in 2007, with approximately 365,000 consumer/SMB subscribers to date, a number that is growing at a rate of about 12,000 new customers monthly. We estimate there are 10 to 15 million households in the underserved parts of the US that are potential customers of our HughesNet broadband satellite service.
• We launched a novel initiative to implement Internet kiosks throughout India’s villages and towns, bringing high-speed Internet, telephony, e-governance and distance learning services to underserved areas. To date, Hughes has implemented several thousand kiosks and expects to have 10,000 operating by the end of 2008. We also received multiple orders from the Indian Space Research Organization for the Edusat distance-learning project for four new state networks and expansion of two existing state networks. This builds on other such government funded projects in Africa, Brazil and Russia.

Hughes experienced a number of significant technology milestones in 2007.

• On August 14, 2007, the long awaited launch of our SPACEWAY™ 3 satellite was successfully completed. SPACEWAY 3, owned by Hughes, is the world’s first communications satellite with on-board switching and routing, which together with numerous other technology advances, will unlock a wealth of value-added, bandwidth-on-demand services. Operating in the Ka-band spectrum, SPACEWAY 3 employs high-performance packet switching, active phase-array antenna and spot-beam technologies enabling transmission rates of up to 440 Mbps on the downlink, direct site-to-site connectivity of up to 16Mbps and a total throughput of 10 Gbps, which is unprecedented in the industry. Commercial service is expected to commence in North America in early 2008.

Hughes has also led the way in developing advanced technology and equipment for new mobile satellite systems.

• Thuraya, one of the world’s leading mobilesat operators, uses a Hughes-developed solution that combines GSM cellular/satellite voice and data services with GPS location capabilities in a small handheld. In 2007, Thuraya awarded us follow-on contracts to develop both a high-speed IP data terminal and a new system gateway.
• Our latest generation 9250 mobile satellite terminal, designed to deliver high-speed transmit and receive rates of over 460Kbps while on the move, was approved to operate over Inmarsat’s Broadband Global Area Network (BGAN). An earlier transportable version, the Hughes 9201, is employed by CNN reporters to cover news in the field, for which the CNN team (including Hughes) received a prestigious new technology award at the IBC 2007, Amsterdam in September, 2007.
• In 2007, we won several strategic technology development contracts with TerreStar Networks Inc.:
    - A turnkey satellite base station subsystem (S-BSS) and satellite air interface protocol to mesh with an integrated satellite ground-based beam forming (GBBF) subsystem, also being developed by Hughes under a separate contract, and a key component of the satellite network portion of TerreStar’s integrated satellite and terrestrial network;
    - A satellite chipset platform based on the 3G cellular UMTS standard to enable wireless mobile devices to communicate over the satellite portion of TerreStar's network.
  These contracts build on those awarded last year by ICO and MSV, making Hughes the technology developer of choice to enable the emerging world of multi-media, mobile satellite services by ATC licensed operators in the US.

As far as 2008 is concerned, Grant Barber, the Executive Vice President and CFO of the company, added, “We are very optimistic for the year ahead in terms of the markets we serve, as well as our position relative to the competition in those markets. Hughes is a well-balanced company. In particular, our enterprise sector, both domestically and internationally, has strong recurring revenues with high renewal rates—an average of 3-5 year contracts with existing customers who are very pleased with our capabilities and performance.”

All in all, 2007 was a year of many firsts for Hughes and perhaps one of the most successful ever for the satellite industry overall. But it also showed that we have only just begun to scratch the surface of the value potential of broadband applications, in all sectors. Indeed, Hughes’ and the broadband industry’s success in future will be determined by how well we bring new applications to market and unlock the maximum value for our customers. I look to the future with great confidence in our continued ability to succeed.

¹Yankee Group Decision/Note^SM Market Analysis, February 24, 2006, “How to Succeed in the $25 Billion Managed Service Market,” Anton Denissov.

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Pradman Kaul is the Chairman and CEO of Hughes and he also continues as Chairman and CEO of Hughes Network Systems, LLC (HNS). Before joining HNS, Mr. Kaul worked at COMSAT Laboratories in Clarksburg, MD.

Mr. Kaul received a Bachelor of Science degree in Electrical Engineering from George Washington University and a Master of Science degree in Electrical Engineering from the University of California at Berkeley. He holds numerous patents and has published articles and papers on a variety of technical topics concerning satellite communications.

In October 2004, Mr. Kaul was inducted into the National Academy of Engineering. Mr. Kaul was selected as a “Distinguished Engineering Alumnus” of the University of California, Berkeley in 1999 and “Distinguished Alumnus” at George Washington University, Washington DC in 2005. He was awarded the IEEE Third Millennium medal in 2000.

Mr. Kaul is also:

• Member, National Advisory Council, George Washington University
• Member, Board of Directors, Primus Telecom – Publicly listed company
• Member, CIBER Advisory Board, University of Maryland
• Chairman, Maryland India Business Round Table