v3.23.2
PROPERTY AND EQUIPMENT
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT
The following table presents the components of Property and equipment, net:
As of
June 30, 2023December 31, 2022
Property and equipment, net:
Satellites, net$1,514,141 $1,563,033 
Other property and equipment, net654,235 674,584 
Total property and equipment, net$2,168,376 $2,237,617 
Satellites
 
As of June 30, 2023, our satellite fleet consisted of ten satellites, seven of which are owned and three of which are leased. They are all in geosynchronous (“GEO”) orbit, approximately 22,300 miles above the equator.

The following table presents our GEO satellite fleet as of June 30, 2023:
GEO Satellite
Segment
Launch Date
Nominal Degree Orbital Location (Longitude)
Depreciable Life (In Years)
Owned:
    
SPACEWAY 3 (1)
HughesAugust 200795 W10
EchoStar XVIIHughesJuly 2012107 W15
EchoStar XIXHughesDecember 201697.1 W15
Al Yah 3 (“AY3”) (2)
HughesJanuary 201820 W5
EchoStar IX (3) (4)
ESSAugust 2003121 W12
EUTELSAT 10A (“W2A”) (5)
Corporate and OtherApril 200910 E-
EchoStar XXICorporate and OtherJune 201710.25 E15
     
Finance leases:
    
Eutelsat 65 West AHughesMarch 201665 W15
Telesat T19VHughesJuly 201863 W15
EchoStar 105/SES-11ESSOctober 2017105 W15
(1) Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed the acquisition of Hughes Communications, Inc. (“Hughes Communications”) and its subsidiaries in 2011 (the “Hughes Acquisition”).
(2) Upon consummation of our joint venture with Al Yah Satellite Communications Company PrJSC (“Yahsat”) in Brazil in November 2019, we acquired the Brazilian Ka-band payload on this satellite with a remaining useful life of 7 years as of that time. In the second quarter of 2023 we reduced the estimated useful life of the satellite as a result of certain technical anomalies. In order to safeguard the future operability of the satellite, the Company has, in conjunction with recommendations from the satellite manufacturers, implemented immediate and long-term remedial actions. A revised estimate of the satellite’s remaining lifetime has been calculated using operational data of two previous quarters. The Company has updated the remaining useful life of AY3 and related ground assets prospectively from April 1, 2023 to reflect the change in estimate. This has increased the depreciation expense for the current six month period by $3.7 million. The increase is expected to be $11.1 million for the full year 2023 and $12.8 million for the year 2024, respectively. Although the anomalies are expected to shorten the remaining useful life of the satellite, they have not affected its current operation.
(3) We own the Ka-band and Ku-band payloads on this satellite.
(4) The Company placed the satellite in an inclined-orbit in the first quarter of 2023. Inclined-orbit will extend its life to enable further revenue generating opportunities.
(5) We acquired the S-band payload on this satellite in December 2013. Prior to acquisition, the S-band payload experienced an anomaly at the time of launch and, as a result, is not fully operational.
The following table presents the components of our satellites, net:
 Depreciable Life (In Years)As of
 June 30, 2023December 31, 2022
Satellites, net:
Satellites - owned
5 to 15
$1,807,036 $1,808,924 
Satellites - acquired under finance leases15368,876 360,642 
Construction in progress—618,727 608,773 
Total satellites2,794,639 2,778,339 
Accumulated depreciation:
Satellites - owned(1,142,989)(1,093,412)
Satellites - acquired under finance leases(137,509)(121,894)
Total accumulated depreciation(1,280,498)(1,215,306)
Total satellites, net$1,514,141 $1,563,033 
The following table presents the depreciation expense associated with our satellites, net:
 For the three months ended June 30,For the six months ended June 30,
 2023202220232022
Depreciation expense:
Satellites - owned$25,807 $24,282 $49,911 $48,478 
Satellites - acquired under finance leases6,101 6,137 12,119 12,124 
Total depreciation expense$31,908 $30,419 $62,030 $60,602 

The following table presents capitalized interest associated with our satellites and satellite-related ground infrastructure:

For the three months ended June 30,For the six months ended June 30,
2023202220232022
Capitalized interest$11,603 $10,883 $23,374 $21,265 
Construction in Progress

In August 2017, we entered into a contract for the design and construction of the EchoStar XXIV satellite, a next-generation, high throughput geostationary satellite. Once in service, the satellite is expected to bring further consumer broadband capacity across North and South America and generate additional sales in other markets, including in-flight Wi-Fi, enterprise networking and cellular backhaul for mobile network operators across the two continents. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other. The satellite was launched in July 2023 and is expected to begin service in the fourth quarter of 2023. See Note 16. Subsequent Events.

Satellite-Related Commitments

As of June 30, 2023 and December 31, 2022, our satellite-related commitments were $179.1 million and $169.3 million, respectively. These include payments pursuant to: the EchoStar XXIV launch contract, regulatory authorizations, non-lease costs associated with our finance lease satellites, in-orbit incentives relating to certain satellites and commitments for satellite service arrangements.

In certain circumstances, the dates on which we are obligated to pay our contractual obligations could change.
Satellite Anomalies and Impairments
 
Except as described above, we are not aware of any anomalies with respect to our owned or leased satellites or payloads that have had any significant adverse effect on their remaining useful lives, the commercial operation of the satellites or payloads or our operating results or financial position as of and for the three months ended June 30, 2023.

During the first quarter of 2023, we lost contact with our third nano-satellite (“EG-3”), which was launched in the second quarter of 2021 and brought into use our Sirion-1 ITU filing in the third quarter of 2021. As of the end of the first quarter of 2023, we have discontinued attempts to reestablish contact with EG-3, and have notified the ITU to suspend the filing. Consequently, we canceled our contract with the vendor who manufactured and operated our nano-satellites and recorded an impairment charge of $3.1 million related to EG-3 and other related assets in the first quarter of 2023 in Corporate and Other. We are not aware of any other anomalies with respect to our owned or leased satellites as of the date of these Consolidated Financial Statements.
Satellite Insurance

We generally do not carry in-orbit insurance on our satellites or payloads because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures.

Pursuant to the terms of our joint venture agreement with Yahsat, we are required to maintain insurance for the Al Yah 3 Brazilian payload during the commercial in-orbit service of such payload, subject to certain limitations on coverage. The insurance policies were procured by Yahsat, in which the Company and Yahsat are the beneficiaries of any claims in proportion to their shareholdings. An insurance claim was submitted in the second quarter of 2023 for compensation with respect to the reduction in estimated useful life of the Al Yah 3 satellite.

We also have obtained certain insurance for our EchoStar XXIV satellite covering launch plus the first year of operations. We will continue to assess circumstances going forward and make insurance-related decisions on a case-by-case basis.
Fair Value of In-Orbit Incentives

As of June 30, 2023 and December 31, 2022, the fair values of our in-orbit incentive obligations approximated their carrying amounts of $47.7 million and $50.2 million, respectively.