UNITEDTable STATESof Contents

~~SECURITIES~~UNITED ~~AND~~STATES ~~EXCHANGE COMMISSION~~

~~WASHINGTON,~~SECURITIES DCAND ~~20549~~EXCHANGE COMMISSION

~~FORM~~WASHINGTON, ~~10-Q~~ DC 20549

~~(Mark~~FORM ~~One)~~ 10-Q

~~x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15~~(dMark One) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~x ~~the~~QUARTERLY ~~Quarterly~~REPORT ~~Period~~PURSUANT ~~Ended~~TO ~~September 30,~~SECTION ~~2010~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

orFor the Quarterly Period Ended March 31, 2011

¨or ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~¨ ~~the~~TRANSITION ~~Transition~~REPORT ~~Period~~PURSUANT ~~from to~~ TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~file~~the ~~number:~~Transition ~~001-33040~~Period from to

~~HUGHES~~Commission ~~COMMUNICATIONS,~~file ~~INC.~~number: 001-33040

~~(Exact~~HUGHES ~~Name~~COMMUNICATIONS, ofINC. ~~Registrant as Specified in Its Charter)~~

Delaware		13-3871202
(State or Other Jurisdiction ofIncorporation or Organization)		(I.R.S. Employer Identification No.)

(Exact Name of Registrant as Specified in Its Charter)

11717 Exploration Lane, Germantown, Maryland 20876

Delaware

13-3871202

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification No.)

~~(Address~~11717 ofExploration ~~Principal~~Lane, ~~Executive~~Germantown, Maryland ~~Offices~~20876 ~~and Zip Code)~~

(~~301)~~Address ~~428-5500~~of Principal Executive Offices and Zip Code)

(~~Registrant’s Telephone Number, Including Area Code~~301) 428-5500

~~Indicate by check mark whether the registrant:~~ (~~1) has~~Registrant’s ~~filed~~Telephone ~~all~~Number, ~~reports~~Including ~~required~~Area ~~to be filed by Section 13 or 15(d~~Code) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant: (1) has ~~submitted~~filed ~~electronically~~all ~~and~~reports ~~posted~~required onto ~~its~~be ~~corporate~~filed ~~Web~~by ~~site,~~Section 13 ifor ~~any,~~15(d) ~~every Interactive~~of ~~Data~~the ~~File~~Securities ~~required~~Exchange toAct ~~be submitted and posted pursuant to Rule 405~~ of ~~Regulation S-T~~1934 during the preceding 12 months (or for such shorter period that the registrant was required to file ~~submit~~such reports), and ~~post~~(2) has been subject to such ~~files)~~filing requirements for the past 90 days. ¨x Yes ¨ No

Indicate by check mark whether the registrant ishas asubmitted ~~large~~electronically ~~accelerated~~and ~~filer,~~posted anon ~~accelerated~~its ~~filer~~corporate Web site, a ~~non-accelerated~~if ~~filer~~any, orevery Interactive aData ~~smaller~~File ~~reporting~~required ~~company.~~to ~~See~~be ~~the~~submitted ~~definitions~~and ofposted ~~“large~~pursuant ~~accelerated~~to ~~filer”,~~Rule 405 ~~“accelerated~~of ~~filer” and~~Regulation ~~“smaller~~S-T ~~reporting~~during ~~company”~~the preceding 12 inmonths ~~Rule~~(or ~~12b-2~~for ofsuch shorter period that the ~~Exchange~~registrant ~~Act~~was ~~(check~~required ~~one~~to submit and post such files):. ¨ Yes ¨ No

~~Large~~Indicate ~~accelerated~~by check mark whether the registrant is a large accelerated filer ~~¨ Accelerated~~, an accelerated filer x, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

~~Non-~~Large accelerated filer ¨ ~~(Do not check if a smaller reporting company) Smaller reporting~~ ~~company~~ Accelerated filer ¨x

~~Indicate~~Non-accelerated filer ¨ (Do bynot check ~~mark~~if ~~whether the company is~~ a ~~shell company~~smaller ~~(as~~reporting ~~defined in Rule 12b-2 of the Exchange Act~~company). Smaller reporting company ¨ ~~Yes x No~~

~~The~~Indicate ~~number~~by ofcheck ~~shares~~mark ofwhether the ~~registrant’s~~company ~~common~~is ~~stock~~a ~~outstanding~~shell company (as ofdefined ~~October 29,~~in ~~2010~~Rule ~~was~~12b-2 ~~21,827,531~~of the Exchange Act). ¨ Yes x No

~~TABLE~~The OFnumber ~~CONTENTS~~ of shares of the registrant’s common stock outstanding as of April 29, 2011 was 21,861,247.

		Page
PART I—FINANCIAL INFORMATION			1
Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		53
Item 4.	Controls and Procedures		55
PART II—OTHER INFORMATION			56
Item 1.	Legal Proceedings		56
Item 1A.	Risk Factors		56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		56
Item 3.	Defaults Upon Senior Securities		56
Item 4.	(Removed and Reserved)		57
Item 5.	Other Information		57
Item 6.	Exhibits		57
SIGNATURES			58

iTABLE OF CONTENTS

PART I—FINANCIAL INFORMATION


		Page
PART I—FINANCIAL INFORMATION			1
Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		43
Item 4.	Controls and Procedures		44
PART II—OTHER INFORMATION			46
Item 1.	Legal Proceedings		46
Item 1A.	Risk Factors		46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 3.	Defaults Upon Senior Securities		47
Item 4.	(Removed and Reserved)		47
Item 5.	Other Information		47
Item 6.	Exhibits		47
SIGNATURES			48

~~Item~~i ~~1. Financial Statements~~

HUGHESTable COMMUNICATIONS,of INC. Contents

~~CONDENSED~~PART ~~CONSOLIDATED~~I—FINANCIAL ~~BALANCE~~INFORMATION ~~SHEETS~~

~~(Dollars~~Item in1. ~~thousands,~~Financial ~~except per share amounts)~~ Statements

~~(Unaudited)~~HUGHES COMMUNICATIONS, INC.

	September 30,2010			December 31,2009
ASSETS
Current assets:
Cash and cash equivalents	$	165,193		$	261,038
Marketable securities		57,300			47,188
Receivables, net		163,832			163,816
Inventories		56,937			60,244
Prepaid expenses and other		26,039			22,476
Total current assets		469,301			554,762
Property, net		728,791			602,403
Capitalized software costs, net		47,727			49,776
Intangible assets, net		12,198			14,524
Goodwill		5,093			5,093
Other assets		68,730			75,836
Total assets	$	1,331,840		$	1,302,394
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	133,432		$	119,461
Short-term debt		6,137			6,750
Accrued liabilities and other		143,741			131,774
Total current liabilities		283,310			257,985
Long-term debt		713,178			714,957
Other long-term liabilities		21,126			16,356
Total liabilities		1,017,614			989,298
Commitments and contingencies
Equity:
Hughes Communications, Inc. (“HCI”) stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized and no shares issued and outstanding as of September 30, 2010 and December 31, 2009		-			-
Common stock, $0.001 par value; 64,000,000 shares authorized; 21,827,731 shares and 21,633,539 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively		22			22
Additional paid in capital		733,287			730,809
Accumulated deficit		(404,636	)		(410,543	)
Accumulated other comprehensive loss		(23,126	)		(16,247	)
Total HCI stockholders’ equity		305,547			304,041
Noncontrolling interests		8,679			9,055
Total equity		314,226			313,096
Total liabilities and equity	$	1,331,840		$	1,302,394

CONDENSED CONSOLIDATED BALANCE SHEETS

~~See~~(Dollars ~~accompanying~~in ~~Notes~~thousands, toexcept ~~the~~per share ~~Condensed~~amounts) ~~Consolidated Financial Statements.~~

1(Unaudited)

HUGHES COMMUNICATIONS, INC.

		62.5			62.5
	March 31, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	116,914		$	138,131
Marketable securities		23,672			44,532
Receivables, net		183,357			186,692
Inventories		59,627			57,819
Prepaid expenses and other		26,794			26,127

Total current assets		410,364			453,301
Property, net		837,601			774,052
Capitalized software costs, net		45,326			46,092
Intangible assets, net		10,683			11,440
Goodwill		5,093			5,093
Other assets		74,980			73,197

Total assets	$	1,384,047		$	1,363,175

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	97,559		$	120,202
Short-term debt		4,700			6,285
Accrued liabilities and other		151,760			128,790

Total current liabilities		254,019			255,277
Long-term debt		756,450			740,576
Other long-term liabilities		26,764			27,308

Total liabilities		1,037,233			1,023,161

Commitments and contingencies

Equity:
Hughes Communications, Inc. (“HCI”) stockholders’ equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized and no shares issued and outstanding as of March 31, 2011 and December 31, 2010		-			-
Common stock, $0.001 par value; 64,000,000 shares authorized; 21,835,000 shares and 21,834,787 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively		22			22
Additional paid in capital		736,993			735,233
Accumulated deficit		(386,918	)		(387,756	)
Accumulated other comprehensive loss		(14,132	)		(18,449	)

Total HCI stockholders’ equity		335,965			329,050

Noncontrolling interests		10,849			10,964

Total equity		346,814			340,014

Total liabilities and equity	$	1,384,047		$	1,363,175

~~CONDENSED~~See ~~CONSOLIDATED~~accompanying ~~STATEMENTS~~Notes OFto ~~OPERATIONS~~the Condensed Consolidated Financial Statements.

~~(Dollars~~1 ~~in thousands, except per share amounts)~~

(Unaudited) Table of Contents

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2010			2009			2010			2009
Revenues:
Services revenues	$	202,276		$	176,253		$	583,406		$	512,001
Hardware sales		64,006			75,164			178,437			235,458
Total revenues		266,282			251,417			761,843			747,459
Operating costs and expenses:
Cost of services		126,420			108,768			365,529			326,497
Cost of hardware products sold		58,356			73,646			174,824			225,134
Selling, general and administrative		50,369			46,457			150,000			136,842
Loss on impairments		-			-			-			45,400
Research and development		4,776			5,453			15,046			16,502
Amortization of intangible assets		765			1,472			2,326			4,361
Total operating costs and expenses		240,686			235,796			707,725			754,736
Operating income (loss)		25,596			15,621			54,118			(7,277	)
Other income (expense):
Interest expense		(14,499	)		(17,735	)		(46,129	)		(47,125	)
Interest income		423			501			1,670			1,028
Other income (loss), net		-			50			-			(295	)
Income (loss) before income tax expense and equity in earnings of unconsolidated affiliates		11,520			(1,563	)		9,659			(53,669	)
Income tax expense		(1,552	)		(966	)		(4,336	)		(790	)
Equity in earnings of unconsolidated affiliates		-			-			-			170
Net income (loss)		9,968			(2,529	)		5,323			(54,289	)
Net (income) loss attributable to the noncontrolling interests		169			(93	)		584			(771	)
Net income (loss) attributable to HCI stockholders	$	10,137		$	(2,622	)	$	5,907		$	(55,060	)
Income (loss) per share:
Basic	$	0.47		$	(0.12	)	$	0.27		$	(2.58	)
Diluted	$	0.45		$	(0.12	)	$	0.26		$	(2.58	)
Shares used in computation of per share data:
Basic		21,690,517			21,379,611			21,557,891			21,368,101
Diluted		22,715,039			21,379,611			22,612,651			21,368,101

HUGHES COMMUNICATIONS, INC.

~~See~~CONDENSED ~~accompanying~~CONSOLIDATED ~~Notes to~~STATEMENTS ~~the~~OF ~~Condensed~~OPERATIONS ~~Consolidated Financial Statements.~~

2(Dollars in thousands, except per share amounts)

~~HUGHES~~(Unaudited) ~~COMMUNICATIONS, INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


	Three Months Ended March 31,
	2011			2010
Revenues:
Services revenues	$	215,670		$	187,940
Hardware revenues		48,422			55,253

Total revenues		264,092			243,193

Operating costs and expenses:
Cost of services		132,710			115,713
Cost of hardware		49,574			60,886
Selling, general and administrative		60,977			50,325
Research and development		5,154			4,915
Amortization of intangible assets		757			790

Total operating costs and expenses		249,172			232,629

Operating income		14,920			10,564
Other income (expense):
Interest expense		(12,505	)		(16,110	)
Interest income		419			591
Other income (loss), net		(248	)		-

Income (loss) before income tax expense		2,586			(4,955	)
Income tax expense		(1,901	)		(1,219	)

Net income (loss)		685			(6,174	)
Net loss attributable to the noncontrolling interests		153			34

Net income (loss) attributable to HCI stockholders	$	838		$	(6,140	)

Income (loss) per share:
Basic	$	0.04		$	(0.29	)
Diluted	$	0.04		$	(0.29	)
Shares used in computation of per share data:
Basic		21,766,155			21,480,908
Diluted		23,360,821			21,480,908

~~(Dollars~~See inaccompanying ~~thousands,~~Notes to ~~except~~the ~~per~~Condensed ~~share~~Consolidated ~~amounts)~~Financial Statements.

~~(Unaudited)~~2

	HCI Shareholders’ Equity
	CommonStock($.001 par value)		AdditionalPaid-InCapital			AccumulatedDeficit			AccumulatedOtherComprehensiveLoss			NoncontrollingInterest			Total
Balance at January 1, 2009	$	22	$	724,558		$	(357,850	)	$	(28,583	)	$	5,711		$	343,858
Consolidation of Hughes Systique Corporation													3,372			3,372
Share-based compensation				5,473												5,473
Retirement of restricted stock				(708	)											(708	)
Purchase of subsidiary shares from noncontrolling interests				(396	)					(19	)		(430	)		(845	)
Comprehensive income (loss):
Net income (loss)							(55,060	)					771			(54,289	)
Foreign currency translation adjustments										6,645			(764	)		5,881
Unrealized gain on hedging instruments										2,639			-			2,639
Reclassification of realized loss on hedging instruments										3,275			-			3,275
Unrealized loss on available-for-sale securities										(2,991	)		-			(2,991	)
Balance at September 30, 2009	$	22	$	728,927		$	(412,910	)	$	(19,034	)	$	8,660		$	305,665
Balance at January 1, 2010	$	22	$	730,809		$	(410,543	)	$	(16,247	)	$	9,055		$	313,096
Share-based compensation				5,679												5,679
Retirement of restricted stock and bonus units				(3,201	)											(3,201	)
Comprehensive income (loss):
Net income (loss)							5,907						(584	)		5,323
Foreign currency translation adjustments										412			208			620
Unrealized loss on hedging instruments										(8,796	)		-			(8,796	)
Reclassification of realized loss on hedging instruments										4,173			-			4,173
Unrealized loss on available-for-sale securities										(2,668	)		-			(2,668	)
Balance at September 30, 2010	$	22	$	733,287		$	(404,636	)	$	(23,126	)	$	8,679		$	314,226

~~See~~HUGHES ~~accompanying~~COMMUNICATIONS, ~~Notes to the Condensed Consolidated Financial Statements~~INC.

3CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

~~HUGHES COMMUNICATIONS~~(Dollars in thousands, ~~INC.~~except per share amounts)

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~ (Unaudited)

(In thousands)


	HCI Shareholders’ Equity
	Common Stock ($.001 par value)		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total
Balance at January 1, 2010	$	22	$	730,809		$	(410,543	)	$	(16,247	)	$	9,055		$	313,096
Share-based compensation				1,871												1,871
Comprehensive income (loss):
Net loss							(6,140	)					(34	)		(6,174	)
Foreign currency translation adjustments										(980	)		251			(729	)
Unrealized loss on hedging instruments										(2,323	)		-			(2,323	)
Reclassification of realized loss on hedging instruments										1,368			-			1,368
Unrealized loss on available-for-sale securities										(647	)		-			(647	)

Balance at March 31, 2010	$	22	$	732,680		$	(416,683	)	$	(18,829	)	$	9,272		$	306,462


Balance at January 1, 2011	$	22	$	735,233		$	(387,756	)	$	(18,449	)	$	10,964		$	340,014
Share-based compensation				1,868												1,868
Retirement of restricted stocks				(108	)											(108	)
Comprehensive income (loss):																-
Net income (loss)							838						(153	)		685
Foreign currency translation adjustments										1,607			38			1,645
Unrealized loss on hedging instruments										(189	)		-			(189	)
Reclassification of realized loss on hedging instruments										1,404			-			1,404
Unrealized gain on available-for-sale securities										1,495			-			1,495

Balance at March 31, 2011	$	22	$	736,993		$	(386,918	)	$	(14,132	)	$	10,849		$	346,814

~~(Unaudited)~~See accompanying Notes to the Condensed Consolidated Financial Statements.

	Nine Months EndedSeptember 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	5,323		$	(54,289	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization		95,612			73,209
Amortization of debt issuance costs		2,048			1,452
Share-based compensation expense		5,679			5,473
Equity in earnings from unconsolidated affiliates		-			(170	)
Loss on impairments		-			45,400
Other		129			581
Change in other operating assets and liabilities, net of acquisition:
Receivables, net		504			37,720
Inventories		3,172			(745	)
Prepaid expenses and other		812			(2,026	)
Accounts payable		13,910			22,534
Accrued liabilities and other		(15,430	)		(18,567	)
Net cash provided by operating activities		111,759			110,572
Cash flows from investing activities:
Change in restricted cash		96			31
Purchases of marketable securities		(85,031	)		(37,117	)
Proceeds from sales of marketable securities		74,781			-
Expenditures for property		(183,734	)		(93,994	)
Expenditures for capitalized software		(9,935	)		(10,315	)
Proceeds from sale of property		404			339
Cash acquired, consolidation of Hughes Systique Corporation		-			828
Long-term loan receivable		-			(10,000	)
Other, net		-			(830	)
Net cash used in investing activities		(203,419	)		(151,058	)
Cash flows from financing activities:
Short-term revolver borrowings		3,770			-
Repayments of revolver borrowings		(4,881	)		-
Net decrease in notes and loans payable		-			(1,315	)
Long-term debt borrowings		3,387			142,318
Repayment of long-term debt		(4,870	)		(6,834	)
Debt issuance costs		(1,734	)		(4,612	)
Net cash provided by (used in) financing activities		(4,328	)		129,557
Effect of exchange rate changes on cash and cash equivalents		143			(3,617	)
Net increase (decrease) in cash and cash equivalents		(95,845	)		85,454
Cash and cash equivalents at beginning of the period		261,038			203,816
Cash and cash equivalents at end of the period	$	165,193		$	289,270
Supplemental cash flow information:
Cash paid for interest	$	36,158		$	29,200
Cash paid for income taxes	$	5,919		$	3,700
Supplemental non-cash disclosures related to:
Capitalized software and property acquired, not paid	$	50,787
Investment in Hughes Telematics, Inc.				$	13,000
Consolidation of Hughes Systique Corporation				$	5,328

SeeTable accompanyingof Notes to the Condensed Consolidated Financial Statements. Contents

4HUGHES COMMUNICATIONS, INC.

~~HUGHES COMMUNICATIONS,~~CONDENSED ~~INC.~~CONSOLIDATED STATEMENTS OF CASH FLOWS

~~NOTES~~(In TOthousands) ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note~~(Unaudited) ~~1: Organization, Basis of Presentation and Summary of Significant Accounting Policies~~

Hughes Communications, Inc. (“HCI” and, together with its consolidated subsidiaries, the “Company” or “we,” “us,” and “our”) was formed as a Delaware corporation on June 23, 2005 and we are a publicly traded company. Our stock trades on the NASDAQ Global Select Market under the symbol “HUGH.”


	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	685		$	(6,174	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization		37,501			30,133
Amortization of debt issuance costs		861			616
Share-based compensation expense		1,868			1,871
Other		230			61
Change in other operating assets and liabilities, net of acquisition:
Receivables, net		4,405			2,680
Inventories		(1,581	)		(2,078	)
Prepaid expenses and other		(939	)		919
Accounts payable		(35,558	)		(20,789	)
Accrued liabilities and other		41,336			5,363

Net cash provided by operating activities		48,808			12,602

Cash flows from investing activities:
Change in restricted cash		373			86
Purchases of marketable securities		(11,999	)		(27,781	)
Proceeds from sales of marketable securities		32,868			15,000
Expenditures for property		(101,269	)		(63,671	)
Expenditures for capitalized software		(2,752	)		(3,166	)
Proceeds from sale of property		80			-

Net cash used in investing activities		(82,699	)		(79,532	)

Cash flows from financing activities:
Short-term revolver borrowings		898			1,999
Repayments of revolver borrowings		(945	)		(2,430	)
Long-term debt borrowings		16,822			1,220
Repayment of long-term debt		(2,756	)		(1,721	)
Debt issuance costs		(1,015	)		(1,742	)

Net cash provided by (used in) financing activities		13,004			(2,674	)

Effect of exchange rate changes on cash and cash equivalents		(330	)		1,739

Net decrease in cash and cash equivalents		(21,217	)		(67,865	)
Cash and cash equivalents at beginning of the period		138,131			261,038

Cash and cash equivalents at end of the period	$	116,914		$	193,173

Supplemental cash flow information:
Cash paid for interest	$	2,491		$	2,413
Cash paid for income taxes	$	3,441		$	2,341
Supplemental non-cash disclosures related to:
Capitalized software and property acquired, not paid	$	21,829		$	25,303

WeSee ~~operate~~accompanying ~~our business primarily through our wholly-owned subsidiary, Hughes Network Systems, LLC (“HNS”). We are a~~Notes ~~telecommunications company that provides equipment and services~~ to the ~~broadband~~Condensed ~~communications~~Consolidated ~~marketplace.~~Financial ~~We have extensive technical expertise in satellite, wireline and wireless communications which we utilize in a number of product and service offerings~~Statements. In particular, we offer a spectrum of broadband equipment and services to the managed services market, which is comprised of enterprises with a requirement to connect a large number of geographically dispersed locations with reliable, scalable, and cost-effective applications, such as credit card verification, inventory tracking and control, and broadcast video. We provide broadband network services and systems to the international and domestic enterprise markets and satellite broadband Internet access to North American consumers, which we refer to as the Consumer market. In addition, we provide networking systems solutions to customers for mobile satellite, telematics and wireless backhaul systems. These services are generally provided on a contract or project basis and may involve the use of proprietary products engineered by us.

We4 have five reportable segments, which we operate and manage as strategic business units and organize by products and services. We measure and evaluate our reportable segments based on the operating earnings of the respective segments. Our business segments include: (i) the North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; (iv) the HTS Satellite segment; and (v) the Corporate and Other segment. The North America Broadband segment consists of the Consumer group, which delivers broadband internet service to consumer customers, and the Enterprise group, which provides satellite, wireline and wireless communication networks and services to enterprises. The International Broadband segment consists of our international service companies and provides managed network services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group, the Telematics group, and the Terrestrial Microwave group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators. The Telematics group previously provided development engineering and manufacturing services to Hughes Telematics, Inc. (“HTI”). However, as a result of the unfavorable impact of the economy on the automobile industry, HTI terminated substantially all of the development engineering and manufacturing services with us in August 2009. We expect our future revenue from the Telematics group to be insignificant. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for both cellular backhaul and broadband wireless access. The HTS Satellite segment, which is a new segment starting in 2010, consists of activities related to the development, construction and launch of high throughput satellites (“HTS”) and currently represents construction activities of our new satellite named Jupiter. As a result of the newly established HTS Satellite segment in 2010, construction activities of Jupiter in 2009, which was included in the North America Broad band segment, have been reclassified to the HTS Satellite segment to conform to the current period presentation. The Corporate and Other segment includes our wholly-owned subsidiary Rare Medium, LLC, certain minority interest investments held by us, and our corporate offices and assets not specifically related to another business segment.

BasisTable of Presentation Contents

~~The~~HUGHES accompanying condensed consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934COMMUNICATIONS, ~~as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”)~~INC. They include the assets, liabilities, results of operations and cash flows of the Company, including its domestic and foreign subsidiaries that are more than 50% owned or for which the Company is deemed to be the primary beneficiary as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “ASC”) 810 “Consolidation.” Entities in which the Company holds at least 20% ownership or in which there are other indicators of significant influence are generally accounted for by the equity method, whereby the Company records its proportionate share of the entities’ results of operations. Entities in which the Company holds less than 20% ownership and does not have the

5NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~HUGHES~~Note ~~COMMUNICATIONS,~~1: Organization ~~INC.~~and Description of Business

~~NOTES~~Hughes TOCommunications, ~~THE~~Inc. ~~CONDENSED~~(“HCI” ~~CONSOLIDATED~~and, ~~FINANCIAL~~together ~~STATEMENTS~~with ~~(CONTINUED~~its consolidated subsidiaries, the “Company” or “we”) was formed as a Delaware corporation on June 23, 2005 and we are a publicly traded company. Our stock trades on the NASDAQ Global Select Market under the symbol “HUGH.”

~~ability~~We tooperate ~~exercise~~our ~~significant~~business ~~influence~~primarily ~~are~~through ~~generally~~our ~~carried~~wholly-owned atsubsidiary, ~~cost.~~Hughes AsNetwork ~~permitted~~Systems, ~~under~~LLC ~~Rule~~(“HNS”). ~~10-01~~We ofare ~~Regulation~~a telecommunications ~~S-X,~~company ~~certain~~that ~~notes~~provides equipment and ~~other~~services ~~financial~~to ~~information~~the ~~normally~~broadband ~~required~~communications bymarketplace. ~~GAAP~~ We have ~~been~~extensive ~~condensed~~technical orexpertise ~~omitted.~~in ~~Management~~satellite, ~~believes~~wireline ~~the~~and ~~accompanying~~wireless ~~condensed~~communications ~~consolidated~~which ~~financial~~we ~~statements~~utilize ~~reflect~~in ~~all~~a ~~normal~~number of product and ~~recurring~~service offerings. In ~~adjustments~~particular, ~~necessary~~we ~~for~~offer a ~~fair~~spectrum ~~presentation~~ of ~~the~~broadband ~~Company’s~~equipment ~~financial~~and ~~position,~~services ~~results~~to ~~of operations,~~the ~~and~~managed ~~cash~~services ~~flows~~market, aswhich is comprised of ~~and~~enterprises ~~for~~with ~~the~~a ~~periods~~requirement ~~presented~~to ~~herein.~~connect ~~Our~~a ~~results~~large number of ~~operations~~geographically ~~for~~dispersed ~~the~~locations ~~three~~with reliable, scalable, and ~~nine~~cost-effective ~~months~~applications, ~~ended~~such ~~September 30,~~as ~~2010~~credit ~~may~~card ~~not~~verification, beinventory ~~indicative~~tracking ofand ~~our~~control, ~~future~~and ~~results~~broadcast video. ~~These~~We ~~condensed~~provide ~~consolidated~~broadband ~~financial statements~~network ~~are~~services ~~unaudited~~ and ~~should~~systems beto ~~read~~the ininternational ~~conjunction~~and ~~with~~domestic ~~our~~enterprise ~~audited~~markets ~~consolidated financial statements~~ and satellite ~~the~~broadband ~~notes~~Internet ~~thereto~~access ~~included~~to inNorth ~~our~~American ~~Annual~~consumers, ~~Report~~which onwe ~~Form~~refer ~~10-K~~to ~~for~~as the ~~year~~Consumer ~~ended~~market. ~~December 31~~In addition, ~~2009.~~we Asprovide anetworking ~~result~~systems ofsolutions ~~our~~to ~~new~~customers ~~segment in~~for ~~2010,~~mobile ~~the~~satellite ~~HTS~~and ~~Satellite~~wireless ~~segment,~~backhaul ~~certain~~systems. ~~prior~~These ~~period~~services ~~items~~are generally inprovided ~~these~~on ~~consolidated~~a ~~financial~~contract ~~statements~~or ~~have~~project ~~been~~basis ~~reclassified~~and tomay ~~conform~~involve to the ~~current~~use ~~period~~of ~~presentation~~proprietary products engineered by us.

~~All~~We ~~intercompany~~have five ~~balances~~reportable segments, which we operate and ~~transactions~~manage ~~with~~as ~~subsidiaries~~strategic business units and ~~other~~organize ~~consolidated~~by ~~entities~~products ~~have~~and ~~been~~services. ~~eliminated~~We measure and evaluate our reportable segments based on the operating earnings of the respective segments. Our business segments include: (i) the North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; (iv) the HTS Satellite segment; and (v) the Corporate and Other segment. The North America Broadband segment consists of the Consumer group, which delivers broadband Internet service to consumer customers, and the Enterprise group, which provides satellite, wireline and wireless communication network products and services to enterprises. The International Broadband segment consists of our international service companies and provides managed network services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group and the Terrestrial Microwave group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for both cellular backhaul and broadband wireless access. The HTS Satellite segment consists of activities related to the development, construction and launch of high throughput satellites (“HTS”) and currently represents construction activities of our new satellite named Jupiter and the development of related network equipment. The Corporate and Other segment includes certain minority interest investments held by us, our corporate offices and assets not specifically related to another business segment.

~~Use~~Note of2: Basis ~~Estimates in the Preparation~~ of Presentation ~~the~~and ~~Condensed~~New ~~Consolidated~~Accounting ~~Financial~~Pronouncements ~~Statements~~

~~The~~Basis ~~preparation~~ of ~~our~~Presentation condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates.

~~New~~The accompanying condensed consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (“SEC”). They include the assets, liabilities, results of operations and cash flows of the Company, including its domestic and foreign subsidiaries that are more than 50% owned or for which the Company is deemed to be the primary beneficiary as defined by the Financial Accounting ~~Pronouncements~~Standards Board (“FASB”) Accounting Standards Codification (the “ASC”) 810 “Consolidation.” Entities in which the Company holds at least 20% ownership or in which there are other indicators of significant influence are generally accounted for by the equity method, whereby the Company records its proportionate share of the entities’ results of

~~Recently~~5 ~~Adopted Accounting Guidance~~

InTable January 2010, the FASB issued Accounting Standard Update (“ASU”) 2010-06 to improve disclosures about fair value measurements. ASU 2010-6 clarifies certain existing disclosures and requires new disclosure regarding significant transfers in and out of Level 1 and Level 2 of fair value measurements and the reasons for the transfer. In addition, ASU 2010-06 clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The amendments in ASU 2010-06 were effective for fiscal years beginning after December 15, 2009, and for interim periods within those fiscal periods. The adoption of ASU 2010-06 did not have a material impact on our disclosure about fair value measurements. Contents

InHUGHES ~~June 2009 and December 2009~~COMMUNICATIONS, ~~the FASB amended ASC 810 changing certain consolidation guidance and requiring improved financial reporting by enterprises involved with variable interest entities (“VIE”)~~INC. The amendments provide guidance in determining when a reporting entity should include the assets, liabilities, noncontrolling interest and results of activities of a VIE in its consolidated financial statements. The amendments to ASC 810 were effective for the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The adoption of amendments to consolidation rules did not have any impact on our disclosures relating to our VIE activity and our financial statements.

~~Accounting Guidance~~NOTES ~~Not~~TO ~~Yet~~THE ~~Effective~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In operations. ~~October~~Entities ~~2009,~~in which the ~~FASB~~Company ~~issued~~holds ~~ASU~~less ~~2009-14~~than 20% ownership and does not have the ability to ~~amend~~exercise ~~ASC~~significant ~~605~~influence ~~“Revenue Recognition~~are generally carried at cost.” ~~The~~As ~~amendments~~permitted inunder ~~this~~Rule 10-01 ~~update~~of ~~change~~Regulation S-X, certain notes and other financial information normally required by GAAP have been condensed or omitted. Management believes the ~~accounting~~accompanying ~~model~~condensed consolidated financial statements reflect all normal and recurring adjustments necessary for ~~revenue~~a ~~arrangements~~fair ~~that~~presentation ~~include~~of ~~both~~the ~~tangible~~Company’s ~~products~~financial position, results of operations, and ~~software~~cash ~~elements.~~flows ~~The~~as ~~amendments~~of inand ~~ASU~~for ~~2009-14~~the ~~will~~periods bepresented ~~effective~~herein. Our results of operations for usthe ~~beginning~~three ~~January~~months ended March 131, 2011, may ~~with~~not ~~early~~be ~~adoption~~indicative ~~permitted~~of our future results. WeThese ~~are~~condensed ~~currently~~consolidated ~~evaluating~~financial ~~the~~statements ~~impact~~are ~~these~~unaudited ~~amendments~~and ~~will~~should ~~have~~be onread in conjunction with our audited consolidated financial statements ~~when~~and ~~they~~the ~~become~~notes ~~effective~~thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.

InAll ~~October~~intercompany ~~2009,~~balances ~~the~~and ~~FASB~~transactions ~~issued ASU 2009-13 amending ASC 605 related to revenue arrangements~~ with ~~multiple~~subsidiaries ~~deliverables.~~and ~~Among~~ other consolidated ~~things, ASU 2009-13 provides guidance for~~ entities in determining the accounting for multiple deliverable arrangements and establishes a hierarchy for determining the amount of revenue to allocate to the various deliverables. We are currently evaluating the impact ASU 2009-13 will have onbeen ~~our financial statements when it becomes effective on January 1, 2011~~eliminated. ~~Early adoption is permitted.~~

6Use of Estimates in the Preparation of the Condensed Consolidated Financial Statements

~~HUGHES~~The ~~COMMUNICATIONS~~preparation of our condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, ~~INC~~disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates.

~~NOTES~~New TOAccounting ~~THE~~Pronouncements ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Note 2: Consolidation~~Recently ofAdopted ~~Hughes~~Accounting ~~Systique~~Guidance ~~Corporation~~

~~Hughes~~In ~~Systique~~October ~~Corporation~~2009, ~~(“Hughes~~the FASB ~~Systique”)~~issued isASU a2009-13 ~~communications~~amending ~~consulting~~ASC ~~and~~605 ~~software~~“Revenue ~~company.~~Recognition” ~~HNS~~related ~~has~~to ~~contracts~~revenue arrangements with ~~Hughes~~multiple ~~Systique~~deliverables. ~~for~~Among ~~software~~other ~~development~~things, ~~services.~~ASU ~~The~~2009-13 ~~founders~~provides ofguidance ~~Hughes~~for ~~Systique~~entities ~~include~~in ~~Pradman~~determining ~~Kaul,~~the ~~our~~accounting ~~Chief~~for ~~Executive~~multiple ~~Officer (“CEO”) and~~deliverable ~~President~~arrangements and ~~certain~~establishes ~~former~~a ~~employees~~hierarchy offor ~~HNS,~~determining ~~including Pradeep Kaul, who is~~ the ~~CEO~~amount ~~and President~~ of ~~Hughes~~revenue ~~Systique,~~to ~~HNS’~~allocate ~~former~~to ~~Executive Vice President and~~ the ~~brother~~various ~~of our CEO and President~~deliverables. The ~~Company~~adoption ~~acquired~~of anASU ~~equity~~2009-13 ~~investment~~on ~~in Hughes~~January 1, ~~Systique~~2011 ~~Series~~did Anot ~~Preferred~~have ~~Stock~~a ~~(“HSC~~material ~~Preferred~~impact ~~Stock”)~~on ofour ~~$3.0~~financial ~~million and $1~~statements.5 ~~million in October 2005 and January 2008, respectively.~~

In ~~February~~October ~~2008~~2009, the ~~Company~~FASB ~~and~~issued ~~Nextwave~~ASU ~~Broadband~~2009-14 ~~Inc. (“Nextwave”), a former significant shareholder of Hughes Systique, agreed~~ to ~~make~~amend ~~available~~ASC to605 ~~Hughes Systique a term loan facility (the “Loan”) of up~~ to ~~$3.0 million.~~change ~~Under~~ the ~~Loan,~~accounting ~~each~~model ~~loan~~for ~~request~~revenue ~~was~~arrangements tothat beinclude atboth tangible ~~least~~products ~~$1.0 million,~~ and ~~the~~software ~~Loan was to be funded equally by the Company and Nextwave~~elements. The ~~Loan~~adoption ~~has a fixed interest rate~~ of ~~6%,~~ASU ~~and it is convertible into common shares of Hughes Systique upon non~~2009-~~payment~~14 oron an event of default. Hughes Systique has the option to pay the interest annually or to convert the interest to principal as a “payment in kind.” In February 2008, the Company and Nextwave each funded $0.5 million as part of a $1.0January ~~million loan drawdown by Hughes Systique under the Loan. In March 2009, Hughes Systique requested and the Company funded the remaining $~~1~~.0 million of its original $1.5 million loan commitment. As a result~~, ~~the~~2011 ~~Company~~did is not ~~obligated~~have toa ~~provide~~material ~~any~~impact ~~further~~on ~~funding~~our tofinancial ~~Hughes Systique under the Loan~~statements.

~~On March 11,~~Note ~~2009, Hughes Systique entered into a termination and settlement agreement with Nextwave (the “Termination Agreement”). The Termination Agreement provided for the following~~3: Recent ~~(i) Hughes~~Developments Systique relieved Nextwave of its obligation to fund its remaining commitment under the Loan; (ii) Nextwave waived Hughes Systique’s obligation to repay amounts previously funded, together with accrued interest; and (iii) Hughes Systique waived Nextwave’s obligations for the purchase of services under existing agreements between Nextwave and Hughes Systique and Nextwave’s obligation to repay outstanding accounts receivable of approximately $0.8 million. Additionally, Nextwave’s ownership in HSC Preferred Stock, which represented approximately 31.79% of Hughes Systique’s equity, was converted to a reduced level of ownership, representing a 5% interest in Hughes Systique’s common stock. The effect of these transactions has increased, on an undiluted basis, our ownership in Hughes Systique to approximately 45.23% and the ownership of our CEO and President and his brother in Hughes Systique to approximately 25.61%. Pursuant to ASC 810, these transactions caused a reconsideration event on March 11, 2009, resulting in the Company becoming the “primary beneficiary” of Hughes Systique, a VIE. As a result, the Company is required to consolidate Hughes Systique’s assets and liabilities and results of operations for periods beginning on or after March 12, 2009 (the “Consolidation Date”). In accordance with ASC 805 “Business Combinations,” the basis of Hughes Systique’s assets and liabilities were adjusted to their fair values. The excess of the fair value of the net assets consolidated from Hughes Systique over their carrying value has been reflected as goodwill in accordance with ASC 805. We believe that the goodwill resulting from the consolidation of Hughes Systique corresponds to the expected future prospects of Hughes Systique. The total amount of goodwill is not expected to be deductible for tax purposes.

7On February 13, 2011, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with EchoStar Corporation, a Nevada corporation (“EchoStar”), EchoStar Satellite Services L.L.C., a Colorado limited liability company (“Satellite Services”), and Broadband Acquisition Corporation, a Delaware corporation (“Merger Sub”), pursuant to which, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving entity and becoming a wholly owned subsidiary of EchoStar.

~~HUGHES~~Pursuant ~~COMMUNICATIONS~~to the Merger Agreement, ~~INC~~upon the closing of the Merger, each of our issued and outstanding shares of common stock (other than any of our common stock with respect to which appraisal rights have been duly exercised under Delaware law) will automatically be converted into the right to receive $60.70 in cash (without interest) and cancelled. Vested restricted stock awards and restricted stock units will become our common stock upon the closing of the Merger and are therefore entitled to the right to receive $60.70 in cash (without interest) and will be cancelled. Unvested restricted stock awards and restricted stock units at the closing of the Merger have the right to receive $60.70 in cash (without interest) payable at the time such restricted stocks vest, and will likewise be cancelled.

~~NOTES~~Vested TOoptions ~~THE~~to ~~CONDENSED~~acquire ~~CONSOLIDATED~~our ~~FINANCIAL~~common ~~STATEMENTS~~stock will continue to be outstanding until the closing of the Merger. Upon the closing of the Merger, vested options will be cancelled, and within 10 days after the closing of the Merger, each vested stock option will receive $60.70 in cash (~~CONTINUED~~without interest) minus the exercise price of the stock option per share. Unvested stock options at closing of the Merger will be converted into the right to receive $60.70 in cash (without interest) minus the exercise price of the stock option per share, payable at the time such options vest.

The ~~following~~ ~~table~~Merger ~~summarizes~~Agreement ~~the~~also ~~fair~~contemplates ~~values~~refinancing certain of ~~Hughes Systique~~HNS’s ~~assets~~existing debt, including the 2009 and ~~liabilities~~2006 atSenior Notes. The COFACE Guaranteed Facility will continue to remain outstanding following the ~~Consolidation~~Merger ~~Date~~if ~~(in~~the ~~thousands):~~requisite lender consents thereunder are obtained. See Note 10—Debt for details of the 2006 and 2009 Senior Notes and the COFACE Guaranteed Facility.

	Amount
Current assets	$	5,250
Property		717
Intangible assets		1,329
Goodwill		2,432
Total assets		9,728
Current liabilities		(2,808	)
Long-term liabilities		(763	)
Total liabilities		(3,571	)
Net assets consolidated prior to noncontrolling interest		6,157
Noncontrolling interest		(3,372	)
Net assets consolidated	$	2,785

Each of the boards of directors of the Company and Merger Sub approved the Merger Agreement and deemed it advisable and fair to, and in the best interests of, their respective companies and stockholders to enter into the Merger Agreement and to consummate the Merger and the transactions and agreements contemplated thereby. The board of directors of EchoStar approved the Merger Agreement and deemed it advisable and fair to, and in the best interests of, its stockholders to enter into the Merger Agreement and to consummate the transactions and agreements contemplated thereby.

~~Based~~The onMerger ~~the~~is ~~valuation~~expected ofto ~~Hughes~~close ~~Systique’s~~later ~~intangible~~this ~~assets~~year, ~~using~~subject anto ~~income~~certain ~~approach~~closing conditions, ~~the~~including ~~fair values~~among ofothers, ~~the~~receipt ~~intangible~~of ~~assets~~approval at by the ~~Consolidation~~Federal ~~Date~~Communications ~~were~~Commission, as ~~follows~~detailed (in ~~thousands):~~our Annual Report on Form 10-K for the year ended December 31, 2010.

	Weighted AverageUseful Lives(years)	Amount
Customer relationships	7	$	620
Favorable leases	3		629
Backlog	2		80
Total amortizable intangible assets	5	$	1,329

The foregoing description of the Merger Agreement and the transactions and agreements contemplated thereby does not purport to be complete and is subject to and qualified in its entirety by reference to the Merger Agreement.

~~Hughes~~6 Systique’s revenue, after eliminating inter-company transactions, was $1.4 million for the three months ended September 30, 2010 compared to $0.8 million for the same period in 2009 and $3.1 million for the nine months ended September 30, 2010 compared to $1.7 million for the same period in 2009 (since the acquisition date). Pro forma financial statements are not presented for Hughes Systique at the acquisition date as its results of operations were not material to our condensed consolidated financial statements.

NoteTable 3: Marketableof Securities Contents

~~The~~HUGHES ~~amortized~~COMMUNICATIONS, ~~cost basis~~INC. ~~and estimated fair value of available-for-sale marketable securities are summarized as follows (in thousands):~~

	Cost Basis		Gross Unrealized Gain		Estimated Fair Value
September 30, 2010:
Municipal commercial paper	$	4,000	$	-	$	4,000
U.S. government bonds and treasury bills		38,296		6		38,302
Other debt securities		14,998		-		14,998
Total available-for-sale securities	$	57,294	$	6	$	57,300
December 31, 2009:
U.S. government bonds and treasury bills	$	22,155	$	6	$	22,161
Other debt securities		25,019		8		25,027
Total available-for-sale securities	$	47,174	$	14	$	47,188

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8Note 4: Marketable Securities

~~HUGHES~~The ~~COMMUNICATIONS,~~amortized ~~INC.~~cost basis and estimated fair value of available-for-sale marketable securities are summarized as follows (in thousands):

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	Cost Basis		Gross Unrealized Losses			Estimated Fair Value
March 31, 2011:
Money market instruments	$	13,674	$	-		$	13,674
Certificate of deposit		6,000		(2	)		5,998
Municipal commercial paper		4,000		-			4,000

Total available-for-sale securities	$	23,674	$	(2	)	$	23,672

December 31, 2010:
Money market instruments	$	21,665	$	(8	)	$	21,657
Municipal commercial paper		17,875		-			17,875
U.S. government bonds and treasury bills		5,000		-			5,000

Total available-for-sale securities	$	44,540	$	(8	)	$	44,532

~~Our~~As ~~investments~~of ~~in municipal~~March 31, ~~commercial~~2011, ~~papers~~our investments have ratings of A-1+ and P-1 ~~ratings~~ from ~~S&P and Moody’s, respectively, and our investments in U.S. government bonds and treasury bills have AAA/Aaa and Aaa/AAa ratings from~~ Standard & Poor’s (“S&P”) and Moody’s, respectively., ~~The~~for ~~investments~~money inmarket ~~Other~~instruments ~~debt~~and ~~securities~~ratings ~~have~~of A-1~~/A-1+~~ and P-1 ~~ratings~~ from S&P and Moody’s, respectively, for municipal commercial paper. InThere was no investment rating for certificate of deposit. In addition to these investments, we hold marketable equity securities as a long-term investment in Other ~~assets (see Note 8—Other~~ Assets ~~for further discussion)~~.

Note 4 5: Receivables, Net

Receivables, net consisted of the following (in thousands):

	September 30, 2010			December 31,2009
		60.25			60.25
Trade receivables	$	150,349		$	154,863
	March 31,2011			December 31, 2010
Contracts in process		20,234			16,952
Trade receivables	$	174,833		$	172,309
Other receivables		4,208			4,101
Contracts in process		21,891			25,208
Total receivables		174,791			175,916
Other receivables		4,360			4,332
Allowance for doubtful accounts		(10,959	)		(12,100	)
Total receivables		201,084			201,849
Total receivables, net	$	163,832		$	163,816
Allowance for doubtful accounts		(17,727	)		(15,157	)
Total receivables, net	$	183,357		$	186,692

Trade receivables included $75.76 million and $85.78 million of amounts due from related parties as of ~~September~~March 3031, ~~2010~~2011 and December 31, ~~2009~~2010, respectively. Advances and progress billings offset against contracts in process amounted to $311.0 3 million and $02.38 million as of ~~September~~March 3031, ~~2010~~2011 and December 31, ~~2009~~2010, respectively.

~~Note~~7 ~~5: Inventories~~

InventoriesTable consisted of the following (in thousands): Contents

	September 30, 2010		December 31,2009
Production materials and supplies	$	7,293	$	7,896
Work in process		16,507		15,615
Finished goods		33,137		36,733
Total inventories	$	56,937	$	60,244

HUGHES COMMUNICATIONS, INC.

~~Inventories~~NOTES ~~are~~TO ~~carried~~THE atCONDENSED ~~the~~CONSOLIDATED ~~lower~~FINANCIAL ofSTATEMENTS ~~cost~~(CONTINUED) or market, principally using standard costs adjusted to reflect actual cost, based on variance analyses performed throughout the year. Inventories are adjusted to net realizable value using management’s best estimates of future use. In making its assessment of future use or recovery, management considers the aging and composition of inventory balances, the effects of technological and/or design changes, forecasted future product demand based on firm or near-firm customer orders and alternative means of disposition of excess or obsolete items.

9Note 6: Inventories

~~HUGHES~~Inventories ~~COMMUNICATIONS,~~consisted ~~INC.~~of the following (in thousands):

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	March 31, 2011		December 31, 2010
Production materials and supplies	$	7,399	$	7,270
Work in process		11,537		12,828
Finished goods		40,691		37,721

Total inventories	$	59,627	$	57,819

~~Note~~Inventories are carried at the lower of cost or market, principally using standard costs adjusted to reflect ~~6: Property~~actual cost, ~~Net~~based on variance analyses performed throughout the year. Inventories are adjusted to net realizable value using management’s best estimates of future use. In making its assessment of future use or recovery, management considers the aging and composition of inventory balances, the effects of technological and/or design changes, forecasted future product demand based on firm or near-firm customer orders and alternative means of disposition of excess or obsolete items.

Note 7: Property, ~~net~~Net ~~consisted of the following (dollars in thousands):~~

		Estimated Useful Lives (years)		September 30, 2010			December 31,2009
Land and improvements			10	$	5,892		$	5,885
Buildings and leasehold improvements			2 - 30		34,474			32,996
Satellite related assets			15		380,394			380,394
Machinery and equipment			1 - 7		323,630			251,648
VSAT operating lease hardware			2 - 5		17,220			18,945
Furniture and fixtures			5 - 7		1,659			1,571
Construction in progress	- Jupiter				196,655			66,555
	- Other				14,603			12,888
Total property					974,527			770,882
Accumulated depreciation					(245,736	)		(168,479	)
Total property, net				$	728,791		$	602,403

Property, net consisted of the following (dollars in thousands):

Satellite related assets primarily consist of SPACEWAYTM 3 (“SPACEWAY 3”), a broadband satellite system with a unique architecture for broadband data communications. In April 2008, we placed SPACEWAY 3 into service and began to depreciate its related costs on a straight-line basis over the estimated useful life of 15 years. Satellite related assets include the costs associated with the construction and launch of the satellite, insurance premiums for the satellite launch and the in-orbit testing period, interest incurred during the construction of the satellite, and other costs directly related to the satellite.


	Estimated Useful Lives (years)		March 31, 2011			December 31, 2010
Land and improvements		10	$	5,907		$	5,888
Buildings and leasehold improvements		2 -30		36,693			35,643
Satellite related assets		15		380,394			380,394
Machinery and equipment		1 - 7		217,711			213,419
Consumer rental		2 - 4		172,438			140,616
VSAT operating lease hardware		2 - 5		10,910			13,137
Furniture and fixtures		5 - 7		1,766			1,732
Construction in progress - Jupiter				294,494			238,358
- Other				19,609			15,924

Total property				1,139,922			1,045,111
Accumulated depreciation				(302,321	)		(271,059	)

Total property, net			$	837,601		$	774,052

InProperty ~~June~~and ~~2009,~~equipment ~~HNS~~are ~~entered~~carried ~~into~~at ancost ~~agreement~~and ~~with~~depreciated ~~Space~~or ~~Systems/Loral,~~amortized ~~Inc.~~on ~~(“SS/L”) under which SS/L~~a ~~will manufacture Jupiter, our next~~straight-~~generation~~line ~~and~~basis ~~geostationary~~over ~~high~~their ~~throughput~~estimated ~~satellite~~useful lives. ~~Jupiter~~A ~~will~~significant ~~employ~~component aof ~~multi-spot~~our ~~beam,~~property ~~bent pipe Ka-band architecture~~ and ~~will~~equipment ~~provide~~is ~~additional~~associated ~~capacity~~with ~~for~~our ~~the~~SPACEWAYTM ~~HughesNet~~3 ~~service~~(“SPACEWAY in3”) ~~North~~satellite, ~~America.~~capitalized ~~The construction of Jupiter began in July 2009 and we began to capitalize all direct~~ costs associated with ~~the~~our ~~construction~~Jupiter satellite and ~~the~~related ~~launch of the satellite~~assets, ~~including interest incurred during~~ and the ~~construction~~consumer ofrental ~~the~~equipment, ~~satellite.~~related ~~Jupiter is scheduled~~ to ~~be launch~~our inconsumer ~~the~~rental ~~first half of 2012~~program.

WeIn ~~capitalized~~June ~~interest~~2009, ofHNS ~~$3.9~~entered ~~million~~into ~~and~~an $8agreement with Space Systems/Loral, Inc.6 ~~million~~(“SS/L”), ~~for~~under ~~the~~which ~~three~~SS/L will manufacture Jupiter, our next-generation and ~~nine~~geostationary ~~months ended~~high ~~September 30,~~throughput ~~2010,~~satellite. ~~respectively~~Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and ~~$0.4~~will ~~million~~provide additional capacity for ~~each~~the ofHughesNet ~~the~~service ~~three~~in ~~and~~North ~~nine~~America. ~~months~~The ~~ended~~construction ~~September 30,~~of Jupiter began in July 2009, ~~related~~and we began to capitalize all direct costs associated with the construction ofand ~~Jupiter.~~the

108

HUGHESTable COMMUNICATIONS,of INC. Contents

~~NOTES~~HUGHES TOCOMMUNICATIONS, ~~THE~~INC. ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Note 7: Intangible~~NOTES ~~Assets,~~TO ~~Net~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Intangible~~ launch ~~assets~~of the satellite, ~~net~~including ~~consisted~~interest incurred during the construction of the ~~following~~satellite. ~~(dollars~~Jupiter is scheduled to be launched in ~~thousands):~~ the first half of 2012.

	Estimated Useful Lives (years)	Cost Basis		Accumulated Amortization			Net Basis
September 30, 2010:
Customer relationships	7 - 8	$	10,406	$	(5,170	)	$	5,236
Patented technology and trademarks	8 - 10		15,275		(8,610	)		6,665
Favorable leases	3		629		(332	)		297
Total intangible assets, net		$	26,310	$	(14,112	)	$	12,198
December 31, 2009:
Backlog and customer relationships	2 - 8	$	22,312	$	(16,133	)	$	6,179
Patented technology and trademarks	2 - 10		15,745		(7,854	)		7,891
Favorable leases	3		629		(175	)		454
Total intangible assets, net		$	38,686	$	(24,162	)	$	14,524

Capitalized satellite costs are depreciated on a straight-line basis over the estimated satellite useful life of 15 years. For the three months ended March 31, 2011 and 2010, we recorded $6.4 million and $2.0 million, respectively, of capitalized interest related to Jupiter.

WeNote amortize the recorded values of our intangible assets over their estimated useful lives. As of September 30, 2010, our intangible assets excluded, in the aggregate, $12.4 million of fully amortized intangible assets. For the three months ended September 30, 2010 and 2009, we recorded $0.8: Intangible ~~million and $1.5 million~~Assets, ~~respectively,~~Net of amortization expense. For the nine months ended September 30, 2010 and 2009, we recorded $2.3 million and $4.4 million, respectively, of amortization expense. Estimated future amortization expense as of September 30, 2010 is as follows (in thousands):

	Amount
Remaining three months ending December 31, 2010	$	757
Year ending December 31,
2011		3,028
2012		2,854
2013		2,818
2014		1,326
2015		1,325
Thereafter		90
Total estimated future amortization expense	$	12,198

Intangible assets, net consisted of the following (dollars in thousands):

Note 8: Other Assets

	90.		90.		90.			90.
	Estimated Useful Lives (years)	Cost Basis		Accumulated Amortization			Net Basis
March 31, 2011:
Customer relationships	7 - 8	$	10,405	$	(5,775	)	$	4,630
Patented technology and trademarks	8 - 10		15,275		(9,414	)		5,861
Favorable leases	3		629		(437	)		192

Total intangible assets, net		$	26,309	$	(15,626	)	$	10,683

December 31, 2010:
Backlog and customer relationships	7 - 8	$	10,405	$	(5,473	)	$	4,932
Patented technology and trademarks	8 - 10		15,275		(9,012	)		6,263
Favorable leases	3		629		(384	)		245

Total intangible assets, net		$	26,309	$	(14,869	)	$	11,440

~~Other~~We amortize the recorded values of our intangible assets ~~consisted~~over their estimated useful lives. For each of the three ~~following~~months ended March 31, 2011 and 2010, we recorded $0.8 million of amortization expense. Estimated future amortization expense as of March 31, 2011 is as follows (in thousands):

	September 30, 2010		December 31, 2009
		90.
Subscriber acquisition costs	$	26,328	$	29,884
	Amount
Debt issuance costs		12,514		12,899
Remaining nine months ending December 31, 2011	$	2,271
Other		29,888		33,053
Year ending December 31,
Total other assets	$	68,730	$	75,836
2012		2,854
2013		2,818
2014		1,326
2015		1,325
2016		89
Total estimated future amortization expense	$	10,683

119

HUGHESTable COMMUNICATIONS,of INC. Contents

~~NOTES~~HUGHES TOCOMMUNICATIONS, ~~THE~~INC. ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

AsNOTES ~~of September 30,~~TO ~~2010,~~THE ~~“Other”~~CONDENSED ~~included~~CONSOLIDATED ~~our~~FINANCIAL ~~cost~~STATEMENTS ~~method and equity method investments, which includes our investment in HTI. On March 12, 2009, we exchanged $13.0 million of receivables that HTI owed to us for HTI convertible preferred stock~~ (~~“HTI Preferred Stock”~~Continued) as part of a $50.0 million private placement of HTI Preferred Stock. In connection with the merger of HTI with Polaris Acquisition Corp. (the “Merger”), which occurred on March 31, 2009, HTI became a publicly traded company and our HTI Preferred Stock was converted into approximately 3.3 million shares of HTI common stock (“HTI Shares”), of which 1.3 million shares and 2.0 million shares are referred to as Non-escrowed shares and Escrowed shares, respectively. The Escrowed shares are subject to certain restrictions and/or earn-out provisions pursuant to the Merger agreement.

AsNote of9: Other ~~September 30,~~Assets 2010, the Non-escrowed shares had a fair value of $1.6 million. We recorded an unrealized loss of $2.0 million and $2.7 million for the three and nine months ended September 30, 2010, respectively, and of $5.1 million since the inception of our investment in the Non-escrowed shares in “Accumulated other comprehensive loss” (“AOCL”).

~~The~~Other ~~Escrowed~~assets ~~shares~~consisted ~~are held by HTI in escrow, and the release~~ of ~~these shares is subject to various earn-out provisions based on HTI attaining specified stock prices of $20.00, $24.50 and $30.50 over specified periods within 5 years after~~ the ~~Merger.~~following If the full earn-out is achieved, our investment could represent approximately 3.8% of HTI’s outstanding common stock. If the earn-out is not attained, all or a portion of the Escrowed shares will be forfeited. In addition to the risk and valuation fluctuations associated with the earn-out target, the carrying value of the investment (in ~~HTI~~thousands): may be subject to fair value adjustments in future reporting periods. We account for the Escrowed shares using the cost method in accordance with ASC 325 “Investments—Other,” as the Escrowed shares are not considered marketable equity securities as of September 30, 2010. As of September 30, 2010, the carrying value and estimated fair value of the HTI Escrowed shares was $1.1 million and a minimal amount, respectively.

Note 9: Debt


	March 31, 2011		December 31, 2010
Subscriber acquisition costs	$	25,755	$	25,695
Debt issuance costs		17,304		17,150
Other		31,921		30,352

Total other assets	$	74,980	$	73,197

~~Short-term~~As of March 31, 2011, “Other” included our cost method and ~~current~~equity ~~portion~~method ofinvestments, which ~~long-term~~includes ~~debt~~our ~~consisted~~investment ofin ~~the~~Hughes ~~following~~Telematics, Inc. (~~dollars~~“HTI”). inAs ~~thousands~~of March 31, 2011, we have 3.3 million shares of HTI common stock (“HTI Shares”):, of which 1.3 million shares and 2.0 million shares are referred to as Non-escrowed shares and Escrowed shares, respectively.

	Interest Rates atSeptember 30, 2010		September 30, 2010		December 31, 2009
VSAT hardware financing		8.00% - 15.00%	$	3,165	$	3,158
Revolving bank borrowings		8.75%		438		1,547
Capital lease and other		5.50% - 39.60%		2,534		2,045
Total short-term and the current portion of long-term debt			$	6,137	$	6,750

The Non-escrowed shares had a fair value of $5.2 million as of March 31, 2011. We recorded an unrealized gain of $1.4 million and an unrealized loss of $0.7 million for the three months ended March 31, 2011 and 2010, respectively, and an unrealized loss of $1.4 million since the inception of our investment in the Non-escrowed shares in “Accumulated other comprehensive loss” (“AOCL”).

AsThe Escrowed shares are subject to achievement of ~~September 30,~~certain ~~2010~~“earn-out” targets by HTI pursuant to HTI’s merger agreement with Polaris Acquisition Corp. If the full earn-out is achieved, ~~HNS~~our ~~had~~investment ~~outstanding~~could ~~revolving~~represent ~~bank~~approximately ~~borrowings~~3.5% of $0HTI’s outstanding common stock.4 ~~million~~If the earn-out is not attained, ~~which~~all ~~had~~or a ~~variable~~ ~~interest~~portion ~~rate~~ of 8the Escrowed shares will be forfeited.~~75%.~~ ~~The~~In ~~borrowing~~addition ~~was~~to ~~obtained~~the byrisk ~~HNS’~~and ~~Indian~~valuation ~~subsidiary~~fluctuations ~~under~~associated ~~its~~with ~~revolving~~the ~~line~~earn-out targets, the carrying value of ~~credit~~the ~~with~~investment ain HTI ~~local~~may ~~bank~~be subject to fair value adjustments in future reporting periods. ~~There~~As isthe noEscrowed ~~requirement~~shares ~~for~~are ~~compensating~~not ~~balances~~considered ~~for~~marketable ~~these~~equity ~~borrowings.~~securities ~~The~~as ~~total~~of ~~amount~~March 31, ~~available~~2011, we account for the Escrowed shares using the cost method in accordance with ~~borrowing~~ASC by325 ~~our~~“Investments—Other.” ~~foreign~~As ~~subsidiaries~~of ~~under~~March 31, ~~various~~2011, ~~revolving~~the ~~lines~~carrying value of ~~credit~~the ~~was~~Escrowed shares of $51.71 million asapproximated ofits ~~September 30,~~estimated ~~2010~~fair value.

~~Long-term~~Note ~~debt consisted of the following (dollars in thousands)~~10: Debt

	Interest Rates atSeptember 30, 2010		September 30, 2010		December 31, 2009
Senior Notes(1)		9.50%	$	589,573	$	587,874
Term Loan Facility		7.62%		115,000		115,000
VSAT hardware financing		8.00% - 15.00%		3,841		5,861
Capital lease and other		5.50% - 39.60%		4,764		6,222
Total long-term debt			$	713,178	$	714,957

Short-term and current portion of long-term debt consisted of the following (dollars in thousands):

(1) Includes 2006 Senior Notes and 2009 Senior Notes.


	Interest Rates at March 31, 2011		March 31, 2011		December 31, 2010
Revolving bank borrowings		8.75%	$	898	$	967
VSAT hardware financing		7.27% -15.00%		2,036		3,109
Capital lease and other		5.50% -39.60%		1,766		2,209

Total short-term and the current portion of long-term debt			$	4,700	$	6,285

12As of March 31, 2011, HNS had outstanding revolving bank borrowings of $0.9 million, which had a variable interest rate of 8.75%. The borrowings were obtained by HNS’ Indian subsidiary under its revolving line of credit with a local bank. There is no requirement for compensating balances for these borrowings. The total amount available for borrowing by our foreign subsidiaries under various revolving lines of credit was $5.1 million and $4.1 million as of March 31, 2011 and December 31, 2010, respectively.

~~HUGHES~~10 ~~COMMUNICATIONS, INC.~~

NOTESTable TOof THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Contents

OnHUGHES ~~March 16~~COMMUNICATIONS, ~~2010,~~ ~~HNS entered into a credit agreement with JP Morgan Chase Bank, N~~INC.A. and Barclays Capital to amend and restate its senior secured $50 million revolving credit facility (the “Revolving Credit Facility”). Pursuant to the terms of the agreement, among other changes, the maturity date of the Revolving Credit Facility was extended to March 16, 2014, subject to an early maturity date of 91 days prior to March 16, 2014 in the event HNS’ 2009 and 2006 Senior Notes and HNS’ Term Loan Facility (as defined below) are not (i) repaid in full or (ii) refinanced with new debt (or amended) with maturities of no earlier than 91 days after March 16, 2014. The terms of the Revolving Credit Facility were amended to be: (i) in respect of the interest rate, at our option, the Alternative Borrowing Rate (as defined in the Revolving Credit Facility) plus 2.00% or the Adjusted London Interbank Offered Rate (“LIBOR”) (as defined in the Revolving Credit Facility) plus 3.00% and (ii) in respect of the participation fee for outstanding letters of credit, 3.00% per annum, in each case subject to downward adjustment based on our leverage ratio. For the nine months ended September 30, 2010 and 2009, there was no borrowing under the Revolving Credit Facility. As of September 30, 2010, the Revolving Credit Facility had total outstanding letters of credit of $4.9 million and an available borrowing capacity of $45.1 million.

InNOTES ~~May 2009,~~TO ~~HNS,~~THE ~~along~~CONDENSED ~~with~~CONSOLIDATED ~~its~~FINANCIAL ~~subsidiary,~~STATEMENTS ~~HNS Finance Corp., as co-issuer, completed a private debt offering of $150.0 million of 9.50% senior notes maturing on April 15, 2014~~ (~~the “2009 Senior Notes”~~CONTINUED). Interest on the 2009 Senior Notes is accrued from April 15, 2009 and is paid semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2009. As of September 30, 2010 and December 31, 2009, HNS recorded $6.5 million and $3.0 million, respectively, of accrued interest payable related to the 2009 Senior Notes.

InLong-term ~~February~~debt ~~2007,~~consisted ~~HNS borrowed $115 million from a syndicate~~ of ~~banks (~~the ~~“Term~~following ~~Loan Facility”), which matures on April 15, 2014. The interest on the Term Loan Facility is paid quarterly at Adjusted LIBOR~~ (asdollars ~~defined~~ in ~~the Term Loan Facility~~thousands): plus 2.50% per annum. To mitigate the variable interest rate risk associated with the Term Loan Facility, HNS entered into a swap agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum (the “Swap Agreement”). As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. As of September 30, 2010 and December 31, 2009, interest accrued based on the Swap Agreement and the Term Loan Facility was $0.8 million.

In April 2006, HNS issued $450 million of 9.50% senior notes maturing on April 15, 2014 (the “2006 Senior Notes”). Interest on the 2006 Senior Notes is paid semi-annually in arrears on April 15 and October 15. As of September 30, 2010 and December 31, 2009, we recorded $19.6 million and $8.9 million, respectively, of accrued interest payable related to the 2006 Senior Notes.


	Interest Rates at March 31, 2011		March 31, 2011		December 31, 2010
Senior Notes⁽¹⁾		9.50%	$	590,792	$	590,173
Term Loan Facility		7.62%		115,000		115,000
COFACE Guaranteed Facility		5.13%		43,523		27,403
VSAT hardware financing		7.27% - 15.00%		2,139		3,214
Capital lease and other		5.50% - 13.80%		4,996		4,786

Total long-term debt			$	756,450	$	740,576

~~Although~~(1) ~~the~~Includes ~~terms and covenants with respect to the 2009 Senior Notes are substantially identical to the~~ 2006 Senior Notes, ~~the 2009 Senior Notes were issued under a separate indenture~~ and ~~do not vote together with the 2006 Senior Notes. Each of the indentures governing the 2006 Senior Notes and the~~ 2009 Senior Notes (collectively, the “Senior Notes”), the agreement governing the amended Revolving Credit Facility and the agreement governing the Term Loan Facility require HNS to comply with certain affirmative and negative covenants: (i) in the case of the indentures, for so long as any Senior Notes are outstanding; (ii) in the case of the amended Revolving Credit Facility, so long as the amended Revolving Credit Facility is in effect; and (iii) in the case of the Term Loan Facility, for so long as the Term Loan Facility remains outstanding. Negative covenants contained in these agreements include limitations on the ability of HNS and/or certain of its subsidiaries to incur additional indebtedness; issue redeemable stock and subsidiary preferred stock; incur liens; pay dividends or distributions or redeem or repurchase capital stock; prepay, redeem or repurchase debt; make loans and investments; enter into agreements that restrict distributions from HNS’ subsidiaries; sell assets and capital stock of our subsidiaries; enter into certain transactions with affiliates; consolidate or merge with or into, or sell substantially all of our assets to, another person; and enter into new lines of business. In addition to these negative covenants, the amended Revolving Credit Facility, the indentures governing the Senior Notes and/or the agreement governing the Term Loan Facility contain affirmative covenants that require us to: (i) preserve our businesses and properties; (ii) maintain insurance over our assets; (iii) pay and discharge all material taxes when due; and (iv) furnish the lenders’ administrative agent our financial statements for each fiscal quarter and fiscal year, certificates from a financial officer certifying that no Event of Default or Default has occurred during the fiscal period being reported, litigation and other notices, compliance with laws, maintenance of records and other such customary covenants. HNS and its subsidiaries comprise a substantial portion of the Company’s net assets and results of operations since January 1, 2006. Because of the negative covenants above, there are certain restrictions on the sale of HNS’ assets. As of September 30, 2010 and December 31, 2009, HNS’ net assets were $201.9 million and $200.0 million, respectively. Management believes that HNS was in compliance with all of its debt covenants as of September 30, 2010.

On October 29, 2010, HNS entered into a $115 million loan agreement with BNP Paribas and Societe Generale (the “COFACE Guaranteed Facility”), which is guaranteed by COFACE, the French Export Credit Agency, to finance the launch related costs for our Jupiter satellite. Pursuant to the COFACE Guaranteed Facility, loan draw-downs, which began in the fourth quarter of 2010, will occur over the construction period for the Jupiter launch vehicle up to the time of the launch, which is estimated to be in the first half of 2012. The COFACE Guaranteed Facility has a fixed interest rate of 5.13%, payable semi-annually in arrears starting six months after each borrowing, and requires that principal repayments be paid in 17 consecutive equal semi-annual installments starting the earlier of (i) six months after the in-orbit delivery of Jupiter, or (ii) December 1, 2012. The agreement also contains covenants and conditions which are customary for financings of this type. As of March 31, 2011 and December 31, 2010, the COFACE Guaranteed Facility had an available borrowing capacity of $71.5 million and $87.6 million, respectively.

~~HUGHES~~On ~~COMMUNICATIONS~~March 16, ~~INC~~2010, HNS entered into a credit agreement with JP Morgan Chase Bank, N.A. and Barclays Capital to amend and restate its senior secured $50 million revolving credit facility (the “Revolving Credit Facility”). Pursuant to the terms of the agreement, among other changes, the maturity date of the Revolving Credit Facility was extended to March 16, 2014, subject to an early maturity date of 91 days prior to March 16, 2014 in the event the 2009 and 2006 Senior Notes and the Term Loan Facility (as defined below) of HNS are not (i) repaid in full or (ii) refinanced with new debt (or amended) with maturities of no earlier than 91 days after March 16, 2014. The terms of the Revolving Credit Facility were amended to be: (i) in respect of the interest rate, at our option, the Alternative Borrowing Rate (as defined in the Revolving Credit Facility) plus 2.00% or the Adjusted London Interbank Offered Rate (“LIBOR”) (as defined in the Revolving Credit Facility) plus 3.00% and (ii) in respect of the participation fee for outstanding letters of credit, 3.00% per annum, in each case subject to downward adjustment based on our leverage ratio. As of March 31, 2011 and December 31, 2010, the Revolving Credit Facility had no outstanding borrowing, $4.6 million and $4.4 million, respectively, of outstanding letters and an available borrowing capacity of $45.4 million and $45.6 million, respectively.

~~NOTES~~In TOMay 2009, ~~THE~~HNS, ~~CONDENSED~~along ~~CONSOLIDATED~~with ~~FINANCIAL~~its ~~STATEMENTS~~subsidiary, HNS Finance Corp., as co-issuer, completed a private debt offering of $150.0 million of 9.50% senior notes maturing on April 15, 2014 (~~CONTINUED~~the “2009 Senior Notes”). The terms and covenants with respect to the 2009 Senior Notes are substantially identical to those of the 2006 Senior Notes (as defined below). Interest on the 2009 Senior Notes is accrued from April 15, 2009 and is paid semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2009. As of March 31, 2011 and December 31, 2010, HNS recorded $6.5 million and $3.0 million, respectively, of accrued interest payable related to the 2009 Senior Notes.

In ~~July~~February ~~2006~~2007, ~~we entered~~HNS ~~into~~borrowed a$115 ~~capital~~million ~~lease~~from ~~with~~a 95syndicate ~~West~~of ~~Co.,~~banks ~~Inc.~~ (the “95Term ~~West~~Loan ~~Co.~~Facility”) ~~and its parent~~, ~~Miraxis~~which ~~License~~matures ~~Holdings~~on April 15, ~~LLC~~2014. ~~(“MLH”),~~The ~~which~~interest ~~are~~on ~~our~~the ~~related~~Term ~~parties~~Loan asFacility ~~discussed~~is inpaid ~~Note~~quarterly ~~15—Transactions~~at ~~with~~Adjusted ~~Related~~LIBOR ~~Parties.~~(as ~~Pursuant~~defined to in the ~~capital~~Term ~~lease~~Loan ~~agreement,~~Facility) 95plus ~~West~~2.50% per Coannum. ~~and~~To ~~MLH~~mitigate ~~agreed~~the tovariable ~~provide~~interest rate arisk ~~series~~associated ofwith ~~coordination~~the ~~agreements~~Term ~~allowing~~Loan Facility, HNS toentered ~~operate~~into ~~SPACEWAY~~a 3swap atagreement ~~the~~to ~~95°~~swap ~~west~~the ~~longitude~~Adjusted ~~orbital~~LIBOR ~~slot~~for ~~where~~a ~~95 West~~fixed ~~Co.~~interest ~~and~~rate ~~MLH~~of ~~have~~5.12% per ~~higher~~annum ~~priority~~(the ~~rights~~“Swap Agreement”). As ~~of September 30,~~a ~~2010~~result, the ~~remaining~~Term ~~debt~~Loan ~~balance~~Facility ~~under~~has ~~the~~a ~~capital~~fixed interest ~~lease~~rate ~~was~~of $47.962% per ~~million,~~annum. ~~which~~As ~~was~~of ~~included~~March 31, in2011 ~~“Capital lease~~ and ~~other”~~December 31, in2010, ~~the~~interest ~~short-term~~accrued ~~and~~based ~~long-term~~on ~~debt tables above. The remaining payments under~~ the ~~capital~~Swap ~~lease are~~Agreement ~~subject~~and ~~to conditions in~~ the ~~agreement~~Term ~~including~~Loan ~~our~~Facility ~~ability~~was ~~to operate SPACEWAY 3 and are~~ $1.0.7 million ~~for each of the years ending December 31, 2011 through 2016~~.

~~Note~~In ~~10: Financial~~April ~~Instruments~~2006, HNS issued $450 million of 9.50% senior notes maturing on April 15, 2014 (the “2006 Senior Notes”). Interest on the 2006 Senior Notes is paid semi-annually in arrears on April 15 and October 15. As of March 31, 2011 and

~~Interest~~11 ~~Rate Swap~~

TheTable interest on the Term Loan Facility was at Adjusted LIBOR plus 2.50% per annum. To mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into the Swap Agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum. As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. We account for the Swap Agreement as a cash flow hedge in accordance with ASC 815-30 “Derivatives and Hedging—Cash Flow Hedges.” Accordingly, in connection with the fair market valuation of the interest rate swap, we recorded a net unrealized loss of $2.0 million and $4.6 million for the three and nine months ended September 30, 2010, respectively, in AOCL. For the three and nine months ended September 30, 2009, we recognized $1.4 million of net unrealized loss and $5.9 million of net unrealized gain, respectively, in AOCL associated with the fair market valuation of the interest rate swap. The remaining net interest payments based on the Swap Agreement and the Term Loan Facility are paid quarterly and estimated to be approximately $2.2 million for the three months ending December 31, 2010, $8.8 million for each of the years ending December 31, 2011 through 2013 and $3.3 million for the year ending December 31, 2014. For the three months ended September 30, 2010 and 2009, we recorded $2.3 million of interest expense on the Term Loan Facility. For the nine months ended September 30, 2010 and 2009, we recorded $6.7 million and $6.8 million, respectively, of interest expense on the Term Loan Facility. Contents

~~Note~~HUGHES ~~11: Fair~~COMMUNICATIONS, ~~Value~~INC.

~~Under~~NOTES ~~ASC~~TO ~~820~~THE ~~“Fair~~CONDENSED ~~Value~~CONSOLIDATED ~~Measurements~~FINANCIAL ~~and~~STATEMENTS ~~Disclosures,” fair value is defined as the price that would be received to sell an asset or paid to transfer a liability~~ (~~exit price~~CONTINUED) in an orderly transaction between market participants at the measurement date, and the principal market is defined as the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability. If there is no principal market, the most advantageous market is used. This is the market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount that would be received for the asset or minimizes the amount that would be paid to transfer the liability. ASC 820 clarifies that fair value should be based on assumptions market participants would make in pricing the asset or liability. Where available, fair value is based on observable quoted market prices or derived from observable market data. Where observable prices or inputs are not available, valuation models are used (i.e. Black-Scholes, a barrier option model or a binomial model). ASC 820 established the following three levels used to classify the inputs used in measuring fair value measurements:

~~Level~~ December 31, ~~1-Inputs~~2010, ~~are~~we ~~unadjusted~~recorded ~~quoted~~$19.6 ~~prices~~million inand ~~active~~$8.9 ~~markets~~million, ~~for~~respectively, ~~identical~~of ~~assets~~accrued orinterest ~~liabilities~~payable ~~available~~related atto the ~~measurement~~2006 ~~date~~Senior Notes.

~~Level~~Although ~~2-Inputs~~the terms and covenants with respect to the 2009 Senior Notes are ~~unadjusted~~substantially ~~quoted~~identical ~~prices~~to ~~for~~the ~~similar~~2006 ~~assets~~Senior Notes, the 2009 Senior Notes were issued under a separate indenture and ~~liabilities~~do not vote together with the 2006 Senior Notes. Each of the indentures governing the 2006 Senior Notes and the 2009 Senior Notes (collectively, the “Senior Notes”), the agreement governing the amended Revolving Credit Facility, the agreement governing the COFACE Guaranteed Facility and the agreement governing the Term Loan Facility require HNS to comply with certain affirmative and negative covenants: (i) in ~~active~~the ~~markets~~case of the indentures, ~~quoted~~for ~~prices~~so long as any Senior Notes are outstanding; (ii) in the case of the amended Revolving Credit Facility, so long as the amended Revolving Credit Facility is in effect; (iii) in the case of the COFACE Guaranteed Facility, for ~~identical~~so long as the COFACE Guaranteed Facility remains outstanding; and (iv) in the case of the Term Loan Facility, for so long as the Term Loan Facility remains outstanding. Negative covenants contained in these agreements include limitations on the ability of HNS and/or ~~similar~~certain of its subsidiaries to incur additional indebtedness; issue redeemable stock and subsidiary preferred stock; incur liens; pay dividends or distributions or redeem or repurchase capital stock; prepay, redeem or repurchase debt; make loans and investments; enter into agreements that restrict distributions from HNS’ subsidiaries; sell assets and ~~liabilities~~capital instock ~~markets~~of our subsidiaries; enter into certain transactions with affiliates; consolidate or merge with or into, or sell substantially all of our assets to, another person; and enter into new lines of business. In addition to these negative covenants, the amended Revolving Credit Facility, the indentures governing the Senior Notes, the COFACE Guaranteed Facility and/or the agreement governing the Term Loan Facility contain affirmative covenants that ~~are~~require ~~not~~us ~~active~~to: (i) preserve our businesses and properties; (ii) maintain insurance over our assets; (iii) pay and discharge all material taxes when due; and (iv) furnish the lenders’ administrative agent our financial statements for each fiscal quarter and fiscal year, ~~inputs~~certificates from a financial officer certifying that no Event of Default or Default (as defined in the respective agreements) has occurred during the fiscal period being reported, litigation and other ~~than~~notices, ~~quoted~~compliance ~~prices~~with laws, ~~that~~maintenance of records and other such customary covenants. HNS and its subsidiaries comprise a substantial portion of the Company’s net assets and results of operations since January 1, 2006. Because of the negative covenants above, there are ~~observable~~certain restrictions on the sale of HNS’ assets. As of March 31, 2011 and December 31, ~~inputs~~2010, ~~derived~~HNS’ ~~from~~net orassets ~~corroborated~~were by$230.1 ~~observable~~million ~~market~~and ~~data~~$221.9 million, respectively. Management believes that HNS was in compliance with all of its debt covenants as of March 31, 2011.

~~Level~~Prior ~~3-Inputs~~to ~~are~~September ~~unobservable~~2005, ~~inputs~~we leased certain VSAT hardware under an operating lease with customers which ~~reflect~~were funded by two financial institutions at the ~~reporting~~inception ~~entity’s~~of ~~own~~the ~~assumptions~~operating onlease for the ~~assumptions~~future ~~market~~operating ~~participants~~lease revenues. As part of the agreement, the financial institution received title to the equipment and obtained the residual rights to the equipment after the operating ~~would~~lease ~~use~~with inthe ~~pricing~~customer expires and assumed the ~~asset~~credit orrisk associated with non-payment by the customers. However, we retained a continuing obligation to the financing institution to indemnify it from losses it may incur (up to the original value of the hardware) from non-performance of our system (a “Non-Performance Event”). Accordingly, we recognized a liability ~~based~~to onthe financial institution for the ~~best~~funded ~~available~~amount. ~~information~~We have not provided a reserve for a Non-Performance Event because we believe that the possibility of an occurrence of a Non-Performance Event due to a service outage is remote, given the ability to quickly re-establish customer service at relatively nominal costs.

14In July 2006, we entered into a capital lease with 95 West Co., Inc. (“95 West Co.”) and its parent, Miraxis License Holdings, LLC (“MLH”), which are our related parties as discussed in Note 15—Transactions with Related Parties. Pursuant to the capital lease agreement, 95 West Co. and MLH agreed to provide a series of coordination agreements allowing HNS to operate SPACEWAY 3 at the 95° west longitude orbital slot where 95 West Co. and MLH have higher priority rights. As of March 31, 2011, the remaining debt balance under the capital lease was $4.9 million, which was included in “Capital lease and other” in the short-term and long-term debt tables above. The remaining payments under the capital lease are subject to conditions in the agreement including our ability to operate SPACEWAY 3 and are $1.0 million for each of the years ending December 31, 2011 through 2016.

~~HUGHES~~Note ~~COMMUNICATIONS,~~11: Financial ~~INC.~~Instruments

~~NOTES~~Interest TORate ~~THE~~Swap ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~In determining~~The ~~fair~~interest ~~value,~~on wethe ~~use~~Term ~~various~~Loan ~~valuation~~Facility ~~approaches,~~was ~~including~~at ~~market,~~Adjusted ~~income~~LIBOR ~~and/or~~plus ~~cost approaches~~2.50% per ~~Other valuation techniques involve significant management judgment~~annum. AsTo ofmitigate ~~September 30, 2010,~~ the ~~carrying~~variable values of cash and cash equivalents, receivables, net, accounts payable, and debt, except for the Senior Notes as described below, approximated their respective fair values because of their short-term maturities.

~~Our~~12 investment in the HTI Shares was measured using Level 1 and Level 2 inputs for the Non-escrowed shares and Escrowed shares, respectively. The fair value of the Non-escrowed shares, as shown in the table below, was determined based on the quoted market prices. For the three and nine months ended September 30, 2010, we recognized an unrealized loss of $2.0 million and $2.7 million, respectively, in AOCL related to the Non-escrowed shares. The fair value of the Escrowed shares, as shown in the table below, was determined using market observable data and utilizing a barrier option pricing model. The valuation of the Escrowed shares reflects the Company’s best estimate of what market participants would use in pricing the investment based on the best available information. For the nine months ended September 30, 2010, the estimated fair value of the Escrowed shares declined by $1.1 million from its carrying value of $1.1 million at December 31, 2009 to minimal amount as of September 30, 2010. Based on our valuation analysis in accordance with ASC 320-10-35 “Investments—Debt and Equity Securities—Subsequent Measurement,” we determined that the decline in the estimated fair value of the Escrowed shares during the current quarter is not an “other than temporary” impairment.

OurTable Senior Notes were categorized as Level 1 of the fair value hierarchy as we utilized pricing for recent market transactions for identical notes. Contents

~~Our~~HUGHES ~~Term Loan Facility originally had a variable interest rate based on observable interest rates plus 2.50% per annum. To mitigate the variable interest rate risk~~COMMUNICATIONS, ~~we entered into the Swap Agreement to swap the Adjusted LIBOR for a fixed interest rate of 5~~INC.~~12% per~~ annum. As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. We adjust the value of the interest rate swap on a quarterly basis. The fair value of the interest rate swap was categorized as Level 2 of the fair value hierarchy.

~~Assets~~NOTES ~~and~~TO ~~liabilities~~THE ~~measured~~CONDENSED atCONSOLIDATED ~~fair~~FINANCIAL ~~value~~STATEMENTS ~~on a recurring basis are summarized below~~ (~~dollars in thousands~~CONTINUED):

			September 30, 2010
	Level	Included In	Carrying Value			Fair Value
Marketable securities	1	Marketable securities	$	57,300		$	57,300
HTI Non-escrowed Shares	1	Other assets	$	1,560		$	1,560
HTI Escrowed Shares	2	Other assets	$	1,121		$	34
2006 Senior Notes	1	Long-term debt	$	450,000		$	468,000
2009 Senior Notes	1	Long-term debt	$	139,573	(1)	$	155,250
Interest rate swap on the Term Loan Facility	2	Other long-term liabilities	$	15,145		$	15,145

interest rate risk associated with the Term Loan Facility, we entered into the Swap Agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum. As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. We account for the Swap Agreement as a cash flow hedge in accordance with ASC 815-30 “Derivatives and Hedging—Cash Flow Hedges.” Accordingly, we recorded a net unrealized gain of $1.2 million and a net unrealized loss of $1.0 million for the three months ended March 31, 2011 and 2010, respectively, in AOCL associated with the fair market valuation of the interest rate swap. The net interest payments based on the Swap Agreement and the Term Loan Facility are paid quarterly and estimated to be approximately $8.8 million for each of the years ending December 31, 2011 through 2013 and $3.3 million for the year ending December 31, 2014. For each of the three months ended March 31, 2011 and 2010, we recorded $2.2 million of interest expense on the Term Loan Facility.

~~(1)~~Note ~~Amount~~12: Fair ~~represents~~Value ~~the face value of $150.0 million, net of the remaining original issue discount of $10.4 million.~~

~~Note~~Under ~~12: Income~~ASC ~~Taxes~~820 “Fair Value Measurements and Disclosures,” fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date, and the principal market is defined as the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability. If there is no principal market, the most advantageous market is used. This is the market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount that would be received for the asset or minimizes the amount that would be paid to transfer the liability. ASC 820 clarifies that fair value should be based on assumptions market participants would make in pricing the asset or liability. Where available, fair value is based on observable quoted market prices or derived from observable market data. Where observable prices or inputs are not available, valuation models are used (i.e. Black-Scholes, a barrier option model or a binomial model). ASC 820 established the following three levels used to classify the inputs used in measuring fair value measurements:

~~For~~Level ~~the three and nine months ended September 30, 2010, we recorded a net income tax expense of $~~1~~.6 million and $4.3 million, respectively. For the three and nine months ended September 30,~~-Inputs ~~2009,~~are weunadjusted ~~recorded~~quoted aprices net income tax expense of $1.0 million and $0.8 million, respectively. The net income tax expense was partially offset by an income tax benefit attributable to our Indian subsidiary as a result of being engaged in ~~telecommunications~~ ~~infrastructure~~active ~~development.~~markets ~~Indian tax law provides~~ for aidentical ~~deduction~~assets ofor ~~100%~~liabilities ofavailable ~~profits~~at ~~and~~the ~~gains~~measurement ~~derived from qualifying infrastructure businesses for ten consecutive assessment years~~date. Because of our U.S. federal net operating loss (“NOL”) carryforward position and full valuation allowance against our net deferred tax assets, our income tax expense represents taxes associated with our foreign

15Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs, other than quoted prices, that are observable, and inputs derived from or corroborated by observable market data.

~~HUGHES~~Level ~~COMMUNICATIONS,~~3-Inputs ~~INC~~are unobservable inputs which reflect the reporting entity’s own assumptions on the assumptions market participants would use in pricing the asset or liability based on the best available information.

~~NOTES~~In TOdetermining ~~THE~~fair ~~CONDENSED~~value, ~~CONSOLIDATED~~we ~~FINANCIAL~~use ~~STATEMENTS~~various ~~(CONTINUED)~~valuation approaches, including market, income and/or cost approaches. Other valuation techniques involve significant management judgment. As of March 31, 2011, the carrying values of cash and cash equivalents, receivables, net, accounts payable, and short-term debt approximated their respective fair values because of their short-term maturities.

~~subsidiaries~~Our ~~and~~investment ~~state~~in ~~taxes.~~HTI Aswas ofmeasured ~~September 30,~~using ~~2010,~~Level we1 ~~have~~and ~~not~~Level ~~met~~2 inputs for the ~~“more~~Non-~~likely-than-not”~~escrowed ~~criteria~~shares and ofEscrowed ~~ASC~~shares, ~~740~~respectively. ~~“Income~~The ~~Taxes”~~fair onvalue ~~deferred~~of ~~tax~~the ~~assets~~Non-escrowed ~~in certain jurisdictions~~shares, ~~thus~~as weshown ~~maintained~~in athe ~~full~~table ~~valuation~~below, ~~allowance~~was determined based on ~~these~~the ~~deferred~~quoted ~~tax~~market ~~assets~~prices. As of ~~September~~March 3031, ~~2010~~2011, wethe ~~estimated~~Non-escrowed ~~that~~shares ~~our~~had ~~remaining~~a ~~NOL~~fair ~~carry-forwards~~value ~~were~~of ~~approximately~~ $~~328~~5.82 million,. ~~expiring~~We recognized ~~between~~an unrealized gain of $1.4 million for the ~~years~~three ~~2012~~months ~~and~~ended ~~2030~~March 31, if ~~unused,~~2011 and ~~our~~an ~~capital~~unrealized loss ~~carry~~of $1.4 million since the inception of our investment in the Non-~~forwards~~escrowed ~~were~~shares ~~approximately~~in ~~$13~~AOCL.7 ~~million~~The fair value of the Escrowed shares, ~~expiring~~as shown ~~between~~in ~~2010~~the ~~and~~table ~~2014~~below, ifwas ~~unused~~determined using market observable data and utilizing a barrier option pricing model. The valuation of the Escrowed shares reflects the Company’s best estimate of what market participants would use in pricing the investment based on the best available information.

~~Certain~~As of ~~our~~March 31, ~~subsidiaries~~2011, ~~are~~the ~~expected~~carrying tovalue ~~utilize~~of athe ~~portion~~Escrowed shares of $1.1 ~~their~~million ~~net~~approximated ~~operating~~its ~~loss~~estimated ~~carry-forwards~~fair ~~during 2010~~value. ~~Several~~Based ofon ~~these subsidiaries~~our ~~have~~valuation ~~not~~analysis ~~met~~in ~~the~~accordance ~~more~~with ASC 320-~~likely–than~~10-~~not~~35 ~~criteria~~“Investments—Debt and ~~therefore~~Equity ~~maintain~~Securities—Subsequent aMeasurement,” ~~full~~we ~~valuation~~determined ~~allowance~~that onthe ~~their~~decline ~~deferred~~in ~~tax~~the ~~assets~~estimated fair asvalue of ~~September 30, 2010. Any benefit realized from~~ the ~~reversal~~Escrowed ofshares ~~valuation~~during ~~allowance~~2010 ~~will~~is ~~be recorded~~not asan a“other ~~reduction~~than totemporary” ~~income tax expense~~impairment.

~~Under~~13 the terms of the Contribution and Membership Interest Purchase Agreement dated December 3, 2004, as amended, among the Company, LightSquared, Inc. (formerly SkyTerra Communications, Inc.), the DIRECTV Group, Inc. (“DIRECTV”) and DTV Network Systems, Inc. (“DTV Networks”), whereby LightSquared acquired 50% of HNS’ voting, or Class A membership interests, DIRECTV has responsibility for all of the pre-closing domestic and international income tax liabilities of DTV Networks. We have recorded a liability in the balance sheet for the estimated amount we may be required to pay to DIRECTV resulting from prepaid taxes exceeding tax liabilities as of April 22, 2005.

AsTable a result of the tax sharing agreement between LightSquared and the Company, we are currently entitled to an estimated $1.1 million reimbursement from LightSquared at the time LightSquared realizes the benefit of the alternative minimum tax credit related to its 2006 Federal income tax return. Recent tax legislation contains provisions enabling the acceleration of the alternative minimum tax credit refund claim. LightSquared has filed the refund claimed with the Internal Revenue Service. Once received, LightSquared will reimburse the Company. This reimbursement has been reflected on our books as a long-term receivable from LightSquared. Contents

InHUGHES ~~accordance with ASC 740~~COMMUNICATIONS, ~~we have identified unrecognized tax benefits related to tax positions of $11~~INC.1 million as of December 31, 2009 and an additional unrecognized tax benefits of $0.1 million through September 30, 2010. If recognized, the total unrecognized tax benefits would impact our effective tax rate. Following is a description of the tax years that remain subject to examination by major tax jurisdictions:

United States - Federal		1994 and forward
United States - Various States		1994 and forward
United Kingdom		2005 and forward
Germany		2004 and forward
Italy		2005 and forward
India		1995 and forward
Mexico		2000 and forward
Brazil		2003 and forward

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Note~~Our Senior Notes were categorized as Level 1 of the fair value hierarchy as we utilized ~~13: Employee~~pricing ~~Share-Based~~for ~~Payments~~recent market transactions for identical notes.

~~2006~~Our ~~Equity~~Term ~~and~~Loan ~~Incentive~~Facility ~~Plan~~originally had a variable interest rate based on observable interest rates plus 2.50% per annum. To mitigate the variable interest rate risk, we entered into the Swap Agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum. As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. We adjust the value of the interest rate swap on a quarterly basis. The fair value of the interest rate swap was categorized as Level 2 of the fair value hierarchy.

InAssets ~~January 2006, we adopted~~ and ~~our~~liabilities ~~Board~~measured ofat ~~Directors~~fair ~~approved~~value ~~the~~on ~~2006~~a ~~Equity~~recurring ~~and~~basis Incentive Plan (the “Plan”). The Plan provides for the grant of equity-based awards, including restricted common stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards, as well as cash bonuses and long-term cash awards to directors, officers, employees, advisors and consultants of the Company and its subsidiaries who are ~~selected~~summarized bybelow ~~our~~(dollars ~~Compensation Committee for participation~~ in ~~the~~thousands): Plan. We recorded compensation expense related to the restricted stock awards, issued to members of our Board of Directors, our executives, a contractor and HNS’ employees, and restricted stock units, issued only to our international employees, after adjustment for forfeitures, of $0.7 million for each of the three months ended September 30, 2010 and 2009 and $2.1 million and $2.2 million for the nine months ended September 30, 2010 and 2009, respectively. As of September 30, 2010, we had $1.4 million of unrecognized compensation expense related to the restricted stock awards and restricted stock units, which will be recognized over the remaining weighted average life of 1.20 years.


			March 31, 2011
	Level	Included In	Carrying Value			Fair Value
Marketable securities	2	Marketable securities	$	23,672		$	23,672
2006 Senior Notes	1	Long-term debt	$	450,000		$	465,750
2009 Senior Notes	1	Long-term debt	$	140,792	⁽¹⁾	$	157,500
Term Loan Facility	2	Long-term debt	$	115,000		$	114,425
COFACE Guaranteed Facility	2	Long-term debt	$	43,523		$	44,379
Interest rate swap on the Term Loan Facility	2	Other long-term liabilities	$	11,686		$	11,686
Capital lease and others	2	Long-term debt	$	4,996		$	5,047
VSAT hardware financing	2	Long-term debt	$	2,139		$	2,029

~~HUGHES~~(1) ~~COMMUNICATIONS~~Amount represents the face value of $150.0 million, ~~INC~~net of the remaining original issue discount of $9.2 million.

~~NOTES~~Note TO13: Income ~~THE~~Taxes ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Summaries~~For the three months ended March 31, 2011 and 2010, we recorded a net income tax expense of $1.9 million and $1.2 million, respectively. Because of our U.S. federal net operating loss ~~non~~(“NOL”) carryforward position and full valuation allowance against our net deferred tax assets, our income tax expense represents taxes associated with our foreign subsidiaries and state taxes. As of March 31, 2011, we estimated that our remaining NOL carry-~~vested~~forwards ~~restricted~~were ~~stock~~approximately ~~awards~~$319.3 million, expiring between the years 2012 and ~~restricted~~2029, ~~stock~~if ~~units~~unused, ~~are~~and asour ~~follows:~~capital loss carry-forwards were approximately $10.4 million, expiring between 2011 and 2014, if unused.

~~Restricted~~As ~~Stock~~of ~~Awards~~March 31, 2011, our German and United Kingdom (“U.K.”) subsidiaries have approximately $38.5 million and $56.2 million of NOL carryforwards, respectively. As the U.K. subsidiary is treated as a disregarded entity for U.S. income tax purposes, its net income or loss is reported on HNS’ partnership income tax return and subsequently allocated to us. The NOL carryforwards are available to reduce future U.K. taxable income and do not expire. The NOL carryforwards of the German subsidiary are available to reduce future German taxable income and do not expire.

	Shares			Weighted-AverageGrant-DateFair Value
Non-vested at December 31, 2009		162,360		$	27.37
Forfeited		(2,625	)	$	46.50
Vested		(80,409	)	$	33.50
Non-vested at September 30, 2010		79,326		$	20.53
Restricted Stock Units
	Shares			Weighted-AverageGrant-Date Fair Value
Non-vested at December 31, 2009		8,675		$	28.73
Vested		(1,500	)	$	46.64
Non-vested at September 30, 2010		7,175		$	24.99

As of March 31, 2011, we have not met the “more-likely-than-not” criteria of ASC 740 “Income Taxes” on deferred tax assets in certain jurisdictions, thus we maintained a full valuation allowance on these deferred tax assets. Any benefit realized from the reversal of valuation allowance will be recorded as a reduction to income tax expense.

~~Stock~~In ~~Option~~accordance ~~Program~~with ASC 740, we have identified unrecognized tax benefits related to tax positions of $4.1 million as of December 31, 2010 and additional unrecognized tax benefits of $0.2 million through March 31, 2011. If recognized, the total unrecognized tax benefits would impact our effective tax rate. We do not believe that the unrecognized tax benefits will significantly fluctuate within the next twelve months. Following is a description of the tax years that remain subject to examination by major tax jurisdictions:

On14 April 24, 2008, our Compensation Committee made stock option awards under the Plan (the “Stock Option Program”), which consisted of the issuance of non-qualified stock options to employees of the Company and its subsidiaries. The grant and exercise price of the stock options is the closing price of the Company’s common stock on the date of the grant. Any options forfeited or cancelled before exercise will be deposited back into the Option Pool and will become available for award under the Stock Option Program. Each grant has a 10 year life and vests 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date. The fair value of each option award was estimated on the date of grant using a Black-Scholes option valuation model.

On March 19,Table 2009, we offered eligible participants in the Stock Option Program the opportunity to exchange (the “Exchange Offer”) all or a portion of their eligible outstanding stock options for new stock options, on a one-for-one basis, through an exchange offer, which expired on April 16, 2009. Each new option (the “New Options”) has an exercise price of $14.47, which was the closing price of our common stock on April 15, 2009, and a new vesting schedule to reflect the new grant date of April 16, 2009. Contents

AsHUGHES ~~a result of the Exchange Offer~~COMMUNICATIONS, ~~which was completed on April 16, 2009, 546,900 outstanding stock options (representing 100% participation) were exchanged, and the estimated fair value of the New Options of $2~~INC.3 million was computed using a Black-Scholes option valuation model based on the new grant date. The compensation expense related to the New Options is recognized on a straight-line basis over the four-year vesting period beginning on the date of grant.

17NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

HUGHES COMMUNICATIONS, INC.


United States - Federal		1997 and forward
United States - Various States		1997 and forward
United Kingdom		2005 and forward
Germany		2004 and forward
Italy		2006 and forward
India		1995 and forward
Mexico		2000 and forward
Brazil		2004 and forward

~~NOTES~~Note 14: Employee TOShare-Based ~~THE~~Payments ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~The~~2006 ~~key assumptions~~Equity ~~for~~and ~~the~~Incentive ~~option~~Plan ~~awards for the nine months ended September 30, 2010 are as follows:~~

		Nine Months EndedSeptember 30, 2010
Volatility range		45.33% — 45.90%
Weighted-average volatility		45.74%
Expected term		5 years
Risk-free interest rate range		1.41% — 2.59%
Weighted-average risk-free interest rate		2.29%

In January 2006, we adopted and our Board of Directors approved the 2006 Equity and Incentive Plan (the “Plan”). The Plan provides for the grant of equity-based awards, including restricted common stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards, as well as cash bonuses and long-term cash awards to directors, officers, other employees, advisors and consultants of the Company and its subsidiaries who are selected by our Compensation Committee for participation in the Plan. We recorded compensation expense related to the restricted stock awards, issued to members of our Board of Directors, our executives, a contractor and HNS’ employees, and restricted stock units, issued only to our international employees, after adjustment for forfeitures, of $0.3 million and $0.7 million for the three months ended March 31, 2011 and 2010, respectively. As of March 31, 2011, we had $1.2 million of unrecognized compensation expense related to the restricted stock awards and restricted stock units, which will be recognized over a weighted average life of 1.84 years.

ASummaries ~~summary~~ of ~~option activity~~non-vested ~~under~~restricted ~~the~~stock ~~Stock~~awards ~~Option~~and ~~Program~~restricted isstock ~~presented~~units ~~below~~are as follows:

	Option Shares			Weighted-AverageExercise Price		WeightedAverageRemainingContractualLife		AggregateIntrinsicValue(1)
Outstanding at December 31, 2009		648,050		$	16.77		9.37	$	6,326
Granted		7,000		$	26.99
Forfeited or expired		(13,850	)	$	15.54
Outstanding at September 30, 2010		641,200		$	16.90		8.63	$	6,837
Vested and expected to vest at September 30, 2010		577,080		$	16.90		8.63	$	6,153
Exercisable at September 30, 2010		-		$	-

Restricted Stock Awards

(1) In thousands.


	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2010		78,326		$	20.19
Vested		(22,175	)	$	14.87

Non-vested at March 31, 2011		56,151		$	22.29

~~The~~Restricted ~~compensation expense~~Stock ~~related~~Units to stock option awards to our employees is recognized on a straight-line basis over the four-year vesting period beginning on the date of grant. We recorded compensation expense of $1.0 million and $0.9 million for the three months ended September 30, 2010 and 2009, respectively, and $3.0 million and $2.6 million for the nine months ended September 30, 2010 and 2009, respectively. As of September 30, 2010, we had $7.2 million of unrecognized compensation expense for non-vested stock options, which will be recognized over the remaining weighted average period of 2.61 years.

HNS’ Bonus Unit Plan


	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2010		23,500		$	26.68
Vested		(2,000	)	$	8.82

Non-vested at March 31, 2011		21,500		$	28.34

In July 2005, HNS adopted an incentive bonus unit plan (the “Bonus Unit Plan”), pursuant to which bonus units were granted to certain employees of the Company. The bonus units provide for time vesting over five years and are subject to a participant’s continued employment with HNS. Pursuant to the Bonus Unit Plan, if participants in the Bonus Unit Plan are employed by HNS at the time of the predetermined exchange dates, they are entitled to exchange their vested bonus units for shares of our common stock. The number of our common stock shares to be issued upon each exchange is calculated based upon the fair market value of the vested bonus unit divided by the average closing trading price of our common stock for the 20 business days immediately preceding the date of the exchange. We recognized compensation expense of $0.2 million for each of the three months ended September 30, 2010 and 2009 and $0.6 million for each of the nine months ended September 30, 2010 and 2009 related to the Bonus Unit Plan. On July 15, 2010, the 2.1 million vested bonus units vested were exchanged for approximately 207,000 shares (net of income tax withholding) of our common stock pursuant to the Bonus Unit Plan. The remaining 300,000 bonus units will vest on July 15, 2011.

18Table of Contents

HUGHES COMMUNICATIONS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~The~~Stock ~~following table~~Option ~~summarizes~~Program ~~changes in bonus units under the Bonus Unit Plan:~~

	Three Months Ended September 30,					Nine Months Ended September 30,
	2010			2009		2010			2009
Non-vested beginning balance		2,439,500			2,500,000		2,453,250			2,500,000
Converted to HCI common shares		(2,139,500	)		-		(2,139,500	)		-
Forfeited		-			-		(13,750	)		-
Non-vested ending balance		300,000			2,500,000		300,000			2,500,000

Our Compensation Committee makes stock option awards under the Plan (the “Stock Option Program”), which consists of the issuance of non-qualified stock options to employees of the Company and its subsidiaries. The grant and exercise price of the stock options is the closing price of the Company’s common stock on the date of the grant. Any options forfeited or cancelled before exercise will be deposited back into the option pool and will become available for award under the Stock Option Program. Each grant has a 10 year life and vests 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date. The fair value of each option award was estimated on the date of grant using a Black-Scholes option valuation model.

~~HNS’~~The ~~Class~~key Bassumptions ~~Membership~~for ~~Interests~~the option awards for the three months ended March 31, 2011 are as follows:

HNS’ Class B membership interests were issued to certain members of our senior management, two of HNS’ former senior management and a member of our Board of Directors. The Class B membership interests are subject to certain vesting requirements, with 50% of the Class B membership interests subject to time vesting over five years and the other 50% vesting based upon certain performance criteria. At the holders’ election, vested Class B membership interests may be exchanged for our common stock. The number of shares of our common stock to be issued upon such exchange is based upon the fair market value of such vested Class B membership interest tendered for exchange divided by the average closing trading price of our common stock for the 20 business days immediately preceding the date of such exchange. As of September 30, 2010, 3,259 of the 3,280 outstanding Class B membership interests were vested. If the total outstanding Class B membership interests were to convert into our common stock as of September 30, 2010, they could be exchanged for approximately 584,000 shares of our common stock. On September 25, 2009, we registered 75,000 shares of our common stock with the SEC on Form S-8 to be issued, from time to time, upon the exchange of the Class B membership interests.


		Three Months Ended March 31, 2011
Volatility		45.4%
Weighted-average volatility		45.4%
Expected term		5 years
Risk-free interest rate		2.02%
Dividend yield		-
Discount for post-vesting restrictions		-

~~Pursuant~~A tosummary ~~ASC 718 “Compensation—Stock Compensation,” HNS determined that the Class B membership interests had nominal value at the date~~ of ~~grant, and, accordingly, minimal compensation~~option ~~expense~~activity ~~was~~under ~~recorded for each of~~ the ~~three~~Stock ~~and~~Option ~~nine~~Program ~~months ended September 30, 2010 and 2009. A summary of Class B membership interests activities~~ is aspresented ~~follows~~below:

	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
	Option Shares			Weighted-AverageExercise Price		WeightedAverageRemainingContractualLife			Aggregate IntrinsicValue(In thousands)
	2010			2009		2010			2009
Outstanding at December 31, 2010		1,196,950		$	22.56		9.04		$	21,412
Outstanding beginning balance		3,280			3,656		3,330			3,656
Granted		5,000		$	61.59		9.85			-
Converted to HCI common shares		-			-		(50	)		-
Forfeited or expired		(3,250	)	$	20.17
Outstanding ending balance		3,280			3,656		3,280			3,656
Outstanding at March 31, 2011		1,198,700		$	22.73		8.80		$	44,289
Vested and expected to vest at March 31, 2011		1,137,578		$	22.74		8.80		$	42,024
Exercisable at March 31, 2011		1,250		$	17.03		7.71		$	53

~~Note~~The ~~14: Long~~compensation expense related to stock option awards is recognized on a straight-~~Term~~line ~~Cash~~basis over ~~Incentive~~the ~~Retention~~four-year ~~Program~~vesting period beginning on the date of grant. We recorded $1.4 million and $1.0 million of compensation expense for the three months ended March 31, 2011 and 2010, respectively. As of March 31, 2011, we had $11.3 million of unrecognized compensation expense for non-vested stock options, which will be recognized over a weighted average period of 2.88 years.

~~In 2005,~~ HNS ~~established a one-time employee retention program (“Retention Program”), which was designed to retain certain employees chosen by HNS~~’ ~~senior~~Bonus ~~management.~~Unit AsPlan a result of HNS successfully attaining 100% of its earnings goal for 2008, as defined in the Retention Program, HNS paid an aggregate of $14.7 million to eligible participants under the Retention Program in 2009, of which $13.2 million was accrued as of December 31, 2008. The Company has no further obligation associated with the Retention Program.

~~Note~~In ~~15: Transactions~~July 2005, HNS adopted an incentive bonus unit plan (the “Bonus Unit Plan”), pursuant to which bonus units were granted to certain employees of the Company. The bonus units provide for time vesting over five years and are subject to a participant’s continued employment with HNS. ~~Related~~Pursuant ~~Parties~~to the Bonus Unit Plan, if participants in the Bonus Unit Plan are employed by HNS at the time of the predetermined exchange dates, they are entitled to exchange their vested bonus units for shares of our common stock. The number of our common stock shares to be issued upon each exchange is calculated based upon the fair market value of the vested bonus unit divided by the average closing trading price of our common stock for the 20 business days immediately preceding the date of the exchange. We recognized compensation expense of $0.1 million and $0.2 million for the three months ended March 31, 2011 and 2010, respectively, related to the Bonus Unit Plan. As of March 31, 2011 and December 31, 2010, HNS had 290,000 and 300,000, respectively, of outstanding bonus units, which will vest

In16 the ordinary course of our operations, we enter into transactions with related parties to purchase and/or sell telecommunications services, equipment, and inventory. Related parties include all entities that are related to Apollo Management, L.P. and its affiliates (collectively “Apollo”), our controlling stockholder.

19Table of Contents

HUGHES COMMUNICATIONS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Hughes~~ on ~~Telematics~~July 15, ~~Inc~~2011. If the total outstanding bonus units were to convert into our common stock as of March 31, 2011, they could be exchanged for approximately 33,900 shares of our common stock, net of applicable tax withholding. For the three months ended March 31, 2011, 10,000 bonus units were forfeited.

~~In July 2006,~~ HNS granted a limited license to HTI allowing HTI to use the HUGHES trademark. The license is limited in that HTI may use the HUGHES trademark only in connection with its business of automotive telematics and only in combination with the TELEMATICS name. As partial consideration for the license, the agreement provides that HNS will be HTI’s ~~preferred~~Class ~~engineering~~B ~~services~~Membership ~~provider.~~Interests ~~The license is royalty-free, except that HTI has agreed to pay a royalty to HNS in the event HTI no longer has a commercial or affiliated relationship with HNS.~~

~~In October 2007,~~ HNS’ ~~entered~~Class ~~into~~B anmembership ~~agreement~~interests ~~with~~were ~~HTI~~issued ~~and~~to acertain ~~customer~~members of ~~HTI~~our senior management, ~~whereby~~two of HNS’ ~~agreed~~former tosenior ~~assume~~management ~~the rights~~ and ~~performance obligations~~a member of ~~HTI~~our inBoard ~~the~~of ~~event~~Directors. ~~that~~The ~~HTI~~Class ~~fails~~B tomembership ~~perform~~interests ~~its~~are ~~obligations~~subject ~~due~~ to acertain ~~fundamental~~vesting ~~cause~~requirements, ~~such~~with as50% ~~bankruptcy~~of or the ~~cessation~~Class ofB ~~its~~membership ~~telematics~~interests ~~business.~~subject Into ~~connection~~time ~~with~~vesting ~~that~~over five ~~agreement,~~years ~~HNS~~ and ~~HTI~~the ~~have~~other ~~entered~~50% ~~into~~vesting abased ~~letter~~upon ~~agreement pursuant~~certain toperformance ~~which~~criteria. ~~HTI~~At ~~has~~the ~~agreed~~holders’ toelection, ~~take~~vested ~~certain~~Class ~~actions~~B tomembership ~~enable~~interests ~~HNS~~may tobe ~~assume~~exchanged ~~HTI’s~~for ~~obligations~~our incommon ~~the~~stock. ~~event~~The ~~that~~number ~~such~~of ~~action~~shares isof ~~required.~~our ~~However,~~common asstock ato ~~result~~be ofissued ~~the~~upon ~~Merger,~~such exchange asis ~~defined~~based ~~and~~upon ~~described~~the infair ~~Note~~market ~~8—Other~~value ~~Assets,~~of ~~HNS’ obligations~~such tovested ~~HTI~~Class ~~and~~B ~~its~~membership ~~customer~~interest ~~expired~~tendered ~~when~~for ~~HTI~~exchange ~~became~~divided aby ~~public~~the ~~company~~average inclosing ~~March~~trading ~~2009~~price ~~with~~of anour ~~initial~~common ~~market~~stock ~~capitalization~~for ~~value~~the ~~greater~~20 ~~than~~business ~~$300.0~~days ~~million.~~immediately Inpreceding ~~January~~the ~~2008,~~date ~~HNS~~of ~~entered~~such ~~into~~exchange. On anSeptember 25, ~~agreement~~2009, ~~with~~we ~~HTI~~registered ~~for~~75,000 ~~the~~shares ~~development~~ of ~~an automotive~~our ~~telematics~~common ~~system~~stock ~~for~~with ~~HTI,~~the ~~comprising~~SEC ~~the~~on ~~telematics~~a ~~system~~Registration ~~hub~~Statement ~~and~~on ~~the~~Form ~~Telematics~~S-8 ~~Control~~to ~~Unit~~be ~~(“TCU”)~~issued, ~~which~~from ~~will~~time ~~serve~~to astime, upon the ~~user~~exchange ~~appliance~~of in the ~~telematics~~Class ~~system~~B membership interests.

InPursuant ~~March~~to ~~2009,~~ASC we718 ~~made an equity investment in HTI, which represented approximately 3.8% of HTI’s outstanding common stock. See Note 8~~“Compensation—~~Other~~Stock ~~Assets for further discussion. In August 2009~~Compensation,” ~~HTI~~HNS ~~terminated~~determined ~~substantially~~that ~~all of~~ the ~~development~~Class ~~engineering~~B ~~and~~membership ~~manufacturing~~interests ~~services~~had ~~with~~nominal value ~~HNS~~at ~~as a result of~~ the ~~bankruptcy~~date ~~filing~~ of ~~one~~grant, ofand, ~~HTI’s customers. On December 18~~accordingly, ~~2009,~~ ~~HNS~~minimal ~~entered~~compensation ~~into~~expense awas ~~promissory~~recorded ~~note with HTI (“Promissory Note”)~~ for ~~$8.3~~each ~~million~~ of ~~account~~the ~~receivables~~three ~~that~~months ~~HTI~~ended ~~owed to HNS. The Promissory Note has a maturity date of December~~March 31, ~~2010~~2011 and ~~an interest rate of 12% per annum. As of September 30,~~ 2010~~, the remaining Promissory Note, including accrued interest, had a balance of $7~~.5 ~~million.~~

~~HTI~~As ~~is controlled by an affiliate~~ of ~~Apollo.~~March 31, ~~Jeffrey A. Leddy~~2011, awe ~~member~~had of3,280 ~~HNS’~~outstanding ~~Board~~Class ofB ~~Managers~~membership ~~and~~interests, ~~our~~which ~~Board~~were offully ~~Directors,~~vested. isIf the ~~CEO~~ ~~and~~total aoutstanding ~~director~~Class ofB ~~HTI~~membership ~~and~~interests ~~owns~~were ~~less~~to ~~than~~convert 2%into ofour ~~HTI’s~~common ~~equity~~stock as of ~~September~~ March 3031, ~~2010.~~2011, Inthey ~~addition,~~could ~~Andrew~~be ~~Africk~~exchanged ~~and~~for ~~Aaron~~approximately ~~Stone~~693,100 ~~members~~shares of ~~HNS’ Board of Managers and~~ our ~~Board~~common ~~of Directors, are directors of HTI and partners of Apollo~~stock.

~~Hughes~~LightSquared ~~Systique~~1998 ~~Corporation~~Long Term Incentive Plan

~~HNS~~In ~~has~~connection ~~contracted~~ with ~~Hughes Systique, an entity consolidated with~~ the ~~Company,~~acquisition ~~for~~of ~~software~~HNS ~~development services. In addition to our 45.23% ownership~~ in ~~Hughes Systique~~2006, ~~our~~the ~~CEO~~compensation ~~and~~committee ~~President~~of ~~and~~LightSquared, ~~his~~Inc. ~~brother,~~(“LightSquared”) ~~who~~determined isthat ~~the~~certain ~~CEO~~holders ~~and President~~ of ~~Hughes~~stock ~~Systique~~options ~~and~~issued ~~our~~under ~~former Executive Vice President, in~~ the ~~aggregate,~~LightSquared ~~owned~~1998 ~~approximately~~Long ~~25.61%,~~Term onIncentive anPlan ~~undiluted~~(the ~~basis,~~“LightSquared ofPlan”) ~~Hughes~~would ~~Systique’s~~receive ~~outstanding~~options ~~shares~~to aspurchase ofour ~~September 30,~~common ~~2010. Furthermore~~stock, ~~our~~subject ~~CEO~~to ~~and~~certain ~~President~~terms under ~~and~~the ~~Jeffrey~~LightSquared ~~A. Leddy~~Plan, aat ~~member~~the ofdate ~~our~~LightSquared ~~Board~~separated ofus ~~Directors~~into ~~and~~a ~~HNS’~~publicly ~~Board~~traded ofcompany ~~Managers, serve on~~ (the ~~board of directors of Hughes Systique~~“Distribution”). As ~~a result~~ of ~~the~~March 31, ~~Termination Agreement~~2011, we ~~are~~had ~~required~~57,500 tooptions ~~consolidate Hughes~~outstanding ~~Systique’s~~to ~~results~~purchase ~~of operations in~~ our ~~operating~~common ~~results.~~stock ~~For~~with a ~~description~~weighted ofaverage exercise ~~additional~~price ~~transactions~~of ~~entered~~$19.40 ~~into~~per ~~between~~share ~~the Company~~ and ~~Hughes~~an ~~Systique,~~aggregate ~~see~~intrinsic ~~Note~~value ~~2—Consolidation~~ of ~~Hughes~~$2.3 ~~Systique Corporation~~million.

~~Agreement~~The ~~with~~fair 95value ~~West~~of Coeach option, as applicable, was determined on the date of grant, except for shares of restricted stock issued to a consultant. In accordance with ASC 505-50, ~~Inc~~“Equity-Based Payments to Non-Employees”, the fair value of such shares is adjusted at the end of the reporting period, and accordingly, the fair value as of March 31, 2011 was used for determining compensation expense attributable to such shares.

InNote ~~July~~15: Transactions ~~2006, HNS entered into an agreement~~ with 95Related ~~West~~Parties Co. and its parent, MLH, pursuant to which 95 West Co. and MLH agreed to provide a series of coordination agreements which allow HNS to operate its SPACEWAY 3 at an orbital position where such parties have higher-priority rights. Jeffrey A. Leddy, a member of our Board of Directors and HNS’ Board of Managers, is the managing director of 95 West Co. and MLH and also owns a small interest in each. Andrew Africk, another member of our Board of Directors and HNS’ Board of Managers, is also a director of MLH. As part of the agreement, HNS agreed to pay $9.3 million, in annual installments of $0.3 million in 2006, $0.75 million in each year between 2007 and 2010 and $1.0 million in each year between 2011 and 2016 for the use of the orbital position, subject to

20In the ordinary course of our operations, we enter into transactions with related parties to purchase and/or sell telecommunications services, equipment, and inventory. Related parties include all entities that are controlled by Apollo Management, L.P. and its affiliates (collectively “Apollo”), our controlling stockholder.

~~HUGHES~~Separation ~~COMMUNICATIONS,~~Agreement ~~INC.~~

~~NOTES~~As TOpart ~~THE~~of ~~CONDENSED~~the ~~CONSOLIDATED~~Distribution ~~FINANCIAL~~in ~~STATEMENTS~~2006, LightSquared and the Company entered into a separation agreement (~~CONTINUED~~the “Separation Agreement”). Among other things, the Separation Agreement provides for certain indemnifications, tax sharing, consulting services and access to facilities.

~~conditions~~Indemnification—The inSeparation ~~the~~Agreement ~~agreement~~provides ~~including~~that ~~HNS’~~the ~~ability~~Company towill ~~operate~~indemnify ~~SPACEWAY~~LightSquared 3.against Aslosses ofbased ~~September 30~~on, ~~2010,~~arising ~~the~~out ~~remaining~~of, ~~debt~~or ~~balance~~resulting ~~under~~from (i) the ~~capital~~ownership ~~lease~~or ~~was $4.9 million, which was~~the ~~included~~operation inof ~~“Capital lease and other” in~~ the ~~short-term~~assets ~~and~~or ~~long-term~~properties ~~debt~~transferred ~~tables~~to ~~included~~the ~~in Note 9—Debt.~~

~~Smart & Final,~~17 ~~Inc.~~

AsTable of September 30, 2010, Apollo owned, directly or indirectly, 95% of Smart & Final, Inc. (“Smart & Final”). We provide broadband products and services to Smart & Final. Contents

~~CKE~~HUGHES ~~Restaurants~~COMMUNICATIONS, ~~Inc~~INC.

OnNOTES ~~July 12,~~TO ~~2010,~~THE anCONDENSED ~~affiliate~~CONSOLIDATED ofFINANCIAL ~~Apollo~~STATEMENTS ~~acquired CKE Restaurants, Inc.~~ (~~“CKE”~~CONTINUED). ~~As a result, CKE indirectly became our related party as of that date. We provide broadband products and services to CKE.~~

~~Other~~ Company under the Separation Agreement, and the operation or conduct of the business of, including contracts entered into and any activities engaged in by, the Company, whether in the past or future; (ii) any other activities the Company engages in; (iii) any guaranty or keep well of or by LightSquared provided to any parties with respect to any of the Company’s actual or contingent obligations; and (iv) certain other matters described in the Separation Agreement. The Separation Agreement provides that LightSquared will indemnify the Company against losses based on, arising out of, or resulting from the ownership or operation of the assets or properties of Mobile Satellite Ventures LP (“MSV”) and TerreStar Networks, Inc., (“TerreStar”) or the operation or conduct of their businesses, including the contracts entered into by them, and certain other matters described in the Separation Agreement.

~~Certain~~Tax ~~members~~sharing agreement—The tax sharing agreement governs the allocation between the Company and LightSquared of ~~our~~tax ~~Board~~liabilities and related tax matters, such as the preparation and filing of ~~Directors~~tax returns and ~~officers~~tax ~~serve~~contests, for all taxable periods ended on or before February 21, 2006. The Company will generally be responsible for, and indemnify LightSquared and its subsidiaries against, all tax liabilities imposed on or attributable to (i) the ~~boards~~Company and any of ~~directors~~its subsidiaries relating to all taxable periods and (ii) LightSquared and any of ~~some~~its subsidiaries for all taxable periods or portions thereof ending on or prior to a change of ~~our~~control ~~affiliates.~~of InLightSquared, ~~some~~in ~~cases~~each case, ~~such directors~~after ~~and~~taking ~~officers~~into ~~have~~account ~~received~~any ~~stock-based~~tax ~~compensation~~attributes ~~from~~of LightSquared or any of its subsidiaries that are available to offset such ~~affiliates~~tax liabilities. Notwithstanding the foregoing, the Company is not responsible for ~~their~~any ~~service.~~taxes Inrelating ~~those~~to ~~cases~~MSV, ~~the~~TerreStar ~~amount~~or a change of ~~stock-based~~control ~~compensation~~of ~~received~~LightSquared. byAdditionally, under the ~~directors~~tax ~~and~~sharing ~~officers~~agreement, LightSquared is ~~comparable~~responsible for, and indemnifies the Company and its subsidiaries against, all tax liabilities imposed on or attributable to ~~stock-based~~MSV ~~compensation~~and ~~awarded~~TerreStar relating to all taxable periods, LightSquared and any of its subsidiaries relating to all taxable periods or portions thereof beginning and ~~other~~ending ~~non-executive~~after ~~members~~a change of ~~the~~control, ~~affiliates’~~and ~~boards~~any change of ~~directors~~control of LightSquared.

~~Related~~Hughes ~~Party~~Telematics, ~~Transactions~~Inc.

~~Sales~~HTI is controlled by an affiliate of Apollo. Jeffrey A. Leddy, a member of HNS’ Board of Managers and ~~purchase~~our ~~transactions~~Board ~~with~~of ~~related~~Directors, ~~parties~~is ~~are~~the Chief Executive Officer and a director of HTI and owns less than 1.5% of HTI’s equity as ~~follows~~of ~~(in~~March 31, ~~thousands):~~2011. In addition, Andrew Africk and Aaron Stone, members of HNS’ Board of Managers and our Board of Directors, are directors of HTI and partners of Apollo.

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2010		2009		2010		2009
Sales:
HTI	$	-	$	7,567	$	501	$	22,295
Others		208		129		453		395
Total sales	$	208	$	7,696	$	954	$	22,690
Purchases:
Hughes Systique(1)	$	-	$	-	$	-	$	1,591
Total purchases	$	-	$	-	$	-	$	1,591

In July 2006, HNS granted a limited license to HTI allowing HTI to use the HUGHES trademark. The license is limited in that HTI may use the HUGHES trademark only in connection with its business of automotive telematics and only in combination with the TELEMATICS name. As partial consideration for the license, the agreement provides that HNS will be HTI’s preferred engineering services provider. The license is royalty-free, except that HTI has agreed to pay a royalty to HNS in the event HTI no longer has a commercial or affiliated relationship with HNS.

~~(1)~~In ~~For~~October ~~the~~2007, ~~period~~HNS ~~after~~entered ~~March~~into 11an agreement with HTI and a customer of HTI, ~~2009~~whereby HNS agreed to assume the rights and performance obligations of HTI in the event that HTI fails to perform its obligations due to a fundamental cause such as bankruptcy or the cessation of its telematics business. In connection with that agreement, ~~Hughes~~HNS ~~Systique~~and HTI have entered into a letter agreement pursuant to which HTI has agreed to take certain actions to enable HNS to assume HTI’s ~~results~~obligations in the event that such action is required. However, as a result of ~~operations~~the ~~are~~merger ~~consolidated~~between HTI and Polaris Acquisition Corp in 2009, HNS’ obligations to HTI and its customer expired. In January 2008, HNS entered into an agreement with HTI for the ~~Company’s~~development ~~operating~~of ~~results~~an automotive telematics system for HTI, comprising the telematics system hub and the Telematics Control Unit (“TCU”), which will serve as the user appliance in the telematics system.

~~Assets~~In ~~resulting~~March ~~from~~2009, ~~transactions~~we ~~with~~made ~~related~~an ~~parties~~equity investment ~~are~~in HTI, which represented approximately 3.8% of HTI’s outstanding common stock as ~~follows~~of (March 31, 2011 before giving effect to the “earn-out” of the Escrowed shares. If the full earn-out targets are achieved, our investment could represent approximately 3.5% of HTI’s outstanding common stock. In addition to the risk and valuation fluctuations associated with the “earn-out” targets, the carrying value of the investment in ~~thousands):~~HTI may be subject to fair value adjustments in future reporting periods.

	September 30,2010		December 31,2009
Due from related parties:
HTI	$	7,459	$	8,652
Others		226		52
Total due from related parties	$	7,685	$	8,704

In August 2009, HTI terminated substantially all of the development, engineering and manufacturing services with HNS as a result of the bankruptcy filing of one of HTI’s customers.

2118

HUGHESTable COMMUNICATIONS,of INC. Contents

~~NOTES~~HUGHES TOCOMMUNICATIONS, ~~THE~~INC. ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Note 16: Segment~~NOTES ~~Data~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Set~~On ~~forth~~December 18, ~~below~~2009, isHNS ~~selected~~entered ~~financial~~into ~~information~~a ~~for~~promissory ~~our~~note ~~operating~~with ~~segments~~HTI (inthe ~~thousands~~“Promissory Note”) for $8.3 ~~There~~million ~~were~~of noaccount ~~intersegment~~receivables ~~transactions~~that HTI owed to HNS. The Promissory Note had an amended maturity date of December 31, 2011 and an interest rate of 12% per annum. As of March 31, 2011 and December 31, 2010, the remaining Promissory Note had a balance of $5.5 million and $5.6 million, respectively.

	NorthAmericaBroadband			InternationalBroadband		TelecomSystems		HTSSatellite			Corporateand Other			Consolidated(2)
As of or For the Three Months Ended September 30, 2010
Revenues	$	190,544		$	51,778	$	22,393	$	-		$	1,567		$	266,282
Operating income (loss)	$	21,100		$	2,658	$	3,663	$	(991	)	$	(834	)	$	25,596
Depreciation and amortization	$	28,500		$	3,794	$	1,049	$	-		$	158		$	33,501
Assets	$	622,031		$	177,019	$	41,133	$	202,674		$	288,983		$	1,331,840
Capital expenditures	$	20,845		$	1,599	$	58	$	41,852		$	1,756		$	66,110
As of or For the Three Months Ended September 30, 2009
Revenues	$	174,123		$	47,521	$	28,825	$	-		$	948		$	251,417
Operating income (loss)	$	10,629		$	3,616	$	2,642	$	-		$	(1,266	)	$	15,621
Depreciation and amortization	$	22,179		$	3,419	$	1,111	$	-		$	170		$	26,879
Assets	$	641,015		$	184,348	$	48,178	$	41,418		$	398,132		$	1,313,091
Capital expenditures	$	22,329		$	1,923	$	233	$	16,282		$	2,479		$	43,246
As of or For the Nine Months Ended September 30, 2010
Revenues	$	542,563		$	143,087	$	72,541	$	-		$	3,652		$	761,843
Operating income (loss)	$	43,537		$	4,051	$	12,034	$	(2,777	)	$	(2,727	)	$	54,118
Depreciation and amortization	$	81,160		$	10,851	$	3,116	$	-		$	485		$	95,612
Assets	$	622,031		$	177,019	$	41,133	$	202,674		$	288,983		$	1,331,840
Capital expenditures	$	67,202		$	8,270	$	261	$	110,248		$	7,688		$	193,669
As of or For the Nine Months Ended September 30, 2009
Revenues	$	514,973		$	142,925	$	87,431	$	-		$	2,130		$	747,459
Operating income (loss)(1)	$	(24,391	)	$	9,952	$	10,742	$	-		$	(3,580	)	$	(7,277	)
Depreciation and amortization	$	60,601		$	9,135	$	3,052	$	-		$	421		$	73,209
Assets	$	641,015		$	184,348	$	48,178	$	41,418		$	398,132		$	1,313,091
Capital expenditures	$	68,660		$	11,836	$	1,051	$	16,282		$	6,480		$	104,309

95 West Co., Inc.

~~(1)~~In ~~Operating~~July ~~loss~~2006, ~~for~~HNS ~~North~~entered ~~America~~into ~~Broadband~~an ~~includes~~agreement with 95 West Co. and its parent, MLH, pursuant to which 95 West Co. and MLH agreed to provide a series of coordination agreements which allow HNS to operate its SPACEWAY 3 at an orbital position where such parties have higher-priority rights. Jeffrey A. Leddy, a member of our Board of Directors and HNS’ Board of Managers, is the managing director of 95 West Co. and MLH and also owns a small interest in each. Andrew Africk, another member of our Board of Directors and HNS’ Board of Managers, is also a director of MLH. As part of the agreement, HNS agreed to pay $449.43 million, in annual installments of ~~impairment~~$0.3 ~~loss~~million ~~related~~in 2006, $0.75 million in each year between 2007 and 2010 and $1.0 million in each year between 2011 and 2016 for the use of the orbital position, subject to ~~our~~conditions ~~prepaid~~in ~~deposit~~the agreement including HNS’ ability to ~~Sea~~operate ~~Launch~~SPACEWAY 3. As of March 31, 2011, the remaining debt balance under the capital lease was $4.9 million, which was ~~impaired~~included in ~~2009~~“Capital lease and other” in the short-term and long-term debt tables included in Note 10—Debt.

~~(2)~~Smart & ~~Capital expenditures on an accrual basis were: (i) $93.8 million and $67.6 million for the three months ended September 30~~Final, ~~2010 and 2009, respectively, and (ii) $217~~Inc.5 ~~million and $127.8 million for the nine months ended September 30, 2010 and 2009, respectively.~~

22As of March 31, 2011, Apollo has controlled of Smart & Final, Inc. (“Smart & Final”). Therefore, Smart & Final is indirectly our related party. We provide broadband products and services to Smart & Final.

~~HUGHES~~CKE ~~COMMUNICATIONS~~Restaurants, ~~INC~~Inc.

~~NOTES~~On TOJuly 12, ~~THE~~2010, ~~CONDENSED~~an ~~CONSOLIDATED~~affiliate ~~FINANCIAL~~of ~~STATEMENTS~~Apollo acquired CKE Restaurants, Inc. (~~CONTINUED~~“CKE”). As a result, CKE indirectly became our related party as of that date. We provide broadband products and services to CKE.

~~Note 17: Comprehensive~~Other ~~Income (Loss)~~

~~Comprehensive~~Certain ~~income~~members ~~(loss)~~of our Board of Directors and officers serve on the boards of directors of some of our affiliates. In some cases, such directors and officers have received stock-based compensation from such affiliates for their service. In those cases, the amount of stock-based compensation received by the directors and officers is ascomparable ~~follows~~to ~~(in~~stock-based compensation awarded to ~~thousands)(1):~~other non-executive members of the affiliates’ boards of directors.

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2010			2009			2010			2009
Net income (loss)	$	9,968		$	(2,529	)	$	5,323		$	(54,289	)
Other comprehensive income (loss):
Foreign currency translation adjustments		3,023			505			620			5,881
Unrealized gain (loss) on hedging instruments		(3,362	)		(2,729	)		(8,796	)		2,639
Reclassification of realized loss on hedging instruments		1,390			1,310			4,173			3,275
Unrealized loss on available-for-sale securities		(1,966	)		(2,991	)		(2,668	)		(2,991	)
Total other comprehensive income (loss)		(915	)		(3,905	)		(6,671	)		8,804
Comprehensive income (loss)		9,053			(6,434	)		(1,348	)		(45,485	)
Comprehensive (income) loss attributable to the noncontrolling interest		(6	)		(155	)		376			(7	)
Comprehensive income (loss) attributable to HCI	$	9,047		$	(6,589	)	$	(972	)	$	(45,492	)

Related Party Transactions

~~(1)~~Sales ~~There~~and ispurchase notransactions ~~tax~~with ~~impact~~related ~~for~~parties ~~items~~are ~~included~~as follows (in ~~the~~thousands): ~~table since the Company has a full valuation allowance against its net deferred income taxes for all reporting periods.~~

Note 18: Net Income (loss) Attributable to HCI stockholders and Transfer from Noncontrolling Interests


	Three Months Ended March 31,
	2011		2010
Sales:
HTI	$	-	$	301
Others		244		123

Total sales	$	244	$	424

	Nine Months EndedSeptember 30,
	2010		2009
	(In thousands)
Net income (loss) attributable to HCI stockholders	$	5,907	$	(55,060	)
Transfers from the noncontrolling interest:
Decrease in HCI paid-in capital for purchase of subsidiary shares		-		(396	)
Change from net income (loss) attributable to HCI stockholders and transfers from the noncontrolling interest	$	5,907	$	(55,456	)

NoteTable 19: Commitmentsof and Contingencies Contents

~~Litigation~~HUGHES COMMUNICATIONS, INC.

WeNOTES ~~are periodically~~TO ~~involved~~THE inCONDENSED ~~litigation~~CONSOLIDATED inFINANCIAL ~~the~~STATEMENTS ~~ordinary~~(CONTINUED) course of our business involving claims regarding intellectual property infringement, product liability, property damage, personal injury, contracts, employment and worker’s compensation. We do not believe that there are any such pending or threatened legal proceedings, including ordinary litigation incidental to the conduct of our business and the ownership of our properties that, if adversely determined, would have a material adverse effect on our business, financial condition, results of operations or liquidity.

InAssets ~~October~~resulting ~~2008, Hughes Telecommunicaçoes do Brasil Ltda. (“HTB”), a wholly-owned subsidiary of HNS, received a tax assessment of approximately $7.2 million~~ from ~~the~~transactions ~~State~~with ofrelated ~~São~~parties ~~Paulo~~are ~~Treasury~~as ~~Department.~~follows ~~The~~(in ~~tax assessment alleges that HTB failed~~thousands): to pay certain import taxes to the State of São Paulo. We do not believe the assessment is valid and plan to dispute the State of São Paulo’s claims and to defend vigorously against these allegations. Therefore, we have not recorded a liability. It is the opinion of management that such litigation is not expected to have a material adverse effect on our financial position, results of operations or cash flows.


	March 31, 2011		December 31, 2010
Due from related parties:
HTI	$	5,527	$	5,632
Others		89		159

Total due from related parties	$	5,616	$	5,791

~~HUGHES~~Note ~~COMMUNICATIONS,~~16: Segment ~~INC.~~Data

~~NOTES~~Set TOforth ~~THE~~below ~~CONDENSED~~is ~~CONSOLIDATED~~selected ~~FINANCIAL~~financial ~~STATEMENTS~~information for our operating segments (~~CONTINUED~~in thousands). There were no intersegment transactions.

In March 2009, an arbitration panel ruled in favor of HNS in its arbitration against Sea Launch Limited Partnership and Sea Launch Company, LLC (collectively, “Sea Launch”) entitling HNS to a full refund of $44.4 million (the “Deposit”) in payments made to Sea Launch in connection with launch services for SPACEWAY 3, in addition to interest of 10% per annum on the $44.4 million from July 10, 2007 until payment on the Deposit is received in full. As a result of Sea Launch filing a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code, our efforts to pursue collection of the arbitral award were stayed under the bankruptcy laws. In June 2009, based upon information made available in the bankruptcy proceedings and other factors, the Company concluded that the value of the previously-recorded Deposit was impaired and recorded an impairment loss of $44.4 million. On May 27, 2010, HNS entered into a settlement agreement with Sea Launch to resolve the claim that HNS filed in the Sea Launch bankruptcy (the “Settlement Agreement”). The Settlement Agreement provides that Sea Launch will irrevocably issue to HNS two credits, each in the amount of $22.2 million (the “Credits”), in satisfaction and discharge of HNS’ bankruptcy claim. The Credits may be used by HNS to defray the cost of up to two launches contracted by December 31, 2015, and scheduled to occur by December 31, 2017. In addition, subject to the terms and conditions of the Settlement Agreement, one or both Credits may be transferred to third parties. The bankruptcy court has approved the Settlement Agreement, and its terms have been incorporated into the court’s order approving Sea Launch’s plan of reorganization. The Settlement Agreement became effective on October 27, 2010.


	North America Broadband		International Broadband			Telecom Systems			HTS Satellite			Corporate and Other			Consolidated
As of or For the Three Months Ended March 31, 2011
Revenues	$	193,706	$	51,672		$	16,692		$	602		$	1,420		$	264,092
Operating income (loss)	$	21,745	$	(738	)	$	(316	)	$	(1,304	)	$	(4,467	)	$	14,920
Depreciation and amortization	$	32,792	$	3,750		$	820		$	-		$	139		$	37,501
Assets	$	635,871	$	187,843		$	45,790		$	308,731		$	205,812		$	1,384,047
Capital expenditures⁽¹⁾	$	39,200	$	1,556		$	10		$	60,405		$	2,850		$	104,021
As of or For the Three Months Ended March 31, 2010
Revenues	$	173,995	$	43,456		$	24,692		$	-		$	1,050		$	243,193
Operating income (loss)	$	9,616	$	(1,156	)	$	3,708		$	(858	)	$	(746	)	$	10,564
Depreciation and amortization	$	25,519	$	3,426		$	1,024		$	-		$	164		$	30,133
Assets	$	636,622	$	168,771		$	45,877		$	99,515		$	328,710		$	1,279,495
Capital expenditures⁽¹⁾	$	26,138	$	4,187		$	153		$	32,767		$	3,592		$	66,837

On(1) ~~May 18,~~Capital ~~2009,~~expenditures ~~the~~on ~~Company~~an ~~and~~accrual ~~HNS~~basis ~~received~~were ~~notice~~$98.9 ofmillion aand ~~complaint filed in the U~~$65.S.2 ~~District~~million ~~Court~~ for the ~~Northern~~three ~~District~~months ofended ~~California~~March ~~by two California subscribers to the HughesNet service. The plaintiffs complain about the speed of the HughesNet service~~31, ~~the~~2011 ~~Fair Access Policy, early termination fees~~ and ~~certain terms and conditions of the HughesNet subscriber agreement. The plaintiffs seek to pursue their claims as a class action on behalf of other California subscribers. On June 4~~2010, ~~2009, the Company and HNS received notice of a similar complaint filed by another HughesNet subscriber in the Superior Court of San Diego County, California~~respectively. The plaintiff in this case also seeks to pursue his claims as a class action on behalf of other California subscribers. Both cases have been consolidated into a single case in the U.S. District Court for the Northern District of California. We believe that the allegations in both complaints are not meritorious and we intend to vigorously defend these matters.

On20 December 18, 2009, the Company and HNS received notice of a complaint filed in the Cook County, Illinois, Circuit Court by a former subscriber to the HughesNet service. The complaint seeks a declaration allowing the former subscriber to file a class arbitration challenging early termination fees under the subscriber agreement. We believe that the allegations in this complaint are not meritorious and we intend to vigorously defend this matter.

CommitmentsTable of Contents

InHUGHES ~~June 2009~~COMMUNICATIONS, ~~HNS entered into an agreement with SS/L for the construction of Jupiter and has agreed to make installment payments to SS/L upon the completion of each milestone as set forth in the agreement~~INC. In connection with the construction of Jupiter, HNS entered into a contract with Barrett Xplore Inc. (“Barrett”), whereby Barrett agreed to lease user beams and purchase gateways and terminals for the Jupiter satellite that are designed to operate in Canada. In April 2010, HNS entered into an agreement with Arianespace for the launch of Jupiter in the first half of 2012. Pursuant to the agreement, the Ariane 5 will launch Jupiter into geosynchronous transfer orbit from Guiana Space Centre in Kourou, French Guiana. As of September 30, 2010, our remaining obligation for the construction and launch of Jupiter was approximately $259.9 million.

WeNOTES ~~are~~TO ~~contingently~~THE ~~liable~~CONDENSED ~~under~~CONSOLIDATED ~~standby~~FINANCIAL ~~letters~~STATEMENTS ~~of credit~~(CONTINUED) and bonds in the aggregate amount of $23.9 million that were undrawn as of September 30, 2010. Of this amount, $4.9 million was issued under the Revolving Credit Facility; $1.7 million was secured by restricted cash; $1.0 million related to insurance bonds; and $16.3 million was issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our foreign subsidiaries are secured by certain assets. As of September 30, 2010, these obligations were scheduled to expire as follows: $6.6 million in 2010; $13.3 million in 2011; $0.8 million in 2012; and $3.2 million in 2013 and thereafter.

24Note 17: Comprehensive Income (Loss)

~~HUGHES~~Comprehensive ~~COMMUNICATIONS,~~income ~~INC.~~(loss) is as follows (in thousands)(1):

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	Three Months Ended March 31,
	2011			2010
Net income (loss)	$	685		$	(6,174	)

Other comprehensive income (loss):
Foreign currency translation adjustments		1,645			(729	)
Unrealized loss on hedging instruments		(189	)		(2,323	)
Reclassification of realized loss on hedging instruments		1,404			1,368
Unrealized gain (loss) on available-for-sale securities		1,495			(647	)

Total other comprehensive income (loss)		4,355			(2,331	)

Comprehensive income (loss)		5,040			(8,505	)
Comprehensive (income) loss attributable to the noncontrolling interest		115			(217	)

Comprehensive income (loss) attributable to HCI	$	5,155		$	(8,722	)

~~Note 20: Subsequent~~(1) ~~Event~~There is no tax impact for items included in the table since the Company has a full valuation allowance against its net deferred income taxes for all reporting periods.

OnNote ~~October 29,~~18: Commitments ~~2010, HNS entered into a $115 million loan agreement with BNP Paribas~~ and ~~Societe~~Contingencies Generale to finance the launch related costs for Jupiter, our next generation, high-throughput, Ka-band satellite. The loan will be guaranteed by COFACE, the French Export Credit Agency. Arianespace has been contracted by HNS to launch Jupiter, the estimated launch date being in the first half of 2012.

~~Loan~~Litigation draw-downs, which will begin in the fourth quarter, will occur over the construction period for the launch vehicle up to the time of the launch. Terms of the loan include a fixed interest rate of 5.13% per annum, payable semi-annually in arrears, and a repayment period of 8.5 years after the launch. The agreement also contains covenants and conditions which are customary for financings of this type.

~~Note~~We are periodically involved in litigation in the ordinary ~~21: Supplemental~~course ~~Guarantor~~of our business involving claims regarding intellectual property infringement, product liability, property damage, personal injury, contracts, employment and ~~Non-Guarantor~~worker’s ~~Financial~~compensation. ~~Information~~We do not believe that there are any such pending or threatened legal proceedings, including ordinary litigation incidental to the conduct of our business and the ownership of our properties that, if adversely determined, would have a material adverse effect on our business, financial condition, results of operations or liquidity.

OnIn ~~August 8,~~October ~~2007~~2008, ~~the Company~~Hughes ~~filed~~Telecommunicaçoes ado ~~shelf~~Brasil ~~registration~~Ltda. ~~statement~~(“HTB”), ona wholly-owned ~~Form~~subsidiary ~~S-3~~of HNS, asreceived ~~amended~~a ontax ~~November 15,~~assessment ~~2007,~~of toapproximately ~~register~~$8.0 ~~shares~~million from the State of ~~our~~São ~~common~~Paulo ~~stock,~~Treasury ~~preferred~~Department. ~~stock,~~The ~~and~~tax ~~warrants~~assessment ~~and~~alleges ~~debt~~that ~~securities~~HTB ~~and~~failed ~~non-convertible~~to ~~debt~~pay ~~securities~~certain ofimport ~~HNS~~taxes ~~and~~to ~~HNS~~the ~~Finance Corp~~State of São Paulo., We ado ~~finance~~not ~~subsidiary~~believe ~~which~~the assessment is ~~HNS’s~~valid ~~wholly-owned~~and ~~subsidiary~~plan ~~(the~~to ~~“Co-Issuer”),~~dispute asthe coState ~~issuers.~~of InSão ~~connection~~Paulo’s ~~with~~claims ~~any~~and ~~future~~to ~~issuance~~defend ofvigorously ~~debt~~against ~~securities~~these ofallegations. ~~HNS~~Recent decrees and legislative actions by the ~~Co-Issuer,~~State weof ~~will,~~São ~~and~~Paulo ~~one~~will oralleviate approximately ~~more~~$5.1 million of ~~our~~the ~~other subsidiaries~~tax ~~may,~~assessment onover atime ~~joint~~with ~~and~~no ~~several~~impact ~~basis~~to the Company. Therefore, ~~offer~~we ~~full~~have ~~and~~not ~~unconditional~~recorded ~~guarantees~~a ofliability. It is the ~~obligations~~opinion of ~~HNS~~management ~~and~~that ~~the~~such ~~Co-Issuer,~~litigation ~~under~~is ~~such~~not ~~debt~~expected ~~securities.~~to ~~The~~have ~~registration~~a ~~statement~~material ~~was~~adverse ~~declared~~effect ~~effective~~on byour financial ~~the~~position, ~~Securities~~results ~~and~~of ~~Exchange Commission~~operations onor ~~November 19,~~cash ~~2007~~flows.

InOn ~~lieu~~May 18, of2009, ~~providing~~the ~~separate~~Company ~~unaudited~~and ~~financial~~HNS ~~statements~~received notice of ~~HNS,~~a complaint filed in the ~~Co-Issuer~~U.S. ~~and HNS’~~District ~~guarantor~~Court ~~subsidiaries,~~for ~~condensed~~the ~~financial~~Northern ~~statements~~District ~~prepared~~of inCalifornia ~~accordance~~by ~~with~~two ~~Rule~~California ~~3-10~~subscribers ~~and~~to ~~Rule 5-04~~the ofHughesNet ~~Regulation~~service. ~~S-X~~The ~~are~~plaintiffs ~~presented~~complain ~~below.~~about ~~The~~the ~~column~~speed ~~marked~~of ~~“Parent”~~the ~~represents~~HughesNet ~~our~~service, ~~results~~the ofFair ~~operations~~Access Policy, ~~with~~early ~~the~~termination ~~subsidiaries~~fees ~~accounted~~and ~~for~~certain ~~using~~terms and conditions of the ~~equity~~HughesNet ~~method~~subscriber agreement. The ~~column~~plaintiffs ~~marked~~seek ~~“Subsidiary~~to ~~Issuer”~~pursue ~~represents~~their ~~the~~claims ~~results~~as ofa ~~HNS.~~class ~~The~~action ~~column~~on ~~marked~~behalf ~~“Guarantor~~of ~~Subsidiaries”~~other ~~includes~~California subscribers. On June 4, 2009, the ~~results~~Company ofand HNS’ ~~guarantor~~received ~~subsidiaries~~notice ~~and~~of ~~the~~a ~~Co-Issuer,~~similar ~~which~~complaint isfiled aby ~~co-issuer~~another ofHughesNet ~~HNS’~~subscriber ~~Senior~~in ~~Notes~~the ~~and~~Superior ~~which~~Court ~~had~~of noSan ~~assets,~~Diego ~~operations~~County, ~~revenues~~California. orThe ~~cash~~plaintiff ~~flows~~in ~~for~~this ~~the~~case ~~periods~~also ~~presented.~~seeks ~~The~~to ~~column~~pursue ~~marked~~his ~~“Non-Guarantor~~claims ~~Subsidiaries”~~as ~~includes~~a ~~the~~class ~~results~~action ofon ~~non-guarantor subsidiaries~~behalf of ~~the~~other ~~Company~~California ~~and HNS~~subscribers. ~~Eliminations~~Both ~~necessary~~cases tohave been ~~arrive~~consolidated atinto a single case in the ~~information~~U.S. District Court for the Northern District of California. In January 2011, the Company agreed to settle this consolidated case on a ~~consolidated~~nationwide basis, ~~for~~subject ~~the~~to ~~periods~~court ~~presented~~approval. ~~are~~As ~~included~~a inresult, the ~~column~~Company accrued ~~so labeled~~$1.9 ~~Separate~~million ~~financial~~for ~~statements~~estimated ~~and~~settlement ~~other~~costs, ~~disclosures concerning~~plaintiffs’ ~~the~~attorney ~~Co-Issuer~~fees and ~~HNS’~~other ~~Guarantor~~related ~~Subsidiaries~~expenses ~~are~~as ~~not~~of ~~presented~~December ~~because~~31, ~~management~~2010. ~~has~~In ~~determined~~the event that ~~they~~the ~~are~~settlement is not ~~material~~effectuated, tothe ~~investors.~~ Company

~~The~~21 following represents the supplemental condensed financial statements of the Company, HNS, the Guarantor Subsidiaries and the Non-guarantor Subsidiaries. These condensed financial statements should be read in conjunction with our condensed consolidated financial statements and notes thereto. In 2010, the Company liquidated one of its wholly-owned non-guarantor subsidiaries. As a result, certain prior period items in the following supplemental condensed financial statements have been reclassified to conform to the current period presentation.

25Table of Contents

HUGHES COMMUNICATIONS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Condensed~~ would ~~Consolidated~~revert ~~Balance~~to ~~Sheet~~its asprevious position of ~~December 31,~~vigorously ~~2010~~defending these matters as it believes that the allegations in these complaints are not meritorious.

~~(In~~On ~~thousands)~~December 18, 2009, the Company and HNS received notice of a complaint filed in the Cook County, Illinois, Circuit Court by a former subscriber to the HughesNet service. The complaint seeks a declaration allowing the former subscriber to file a class arbitration challenging early termination fees under the subscriber agreement. The Company was dismissed from this case in September 2010, while HNS remains a defendant. HNS’s motion to dismiss, filed in September 2010, is pending, and HNS will continue to vigorously defend the case.

Some or all of the Company, its directors, EchoStar, EchoStar Satellite Services, L.L.C. (~~Unaudited~~“EchoStar LLC”), Broadband Acquisition Corporation (“Merger Sub”), and Apollo Global Management, LLC (“AGM”) have been named as defendants in five shareholder class action lawsuits in connection with the proposed transaction in which EchoStar will acquire all of the outstanding equity of the Company. On February 18, 2011, the Gottlieb Family Foundation filed its class action complaint in the Circuit Court for Montgomery County, Maryland. On February 23, 2011, Plymouth County Retirement System filed its shareholder class action complaint, which has since been voluntarily dismissed by the plaintiffs, in the Court of Chancery of the State of Delaware. On February 24, 2011, Edward Ostensoe filed his shareholder class action complaint in the Circuit Court for Montgomery County, Maryland. On February 28, 2011, Nina J. Shah Rohrbasser Irr. Trust filed its shareholder class action complaint in the Court of Chancery of the State of Delaware. On March 8, 2011, entities affiliated with ALJ Capital Management, LLC filed their shareholder class action complaint in the Court of Chancery of the State of Delaware. Each complaint alleges, among other things, that the directors of the Company breached their fiduciary duties in agreeing to the transaction and that some or all of the Company, EchoStar, EchoStar LLC, Merger Sub and AGM aided and abetted such breaches by the directors of the Company. In each case, the plaintiffs seek to enjoin the proposed transaction and/or damages, costs, and attorney fees. On April 28, 2011, the Company, its directors, and AGM entered into a Memorandum of Understanding with the plaintiffs in the Maryland actions that contains the essential terms of a settlement agreed to in principle between the parties (the “Settlement”). The Settlement remains subject to the approval of the court or courts, and contemplates the dismissal with prejudice of all four actions. The Company believes that the allegations in all of these complaints are not meritorious and if necessary, will vigorously contest these actions.

	Parent		SubsidiaryIssuer		GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations			Total
Assets
Cash and cash equivalents	$	51,901	$	103,266	$	166	$	9,860	$	-		$	165,193
Marketable securities		42,300		15,000		-		-		-			57,300
Receivables, net		6,650		121,801		28		55,919		(20,566	)		163,832
Inventories		-		42,999		-		13,938		-			56,937
Prepaid expenses and other		321		9,665		72		15,981		-			26,039
Total current assets		101,172		292,731		266		95,698		(20,566	)		469,301
Property, net		-		668,261		32,354		28,176		-			728,791
Investment in subsidiaries		201,699		114,778		-		-		(316,477	)		-
Other assets		6,261		97,050		595		31,512		(1,670	)		133,748
Total assets	$	309,132	$	1,172,820	$	33,215	$	155,386	$	(338,713	)	$	1,331,840
Liabilities and equity
Accounts payable	$	278	$	115,717	$	92	$	34,873	$	(17,528	)	$	133,432
Short-term debt		-		2,271		-		3,866		-			6,137
Accrued liabilities and other		658		121,883		-		24,238		(3,038	)		143,741
Total current liabilities		936		239,871		92		62,977		(20,566	)		283,310
Long-term debt		-		710,084		-		3,094		-			713,178
Other long-term liabilities		-		20,963		-		1,833		(1,670	)		21,126
Total HCI stockholders’ equity		305,547		201,902		27,093		87,482		(316,477	)		305,547
Noncontrolling interests		2,649		-		6,030		-		-			8,679
Total liabilities and equity	$	309,132	$	1,172,820	$	33,215	$	155,386	$	(338,713	)	$	1,331,840

No other material legal proceedings have commenced or been terminated during the period covered by this report.

26Commitments

~~HUGHES~~In ~~COMMUNICATIONS~~June 2009, ~~INC~~HNS entered into an agreement with SS/L, under which HNS is obligated to pay an aggregate of approximately $252.0 million for the construction of our Jupiter satellite and has agreed to make installment payments to SS/L upon the completion of each milestone set forth in the agreement. As of March 31, 2011, the remaining obligation for the construction and the launch of Jupiter was $164.9 million. We anticipate launching Jupiter in the first half of 2012. In connection with the construction of Jupiter, HNS has entered into a contract with Barrett Xplore Inc. (“Barrett”), whereby Barrett has agreed to lease user beams and purchase gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

~~NOTES~~We TOare ~~THE~~contingently ~~CONDENSED~~liable ~~CONSOLIDATED~~under ~~FINANCIAL~~standby ~~STATEMENTS~~letters ~~(CONTINUED)~~of credit and bonds in the aggregate amount of $19.0 million that were undrawn as of March 31, 2011. Of this amount, $4.6 million was issued under the Revolving Credit Facility; $0.7 million was secured by restricted cash; $1.1 million related to insurance bonds; and $12.6 million was issued under credit arrangements available to our foreign subsidiaries. Certain letters of credit issued by our foreign subsidiaries are secured by their assets. As of March 31, 2011, these obligations were scheduled to expire as follows: $7.8 million in 2011; $8.3 million in 2012; $0.5 million in 2013; $0.3 million in 2014; and $2.1 million thereafter.

~~Condensed Consolidated~~22 ~~Balance Sheet as of December 31, 2009~~

(InTable thousands)of Contents

~~(Unaudited)~~HUGHES COMMUNICATIONS, INC.

	Parent		SubsidiaryIssuer		GuarantorSubsidiaries		Non-GuarantorSubsidiaries		Eliminations			Total
Assets
Cash and cash equivalents	$	74,825	$	173,991	$	1,091	$	11,131	$	-		$	261,038
Marketable securities		16,062		31,126		-		-		-			47,188
Receivables, net		7,888		115,948		628		63,405		(24,053	)		163,816
Inventories		-		47,437		138		12,669		-			60,244
Prepaid expenses and other		264		7,421		234		14,557		-			22,476
Total current assets		99,039		375,923		2,091		101,762		(24,053	)		554,762
Property, net		-		542,642		32,792		26,969		-			602,403
Investment in subsidiaries		200,687		115,136		-		-		(315,823	)		-
Other assets		8,903		102,045		3,221		32,663		(1,603	)		145,229
Total assets	$	308,629	$	1,135,746	$	38,104	$	161,394	$	(341,479	)	$	1,302,394
Liabilities and equity
Accounts payable	$	753	$	97,114	$	2,272	$	39,122	$	(19,800	)	$	119,461
Short-term debt		-		2,054		-		4,696		-			6,750
Accrued liabilities and other		701		110,088		714		24,524		(4,253	)		131,774
Total current liabilities		1,454		209,256		2,986		68,342		(24,053	)		257,985
Long-term debt		-		710,259		-		4,698		-			714,957
Other long-term liabilities		-		16,191		-		1,768		(1,603	)		16,356
Total HCI stockholders’ equity		304,041		200,040		29,197		86,586		(315,823	)		304,041
Noncontrolling interests		3,134		-		5,921		-		-			9,055
Total liabilities and equity	$	308,629	$	1,135,746	$	38,104	$	161,394	$	(341,479	)	$	1,302,394

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

27Note 19: Supplemental Guarantor and Non-Guarantor Financial Information

~~HUGHES~~In ~~COMMUNICATIONS~~lieu of providing separate unaudited financial statements of HNS, ~~INC~~the Co-Issuer and HNS’ guarantor subsidiaries, condensed financial statements prepared in accordance with Rule 3-10 and Rule 5-04 of Regulation S-X are presented below. The column marked “Parent” represents our results of operations, with the subsidiaries accounted for using the equity method. The column marked “Subsidiary Issuer” represents the results of HNS. The column marked “Guarantor Subsidiaries” includes the results of HNS’ guarantor subsidiaries and the Co-Issuer, which is a co-issuer of HNS’ Senior Notes and which had no assets, operations, revenues or cash flows for the periods presented. The column marked “Non-Guarantor Subsidiaries” includes the results of non-guarantor subsidiaries of the Company and HNS. Eliminations necessary to arrive at the information for the Company on a consolidated basis for the periods presented are included in the column so labeled. Separate financial statements and other disclosures concerning the Co-Issuer and HNS’ Guarantor Subsidiaries are not presented because management has determined that they are not material to investors.

~~NOTES~~The following TOrepresents ~~THE~~the ~~CONDENSED~~supplemental ~~CONSOLIDATED~~condensed ~~FINANCIAL~~financial ~~STATEMENTS~~statements ~~(CONTINUED)~~of the Company, HNS, the Guarantor Subsidiaries and the Non-guarantor Subsidiaries. These condensed financial statements should be read in conjunction with our condensed consolidated financial statements and notes thereto. In 2010, the Company liquidated one of its wholly-owned non-guarantor subsidiaries. As a result, certain prior period items in the following supplemental condensed financial statements have been reclassified to conform to the current period presentation.

Condensed Consolidated ~~Statement~~Balance ofSheet ~~Operations~~as ~~for~~of ~~the Three Months Ended September~~March 3031, ~~2010~~ 2011

(In thousands)

(Unaudited)

	Parent			SubsidiaryIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
Revenues	$	201		$	232,620		$	277		$	39,992		$	(6,808	)	$	266,282
Assets
Operating costs and expenses:
Cash and cash equivalents	$	72,186		$	33,091		$	144		$	11,493		$	-		$	116,914
Costs of revenues		-			161,150			-			28,375			(4,749	)		184,776
Marketable securities		20,993			2,679			-			-			-			23,672
Selling, general and administrative		849			40,838			726			10,015			(2,059	)		50,369
Receivables, net		11,856			138,217			72			61,849			(28,637	)		183,357
Research and development		-			4,776			-			-			-			4,776
Inventories		-			47,337			-			12,290			-			59,627
Amortization of intangible assets		-			682			-			83			-			765
Prepaid expenses and other		81			8,862			71			17,817			(37	)		26,794
Total operating costs and expenses		849			207,446			726			38,473			(6,808	)		240,686
Total current assets		105,116			230,186			287			103,449			(28,674	)		410,364
Operating income (loss)		(648	)		25,174			(449	)		1,519			-			25,596
Property, net		-			776,370			33,497			27,734			-			837,601
Other income (expense):
Investment in subsidiaries		229,461			118,600			-			-			(348,061	)		-
Interest expense		-			(14,098	)		-			(400	)		(1	)		(14,499	)
Other assets		8,363			99,729			135			30,541			(2,686	)		136,082
Interest and other income, net		84			249			-			89			1			423
Total assets	$	342,940		$	1,224,885		$	33,919		$	161,724		$	(379,421	)	$	1,384,047
Equity in earnings (losses) of subsidiaries		10,588			(308	)		-			-			(10,280	)		-
Liabilities and equity
Income (loss) before income tax expense		10,024			11,017			(449	)		1,208			(10,280	)		11,520
Accounts payable	$	3,313		$	77,347		$	123		$	37,717		$	(20,941	)	$	97,559
Income tax expense		(1	)		(217	)		-			(1,334	)		-			(1,552	)
Short-term debt		-			1,304			-			3,396			-			4,700
Net income (loss)		10,023			10,800			(449	)		(126	)		(10,280	)		9,968
Accrued liabilities and other		1,263			135,690			-			22,503			(7,696	)		151,760
Net (income) loss attributable to noncontrolling interests		114			-			(481	)		536			-			169
Total current liabilities		4,576			214,341			123			63,616			(28,637	)		254,019
Net income (loss) attributable to HCI stockholders	$	10,137		$	10,800		$	(930	)	$	410		$	(10,280	)	$	10,137
Long-term debt		-			753,664			-			2,786			-			756,450
Other long-term liabilities		-			26,764			-			2,723			(2,723	)		26,764
Total HCI stockholders’ equity		335,965			230,116			25,346			92,599			(348,061	)		335,965
Noncontrolling interests		2,399			-			8,450			-			-			10,849
Total liabilities and equity	$	342,940		$	1,224,885		$	33,919		$	161,724		$	(379,421	)	$	1,384,047

2823

HUGHESTable COMMUNICATIONS,of INC. Contents

~~NOTES~~HUGHES TOCOMMUNICATIONS, ~~THE~~INC. ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~Condensed Consolidated~~NOTES ~~Statement~~TO ofTHE ~~Operations~~CONDENSED ~~for~~CONSOLIDATED ~~the~~FINANCIAL ~~Three~~STATEMENTS ~~Months~~(CONTINUED) ~~Ended September 30, 2009~~

~~(In~~Condensed ~~thousands)~~Consolidated Balance Sheet as of December 31, 2010

(~~Unaudited~~In thousands)

	Parent			SubsidiaryIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
Revenues	$	133		$	216,258		$	3,918		$	37,934		$	(6,826	)	$	251,417
Operating costs and expenses:
Costs of revenues		-			158,179			2,237			28,169			(6,171	)		182,414
Selling, general and administrative		1,298			37,667			1,286			6,861			(655	)		46,457
Research and development		-			4,792			661			-			-			5,453
Amortization of intangible assets		-			1,103			282			87			-			1,472
Total operating costs and expenses		1,298			201,741			4,466			35,117			(6,826	)		235,796
Operating income (loss)		(1,165	)		14,517			(548	)		2,817			-			15,621
Other income (expense):
Interest expense		-			(17,418	)		-			(340	)		23			(17,735	)
Interest and other income, net		100			397			-			77			(23	)		551
Equity in earnings (losses) of subsidiaries		(1,677	)		1,181			-			-			496			-
Income (loss) before income tax expense		(2,742	)		(1,323	)		(548	)		2,554			496			(1,563	)
Income tax expense		(1	)		(247	)		-			(718	)		-			(966	)
Net income (loss)		(2,743	)		(1,570	)		(548	)		1,836			496			(2,529	)
Net (income) loss attributable to noncontrolling interests		123			-			(302	)		86			-			(93	)
Net income (loss) attributable to HCI stockholders	$	(2,620	)	$	(1,570	)	$	(850	)	$	1,922		$	496		$	(2,622	)

(Unaudited)


	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total
Assets
Cash and cash equivalents	$	56,583	$	67,707	$	256	$	13,585	$	-		$	138,131
Marketable securities		37,857		6,675		-		-		-			44,532
Receivables, net		9,437		141,422		38		61,067		(25,272	)		186,692
Inventories		-		45,388		-		12,431		-			57,819
Prepaid expenses and other		181		9,172		70		16,704		-			26,127

Total current assets		104,058		270,364		364		103,787		(25,272	)		453,301
Property, net		-		713,007		32,948		28,097		-			774,052
Investment in subsidiaries		221,665		118,080		-		-		(339,745	)		-
Other assets		7,404		98,967		1,405		29,746		(1,700	)		135,822

Total assets	$	333,127	$	1,200,418	$	34,717	$	161,630	$	(366,717	)	$	1,363,175

Liabilities and equity
Accounts payable	$	681	$	101,684	$	199	$	36,764	$	(19,126	)	$	120,202
Short-term debt		-		2,284		-		4,001		-			6,285
Accrued liabilities and other		756		109,561		-		24,619		(6,146	)		128,790

Total current liabilities		1,437		213,529		199		65,384		(25,272	)		255,277
Long-term debt		-		737,677		-		2,899		-			740,576
Other long-term liabilities		-		27,308		-		1,700		(1,700	)		27,308
Total HCI stockholders’ equity		329,050		221,904		26,194		91,647		(339,745	)		329,050
Noncontrolling interests		2,640		-		8,324		-		-			10,964

Total liabilities and equity	$	333,127	$	1,200,418	$	34,717	$	161,630	$	(366,717	)	$	1,363,175

~~HUGHES~~24 ~~COMMUNICATIONS, INC.~~

NOTESTable TOof THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Contents

~~Condensed~~HUGHES ~~Consolidated Statement of Operations for the Nine Months Ended September 30~~COMMUNICATIONS, ~~2010~~INC.

~~(In~~NOTES ~~thousands~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~(Unaudited)~~Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2011

	Parent			SubsidiaryIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
Revenues	$	590		$	667,416		$	1,637		$	112,298		$	(20,098	)	$	761,843
Operating costs and expenses:
Costs of revenues		-			474,269			306			82,931			(17,153	)		540,353
Selling, general and administrative		2,587			122,391			2,915			25,052			(2,945	)		150,000
Research and development		-			14,591			455			-			-			15,046
Amortization of intangible assets		-			1,899			168			259			-			2,326
Total operating costs and expenses		2,587			613,150			3,844			108,242			(20,098	)		707,725
Operating income (loss)		(1,997	)		54,266			(2,207	)		4,056			-			54,118
Other income (expense):
Interest expense		-			(45,139	)		-			(1,160	)		170			(46,129	)
Interest and other income, net		242			369			870			359			(170	)		1,670
Equity in earnings (losses) of subsidiaries		7,228			(816	)		-			-			(6,412	)		-
Income (loss) before income tax expense		5,473			8,680			(1,337	)		3,255			(6,412	)		9,659
Income tax expense		(5	)		(648	)		(3	)		(3,680	)		-			(4,336	)
Net income (loss)		5,468			8,032			(1,340	)		(425	)		(6,412	)		5,323
Net (income) loss attributable to noncontrolling interests		439			-			(764	)		909			-			584
Net income (loss) attributable to HCI stockholders	$	5,907		$	8,032		$	(2,104	)	$	484		$	(6,412	)	$	5,907

(In thousands)

30(Unaudited)

HUGHES COMMUNICATIONS, INC.


	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Revenues	$	205		$	229,340		$	362		$	41,996		$	(7,811	)	$	264,092

Operating costs and expenses:
Costs of revenues		-			156,842			-			32,487			(7,045	)		182,284
Selling, general and administrative		4,305			47,753			835			8,850			(766	)		60,977
Research and development		-			5,154			-			-			-			5,154
Amortization of intangible assets		-			682			-			75			-			757

Total operating costs and expenses		4,305			210,431			835			41,412			(7,811	)		249,172

Operating income (loss)		(4,100	)		18,909			(473	)		584			-			14,920
Other income (expense):
Interest expense		-			(12,324	)		-			(227	)		46			(12,505	)
Interest and other income (loss), net		83			(28	)		-			162			(46	)		171
Equity in earnings (losses) of subsidiaries		4,769			(1,111	)		-			-			(3,658	)		-

Income (loss) before income tax expense		752			5,446			(473	)		519			(3,658	)		2,586
Income tax expense		(131	)		(282	)		-			(1,488	)		-			(1,901	)

Net income (loss)		621			5,164			(473	)		(969	)		(3,658	)		685
Net (income) loss attributable to noncontrolling interests		217			-			(375	)		311			-			153

Net income (loss) attributable to HCI stockholders	$	838		$	5,164		$	(848	)	$	(658	)	$	(3,658	)	$	838

~~NOTES~~25 ~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

CondensedTable Consolidated Statement of Operations for the Nine Months Ended September 30, 2009 Contents

~~(In~~HUGHES ~~thousands)~~COMMUNICATIONS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (~~Unaudited~~CONTINUED)

	Parent			SubsidiaryIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
Revenues	$	384		$	649,308		$	7,945		$	111,180		$	(21,358	)	$	747,459
Operating costs and expenses:
Costs of revenues		-			484,072			4,405			82,253			(19,099	)		551,631
Selling, general and administrative		3,488			112,105			3,844			19,664			(2,259	)		136,842
Loss on impairments		1,000			44,400			-			-			-			45,400
Research and development		-			14,414			2,088			-			-			16,502
Amortization of intangible assets		-			3,311			845			205			-			4,361
Total operating costs and expenses		4,488			658,302			11,182			102,122			(21,358	)		754,736
Operating income (loss)		(4,104	)		(8,994	)		(3,237	)		9,058			-			(7,277	)
Other income (expense):
Interest expense		-			(46,389	)		-			(781	)		45			(47,125	)
Interest and other income, net		426			294			-			228			(45	)		903
Equity in earnings (losses) of subsidiaries		(51,664	)		3,582			-			-			48,082			-
Income (loss) before income tax (expense) benefit		(55,342	)		(51,507	)		(3,237	)		8,505			48,082			(53,499	)
Income tax expense		(3	)		(627	)		-			(160	)		-			(790	)
Net income (loss)		(55,345	)		(52,134	)		(3,237	)		8,345			48,082			(54,289	)
Net (income) loss attributable to noncontrolling interests		285			-			(1,440	)		384			-			(771	)
Net income (loss) attributable to HCI stockholders	$	(55,060	)	$	(52,134	)	$	(4,677	)	$	8,729		$	48,082		$	(55,060	)

Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2010

31(In thousands)

~~HUGHES~~(Unaudited) ~~COMMUNICATIONS, INC.~~

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Revenues	$	251		$	212,471		$	988		$	35,826		$	(6,343	)	$	243,193

Operating costs and expenses:
Costs of revenues		-			155,328			306			26,947			(5,982	)		176,599
Selling, general and administrative		770			41,086			1,372			7,458			(361	)		50,325
Research and development		-			4,460			455			-			-			4,915
Amortization of intangible assets		-			534			168			88			-			790

Total operating costs and expenses		770			201,408			2,301			34,493			(6,343	)		232,629

Operating income (loss)		(519	)		11,063			(1,313	)		1,333			-			10,564
Other income (expense):
Interest expense		-			(15,793	)		-			(348	)		31			(16,110	)
Interest and other income (loss), net		56			(359	)		870			55			(31	)		591
Equity in earnings (losses) of subsidiaries		(5,812	)		(246	)		-			-			6,058			-

Income (loss) before income tax (expense) benefit		(6,275	)		(5,335	)		(443	)		1,040			6,058			(4,955	)
Income tax expense		(2	)		(227	)		(3	)		(987	)		-			(1,219	)

Net income (loss)		(6,277	)		(5,562	)		(446	)		53			6,058			(6,174	)
Net (income) loss attributable to noncontrolling interests		137			-			(141	)		38			-			34

Net income (loss) attributable to HCI stockholders	$	(6,140	)	$	(5,562	)	$	(587	)	$	91		$	6,058		$	(6,140	)

~~Condensed Consolidated~~26 ~~Statement of Cash Flows for the Nine Months Ended September 30, 2010~~

(InTable thousands)of Contents

~~(Unaudited)~~HUGHES COMMUNICATIONS, INC.

	Parent			SubsidiaryIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
Cash flows from operating activities:
Net income (loss)	$	5,468		$	8,032		$	(1,340	)	$	(425	)	$	(6,412	)	$	5,323
Adjustments to reconcile net income (loss)to net cash flows from operating activities		(2,104	)		92,496			1,452			8,180			6,412			106,436
Net cash provided by (used in) operating activities		3,364			100,528			112			7,755			-			111,759
Cash flows from investing activities:
Change in restricted cash		-			-			-			96			-			96
Purchases of marketable securities		(47,416	)		(37,615	)		-			-			-			(85,031	)
Proceeds from sales of marketable securities		21,166			53,615			-			-			-			74,781
Expenditures for property		-			(175,640	)		(1,037	)		(7,057	)		-			(183,734	)
Expenditures for capitalized software		-			(9,935	)		-			-			-			(9,935	)
Proceeds from sales of property		-			13			-			391			-			404
Net cash used in investing activities		(26,250	)		(169,562	)		(1,037	)		(6,570	)		-			(203,419	)
Cash flows from financing activities:
Short-term revolver borrowings		-			-			-			3,770			-			3,770
Repayments of revolver borrowings		-			-			-			(4,881	)		-			(4,881	)
Long-term debt borrowings		-			1,699			-			1,688			-			3,387
Repayment of long-term debt		-			(1,656	)		-			(3,214	)		-			(4,870	)
Debt issuance costs		-			(1,734	)		-			-			-			(1,734	)
Net cash used in financing activities		-			(1,691	)		-			(2,637	)		-			(4,328	)
Effect of exchange rate changes on cash and cash equivalents		-			-			-			143			-			143
Net decrease in cash and cash equivalents		(22,886	)		(70,725	)		(925	)		(1,309	)		-			(95,845	)
Cash and cash equivalents at beginning of period		74,787			173,991			1,091			11,169			-			261,038
Cash and cash equivalents at end of period	$	51,901		$	103,266		$	166		$	9,860		$	-		$	165,193

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

32Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2011

~~HUGHES~~(In ~~COMMUNICATIONS,~~thousands) ~~INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ (~~CONTINUED~~Unaudited)

Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2009


	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Cash flows from operating activities:
Net income (loss)	$	621		$	5,164		$	(473	)	$	(969	)	$	(3,658	)	$	685
Adjustments to reconcile net income (loss) to net cash flows from operating activities		(1,888	)		44,127			1,384			842			3,658			48,123

Net cash provided by (used in) operating activities		(1,267	)		49,291			911			(127	)		-			48,808

Cash flows from investing activities:
Change in restricted cash		-			-			-			373			-			373
Purchases of marketable securities		(11,999	)		-			-			-			-			(11,999	)
Proceeds from sales of marketable securities		28,869			3,999			-			-			-			32,868
Expenditures for property		-			(98,898	)		(1,023	)		(1,348	)		-			(101,269	)
Expenditures for capitalized software		-			(2,752	)		-			-			-			(2,752	)
Proceeds from sales of property		-			-			-			80			-			80

Net cash provided by (used in) investing activities		16,870			(97,651	)		(1,023	)		(895	)		-			(82,699	)

Cash flows from financing activities:
Short-term revolver borrowings		-			-			-			898			-			898
Repayments of revolver borrowings		-			-			-			(945	)		-			(945	)
Long-term debt borrowings		-			16,490			-			332			-			16,822
Repayment of long-term debt		-			(1,731	)		-			(1,025	)		-			(2,756	)
Debt issuance costs		-			(1,015	)		-			-			-			(1,015	)

Net cash provided by (used in) financing activities		-			13,744			-			(740	)		-			13,004

Effect of exchange rate changes on cash and cash equivalents		-			-			-			(330	)		-			(330	)

Net increase (decrease) in cash and cash equivalents		15,603			(34,616	)		(112	)		(2,092	)		-			(21,217	)
Cash and cash equivalents at beginning of period		56,583			67,707			256			13,585			-			138,131

Cash and cash equivalents at end of period	$	72,186		$	33,091		$	144		$	11,493		$	-		$	116,914

~~(In~~27 ~~thousands)~~

(Unaudited)Table of Contents

	Parent			SubsidiaryIssuer			GuarantorSubsidiaries			Non-GuarantorSubsidiaries			Eliminations			Total
Cash flows from operating activities:
Net income (loss)	$	(55,345	)	$	(52,134)		$	(3,237	)	$	8,345		$	48,082		$	(54,289	)
Adjustments to reconcile net income (loss)to net cash flows from operating activities		42,131			167,647			6,491			(3,326	)		(48,082	)		164,861
Net cash provided by (used in) operating activities		(13,214	)		115,513			3,254			5,019			-			110,572
Cash flows from investing activities:
Change in restricted cash		-			(1	)		-			32			-			31
Purchases of marketable securities		(12,037	)		(25,080	)		-			-			-			(37,117	)
Expenditures for property		-			(80,308	)		(4,183	)		(9,503	)		-			(93,994	)
Expenditures for capitalized software		-			(10,315	)		-			-			-			(10,315	)
Proceeds from sales of property		-			22			-			317			-			339
Cash acquired, consolidation of Hughes Systique		-			-			-			828			-			828
Long-term loan receivable		-			(10,000	)		-			-			-			(10,000	)
Other, net		(75	)		(410	)		-			(345	)		-			(830	)
Net cash used in investing activities		(12,112	)		(126,092	)		(4,183	)		(8,671	)		-			(151,058	)
Cash flows from financing activities:
Net decrease in notes and loans payable		-			-			-			(1,315	)		-			(1,315	)
Long-term debt borrowings		-			137,490			-			4,828			-			142,318
Repayment of long-term debt		-			(4,461	)		-			(2,373	)		-			(6,834	)
Debt issuance costs		-			(4,612	)		-			-			-			(4,612	)
Net cash provided by financing activities		-			128,417			-			1,140			-			129,557
Effect of exchange rate changes on cash and cash equivalents		-			-			-			(3,617	)		-			(3,617	)
Net increase (decrease) in cash and cash equivalents		(25,326	)		117,838			(929	)		(6,129	)		-			85,454
Cash and cash equivalents at beginning of period		103,281			75,956			2,013			22,566			-			203,816
Cash and cash equivalents at end of period	$	77,955		$	193,794		$	1,084		$	16,437		$	-		$	289,270

HUGHES COMMUNICATIONS, INC.

33NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Item~~Condensed 2.Consolidated ~~Management’s~~Statement ~~Discussion~~of ~~and~~Cash ~~Analysis~~Flows offor ~~Financial~~the ~~Condition~~Three ~~and~~Months ~~Results~~Ended March 31, of2010 ~~Operations~~

~~The~~(In ~~following~~thousands) discussion and analysis of the Company’s financial condition and results of operations are based upon financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America and should each be read together with our condensed consolidated financial statements and the notes to those condensed consolidated financial statements included elsewhere in this report. This report contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business strategy, expectations and intentions within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events. We urge you to consider statements that use the terms “believe,” “do not believe,” “anticipate,” “expect,” “plan,” “may,” “estimate,” “strive,” “intend,” “will,” “should,” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and because our business is subject to numerous risks, and uncertainties, our actual results could differ materially from those anticipated in the forward-looking statements, including those set forth below under this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” “Special Note Regarding Forward-Looking Statements” and contained elsewhere in this report. All forward-looking statements speak only as of the date of this report. Actual results will most likely differ from those reflected in these forward-looking statements and the differences could be substantial. We disclaim any obligation to update these forward-looking statements or disclose any difference, except as may be required by securities laws, between our actual results and those reflected in these statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved.

~~Overview~~(Unaudited)

Hughes Communications, Inc. (“HCI” and, together with its consolidated subsidiaries, the “Company” or “we,” “us,” and “our”) operates its business primarily through Hughes Network Systems, LLC (“HNS”), our wholly-owned subsidiary, a telecommunications company. We provide equipment and services to the broadband communications marketplace. We have extensive technical expertise in satellite, wireline and wireless communications which we utilize in a number of product and service offerings. In particular, we offer a spectrum of broadband equipment and services to the managed services market, which is comprised of enterprises with a requirement to connect a large number of geographically dispersed locations with reliable, scalable, and cost-effective applications, such as credit card verification, inventory tracking and control, and broadcast video. We provide broadband network services and systems to the international and domestic enterprise markets and satellite broadband Internet access to North American consumers, which we refer to as the Consumer market. In addition, we provide networking systems to customers for mobile satellite, telematics and wireless backhaul systems. These services are generally provided on a contract or project basis and may involve the use of proprietary products engineered by us.


	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Cash flows from operating activities:
Net income (loss)	$	(6,277	)	$	(5,562	)	$	(446	)	$	53		$	6,058		$	(6,174	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities		5,222			18,845			218			549			(6,058	)		18,776

Net cash provided by (used in) operating activities		(1,055	)		13,283			(228	)		602			-			12,602

Cash flows from investing activities:
Change in restricted cash		-			(1	)		-			87			-			86
Purchases of marketable securities		(5,166	)		(22,615	)		-			-			-			(27,781	)
Proceeds from sales of marketable securities		5,000			10,000			-			-			-			15,000
Expenditures for property		-			(59,409	)		(642	)		(3,620	)		-			(63,671	)
Expenditures for capitalized software		-			(3,166	)		-			-			-			(3,166	)

Net cash used in investing activities		(166	)		(75,191	)		(642	)		(3,533	)		-			(79,532	)

Cash flows from financing activities:
Short-term revolver borrowings		-			-			-			1,999			-			1,999
Repayments of revoler borrowings		-			-			-			(2,430	)		-			(2,430	)
Long-term debt borrowings		-			550			-			670			-			1,220
Repayment of long-term debt		-			(443	)		-			(1,278	)		-			(1,721	)
Debt issuance costs		-			(1,742	)		-			-			-			(1,742	)

Net cash provided by financing activities		-			(1,635	)		-			(1,039	)		-			(2,674	)

Effect of exchange rate changes on cash and cash equivalents		-			-			-			1,739			-			1,739

Net increase (decrease) in cash and cash equivalents		(1,221	)		(63,543	)		(870	)		(2,231	)		-			(67,865	)
Cash and cash equivalents at beginning of period		74,825			173,991			1,091			11,131			-			261,038

Cash and cash equivalents at end of period	$	73,604		$	110,448		$	221		$	8,900		$	-		$	193,173

~~Strategic~~28 ~~Initiatives and Their Impact on Our Results of Operations~~

ForTable the three months ended September 30, 2010, we generated a net income attributable to our stockholders of $10.1 million compared to a net loss attributable to our stockholders of $2.6 million for the same period in 2009. For the nine months ended September 30, 2010, we generated a net income attributable to our stockholders of $5.9 million compared to a net loss attributable to our stockholders of $55.1 million for the same period in 2009. The changes in our net income were significantly impacted by the $45.4 million impairment losses recognized in 2009, primarily related to our prepaid deposit (the “Deposit”) paid to Sea Launch Company, LLC (“Sea Launch”). In addition, our gross margin for the three and nine months ended September 30, 2010 improved by $12.5 million and $25.7 million, respectively, compared to the same periods in 2009. The increase in our net income attributable to our stockholders for the three and nine months ended September 30, 2010 was partially offset by the increase in our selling, general and administrative expenses as we increased our efforts in promoting our products and services in our North American businesses. Contents

~~Technology—~~Item 2. Management’s WeDiscussion ~~incorporate advances in technology to reduce costs~~ and ~~to increase the functionality and reliability~~ Analysis of ~~our~~Financial ~~products~~Condition and ~~services.~~Results ~~Through the usage~~ of ~~advanced~~Operations ~~spectrally efficient modulation and coding~~

34The following discussion and analysis of the Company’s financial condition and results of operations are based upon financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America and should each be read together with our condensed consolidated financial statements and the notes to those condensed consolidated financial statements included elsewhere in this report. This report contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business strategy, expectations and intentions within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events. We urge you to consider statements that use the terms “believe,” “do not believe,” “anticipate,” “expect,” “plan,” “may,” “estimate,” “strive,” “intend,” “will,” “should,” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and because our business is subject to numerous risks, and uncertainties, our actual results could differ materially from those anticipated in the forward-looking statements, including those set forth below under this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” “Special Note Regarding Forward-Looking Statements” and contained elsewhere in this report. All forward-looking statements speak only as of the date of this report. Actual results will most likely differ from those reflected in these forward-looking statements and the differences could be substantial. We disclaim any obligation to update these forward-looking statements or disclose any difference, except as may be required by securities laws, between our actual results and those reflected in these statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved.

~~methodologies,~~Overview such as DVB-S2, and proprietary software web acceleration and compression techniques, we continue to improve the efficiency of our networks. In addition, we invest in technologies to enhance our system and network management capabilities, specifically our managed services for enterprises. We also continue to invest in next generation technologies that can be applied to our future products and services.

~~Acquisitions~~Hughes Communications, ~~Strategic~~Inc. ~~Alliances~~(“HCI” and, ~~Divestitures—We~~together ~~continue~~with its toconsolidated ~~focus~~subsidiaries, onthe ~~expanding~~“Company” ~~the~~or ~~identified~~“we,” ~~markets~~“us,” ~~for~~and “our”) ~~products~~operates its business primarily through Hughes Network Systems, LLC (“HNS”), our wholly-owned subsidiary, a telecommunications company. We provide equipment and services to the broadband communications marketplace. We have extensive technical expertise in satellite, wireline and ~~network~~wireless ~~solutions~~communications which we utilize in ~~our~~a ~~North~~number ~~America~~of ~~Broadband~~product and service offerings. In particular, ~~International~~we ~~Broadband~~offer a spectrum of broadband equipment and ~~Telecom~~services ~~Systems~~to ~~segments.~~the ~~Consistent~~managed services market, which is comprised of enterprises with ~~our~~a ~~strategy~~requirement to ~~grow~~connect ~~and~~a ~~improve~~large ~~our~~number ~~financial~~of ~~position~~geographically dispersed locations with reliable, wescalable, ~~also~~and cost-effective ~~review~~applications, ~~our~~such ~~competitive~~as ~~position~~credit oncard anverification, ~~ongoing~~inventory ~~basis~~ tracking and control, ~~from~~and ~~time~~broadcast tovideo. ~~time,~~We ~~consider~~provide ~~various~~broadband ~~acquisitions,~~network ~~strategic~~services ~~alliances~~and systems to the international and ~~divestitures~~domestic ~~which~~enterprise wemarkets ~~believe~~and ~~would~~satellite bebroadband Internet ~~beneficial~~access to ~~our~~North ~~business.~~American Weconsumers, ~~from~~which ~~time~~we refer to ~~time~~as the Consumer market. In addition, ~~consider~~we ~~various~~provide ~~alternatives~~networking ~~related~~systems to ~~the~~customers ~~ownership~~for ~~structure~~mobile ofsatellite aand ~~new satellite,~~wireless ~~capacity~~backhaul ~~features~~systems. ~~and~~These ~~other~~services ~~factors~~are ~~that~~generally ~~would~~provided ~~promote~~on ~~long~~a ~~term~~contract ~~growth~~or project ~~while~~basis ~~meeting~~and may involve the ~~needs~~use of ~~our~~proprietary ~~customers~~products engineered by us.

InStrategic ~~June~~Initiatives 2009, HNS entered into an agreement with Space Systems/Loral, Inc. (“SS/L”) under which SS/L will manufacture our next-generation, geostationary high throughput satellite (“HTS”) named Jupiter. Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and ~~will~~Their ~~provide~~Impact ~~additional~~on ~~capacity~~Our ~~for~~Results ~~the HughesNet service in North America. In connection with the construction~~ of Jupiter, HNS entered into a contract with Barrett Xplore Inc. (“Barrett”), whereby Barrett agreed to lease user beams and purchase gateways and terminals for the Jupiter satellite that are designed to ~~operate~~Operations in Canada. In connection with the lease agreement with Barrett, our revenue backlog associated with our Jupiter satellite is $245.0 million, which is expected to be realized over 15 years once Jupiter is launched and placed into service. In April 2010, HNS entered into an agreement with Arianespace for the launch of Jupiter in the first half of 2012. Pursuant to the agreement, the Ariane 5 will launch Jupiter into geosynchronous transfer orbit from Guiana Space Centre in Kourou, French Guiana. As of September 30, 2010, our remaining obligation for the construction and launch of Jupiter was approximately $259.9 million.

AsFor the three months ended March 31, 2011, we generated a ~~result~~net ofincome attributable to our ~~efforts~~stockholders of $0.8 million compared to ~~expand~~a ~~the~~net ~~identified~~loss ~~markets~~attributable ~~for~~to our ~~products,~~stockholders ~~services~~of ~~and~~$6.1 ~~network~~million ~~solutions~~for the same period in ~~our~~2010. ~~North~~The ~~America~~increase ~~Broadband~~during ~~segment,~~the incurrent ~~August~~quarter ~~2010,~~was wemainly ~~were~~due ~~awarded~~to higher gross margin of $5815.72 million, asor ~~the only~~22.8%, ~~national~~as ~~provider~~a result of ~~high-speed~~growth ~~satellite~~in ~~broadband~~our services ~~service~~businesses, ~~under~~primarily ~~the~~in ~~broadband~~our ~~programs~~North ~~established~~American ~~pursuant~~businesses, toand the ~~American~~reduction ~~Recovery~~of ~~and~~costs ~~Reinvestment~~associated ~~Act~~with ofleased ~~2009~~satellite capacity. ~~This~~The ~~award~~increase isin ~~part~~our ofgross ~~the~~margin ~~government’s~~was ~~investments~~partially inoffset ~~broadband~~by ~~projects to~~higher ~~expand~~selling, ~~access~~general toand ~~broadband~~administrative ~~service~~expenses, which ~~and~~included ~~create~~$3.7 ~~jobs~~million ~~and~~of ~~economic~~expenses ~~opportunity~~associated inwith ~~rural,~~the ~~underserved~~planned ~~communities~~merger ~~nationwide~~with EchoStar Corporation (“EchoStar”). WeSee ~~began~~“Selling, toGeneral ~~offer~~and ~~services~~Administrative toExpense” ~~customers~~for ~~under~~a ~~this~~more ~~program~~detailed inexplanation ~~October~~of ~~2010.~~the fluctuation.

~~Key~~Technology—We ~~Business~~incorporate ~~Metrics~~advances in technology to reduce costs and to increase the functionality and reliability of our products and services. Through the usage of advanced spectrally efficient modulation and coding methodologies, such as DVB-S2, and proprietary software web acceleration and compression techniques, we continue to improve the efficiency of our networks. In addition, we invest in technologies to enhance our system and network management capabilities, specifically our managed services for enterprises. We also continue to invest in next generation technologies that can be applied to our future products and services.

~~Business~~29 Segments—We divide our operations into five distinct segments—(i) the North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; (iv) the HTS Satellite segment; and (v) the Corporate and Other segment. Within the North America Broadband segment, sales are attributed to the Consumer group, which delivers broadband internet service to consumer customers, and the Enterprise group, which provides satellite, wireline and wireless communication networks and services to enterprises. The International Broadband segment consists of our international service companies and provides managed network services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group, the Telematics group, and the Terrestrial Microwave group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators. The Telematics group previously provided development engineering and manufacturing services to Hughes Telematics, Inc. (“HTI”). However, as a result of the unfavorable impact of the economy on the automobile industry, HTI terminated substantially all of the development engineering and manufacturing services with us in August 2009. We expect our future revenue from the Telematics group to be insignificant. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for both cellular backhaul and broadband wireless access. The HTS Satellite segment, which is a new segment starting in 2010, consists of activities related to the development, construction and launch of high throughput satellites and currently represents construction activities of Jupiter. The Corporate and Other segment includes our wholly-owned subsidiary Rare Medium, LLC, certain minority interest investments held by us, and our corporate offices and assets not specifically related to another business segment. Due to the complementary nature and common architecture of our services and products across our business segments, we are able to leverage our expertise and resources within our various operating units to yield significant cost efficiencies.

35Table of Contents

~~Revenues~~Acquisitions, Strategic Alliances and Divestitures—We ~~generate~~continue ~~revenues~~to ~~from~~focus on expanding the ~~sale~~identified ~~and~~markets ~~financing~~for ofour ~~hardware~~products, services and ~~the~~network ~~provision~~solutions ofin ~~services. In~~ our North America ~~and~~ Broadband, International Broadband and Telecom Systems segments,. weConsistent ~~generate~~with ~~revenues~~our ~~from~~strategy ~~services~~to grow and ~~hardware.~~improve In our ~~Telecom~~financial ~~Systems segment~~position, we ~~generate~~also review ~~revenues~~our ~~primarily~~competitive ~~from~~position ~~the~~on ~~development~~an ~~and~~ongoing ~~sale~~basis ofand, ~~hardware.~~from ~~Some~~time ofto ~~our~~time, ~~enterprise~~consider ~~customers~~various ~~purchase~~acquisitions, ~~equipment separately~~strategic alliances and ~~operate~~divestitures ~~their~~which ~~own~~we ~~networks~~believe would be beneficial to our business. ~~These~~We, ~~customers~~from ~~include~~time ~~large~~to ~~enterprises~~time, ~~incumbent~~consider ~~local~~various alternatives ~~exchange~~related ~~carriers~~to the development, ~~governmental~~construction ~~agencies~~and ownership structure of satellite assets and ~~resellers.~~related ~~Contracts~~ground ~~for~~infrastructure, ~~our~~capacity ~~services~~features ~~vary~~and inother ~~length~~factors ~~depending~~that would promote long-term growth on a global basis, while meeting the ~~customers’~~needs of ~~requirements~~our customers.

~~Services—Our~~On ~~services~~February 13, ~~revenue~~2011, iswe ~~varied~~entered ininto ~~nature~~an Agreement and ~~includes~~Plan ~~equipment~~of ~~rental~~Merger ~~from~~(the ~~our~~“Merger Agreement”) ~~consumer~~with ~~rental program~~EchoStar, ~~total~~ ~~turnkey~~EchoStar ~~communications~~Satellite ~~services~~Services L.L.C., ~~terminal~~a ~~relocation,~~Colorado ~~maintenance~~limited ~~and~~liability ~~changes~~company, ~~transponder capacity~~ and ~~multicast~~Broadband orAcquisition ~~broadcast~~Corporation, ~~services.~~a ~~Our~~Delaware ~~services~~corporation ~~are~~(“Merger ~~offered~~Sub”), onpursuant ato ~~contractual basis~~which, ~~which~~subject ~~vary~~to ~~in length based on~~ the ~~particular~~terms ~~end~~and ~~market.~~conditions ~~Typically~~set forth therein, ~~our~~Merger ~~large~~Sub ~~enterprise~~will ~~customers~~merge ~~enter~~with and into athe ~~three-~~Company to(the ~~five-year contract~~“Merger”), ~~and~~with ~~our~~the ~~consumer~~Company ~~customers~~continuing ~~enter~~as ~~into~~the asurviving ~~24-month~~entity ~~contract.~~and Webecoming ~~bill~~a ~~and~~wholly ~~recognize~~owned ~~service~~subsidiary ~~revenues~~of onEchoStar. aThe ~~monthly~~Merger ~~per~~is ~~site~~expected ~~basis.~~to ~~For~~close ~~enterprise~~later ~~customers~~this ~~who receive~~year, ~~services~~subject ~~from~~to ~~our~~certain ~~network~~closing ~~operations~~conditions, ~~our~~including ~~services~~among ~~include~~others, receipt of approval by the ~~following:~~Federal Communications Commission.

~~Service~~Sales ~~Type~~and ~~Description~~Distribution—In ~~Broadbandconnectivity~~June ~~• Provides basic transport~~2009, ~~intranet~~HNS ~~connectivity~~entered ~~services~~into ~~and~~an ~~internet~~agreement ~~service~~with ~~provider~~Space ~~services • Applications include high-speed internet access~~Systems/Loral, IPInc. ~~VPN~~(“SS/L”), ~~multicast~~under which ~~file~~SS/L ~~delivery~~will ~~and~~manufacture ~~streaming,~~our ~~point~~next-~~of-sale credit transactions~~generation, ~~enterprise~~geostationary ~~back-office~~high ~~communications,~~throughput ~~and~~ satellite ~~backup~~(“HTS”) ~~for~~named ~~frame~~Jupiter. ~~relay~~Jupiter ~~service~~will ~~and~~employ ~~other~~a ~~terrestrial networks Managed networkservices • Provides one~~multi-~~stop~~spot ~~turnkey suite of bundled services that include wireline and wireless satellite networks • Includes network design program management~~beam, ~~installation~~bent ~~management,~~pipe ~~network~~Ka-band ~~and~~architecture ~~application engineering services, proactive network management, network operations, field maintenance~~ and ~~customer~~will ~~care~~provide ~~ISP~~additional ~~services~~capacity ~~andhosted~~for ~~application~~the •HughesNet service ~~Provides~~in ~~internet~~North ~~connectivity~~America. ~~and~~The ~~hosted~~Company ~~customer-owned~~anticipates ~~and~~launching ~~managed~~Jupiter ~~applications~~in ~~on our network facilities • Provides~~ the ~~customer~~first ~~application~~half ~~services~~of ~~developed~~2012. byHNS usentered orinto ina ~~conjunction~~contract with ~~our~~Barrett ~~service~~Xplore ~~partners~~Inc. ~~• Includes internet access~~(“Barrett”), ~~e-mail~~whereby ~~services,~~Barrett ~~web~~agreed ~~hosting~~to ~~and~~lease ~~online~~user ~~payments~~beams ~~Digital mediaservices • Digital content management~~ and ~~delivery~~purchase ~~including~~gateways ~~video, online learning~~ and ~~digital~~Ka-band terminals ~~signage~~for ~~applications~~the ~~Customized~~Jupiter ~~businesssolutions~~satellite ~~• Provides customized, industry-specific enterprise solutions~~ that ~~can~~are bedesigned ~~applied~~ to ~~multiple~~operate ~~businesses~~ in aCanada ~~given~~(the ~~industry~~“Barrett Agreement”).

~~Our~~In ~~services to enterprise customers are~~August ~~negotiated~~2010, onwe awere ~~contract-by-contract~~awarded ~~basis~~$58.7 ~~with~~million ~~price~~from ~~varying~~the ~~based~~U.S. onGovernment ~~numerous~~as ~~factors,~~the ~~including~~only ~~number~~national provider of ~~sites,~~high-speed ~~complexity~~satellite ofbroadband ~~system~~service ~~and~~under ~~scope~~the ofbroadband ~~services~~stimulus ~~provided.~~program, Weestablished ~~have~~pursuant to the ~~ability~~American toRecovery ~~integrate~~and ~~these~~Reinvestment ~~service~~Act ~~offerings~~of ~~to provide~~2009. ~~comprehensive~~This ~~solutions~~award ~~for~~is ~~our~~part ~~customers~~of the U.S. WeGovernment’s ~~also~~investments ~~provide~~in ~~managed~~broadband ~~services~~projects to ~~our~~expand ~~customers~~access ~~who~~to ~~operate~~broadband ~~their~~service ~~own~~and ~~dedicated~~create ~~network~~jobs ~~facilities~~ and ~~charge~~economic ~~them~~opportunity ain ~~management~~rural, ~~fee~~underserved ~~for~~communities ~~the~~nationwide. ~~operation~~We ~~and~~began ~~support~~to ofoffer ~~their~~services ~~networks~~to customers under this program in October 2010.

~~Hardware—We~~Key ~~offer~~Business ~~our~~Metrics enterprise customers the option to purchase their equipment up front or to finance the sale through a third-party leasing company as part of their service agreement under which payments are made over a fixed term. Our consumer customers also have the option to purchase the equipment up front with a 24-month service contract. Hardware revenues of the North American Enterprise group and International Broadband segment are derived from: (i) network operating centers; (ii) radio frequency terminals (earth stations); (iii) VSAT components including indoor units, outdoor units, and antennas; (iv) voice, video and data appliances; (v) routers and DSL modems; and (vi) system integration services to integrate all of the above into a system.

Business Segments— We ~~also~~divide ~~provide~~our ~~specialized~~operations ~~equipment~~into tofive ~~our~~distinct ~~Mobile~~segments—(i) the ~~Satellite~~North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; (iv) the HTS Satellite segment; and ~~Terrestrial~~(v) the ~~Microwave~~Corporate ~~customers~~and Other segment. ~~Through~~Within ~~large~~the ~~multi-year~~North ~~contracts~~America Broadband segment, wesales ~~develop~~are ~~and~~attributed ~~supply~~to ~~turnkey~~the ~~networking~~Consumer ~~and~~group, ~~terminal~~which ~~systems~~delivers broadband Internet service to consumer ~~for~~customers, ~~various~~and ~~operators~~the ~~who~~Enterprise ~~offer~~group, ~~mobile~~which provides satellite~~-based~~, wireline and wireless communication network products and services to enterprises. WeThe ~~also~~International ~~supply~~Broadband ~~microwave-based~~segment ~~networking~~consists of our international service companies and provides managed network services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group and the Terrestrial Microwave group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators. ~~for~~The ~~back~~Terrestrial Microwave group provides point-~~hauling~~to-multipoint ~~their~~microwave ~~data~~radio ~~from~~network ~~cellular~~systems ~~telephone~~that ~~sites~~are toused ~~their~~for ~~switching~~both ~~centers~~cellular backhaul and broadband wireless access. InThe HTS ~~addition~~Satellite segment consists of activities related to the development, ~~local~~construction and launch of high throughput satellites and currently represents construction activities of Jupiter and the development of related network equipment. The ~~exchange~~Corporate ~~carriers~~and ~~use~~Other segment includes certain minority interest investments held by us, our ~~equipment~~corporate ~~for~~offices ~~broadband~~and ~~access~~assets ~~traffic~~not ~~from~~specifically ~~corporations~~related ~~bypassing~~to ~~local~~another ~~phone~~business ~~companies~~segment. ~~The~~Due ~~size~~to the complementary nature and ~~scope~~common architecture of ~~these~~our ~~projects~~services ~~vary~~and products ~~from~~across ~~year~~our business segments, we are able to ~~year~~leverage byour ~~customer~~expertise and doresources ~~not~~within ~~follow~~our avarious ~~pattern~~operating ~~that~~units ~~can~~to beyield ~~reasonably~~significant ~~predicted~~cost efficiencies.

3630

MarketTable trends impactingof our revenues— The following table presents our revenues by end market for the three and nine months ended September 30, 2010 and 2009 (dollars in thousands): Contents

~~Three~~Revenues—We ~~Months~~generate ~~Ended~~revenues ~~September 30~~from the sale and financing of hardware and the provision of services. In our North America and International Broadband segments, ~~2010~~we ~~Compared~~generate torevenues ~~Three~~from ~~Months~~services ~~Ended~~and ~~September 30~~hardware. In our Telecom Systems segment, ~~2009~~we generate revenues primarily from the development and sale of hardware. Some of our enterprise customers purchase equipment separately and operate their own networks. These customers include large enterprises, incumbent local exchange carriers, governmental agencies and resellers. Contracts for our services vary in length depending on the customers’ requirements.

	Three Months EndedSeptember 30,				Variance
	2010		2009		Amount			%
Revenues:
Services revenues	$	202,276	$	176,253	$	26,023			14.8	%
Hardware sales		64,006		75,164		(11,158	)		(14.8	)%
Total revenues	$	266,282	$	251,417	$	14,865			5.9	%
Revenues by end market:
North America Broadband segment:
Consumer	$	122,166	$	107,085	$	15,081			14.1	%
Enterprise		68,378		67,038		1,340			2.0	%
Total North America Broadband segment		190,544		174,123		16,421			9.4	%
International Broadband segment		51,778		47,521		4,257			9.0	%
Telecom Systems segment:
Mobile Satellite Systems		20,070		17,309		2,761			16.0	%
Telematics		-		8,709		(8,709	)		(100.0	)%
Terrestrial Microwave		2,323		2,807		(484	)		(17.2	)%
Total Telecom Systems segment		22,393		28,825		(6,432	)		(22.3	)%
Corporate and Other segment		1,567		948		619			65.3	%
Total revenues	$	266,282	$	251,417	$	14,865			5.9	%

Average revenue per unit (“ARPU”)—ARPU is calculated by dividing the total service revenues from the Consumer group for the reporting period by the sum of the total number of subscribers in our Consumer group at the end of each month in the reporting period. Our ARPU calculation may not be consistent with other companies’ calculation in the same or similar businesses as we are not aware of any uniform standards for calculating ARPU.

~~The~~Churn ~~following~~rate—Churn ~~table~~rate ~~presents~~represents ~~our~~the average of the monthly churn rates for the months included in the reporting period. Monthly churn rate, ~~average~~is ~~revenue~~calculated ~~per~~by ~~unit~~dividing ~~(“ARPU”),~~the ~~average~~number of subscribers ~~monthly~~that ~~gross~~churn ~~subscriber~~in ~~additions,~~the ~~and~~month by the number of those subscribers: at the end of the month in our Consumer group and our small/medium enterprise and wholesale business customers. Our churn rate calculations may not be consistent with other companies’ calculation in the same or similar businesses as we are not aware of any uniform standards for calculating churn rate.

	As of or For theThree Months Ended September 30,						Variance
	2010			2009			Amount			%
Churn rate(1)		2.22	%		2.30	%		(0.08	)%		(3.5	)%
ARPU(2)	$	75		$	71		$	4			5.6	%
Average monthly gross subscriber additions(1)		16,500			16,800			(300	)		(1.8	)%
Subscribers(1)		558,200			490,000			68,200			13.9	%

Services—Our services revenue is varied in nature and includes equipment rental from our consumer rental program, total turnkey communications services, terminal relocation, maintenance and changes, transponder capacity and multicast or broadcast services. Our services are offered on a contractual basis, which vary in length based on the particular end market. Typically, our large enterprise customers enter into a three- to five-year contract, and our consumer customers enter into a 24-month contract. We bill and recognize service revenues on a monthly per site basis. Our services include the following:

~~(1)~~Service ~~Relates~~Type toDescription ~~our~~Broadbandconnectivity ~~Consumer~~• ~~group~~Provides basic transport, intranet connectivity services and ~~our~~internet ~~small/medium~~service provider services • Applications include high-speed internet access, IP VPN, multicast file delivery and streaming, point-of-sale credit transactions, enterprise back-office communications, and ~~wholesale~~satellite ~~business~~backup ~~customers~~for ~~who~~frame ~~receive~~relay ~~subscription~~service and other terrestrial networks Managed networkservices • Provides one-stop turnkey suite of bundled services. ~~The~~that ~~small/medium~~include ~~enterprise~~wireline and ~~wholesale~~wireless ~~business~~satellite ~~customers~~networks ~~are~~• ~~part~~Includes ofnetwork ~~our~~design ~~Enterprise~~program ~~group.~~management, ~~The~~installation ~~Consumer~~management, network and ~~Enterprise~~application ~~groups~~engineering ~~are~~services, ~~part~~proactive ofnetwork ~~our~~management, ~~North~~network ~~America~~operations, ~~Broadband~~field ~~segment.~~maintenance ~~The~~and ~~trend~~customer ofcare ~~this~~ISP ~~metric~~services ~~has~~andhosted ~~been~~application ~~substantially~~• ~~similar~~Provides ~~for~~internet ~~the~~connectivity ~~Consumer~~and ~~group~~hosted customer-owned and managed applications on our network facilities • Provides the ~~small/medium~~customer ~~enterprise~~application services developed by us or in conjunction with our service partners • Includes internet access, e-mail services, web hosting and ~~wholesale~~online ~~business~~payments ~~customers.~~Digital mediaservices • Digital content management and delivery including video, online learning and digital signage applications Customized businesssolutions • Provides customized, industry-specific enterprise solutions that can be applied to multiple businesses in a given industry

~~(2)~~Our ~~Relates~~services ~~only~~ to ~~our~~enterprise customers ~~Consumer~~are ~~group~~negotiated on a contract-by-contract basis with price varying based on numerous factors, ~~which~~including isnumber ~~part~~of sites, complexity of system and scope of services provided. We have the ability to integrate these service offerings to provide comprehensive solutions for our ~~North~~customers. ~~America~~We ~~Broadband~~also ~~segment~~provide managed services to our customers who operate their own dedicated network facilities and charge them a management fee for the operation and support of their networks.

Hardware— We offer our enterprise customers the option to purchase their equipment up-front or to finance the sale through a third-party leasing company as part of their service agreement under which payments are made over a fixed term. Our consumer customers also have the option to purchase the equipment up-front with a 24-month service contract. Hardware revenues of the North ~~America~~American Enterprise group and International Broadband ~~Segment~~segment

~~Revenue~~31 from our Consumer group for the three months ended September 30, 2010 increased by 14.1% to $122.2 million compared to the same period in 2009. The growth in our Consumer group has been driven primarily by three factors: (i) the substantial growth in the number of subscribers arising from increased consumer awareness of our products and services as a result of the expansion of our use of direct mail campaigns and television commercials targeting geographic areas that have historically been underserved by DSL and cable services; (ii) value-added services, such as express repair and web premium content services, and the election by our customers to utilize the consumer rental program and to subscribe to higher level service plans resulting in an

increaseTable inof ARPU; and (iii) improvements in customer retention as shown by the reduction in the churn rate. Contents

37 are derived from: (i) network operating centers; (ii) radio frequency terminals (earth stations); (iii) VSAT components including indoor units, outdoor units, and antennas; (iv) voice, video and data appliances; (v) routers and DSL modems; and (vi) system integration services to integrate all of the above into a system.

AsWe ~~of September 30,~~also ~~2010~~provide ~~and~~specialized ~~2009,~~equipment weto ~~achieved~~our aMobile ~~total~~Satellite ~~subscription~~Systems ~~base of 558,200~~ and ~~490,000,~~Terrestrial ~~respectively,~~Microwave ~~which~~customers. ~~included~~Through ~~34,400~~large ~~and~~multi-year 25contracts,~~800,~~ ~~respectively,~~we ~~subscribers~~develop ~~in our small/medium enterprise~~ and ~~wholesale~~supply ~~businesses.~~turnkey ~~Our~~networking ~~ARPU, which is used to measure average monthly consumer subscription service revenues on a per subscriber basis, was $75~~ and ~~$71~~terminal systems for ~~the~~various ~~three~~operators ~~months~~who ~~ended~~offer ~~September 30,~~mobile ~~2010~~satellite-based ~~and 2009, respectively~~services. ~~ARPU~~We isalso ~~calculated~~supply bymicrowave-based ~~dividing~~networking ~~the~~equipment ~~total~~to ~~service~~mobile ~~revenues from~~operators ~~the Consumer group~~ for ~~the~~back-hauling ~~reporting~~their ~~period~~data byfrom ~~the~~cellular ~~sum~~telephone ofsites ~~the~~to ~~total~~their ~~number~~switching ~~of subscribers in our Consumer group at the end of each month in the reporting period~~centers. ~~Churn~~In ~~rate~~addition, ~~represents~~local exchange ~~the~~carriers ~~average~~use ofour ~~the~~equipment ~~monthly~~for ~~churn~~broadband ~~rates~~access ~~for~~traffic ~~the~~from ~~months included~~corporations inbypassing ~~the~~local ~~reporting~~phone ~~period~~companies. ~~Monthly~~The ~~churn~~size ~~rate~~and isscope ~~calculated by dividing the number~~ of ~~subscribers~~these atprojects ~~the~~vary ~~end~~from ofyear ~~the~~to ~~month~~year by ~~the~~customer ~~number of churns for the month for the subscribers in our Consumer group~~ and ~~our~~do ~~small/medium~~not ~~enterprise~~follow ~~and wholesale~~a ~~business~~pattern ~~customers.~~that ~~Our~~can ~~ARPU and churn rate calculations may not~~ be ~~consistent~~reasonably ~~with other companies’ calculation in the same or similar businesses as we are not aware of any uniform standards for calculating ARPU~~predicted.

Revenue ~~from~~Backlog—We ~~our~~benefit ~~North~~from ~~American~~strong ~~Enterprise~~visibility ~~group~~of ~~for~~our ~~the~~future ~~three~~revenues. ~~months~~At ~~ended~~March 31, ~~September~~2011 and December 3031, 2010, ~~increased~~our bytotal 2revenue backlog, which we define as our expected future revenue under customer contracts that are non-cancelable and excluding agreements with our consumer customers, was approximately $1,072.0%6 tomillion and $1,063.8 million, respectively. Included in our revenue backlog as of March 31, 2011 are future revenues of $68253.4 7 million ~~compared~~associated towith ~~the~~our ~~same~~Jupiter ~~period~~satellite. inOf ~~2009~~the $253.7 ~~The~~million, ~~increase~~$245.0 ~~was~~million ~~primarily~~is ~~due~~associated towith the ~~realization~~Barrett ofAgreement ~~service~~for ~~revenues~~satellite capacity, ~~from~~which ~~our~~revenue ~~contracts~~is ~~booked~~expected into ~~prior~~be ~~periods.~~realized ~~Enterprise~~ratably over 15 years once the satellite is launched and placed into service ~~revenue~~and $8.7 million is ~~generally~~related ~~characterized~~to bygateway ~~long~~developments ~~term~~for ~~contracts~~Barrett. Associated with the Barrett Agreement for satellite capacity, we have collected $5.0 million of non-refundable reservation fee.

~~International~~The ~~Broadband~~amounts ~~Segment~~included in backlog represent the full contract value for the duration of the contract and does not include termination fees. We do not assume that a contract will be renewed beyond its stated expiration date. In certain cases of breach for non-payment or customer bankruptcy, we may not be able to recover the full value of certain contracts or termination fees.

~~Revenue~~Generally, ~~from~~following ~~our~~the ~~International~~successful ~~Broadband~~launch ~~segment~~of a ~~for~~satellite, if the ~~three~~satellite ~~months~~is ~~ended~~operating ~~September 30~~nominally, ~~2010~~our ~~increased~~customers may only terminate their service agreements for satellite capacity by ~~9.0%~~paying tous ~~$51.8 million~~all, ~~compared~~or tosubstantially all, of the ~~same~~payments ~~period~~that inwould ~~2009,~~have ~~primarily~~otherwise become due toover ~~an increase~~the interm ~~hardware~~of ~~orders~~the service ~~and~~agreement. ~~higher~~In ~~service~~the ~~revenues~~case ~~from~~of our ~~Brazil~~satellite ~~and~~under ~~global~~construction, ~~service~~Jupiter, ~~operations.~~we ~~Also~~would ~~contributing~~not be obligated to return the ~~increase~~customer ~~was~~prepayments ~~$0.8~~made ~~million~~under ~~resulting~~service ~~from~~agreements for the ~~favorable~~satellite ~~impact~~if ofthe ~~currency~~launch ~~exchange~~was ~~due~~ to fail. Also, if the ~~depreciation~~launch of ~~the~~Jupiter Uwas significantly delayed, our customers could exercise their right of termination under their service agreements.S See Part II—Item 1A. Risk Factors and Special Note Regarding Forward-Looking Statements for a discussion of the potential risks ~~dollar~~to our revenue and backlog. Although we have signed contracts with our consumer customers for 24 months, we do not include these contractual commitments in our backlog.

~~Telecom~~Cost ~~Systems~~of ~~Segment~~Services—Our cost of services primarily consists of transponder capacity leases, hub infrastructure, customer care, wireline and wireless capacity, depreciation expense related to network infrastructure and capitalized hardware and software, and the salaries and related employment costs for those employees who manage our network operations and other project areas. These costs are dependent on the number of customers served and have increased relative to our growth. We continue to execute a number of cost containment and efficiency initiatives that were implemented in previous years. In addition, the migration to a single upgraded platform for ongoing consumer customers from our North America Broadband segment has enabled us to leverage our satellite bandwidth and network operation facilities to achieve further cost efficiencies. The costs associated with transponder capacity leases for the Consumer group are expected to decline as more customers are added to the SPACEWAY network.

~~Revenue~~Cost ~~from~~of Hardware—We outsource a significant portion of the manufacturing of our hardware for our North America and International Broadband and Telecom Systems ~~segment~~segments ~~for~~to ~~the~~third-party ~~three~~contract ~~months~~manufacturers. ~~ended~~Our ~~September 30,~~cost ~~2010~~of ~~decreased~~hardware byrelates ~~22.3%~~primarily to ~~$22~~direct materials and subsystems (e.~~4 million~~g., ~~compared~~antennas), tosalaries ~~the~~and ~~same~~related ~~period~~employment incosts ~~2009.~~for ~~The~~those ~~decrease~~employees ~~was~~who ~~mainly attributable~~are todirectly associated with the procurement and manufacture of our ~~Telematics~~products ~~group~~and asother ~~there~~items ~~was~~of noindirect ~~revenue~~overhead ~~earned~~incurred ~~for~~in the ~~three~~procurement ~~months~~and ~~ended~~production ~~September 30,~~process. Cost ~~2010~~of ~~compared~~hardware toalso ~~$8.7~~includes ~~million~~certain ~~for~~engineering and hardware costs related to the ~~same~~design ~~period~~of ina ~~2009~~particular product for specific customer programs. ~~The~~As ~~decrease~~we inhave ~~revenue~~developed ~~was~~new ~~partially~~product ~~offset~~offerings, bywe ~~the~~have ~~increase~~reduced inproduct ~~revenue~~costs ~~from~~due to higher levels of ~~our~~component ~~Mobile~~integration, ~~Satellite~~design ~~Systems~~improvements ~~group~~and volume increases.

~~Nine~~Subscriber ~~Months~~acquisition ~~Ended~~costs ~~September 30,~~(“SAC”) ~~2010~~are associated ~~Compared~~with toour ~~Nine~~Consumer ~~Months~~group ~~Ended~~and ~~September 30,~~are ~~2009~~ comprised of three

	Nine Months EndedSeptember 30,				Variance
	2010		2009		Amount			%
Revenues:
Services revenues	$	583,406	$	512,001	$	71,405			13.9	%
Hardware sales		178,437		235,458		(57,021	)		(24.2	)%
Total revenues	$	761,843	$	747,459	$	14,384			1.9	%
Revenues by end market:
North America Broadband segment:
Consumer	$	353,098	$	310,020	$	43,078			13.9	%
Enterprise		189,465		204,953		(15,488	)		(7.6	)%
Total North America Broadband segment		542,563		514,973		27,590			5.4	%
International Broadband segment		143,087		142,925		162			0.1	%
Telecom Systems segment:
Mobile Satellite Systems		60,103		55,144		4,959			9.0	%
Telematics		501		23,437		(22,936	)		(97.9	)%
Terrestrial Microwave		11,937		8,850		3,087			34.9	%
Total Telecom Systems segment		72,541		87,431		(14,890	)		(17.0	)%
Corporate and Other segment		3,652		2,130		1,522			71.5	%
Total revenues	$	761,843	$	747,459	$	14,384			1.9	%

38Table of Contents

elements: (i) the subsidy for the cost of hardware and related installation; (ii) certain sales and marketing expense; and (iii) dealer and customer service representative commissions on new installations/activations. The ~~following~~subsidy ~~table~~for cost of hardware and related cost of installation is deferred and amortized over the shorter of the initial contract period or the useful life of the hardware as a component of cost of ~~presents~~hardware ~~our~~for ~~churn~~hardware ~~rate,~~related ~~ARPU,~~sales ~~average~~or ~~monthly~~cost ~~gross~~of ~~subscriber~~services ~~additions,~~for activities related to the consumer rental program. The portion of SAC related to sales and ~~subscribers:~~marketing is expensed as incurred. Dealer and customer service representative commissions are deferred and amortized over the initial contract period as a component of sales and marketing expense.

	As of or For theNine Months Ended September 30,						Variance
	2010			2009			Amount			%
Churn rate(1)		2.07	%		2.29	%		(0.22	)%		(9.6	)%
ARPU(2)	$	73		$	70		$	3			4.3	%
Average monthly gross subscriber additions(1)		17,100			17,000			100			0.6	%
Subscribers(1)		558,200			490,000			68,200			13.9	%

Selling, General and Administrative (“SG&A”)—Selling expenses primarily consist of the salaries, commissions, related benefit costs of our direct sales force and marketing staff, advertising, channel compensations on new activations which are deferred and amortized over the initial consumer contract period, travel, allocation of facilities, and other directly related overhead costs for our domestic and international businesses. General and administrative expenses include bad debt expense and salaries and related employee benefits for employees associated with common supporting functions, such as accounting and finance, risk management, legal, information technology, administration, human resources, and senior management. Selling, general, and administrative costs also include facilities costs, third-party service providers’ costs (such as outside tax and legal counsel, and insurance providers), bank fees related to credit card processing charges and depreciation of fixed assets.

Research and Development (1“R&D”)—The ~~Relates~~Company’s toR&D ~~our~~programs ~~Consumer~~are important ~~group~~to ~~and~~support ~~our~~future ~~small/medium~~growth ~~enterprise~~by reducing costs and ~~wholesale~~providing ~~business~~new ~~customers~~technology ~~who~~and ~~receive~~innovations ~~subscription~~to ~~services~~its customers. ~~The~~R&D ~~small/medium~~expenses ~~enterprise~~primarily ~~and~~consist ~~wholesale~~of ~~business~~the ~~customers~~salaries ~~are~~of ~~part~~certain members of our ~~Enterprise~~engineering ~~group.~~staff ~~The~~plus ~~Consumer~~an ~~and~~applied ~~Enterprise~~overhead ~~groups~~charge. R&D ~~are~~expenses ~~part~~also ofinclude ~~our~~engineering ~~North~~support ~~America~~for ~~Broadband~~existing ~~segment.~~platforms ~~The~~and ~~trend~~development ofefforts ~~this~~to ~~metric~~build ~~has~~new ~~been~~products ~~substantially~~and ~~similar~~software ~~for~~applications, ~~the~~subcontractors, ~~Consumer~~material ~~group~~purchases and ~~the~~other ~~small/medium~~direct ~~enterprise~~costs ~~and~~in ~~wholesale~~support ~~business~~of ~~customers~~product development.

~~(2)~~Market ~~Relates~~Trends ~~only~~Impacting toOur ~~our~~Revenues ~~Consumer group, which is part of our North America Broadband segment.~~

~~North~~The ~~America~~following ~~Broadband~~table ~~Segment~~presents our revenues by end market for the three months ended March 31, 2011 and 2010 (dollars in thousands):

Revenue from our Consumer group for the nine months ended September 30, 2010 increased by 13.9% to $353.1 million compared to the same period in 2009. The growth in our Consumer group has been driven primarily by three factors: (i) the substantial growth in the number of subscribers arising from increased consumer awareness of our products and services as a result of the expansion of our use of direct mail campaigns and television commercials targeting geographic areas that have historically been underserved by DSL and cable services; (ii) value-added services, such as express repair and web premium content services, and the election by our customers to utilize the consumer rental program and to subscribe to higher level service plans resulting in an increase in ARPU; and (iii) improvements in customer retention as shown by the reduction in the churn rate.


	Three Months Ended March 31,
	Three Months Ended March 31,				Variance
	2011		2010		Amount			%
Revenues:
Services revenues	$	215,670	$	187,940	$	27,730			14.8%
Hardware revenues		48,422		55,253		(6,831	)		(12.4)%

Total revenues	$	264,092	$	243,193	$	20,899			8.6%

Revenues by end market:
North America Broadband segment:
Consumer	$	130,814	$	113,354	$	17,460			15.4%
Enterprise		62,892		60,641		2,251			3.7%

Total North America Broadband segment		193,706		173,995		19,711			11.3%

International Broadband segment		51,672		43,456		8,216			18.9%

Telecom Systems segment:
Mobile Satellite Systems		15,610		19,706		(4,096	)		(20.8)%
Terrestrial Microwave		1,082		4,986		(3,904	)		(78.3)%

Total Telecom Systems segment		16,692		24,692		(8,000	)

Filing Compare · Hughes Communications, Inc.