UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~September~~March 3031, ~~2009~~2010

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

For the Transition Period from ____ to____

Commission file number: 333-138009

Hughes Network Systems, LLC

(Exact Name of Registrant as Specified in Its Charter)

Delaware	11-3735091
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

11717 Exploration Lane, Germantown, Maryland 20876

(Address of Principal Executive Offices and Zip Code)

(301) 428-5500

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) 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. o Yes x No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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):

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

Indicate by check mark whether the company is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

The number of the registrant's membership interests outstanding as of ~~November 2~~April 30, ~~2009~~2010 was as follows:

Class A Membership Interests: 95,000

Class B Membership Interests: 3,~~506~~330

~~TABLE~~Table OFof ~~CONTENTS~~Contents

		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	3127
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4939
Item 4T.	Controls and Procedures	5140
PART II—OTHER INFORMATION		5242
Item 1.	Legal Proceedings	5242
Item 1A.	Risk Factors	5242
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5242
Item 3.	Defaults Upon Senior Securities	5342
Item 4.	~~Submission~~(Removed ofand ~~Matters to a Vote of Security Holders~~Reserved)	5342
Item 5.	Other Information	5342
Item 6.	Exhibits	5343
SIGNATURES		5444

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

HUGHES NETWORK SYSTEMS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	September 30,			December 31,
	March 31,			December 31,
	2009			2008
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	~~209~~118,~~161~~336		$	~~100~~183,~~262~~733
Marketable securities		2543,~~078~~672			-31,126
Receivables, net		~~165~~159,~~608~~093			~~200~~162,~~259~~806
Inventories		6761,~~226~~690			6560,~~485~~244
Prepaid expenses and other		2321,~~545~~543			20,~~425~~976
Total current assets		~~490~~404,~~618~~334			~~386~~458,~~431~~885
Property, net		~~569~~638,~~334~~399			~~507~~601,~~270~~964
Capitalized software costs, net		5148,~~206~~858			5149,~~454~~776
Intangible assets, net		1512,~~624~~786			1913,~~780~~488
Goodwill		2,661			2,661
Other assets		7268,~~329~~177			~~112~~68,~~511~~524
Total assets	$	1,~~201~~175,~~772~~215		$	1,~~080~~195,~~107~~298
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	~~103~~98,~~141~~175		$	80117,~~667~~513
Short-term debt		6,~~395~~506			86,~~252~~750
Accrued liabilities and other		~~168~~140,~~388~~093			~~159~~133,~~415~~926
Total current liabilities		~~277~~244,~~924~~774			~~248~~258,~~334~~189
Long-term debt		714,~~826~~298			~~578~~714,~~298~~957
Other long-term liabilities		1317,~~128~~177			1816,~~005~~191
Total liabilities		1976,~~005,878~~249			~~844~~989,~~637~~337
Commitments and contingencies
Equity:
Hughes Network Systems, LLC ("HNS") equity:
Class A membership interests		~~177~~178,~~707~~157			177,~~425~~933
Class B membership interests		-			-
Retained earnings		2830,~~865~~532			8036,~~999~~094
Accumulated other comprehensive loss		(1615,~~188~~951	)		(2713,~~586~~987	)
Total HNS' equity		~~190~~192,~~384~~738			~~230~~200,~~838~~040
Noncontrolling interest		56,~~510~~228			45,~~632~~921
Total equity		~~195~~198,~~894~~966			~~235~~205,~~470~~961
Total liabilities and equity	$	1,~~201~~175,~~772~~215		$	1,~~080~~195,~~107~~298

See accompanying Notes to the Condensed Consolidated Financial Statements.

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HUGHES NETWORK SYSTEMS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2009			2008			2009			2008
	2010			2009
Revenues:
Services revenues	$	~~175~~186,~~305~~890		$	~~156~~161,~~859~~904		$	~~509,871~~		$	~~454,740~~
Hardware sales		7555,~~164~~253			~~114~~77,~~860~~850			~~235,458~~			~~319,489~~
Total revenues		~~250~~242,~~469~~143			~~271~~239,~~719~~754			~~745,329~~			~~774,229~~
Operating costs and expenses:
Cost of services		~~108~~115,~~894~~650			~~105~~106,~~988~~546			~~326,532~~			~~301,875~~
Cost of hardware products sold		7360,~~646~~886			9674,~~881~~205			~~225,134~~			~~271,220~~
Selling, general and administrative		4448,~~204~~680			4143,~~397~~797			~~132,302~~			~~129,961~~
Loss on impairment		-			-			44,400			-
Research and development		4,915			5,351
Research and development		5,453			6,493			16,502			19,745
Amortization of intangible assets		702			1,385
Amortization of intangible assets		1,385			1,629			4,156			4,904
Total operating costs and expenses		230,833			231,284
Total operating costs and expenses		233,582			252,388			749,026			727,705
Operating income		11,310			8,470
Operating income (loss)		16,887			19,331			(3,697	)		46,524
Other income (expense):
Other income (expense):
Interest expense		(16,105	)		(13,829	)
Interest expense		(17,727	)		(14,095	)		(47,106	)		(37,305	)
Interest income		553			227
Interest income		468			666			865			2,569
Loss before income tax (expense) benefit		(4,242	)		(5,132	)
Other income (loss), net		(1	)		6			(365	)		95
Income tax (expense) benefit		(1,217	)		668
Income (loss) before income tax expense		(373	)		5,908			(50,303	)		11,883
Net loss		(5,459	)		(4,464	)
Income tax expense		(981	)		(2,288	)		(775	)		(4,101	)
Net income attributable to the noncontrolling interest		(103	)		(390	)
Net income (loss)		(1,354	)		3,620			(51,078	)		7,782
Net loss attributable to HNS	$	(5,562	)	$	(4,854	)
Net income attributable to the noncontrolling interest		(216	)		(35	)		(1,056	)		(105	)
Net income (loss) attributable to HNS	$	(1,570	)	$	3,585		$	(52,134	)	$	7,677

See accompanying Notes to the Condensed Consolidated Financial Statements.

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HUGHES NETWORK SYSTEMS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(Unaudited)

	HNS Owners' Equity
	HNS' Equity
							Accumulated
	Class A and B Membership			Retained			Accumulated Other Comprehensive			Noncontrolling
	Class A and B						Other
	Membership			Retained			Comprehensive			Noncontrolling
	Interests			Earnings			Loss			Interest			Total
Balance at December 31, 2008	$	177,425		$	80,999		$	(27,586	)	$	4,632		$	235,470
Balance at January 1, 2009	$	177,425		$	80,999		$	(28,583	)	$	5,629		$	235,470
Vesting of bonus unit and restricted stock		8			-			-			-			8
Share-based compensation		220			-			-			-			220
Shared-based compensation		665			-			-			-			665
Comprehensive income (loss):
Purchase of subsidiary shares fromnoncontrolling interest		(391	)					(19	)		(345	)		(755	)
Net income (loss)					(4,854	)					390			(4,464	)
Comprehensive income:
Foreign currency translation adjustments								(1,407	)
Net income (loss)		-			(52,134	)		-			1,056			(51,078	)
Unrealized gain on hedging instruments								5,337
Foreign currency translation adjustments								5,505			167			5,672
Reclassification of realized loss on hedging instruments								(854	)
Reclassification of realized loss onhedging instruments								3,275			-			3,275
Balance at March 31, 2009	$	177,645		$	76,145		$	(25,507	)	$	6,019		$	231,226
Unrealized gain on hedging instruments								2,639			-			2,639
Balance at January 1, 2010	$	177,933		$	36,094		$	(13,987	)	$	5,921		$	205,961
Unrealized loss on available-for-sale securities								(2	)		-			(2	)
Share-based compensation		224			-			-			-			224
Balance at September 30, 2009	$	177,707		$	28,865		$	(16,188	)	$	5,510		$	195,894
Comprehensive income (loss):
Net income (loss)					(5,562	)					103			(5,459	)
Foreign currency translation adjustments								(1,011	)		204			(807	)
Unrealized loss on hedging instruments								(2,323	)					(2,323	)
Reclassification of realized loss on hedging instruments								1,368						1,368
Unrealized gain on available-for-sale securities								2						2
Balance at March 31, 2010	$	178,157		$	30,532		$	(15,951	)	$	6,228		$	198,966

See accompanying Notes to the Condensed Consolidated Financial Statements.

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HUGHES NETWORK SYSTEMS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2009			2008
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	(51,078	)	$	7,782
Net loss	$	(5,459	)	$	(4,464	)
Adjustments to reconcile net income (loss) to cash flowsfrom operating activities:
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization		7229,~~788~~969			4821,~~908~~860
Amortization of debt issuance costs		~~1,452~~616			~~1,056~~378
Equity plan compensation expense		665			248
Share-based compensation expense		224			220
Loss on impairment		44,400			-
Other		37			(9	)
Other		578			10
Change in other operating assets and liabilities, net of acquisition:
Receivables, net		483,~~922~~077			1223,~~615~~683
Inventories		(~~745~~2,078	)		(81,~~015~~089	)
Prepaid expenses and other		~~(2,531~~828	)		~~(19,761~~747	)
Accounts payable		24(19,~~261~~909	)		12(4,~~140~~873	)
Accrued liabilities and other		~~(15~~7,~~657~~660	)		(143,~~582~~025	)
Net cash provided by operating activities		~~123~~14,~~055~~965			4033,~~401~~428
Cash flows from investing activities:
Change in restricted cash		~~(72~~88	)		~~3,047~~94
Purchases of marketable securities		(2522,~~080~~615	)		-
Proceeds from sales of marketable securities		-10,000			~~3,000~~-
Expenditures for property		(9363,~~953~~668	)		(5226,~~991~~625	)
Expenditures for capitalized software		(103,~~315~~166	)		(104,~~526~~391	)
Proceeds from sale of property		~~339~~-			~~104~~56
Long-term loan		(10,000	)		-
Net cash used in investing activities		(79,361	)		(30,866	)
Acquisition of Helius, Inc., net of cash received		-			(10,543	)
Other, net		(755	)		-
Net cash used in investing activities		(139,836	)		(67,909	)
Cash flows from financing activities:
Net increase (decrease) in notes and loans payable		(1,315	)		403
Short-term revolver borrowings		1,999			-
Long-term debt borrowings		142,318			2,539
Repayments of revolver borrowings		(2,430	)		-
Repayment of long-term debt		(6,832	)		(11,449	)
Net decrease in notes and loans payable		-			(509	)
Debt issuance costs		(4,612	)		-
Long-term debt borrowings		1,220			933
Net cash provided by (used in) financing activities		129,559			(8,507	)
Repayments of long-term debt		(1,721	)		(2,069	)
Effect of exchange rate changes on cash and cash equivalents		(3,879	)		5,059
Debt issuance costs		(1,742	)		-
Net increase (decrease) in cash and cash equivalents		108,899			(30,956	)
Net cash used in financing activities		(2,674	)		(1,645	)
Cash and cash equivalents at beginning of the period		100,262			129,227
Effect of exchange rate changes on cash and cash equivalents		1,673			1,393
Cash and cash equivalents at end of the period	$	209,161		$	98,271
Net increase (decrease) in cash and cash equivalents		(65,397	)		2,310
Cash and cash equivalents at beginning of the period		183,733			100,262
Cash and cash equivalents at end of the period	$	118,336		$	102,572
Supplemental cash flow information:
Cash paid for interest	$	292,~~182~~407		$	302,~~011~~653
Cash paid for income taxes	$	32,~~660~~341		$	~~2,503~~705
Supplemental non-cash disclosures related to:
Capitalized software and property acquired, not paid	$	25,303

See accompanying Notes to the Condensed Consolidated Financial Statements.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1:

Organization, Basis of Presentation and Summary of Significant Accounting Policies

Hughes Network Systems, LLC (“HNS” and, together with its consolidated subsidiaries, the “Company” or “we,” “us,” and “our”) was formed as a Delaware limited liability company on November 12, 2004. The Limited Liability Company Agreement of Hughes Network Systems, LLC, as amended (the “LLC Agreement”) provides for two classes of membership interests. The Class A membership interests, which have voting rights, are purchased by investors in the Company. The Class B membership interests, which do not have voting rights, are available for grant to employees, officers, directors, and consultants of the Company in exchange for the performance of services. Hughes Communications, Inc. (“HCI” or “Parent”) is the sole owner of our Class A membership interests and serves as our managing member, as defined in the LLC Agreement. As of ~~September~~March 31, 302010, ~~2009,~~ there were 95,000 Class A membership interests outstanding and 3,~~656~~ 330 Class B membership interests outstanding.

We are a telecommunications company that provides equipment and services to the broadband communications marketplace. We have extensive technical expertise in satellite, ~~wire~~ ~~line~~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. ~~Our~~ We provide broadband network services and systems ~~are provided~~ to the international and domestic enterprise markets, and ~~our~~ satellite broadband Internet access ~~is provided~~ 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.

We 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 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, including our Jupiter satellite, which is currently under construction and/or the provision of satellite capacity. The Corporate segment includes our corporate offices and assets not specifically related to another business segment.

Basis of Presentation

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 Standards Board (“FASB”) Accounting Standards Codification (the “ASC” ~~or the “Codification”~~) 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 ability to ~~exercise~~ ~~significant influence are generally carried at cost. As permitted under~~exercise Rule 10-01 of Regulation S-X, certain notes and other financial information normally required by GAAP have been condensed or omitted. Management believes the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. Our results of operations for the three and nine months ended September 30, 2009 may not be indicative of our future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with our latest audited consolidated financial statements and the notes thereto included in our Registration Statement on Form S-4/A filed with the SEC on July 17, 2009 (File number 333-160307). Our latest audited consolidated financial statements contained in our Registration Statement on Form S-4/A differ from those contained in our Annual Report on Form 10-K for the year ended December 31, 2008 in that they have been retrospectively adjusted to reflect the adoption of the update to ASC 810 relating to noncontrolling interests, which did not have a material impact on our financial position, results of operations or cash flows. However, the update impacted the presentation and disclosure of noncontrolling interests on our consolidated financial statements. As a result, certain prior period items in these condensed consolidated financial statements have been reclassified to conform to the current period presentation.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~All~~significant ~~intercompany~~influence ~~balances~~are ~~and~~generally ~~transactions~~carried ~~with~~at ~~subsidiaries~~cost. As permitted under Rule 10-01 of Regulation S-X, certain notes and other ~~consolidated~~financial ~~entities~~information normally required by GAAP have been ~~eliminated~~condensed or omitted. WeManagement ~~have~~believes ~~evaluated~~the ~~our subsequent~~accompanying ~~events~~condensed ~~through~~consolidated ~~November~~financial 3statements reflect all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, ~~2009~~results of operations, ~~which~~and iscash flows as of and for the ~~date~~periods presented herein. Our results of operations for the three months ended March 31, 2010 may not be indicative of our future results. These condensed consolidated financial statements ~~were~~ ~~available~~are tounaudited and should be ~~issued~~read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.

All intercompany balances and transactions with subsidiaries and other consolidated entities have been eliminated.

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

The 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, 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 Accounting Pronouncements

In July 2009, the Codification was released, changing the way accounting standards are organized from a standards-based model (with thousand of individual standards) to a topically based model (with roughly 90 topics). The 90 topics are organized by ASC number and are updated with an Accounting Standards Update (“ASU”). The ASU will replace accounting changes that historically were issued as FASB Statements, FASB Interpretations, FASB Staff Positions, or other types of FASB standards. The FASB only considers the ASU as update to the Codification but not as authoritative in its own right. The Codification serves as the single source of nongovernmental authoritative U.S. GAAP for interim and annual periods ending after September 15, 2009. Accordingly, all accounting references included in this report is provided in accordance with the Codification.

Recently Adopted Accounting Guidance

In ~~September~~ ~~2009~~January 2010, the FASB issued Accounting Standard Update (“ASU”) ~~2009~~2010-6,06 ~~effective~~to ~~for~~improve ~~reporting~~disclosures ~~periods ending~~about ~~after~~fair ~~September~~value ~~15,~~measurements. ~~2009,~~ASU to2010-6 ~~provide~~clarifies ~~implementation~~certain ~~guidance~~existing todisclosures ~~ASC~~and ~~740, “Income~~requires ~~Taxes,”~~new ondisclosure ~~accounting~~regarding ~~for~~significant ~~uncertainty~~transfers in ~~income~~and ~~taxes~~out of Level 1 and ~~related disclosure~~Level 2 of fair value measurements and the reasons for ~~nonpublic~~the ~~entities~~transfer. ~~The~~In ~~adoption~~addition, ofASU 2010-06 clarifies existing fair value disclosures about the ~~guidance~~level of disaggregation and ~~disclosures~~ 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 2010-606 did not have a material impact on our ~~income~~fair ~~tax~~value ~~disclosure and financial statements~~measurements.

In ~~August~~ June 2009 and December 2009, the FASB ~~issued~~amended ~~ASU~~ASC ~~2009-5,~~810 ~~effective~~changing ~~for~~certain ~~reporting~~consolidation ~~periods~~guidance ~~beginning after~~and ~~October~~requiring 1,improved ~~2009,~~financial toreporting ~~revise~~by ~~ASC~~enterprises ~~820,~~involved ~~“Fair~~with ~~Value~~variable ~~Measurements~~interest ~~and Disclosures,~~entities (“VIE”). ~~for~~The amendments provide guidance in determining when a reporting entity should include the ~~fair~~assets, ~~value~~liabilities, ~~measurement~~noncontrolling interest and results of ~~liabilities~~activities ~~when~~of a ~~quoted~~VIE ~~price~~ in anits ~~active~~consolidated ~~market~~financial statements. The amendments to ASC 810 were effective for the ~~identical~~first ~~liability~~annual isreporting ~~not~~period ~~available~~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 ~~the~~amendments ~~guidance~~to inconsolidation ~~ASU~~rules ~~2009-5~~ did not have aany ~~material~~ impact on our disclosures relating to our VIE activity and our financial statements.

InAccounting ~~May 2009,~~Guidance ~~the~~Not ~~FASB~~Yet amended ASC 855, “Subsequent Events,” effective for reporting periods ending after June 15, 2009, to established general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of the amendment did not have a material impact on our financial statements.Effective

In ~~April~~ October 2009, the FASB ~~amended~~issued ~~ASC~~ASU ~~820,~~2009-14 ~~effective~~to ~~for~~amend ~~reporting~~ASC ~~periods~~605 ~~ending~~“Revenue ~~after June~~Recognition.” ~~15,~~The ~~2009,~~amendments toin ~~provide~~this ~~guidance~~update onchange ~~(i) estimating~~ the ~~fair~~accounting ~~value~~model offor anrevenue ~~asset or~~arrangements ~~liability~~that ~~when~~include ~~the~~both ~~volume~~tangible products and ~~level~~software ofelements. ~~activity~~The ~~for~~amendments ~~the~~in ~~asset~~ASU or2009-14 ~~liability have~~will ~~significantly~~be ~~decreased~~effective ~~and~~for ~~(ii)~~us ~~identifying~~beginning ~~whether~~January 1, a2011, ~~transaction~~with ~~is distressed~~early oradoption ~~forced~~permitted. ~~The~~We ~~adoption~~are ofcurrently evaluating the ~~amendment~~impact ~~did~~these ~~not~~amendments will have ~~a material impact~~ on our financial statements when they become effective.

In ~~April~~ October 2009, the FASB ~~amended~~issued ~~ASC~~ASU ~~320,~~2009-13 ~~“Investments—Debt~~amending ~~and~~ASC ~~Equity~~605 ~~Securities”, effective~~related ~~for~~to ~~reporting~~revenue ~~periods~~arrangements ~~ending~~with ~~after~~multiple ~~June~~deliverables. ~~15,~~Among ~~2009~~other things, toASU ~~provide~~2009-13 provides guidance on ~~measuring~~for ~~other-than-temporary~~entities ~~impairments~~in ~~for~~determining ~~debt~~the ~~securities~~selling ~~and~~price ~~improving the~~of ~~presentation~~a deliverable and ~~disclosure~~clarifies that the allocation of ~~other-than-temporary~~revenue ~~impairments~~is based on ~~debt~~entity-specific ~~and equity~~assumptions ~~securities~~rather inthan ~~financial~~assumptions ~~statements~~of a marketplace participant. ~~The~~We ~~adoption~~are ofcurrently evaluating the ~~amendment~~impact ~~did~~ASU ~~not have~~2009-13 awill ~~material~~have ~~impact~~ on our financial statements when it becomes effective on January 1, 2011. Early adoption is permitted.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

InNote ~~April~~2: ~~2009,~~Marketable the FASB amended ASC 825, “Financial Instruments,” effective for reporting periods ending after June 15, 2009, requiring companies to provide qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value in interim and annual financial statements. The adoption of the amendment did not have a material impact on our disclosures about the fair values of financial instruments.Securities

InThe ~~March~~amortized ~~2008,~~cost ~~the~~basis ~~FASB amended ASC 815, “Derivative~~ and ~~Hedging,” effective~~estimated ~~for~~fair ~~statements~~value ~~issued~~of available-for-sale ~~fiscal~~marketable ~~years~~securities ~~and~~are ~~interim~~summarized ~~periods~~as ~~beginning after~~follows ~~November 15,~~(in 2008, to expand the disclosure requirements for derivative instruments and hedging activities. The adoption of the amendment did not have a material impact on our disclosures about derivative instruments and hedging activities.thousands):

In February 2008, the FASB amended ASC 820 to delay the effective date of fair value measurements for non-financial assets and liabilities to fiscal years beginning after November 15, 2008. The adoption of fair value measurements for non-financial assets and liabilities did not have a material impact on our financial statements.

	Cost		Gross Unrealized		Estimated
	Basis		Gain		Fair Value
March 31, 2010:
Municipal commercial paper	$	12,615	$	-	$	12,615
U.S. government bonds and treasury bills		15,045		11		15,056
Other debt securities		15,999		2		16,001
Total available-for-sale securities	$	43,659	$	13	$	43,672
December 31, 2009:
U.S. government bonds and treasury bills	$	15,105	$	4	$	15,109
Other debt securities		16,012		5		16,017
Total available-for-sale securities	$	31,117	$	9	$	31,126

~~In December~~Our ~~2007,~~investments ~~the~~in ~~FASB~~municipal ~~amended~~commercial ~~ASC~~papers ~~810,~~have ~~effective~~A-1+ ~~for fiscal years~~ and ~~interim periods~~P-1 ~~beginning~~ratings onfrom orS&P ~~after~~and ~~December 15~~Moody’s, ~~2008~~respectively, toand ~~improve~~our ~~the~~investments ~~relevance, comparability,~~in ~~and~~U.S. ~~transparency~~government ofbonds ~~the~~and ~~financial~~treasury ~~information~~bills ~~that~~have aAAA ~~reporting entity~~and ~~provides~~Aaa inratings ~~its~~from ~~consolidated~~S&P ~~financial~~and ~~statements~~Moody’s, respectively. The ~~adoption~~investments ofin ~~the amendment~~Other ~~did~~debt ~~not~~securities have aA-1+ ~~material~~and ~~impact~~P-1/Aa3 onratings ~~our~~from ~~financial statements~~S&P and Moody’s, respectively.

~~Accounting Guidance~~Note ~~Not~~3: ~~Yet~~Receivables, ~~Effective~~Net

~~In October 2009~~Receivables, ~~the~~net ~~FASB~~consisted ~~issued~~of ~~ASU 2009-14 to amend ASC 605, “Revenue Recognition.” The amendments in this update change~~ the ~~accounting~~following ~~model for revenue arrangements that include both tangible products and software elements. The amendments~~ (in ASU 2009-14 will be effective for us beginning January 1, 2011, with early adoption permitted. We are currently evaluating the impact these amendments will have on our financial statements when they become effective.thousands):

In October 2009, the FASB issued ASU 2009-13 amending certain criteria and disclosures of ASC 605 related to multiple-deliverable arrangements. Among other things, ASU 2009-13 establishes a selling price hierarchy for determining the selling price of a deliverable and clarifies that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant. The amendments in ASU 2009-13 are effective for us beginning January 1, 2011, with early adoption permitted. We are currently evaluating the impact these amendments will have on our financial statements when they become effective.

	March 31,			December 31,
	2010			2009
Trade receivables	$	152,323		$	154,037
Contracts in process		15,929			16,952
Other receivables		3,428			3,902
Total receivables		171,680			174,891
Allowance for doubtful accounts		(12,587	)		(12,085	)
Total receivables, net	$	159,093		$	162,806

~~In June 2009,~~Trade ~~the~~receivables ~~FASB~~included ~~amended~~$8.9 ~~ASC~~million ~~810~~and ~~changing~~$8.7 ~~certain~~million ~~consolidation~~of ~~guidance~~amounts ~~and improved~~due ~~financial~~from ~~reporting~~related ~~requirements~~parties byas ~~enterprises~~of ~~involved~~March ~~with~~31, ~~variable interest~~2010 ~~entities~~and December 31, ~~which~~2009, isrespectively. ~~effective~~Advances ~~for~~and usprogress ~~beginning~~billings ~~January~~offset 1,against ~~2010.~~contracts ~~We believe~~in ~~the~~process ~~adoption~~amounted ofto ~~the~~$3.6 million ~~amendments~~and ~~will~~$0.3 ~~not~~million ~~have~~as aof ~~material~~March ~~impact~~31, on2010 ~~our financial~~and ~~statements~~December 31, 2009, respectively.

Note 2: Acquisition of Helius, Inc.

In February 2008, we completed the acquisition of Helius, Inc. pursuant to the merger agreement HCI entered into on December 21, 2007 (the “Merger Agreement”). Pursuant to the Merger Agreement, we paid $10.5 million, after certain adjustments, at the closing of the acquisition. Immediately after the acquisition, Helius, Inc. was converted to a limited liability company, Helius, LLC (“Helius”). As part of the Merger Agreement, we have a remaining contractual obligation for contingent consideration of up to $20.0 million (the “Contingent Payment”). If Helius achieves certain post-closing performance goals (the “Performance Goals”) as set forth in the Merger Agreement, we are obligated to pay the Contingent Payment in April 2010 as additional purchase price. Since it is not certain that Helius will achieve the Performance Goals, we have not recognized the liability on the Contingent Payment in accordance with ASC 805, “Business Combinations,” which was formerly issued under SFAS No. 141, “Business Combinations.” As of September 30, 2009, we performed an evaluation of Helius’ operating results and expect that Helius will not meet the Performance Goals. As a result, we do not expect to pay the Contingent Payment. However, if it becomes probable that Helius will achieve the Performance Goals pursuant to the Merger Agreement, we will recognize the Contingent Payment as additional goodwill.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~The excess~~Note of4: the total acquisition costs of $10.8 million over the fair value of the net assets acquired from Helius has been reflected as goodwill in accordance with ASC 805-30, “Goodwill or Gain from Bargain Purchase, Including Consideration Transferred.” We believe that the goodwill resulting from the Helius acquisition reflects the expected synergies that will generate long-term revenue growth, expansion of customer service and improvement of customer retention rates as we combine Helius’ customer base and skills as a recognized leader in the internet protocol television solutions business with our extensive broadband networking experience and customer base. Due to the nature of Helius’ business activities, its customer base and other similarities with our North America Enterprise business, Helius operates within our North America Broadband segment. Helius’ results of operations have been included in our consolidated statement of operations since February 2008.Inventories

	Amount
Cash consideration	$	10,500
Direct acquisition costs		305
Total acquisition costs	$	10,805

Inventories consisted of the following (in thousands):

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	March 31,		December 31,
	2010		2009
Production materials and supplies	$	8,547	$	7,896
Work in process		19,064		15,615
Finished goods		34,079		36,733
Total inventories	$	61,690	$	60,244

	Amount
Current assets	$	1,054
Property		658
Intangible assets		7,600
Goodwill		2,661
Total assets		11,973
Current liabilities		(1,168	)
Total liabilities		(1,168	)
Net assets acquired	$	10,805

Inventories are carried at the lower of cost 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.

~~Based~~Note ~~on the~~5: ~~valuation of Helius’ intangible assets~~Property, ~~using an income approach, the fair values of the intangible assets at the acquisition date were as follows (in thousands):~~Net

	Weighted Average Useful Lives (years)		Amount
Customer relationships		8	$	4,260
Patented technology		8		2,870
Trademarks		2		470
Total amortizable intangible assets		8	$	7,600

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

The total amount of goodwill is expected to be deductible for tax purposes. Pro forma financial statements are not presented as Helius’ results of operations were not material to our consolidated financial statements.

		Estimated Useful Lives	March 31,			December 31,
		(years)	2010			2009
Land and improvements		10	$	5,891		$	5,885
Buildings and leasehold improvements		2 - 30		33,532			32,867
Satellite related assets		15		380,394			380,394
Machinery and equipment		1 - 7		277,186			250,345
VSAT operating lease hardware		2 - 5		19,035			18,945
Furniture and fixtures		7		1,579			1,557
Construction in progress	—Jupiter			98,302			66,555
	—Other			14,857			12,888
Total property				830,776			769,436
Accumulated depreciation				(192,377	)		(167,472	)
Total property, net			$	638,399		$	601,964

Satellite related assets primarily consist of SPACEWAYTM 3 (“SPACEWAY 3”), a next generation 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.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Note~~In 3:June ~~Marketable~~2009, ~~Securities~~we entered into an agreement with Space Systems/Loral, Inc. (“SS/L”), under which SS/L will manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. In July 2009, we began the construction of the satellite and capitalized costs associated with the construction of the satellite, including interest incurred and other direct costs related to the satellite. We anticipate launching Jupiter in the first half of 2012.

~~The amortized~~For ~~cost~~the ~~basis~~three ~~and~~months ~~estimated~~ended ~~fair~~March ~~values~~31, of2010, ~~available-for-sale~~we ~~marketable securities~~capitalized ~~are~~$2.0 ~~summarized~~million asof ~~follows~~interest ~~(in~~related ~~thousands):~~to the construction of Jupiter.

	Cost		Unrealized			Estimated
	Basis		Losses			Fair Values
September 30, 2009:
U.S. government bonds and treasury bills	$	15,090	$	(2	)	$	15,088
Money market instruments		9,990		-			9,990
Total available-for-sale securities	$	25,080	$	(2	)	$	25,078
December 31, 2008:
Total available-for-sale securities	$	-	$	-		$	-

Note 6:

Intangible Assets, Net

~~The~~Intangible ~~unrealized losses for the nine months ended September 30~~assets, ~~2009 were~~net ~~not~~consisted ~~material.~~of ~~The~~the ~~investments~~following in(dollars ~~U.S. government bonds and treasury bills have AAA/Aaa ratings from S&P and Moody’s, respectively. The investments~~ in ~~money~~ ~~market instruments have A-1/P-1 ratings from S&P and Moody’s, respectively. All investments mature within one year.~~thousands):

Note 4: Receivables, Net

	Estimated Useful Lives (years)	Cost Basis		Accumulated Amortization			Net Basis
March 31, 2010:
Backlog and customer relationships	4 - 8	$	21,612	$	(16,296	)	$	5,316
Patented technology and trademarks	2 - 10		15,745		(8,275	)		7,470
Total intangible assets, net		$	37,357	$	(24,571	)	$	12,786
December 31, 2009:
Backlog and customer relationships	4 - 8	$	21,612	$	(16,015	)	$	5,597
Patented technology and trademarks	2 - 10		15,745		(7,854	)		7,891
Total intangible assets, net		$	37,357	$	(23,869	)	$	13,488

~~Receivables~~We amortize the recorded values of our intangible assets over their estimated useful lives. As of March 31, ~~net~~ ~~consisted~~2010, our intangible assets included $11.8 million of fully depreciated intangible assets. For the ~~following~~three months ended March 31, 2010 and 2009, we recorded $0.7 million and $1.4 million of amortization expense, respectively. Estimated future amortization expense at March 31, 2010 is as follows (in thousands):

	September 30,			December 31,
	Amount
	2009			2008
Remaining nine months ending December 31, 2010	$	2,048
Trade receivables	$	154,883		$	177,684
Year ending December 31,
Contracts in process		20,622			30,412
2011		2,730
Other receivables		3,360			1,714
2012		2,730
Total receivables		178,865			209,810
2013		2,730
Allowance for doubtful accounts		(13,257	)		(9,551	)
2014		1,237
Total receivables, net	$	165,608		$	200,259
2015		1,237
Thereafter		74
Total estimated future amortization expense	$	12,786

Trade receivables included $11.7 million and $6.8 million of amounts due from affiliates as of September 30, 2009 and December 31, 2008, respectively. Advances and progress billings offset against contracts in process amounted to $1.5 million and $13.9 million as of September 30, 2009 and December 31, 2008, respectively.

Note 5: Inventories

Inventories consisted of the following (in thousands):

	September 30,		December 31,
	2009		2008
Production materials and supplies	$	7,663	$	10,268
Work in process		19,005		12,445
Finished goods		40,558		42,772
Total inventories	$	67,226	$	65,485

Inventories are carried at the lower of cost or market, principally using standard costs adjusted to reflect actual, 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.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 67: ~~Property,~~Other ~~Net~~Assets

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

		Estimated Useful Lives		September 30,			December 31,
		(years)		2009			2008
Land and improvements			10	$	5,880		$	5,871
Buildings and leasehold improvements			2 - 30		32,192			28,090
Satellite related assets			15		380,394			380,394
Machinery and equipment			1 - 7		222,184			134,544
VSAT operating lease hardware			2 - 5		39,168			42,741
Furniture and fixtures			7		1,514			1,092
Construction in progress	—Jupiter				41,418			-
	—Other				10,299			25,180
Total property					733,049			617,912
Accumulated depreciation					(163,715	)		(110,642	)
Total property, net				$	569,334		$	507,270

Satellite related assets primarily consist of SPACEWAYTM 3 (“SPACEWAY 3”), a next-generation 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.

In June 2009, we entered into an agreement with Space Systems/Loral, Inc. (“SS/L”), under which SS/L will manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. In July 2009, we began the construction of the satellite and capitalized costs associated with the construction of the satellite, including interest incurred and other direct costs related to the satellite. We anticipate launching Jupiter in the first quarter of 2012.

For each of the three and nine months ended September 30, 2009, we capitalized $0.4 million of interest related to the construction of Jupiter. In 2008, we capitalized $4.8 million of interest related to the construction of SPACEWAY 3 in the first quarter of 2008 and none for the three months ended September 30, 2008 as we placed SPACEWAY 3 into service in April 2008.

Note 7: Intangible Assets, Net

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

	Estimated Useful Lives (years)		Cost Basis		Accumulated Amortization			Net Basis
September 30, 2009:
Backlog and customer relationships		4 - 8	$	22,092	$	(15,380	)	$	6,712
Patented technology and trademarks		2 - 10		16,393		(7,481	)		8,912
Total intangible assets, net			$	38,485	$	(22,861	)	$	15,624
December 31, 2008:
Backlog and customer relationships		4 - 8	$	22,092	$	(12,694	)	$	9,398
Patented technology and trademarks		2 - 10		16,393		(6,011	)		10,382
Total intangible assets, net			$	38,485	$	(18,705	)	$	19,780

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We amortize the recorded values of our intangible assets over their estimated useful lives. We recorded amortization expense of $1.4 million and $1.6 million for the three months ended September 30, 2009 and 2008, respectively, and $4.2 million and $4.9 million for the nine months ended September 30, 2009 and 2008, respectively.

Estimated future amortization expense as of September 30, 2009 was as follows (in thousands):

	Amount
Remaining three months ending December 31, 2009	$	1,385
Year ending December 31,
2010		2,920
2011		2,902
2012		2,902
2013		2,902
2014		1,270
Thereafter		1,343
Total estimated future amortization expense	$	15,624

Note 8: Other Assets

Other assets consisted of the following (in thousands):

	September 30,		December 31,
	March 31,		December 31,
	2009		2008
	2010		2009
Subscriber acquisition costs	$	3328,~~309~~513	$	4329,~~361~~884
Debt issuance costs		13,~~473~~956		1012,~~312~~899
Long-term loan		10,000		-
Other		25,708		25,741
Other		15,547		14,438
Total other assets	$	68,177	$	68,524
Sea Launch deposit		-		44,400
Total other assets	$	72,329	$	112,511

InNote ~~June 2007,~~8: we initiated an arbitration proceeding against Sea Launch Limited Partnership and Sea Launch Company, LLC (collectively, “Sea Launch”) relating to our SPACEWAY 3 satellite. Because of the material failure of a Sea Launch rocket that occurred in January 2007, the launch of our SPACEWAY 3 satellite was substantially delayed. In anticipation of receiving a full refund of $44.4 million in payments (the “Deposit”) made to Sea Launch, we recorded $44.4 million in “Other assets” in June 2007. In March 2009, we received an arbitral award against Sea Launch entitling us to a refund of the Deposit, in addition to interest of 10% per annum on the Deposit from July 10, 2007 until payment in full of the Deposit.Debt

On June 22, 2009, Sea Launch filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. As a result of this filing, our efforts to pursue collection of the arbitral award against Sea Launch have been stayed by the bankruptcy laws. While we still intend to vigorously pursue collection of our arbitral award, we will have to do so as part of Sea Launch’s bankruptcy process and timetable. Sea Launch is a private company and our evaluation had historically been principally based on Sea Launch’s available credit information and its ability to continue its operations, including its launch backlog and history of successful launches. Based upon information made available in the bankruptcy proceedings, Sea Launch’s credit information and its ability to continue its operations, we determined that the value of the Deposit was impaired in accordance with ASC 360-10-55, “Accounting for the Impairment or Disposal of Long-Lived Assets.” As a result, in June 2009, we recognized an impairment loss of $44.4 million related to our North America Broadband segment in “Loss on impairment” included in the accompanying unaudited Condensed Consolidated Statements of Operations.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 9: Short-Term and Long-Term Debt

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

			September 30,		December 31,
	Interest Rates at		March 31,		December 31,
	Interest Rates		2009		2008
	March 31, 2010		2010		2009
VSAT hardware financing		8.00% - 15.00%	$	3,~~037~~188	$	43,~~864~~158
Revolving bank borrowings		8.2575% ~~- 18.00%~~		1,~~270~~103		21,~~432~~547
Term loans		13.75% - 14.44%		1,610		206
Capital lease and other		6.00% - 39.60%		2,215		2,045
Capital lease and other		6.00% - 39.60%		478		750
Total short-term and the current portion of long-term debt			$	6,506	$	6,750
Total short term borrowings and currentportion of long-term debt			$	6,395	$	8,252

As of ~~September~~ 30March 31, ~~2009~~2010, we had ~~$1.3~~an ~~million of~~ outstanding revolving bank ~~borrowings,~~ ~~which~~borrowing ~~were~~of ~~obtained~~$1.1 bymillion, ~~our~~which ~~subsidiary~~had ina ~~India~~variable ~~under~~interest ~~revolving~~rate ~~lines~~ of ~~credit~~8.75%. ~~with~~The ~~several~~borrowing ~~local~~was ~~banks~~obtained ~~and~~by ~~which~~our ~~had~~Indian asubsidiary ~~weighted~~under ~~average~~its ~~variable interest~~revolving ~~rate~~line of 10credit with a local bank.~~08%.~~ There is no requirement for compensating balances for these borrowings. The total amount available for borrowing by our foreign subsidiaries under ~~the~~various revolving lines of credit was $34.27 million as of ~~September~~ 30March 31, ~~2009~~2010.

Long-term debt consisted of the following (dollars in thousands):

				September 30,			December 31,
		Interest Rates at			March 31,			December 31,
	Interest Rates			2009			2008
		March 31, 2010			2010			2009
Senior Notes(1)		~~9.50%~~	9.50%	$	~~587,341~~$	588,424	$	~~450,000~~$	587,874
Term loans		7.62% - 14.44%			116,196			115,000
Term Loan Facility			7.62%			115,000			115,000
VSAT hardware financing		~~8.00% - 15.00%~~	8.00% - 15.00%		~~6,344~~	5,152		~~8,038~~	5,861
Capital lease and other		~~6.00% - 39.60%~~	6.00% - 39.60%		~~4,945~~	5,722		~~5,260~~	6,222
Total long-term debt				$	~~714,826~~$	714,298	$	~~578,298~~$	714,957
(1) Includes 2006 Senior Notes and 2009 Senior Notes.

On ~~May~~ March 2716, ~~2009~~2010, we, ~~along~~entered into a credit agreement with ~~our~~JP ~~subsidiary,~~Morgan ~~HNS~~Chase ~~Finance~~Bank, ~~Corp~~N.,A. ~~as co-issuer,~~and ~~completed~~Barclays aCapital ~~private~~to ~~debt~~amend ~~offering~~and ofrestate ~~$150.0~~our ~~million~~senior ofsecured 9.$50% ~~senior notes~~million ~~maturing~~revolving oncredit ~~April 15,~~facility ~~2014~~ (the “~~2009~~Revolving ~~Senior~~Credit ~~Notes~~Facility”). Pursuant ~~Interest~~to on the ~~2009~~ ~~Senior~~terms ~~Notes~~of isthe ~~accrued~~agreement, ~~from~~among ~~April~~other 15changes, ~~2009~~the ~~and~~maturity isdate ~~paid~~of ~~semi-annually~~the ~~in arrears~~Revolving onCredit ~~April 15~~Facility ~~and~~was ~~October 15~~extended ofto ~~each~~March ~~year~~16, ~~beginning on October 15~~2014, ~~2009.~~subject ~~After~~to ~~the~~an ~~original~~early ~~issue~~maturity ~~discount~~date of ~~$13.6~~91 ~~million~~days ~~and~~prior ~~related offering~~to ~~expenses~~March of16, ~~approximately~~2014 in ~~$4.5~~the ~~million,~~event weour ~~received~~2009 ~~net~~and ~~proceeds~~2006 ~~of approximately~~Senior ~~$133.6~~Notes ~~million,~~and ~~including~~our ~~$1.7~~Term ~~million~~Loan ofFacility ~~prepaid~~(as ~~interest received~~defined ~~from~~below) ~~the~~are ~~note~~not ~~holders,~~(i) ~~from~~repaid ~~the~~in ~~offering.~~full ~~The~~or ~~2009~~(ii) ~~Senior~~refinanced ~~Notes~~with ~~were offered~~new ~~and~~debt ~~sold~~(or inamended) ~~the~~with ~~United~~maturities ~~States~~of ~~only~~no toearlier ~~qualified~~than ~~institutional~~91 ~~buyers pursuant~~days toafter ~~Rule~~March ~~144A~~16, 2014. The terms of the ~~Securities~~Revolving ~~Act~~Credit ofFacility ~~1933,~~was as amended, ~~(the “Securities~~to ~~Act”~~be: (i) ~~and~~ in ~~offshore~~respect ~~transactions~~of tothe ~~non-United~~interest ~~States~~rate, ~~persons~~at ~~in reliance~~our onoption, ~~Regulation S of~~ the ~~Securities~~ABR ~~Act.~~(as Indefined ~~connection~~in ~~with~~ the ~~offering of~~Revolving ~~the~~Credit ~~2009~~Facility) ~~Senior~~plus ~~Notes,~~2.00% weor ~~entered~~the ~~into~~Adjusted aLIBOR ~~registration~~(as ~~rights~~defined ~~agreement requiring~~in usthe toRevolving ~~complete~~Credit aFacility) ~~registered~~plus ~~exchange~~3.00% ~~offer~~and ~~relating~~(ii) toin ~~the~~respect ~~2009~~of ~~Senior Notes~~the ~~within~~participation ~~360~~fee ~~days~~for ~~after~~outstanding ~~May~~letters 27of credit, ~~2009~~3.00% per Onannum, ~~August~~in ~~17,~~each ~~2009,~~case wesubject ~~completed~~to ~~the registered~~downward ~~exchange~~adjustment ~~offer~~based ~~pursuant~~on toour leverage ratio. For the ~~registration~~three ~~rights~~months ~~agreement. Accordingly~~ended March 31, ~~the~~2010 and 2009, ~~Senior~~there ~~Notes~~were ~~have~~no ~~been~~borrowings ~~registered~~ under the ~~Securities Act~~Revolving Credit Facility. As of ~~September 30~~March 31, ~~2009~~2010, wethe ~~recorded~~Revolving ~~$6.5~~Credit ~~million~~Facility ofhad ~~accrued~~total ~~interest payable,~~outstanding ~~including~~letters ~~$1.7~~of ~~million~~credit of ~~prepaid~~$2.1 ~~interest~~million ~~received~~and ~~from~~an ~~the~~available ~~note holders,~~borrowing ~~related~~capacity toof ~~the~~$47.9 ~~2009 Senior Notes~~million.

The $450 million senior notes (the “2006 Senior Notes”) have a fixed interest rate of 9.50% per annum and mature on April 15, 2014. Interest on the 2006 Senior Notes is paid semi-annually in arrears on April 15 and October 15. As of September 30, 2009 and December 31, 2008, we recorded $19.6 million and $9.0 million, respectively, of accrued interest payable related to the 2006 Senior Notes.10

We have a senior secured $50 million revolving credit facility (the “Revolving Credit Facility”), which matures on April 22, 2011. The interest rate associated with the Revolving Credit Facility is based on, at our option, the ABR rate plus 1.50% per annum or Adjusted LIBOR plus 2.50% per annum. For the nine months ended September 30, 2009 and 2008, there were no borrowings under the Revolving Credit Facility. As of September 30, 2009, the Revolving Credit Facility had total outstanding letters of credit of $3.0 million and an available borrowing capacity of $47.0 million.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In ~~February~~ ~~2007~~May 2009, we, ~~borrowed~~along ~~$115~~with ~~million~~our ~~from~~subsidiary, aHNS ~~syndicate~~Finance ~~of banks (the “Term Loan Facility”)~~Corp., ~~which~~as ~~matures on April 15~~Co-Issuer, ~~2014.~~completed ~~The~~a ~~interest~~private ondebt ~~the~~offering ~~Term~~of ~~Loan Facility~~$150.0 ismillion ~~paid~~of ~~quarterly~~9.50% atsenior ~~Adjusted~~notes ~~LIBOR~~maturing ~~(as~~on ~~defined~~April 15, in2014 (the ~~Term~~“2009 ~~Loan Facility~~Senior ~~and existing Revolving Credit Facility~~Notes”) ~~plus 2~~.~~50%~~ ~~per~~Interest ~~annum.~~on ~~To mitigate~~ the ~~variable~~2009 ~~interest~~Senior ~~rate~~Notes ~~risk~~is ~~associated~~accrued ~~with~~from ~~the Term Loan Facility~~April 15, we ~~entered~~2009 ~~into~~and ais ~~swap~~paid ~~agreement~~semi-annually toin ~~swap~~arrears ~~the~~on ~~Adjusted~~April 15 ~~LIBOR~~and ~~for~~October 15 ~~a fixed interest rate~~ of ~~5.12%~~each ~~per~~year, ~~annum~~beginning ~~(the~~on ~~“Swap~~October 15, ~~Agreement”)~~2009. As aof ~~result~~March 31, ~~the~~2010 ~~Term~~and ~~Loan Facility~~December ~~has~~31, a2009, ~~fixed~~we ~~interest~~recorded ~~rate of 7~~$6.~~62%~~5 ~~per~~million ~~annum. As of each of September 30, 2009~~ and ~~December~~$3.0 31million, ~~2008~~respectively, ~~interest~~of accrued ~~based~~interest onpayable ~~the~~related ~~Swap~~to ~~Agreement and~~ the ~~Term~~2009 ~~Loan~~Senior ~~Facility was $0~~Notes.~~8 million.~~

~~Although the~~In ~~terms~~February ~~and covenants with respect to the 2006 Senior Notes are substantially identical to the 2009 Senior Notes~~2007, ~~the~~we ~~2009~~borrowed ~~Senior~~$115 ~~Notes~~million ~~were~~from ~~issued under~~ a ~~separate~~ ~~indenture~~syndicate ~~and do not vote together with the 2006 Senior Notes. Each~~ of ~~the~~ ~~indentures~~banks ~~governing the 2006 Senior Notes and the 2009 Senior Notes~~ (~~collectively,~~ the “~~Senior~~Term ~~Notes~~Loan Facility”), ~~the~~which ~~agreement~~matures ~~governing~~on ~~the~~April 15, ~~amended Revolving~~2014. ~~Credit~~The ~~Facility~~interest ~~and~~on the ~~agreement governing the~~ Term Loan Facility ~~require~~ usis topaid ~~comply~~quarterly ~~with~~at ~~certain~~Adjusted ~~affirmative~~LIBOR ~~and negative covenants:~~ (~~i) in the case of the indentures, for so long~~ as ~~any~~defined ~~Senior Notes are outstanding; (ii)~~ in the ~~case~~Term ofLoan ~~the amended Revolving Credit~~ Facility,) ~~so long~~plus as2.50% per ~~the~~annum. ~~amended~~To ~~Revolving~~mitigate ~~Credit Facility is in effect; and (iii) in~~ the ~~case~~variable ofinterest ~~the~~rate ~~Term~~risk ~~Loan~~associated ~~Facility,~~with ~~for so long as~~ the Term Loan Facility remains outstanding. Negative covenants contained in these agreements include limitations on our ability and/or certain of our subsidiaries’ ability 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~~we orentered ~~repurchase debt; make loans and investments; enter~~ into ~~agreements~~ ~~that~~a ~~restrict~~swap ~~distributions~~agreement ~~from~~to ~~our~~swap ~~subsidiaries;~~the ~~sell~~Adjusted ~~assets~~LIBOR ~~and capital~~for ~~stock~~a offixed ~~our~~interest ~~subsidiaries;~~rate ~~enter into certain transactions with affiliates; consolidate or merge with or into, or sell substantially all~~ of ~~our assets~~5.12% per ~~to,~~annum ~~another~~(the ~~person;~~“Swap ~~and enter into new lines of business~~Agreement”). InAs ~~addition~~a ~~to these negative covenants~~result, the ~~amended Revolving Credit Facility, the indentures governing the Senior Notes and/or the agreement governing the~~ Term Loan Facility ~~contain~~ ~~affirmative~~has ~~covenants~~a ~~that~~fixed ~~require~~interest usrate ~~to:~~of ~~(i)~~7.62% ~~preserve~~per ~~our businesses~~annum. ~~and~~As ~~properties;~~of ~~(ii) maintain~~March ~~insurance~~31, ~~over~~2010 ~~our assets; (iii) pay~~ and ~~discharge~~December ~~all~~31, ~~material~~2009, ~~taxes~~interest ~~when~~accrued ~~due;~~based ~~and~~on ~~(iv) furnish~~ the ~~lenders’~~Swap ~~administrative~~Agreement ~~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~~Term ~~period~~Loan ~~being reported,~~Facility ~~litigation~~was ~~and other notices, compliance with laws, maintenance of records and other such customary covenants~~$0.8 ~~Management believes that we were in compliance with all of our debt covenants as of September 30, 2009~~million.

~~We entered~~In ~~into~~April a2006, ~~capital~~we ~~lease~~issued ~~with~~$450 95million ~~West~~of Co9.,50% ~~Inc.~~senior ~~(“95~~notes ~~West~~maturing ~~Co.”)~~on ~~and its parent~~April 15, ~~Miraxis~~2014 ~~License~~(the ~~Holdings,~~“2006 ~~LLC~~Senior ~~(“MLH~~Notes”)~~, which are our related parties as discussed in Note 15—Transactions with Related Parties~~. ~~Pursuant~~Interest toon the ~~capital lease~~2006 ~~agreement,~~Senior 95Notes ~~West~~is ~~Co.~~paid ~~and~~semi-annually ~~MLH~~in ~~agreed~~arrears toon ~~provide a series of coordination agreements allowing us to operate SPACEWAY 3 at the 95° west longitude orbital slot where 95~~April ~~West~~15 ~~Co.~~ and ~~MLH have higher priority rights~~October 15. As of ~~September 30~~March 31, ~~2009,~~2010 ~~the~~and ~~remaining~~December ~~debt~~31, ~~balance~~2009, ~~under~~we ~~the~~recorded ~~capital lease was~~ $519.36 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 as follows: $08.759 million, ~~for the year ending December 31~~respectively, ~~2010~~of ~~and~~accrued ~~$1.0 million~~interest ~~for~~payable ~~each~~related ofto the ~~years~~2006 ~~ending~~Senior ~~December 31, 2011 through 2016~~Notes.

~~Note~~Although 10the 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 us to comply with certain affirmative and negative covenants: ~~Financial~~(i) in ~~Instruments~~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 our ability and/or certain of our subsidiaries’ ability 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 our 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. Management believes that we were in compliance with all of our debt covenants as of March 31, 2010.

In 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 14—Transactions with Related Parties. Pursuant to the capital lease agreement, 95 West Co. and MLH agreed to provide a series of coordination agreements allowing us 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, 2010, the remaining debt balance under the capital lease was $5.3 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 as follows: $0.75 million for the year ending December 31, 2010 and $1.0 million for each of the years ending December 31, 2011 through 2016.

Note 9:

Financial Instruments

Interest Rate Swap

The 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, we recorded a net unrealized loss of $1.4 million and $1.0 million for the three months ended September 30, 2009 and 2008, respectively, and a net unrealized gain of $5.9 million and a net unrealized loss of $0.6 million for the nine months ended September 30, 2009 and 2008, respectively, in “Accumulated other comprehensive loss” 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, 2009 through 2013 and $3.3 million for the year ending December 31, 2014. We recorded interest expense of $2.3 million and $2.2 million for the three months ended September 30, 2009 and 2008, respectively and of $6.8 million and $6.7 million for the nine months ended September 30, 2009 and 2008, respectively, on the Term Loan Facility.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Note~~We ~~11:~~account ~~Fair~~for ~~Value~~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 loss of $1.0 million and a net unrealized gain of $4.5 million for the three months ended March 31, 2010 and 2009, respectively, in accumulated other comprehensive loss 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, 2010 through 2013 and $3.3 million for the year ending December 31, 2014. For each of the three months ended March 31, 2010 and 2009, we recorded $2.2 million interest expense on the Term Loan Facility.

~~Under~~Note ~~ASC 820,~~10: ~~fair~~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:Value

Under ASC 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:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 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.

Level 3-Inputs 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.

In determining fair value, we use various valuation approaches, including market, income and/or cost approaches. Other valuation techniques involve significant management judgment. As of ~~September 30~~March 31, ~~2009~~2010, the carrying 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.

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

Our 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, 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.

~~Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands):~~12

				September 30, 2009
	Level		Included In	Carrying Value		Fair Value
Marketable securities		1	Assets	$	25,078	$	25,078
2006 Senior Notes		1	Liabilities	$	450,000	$	453,317
2009 Senior Notes		1	Liabilities	$	150,000	$	151,106
Swap on the Term Loan Facility		2	Liabilities	$	11,489	$	11,489

We measure certain nonfinancial assets and liabilities at fair value on a nonrecurring basis in accordance with ASC 820. As described in Note 8—Other Assets, we recognized an impairment loss of $44.4 million related to our North America Broadband segment in the second quarter of 2009 as a result of using Level 3 inputs in determining the fair value of the Deposit. Since Sea Launch is a private company, the evaluation required significant management inputs and judgments. Our evaluation was based upon information made available in the bankruptcy proceedings, Sea Launch’s credit information and its ability to continue its operations.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Note~~Assets ~~12:~~and ~~Income~~liabilities ~~Taxes~~measured at fair value on a recurring basis are summarized below (dollars in thousands):

We are a limited liability company and have elected to be treated as a partnership for income tax purposes. As such, our U.S. federal and state income taxes (in the states which tax limited liability companies as partnerships) are the direct responsibility of our members. Our Parent holds 100% of our Class A membership interests; and therefore, our activity is reported on our Parent’s income tax returns. Under the terms of the Contribution and Membership Interest Purchase Agreement dated December 3, 2004, as amended (the “December 2004 Agreement”), among the Company, SkyTerra Communications, Inc. (“SkyTerra”), the DIRECTV Group, Inc. (“DIRECTV”) and DTV Network Systems, Inc. (“DTV Networks”), DIRECTV retained the domestic tax benefits of the Company occurring prior to April 23, 2005 and has responsibility for all of the pre-closing domestic and foreign 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. Our income tax expense represents taxes associated with our foreign subsidiaries and state taxes in the states that recognize limited liability companies as taxable corporations. For the three and nine months ended September 30, 2009, we recorded a net income tax expense of $1.0 million and $0.8 million, respectively. Our income tax expense was partially offset by an income tax benefit generated by our Indian subsidiary as a result of being engaged in telecommunications infrastructure development. Indian tax law provides for a deduction of 100% of profits and gains derived from qualifying infrastructure businesses for ten consecutive assessment years. For the three and nine months ended September 30, 2008, we recorded $2.3 million and $4.1 million, respectively, of income tax expense.

				March 31, 2010
	Level		Included In	Carrying Value		Fair Value
Marketable securities		1	Marketable securities	$	43,672	$	43,672
2006 Senior Notes		1	Long-term debt	$	450,000	$	462,375
2009 Senior Notes		1	Long-term debt	$	150,000	$	154,163
Interest rate swap on the Term Loan Facility		2	Other long-term liabilities	$	11,477	$	11,477

~~For~~Note ~~the three~~11: ~~and~~Income nine months ended September 30, 2009, certain of our foreign subsidiaries utilized $0.1 million and $1.4 million, respectively, of their net operating loss carry-forwards. Since they have not met the “more likely than not” criteria of ASC 740, they maintain a full valuation allowance on their deferred tax assets as of September 30, 2009. In accordance with ASC 805, any benefit realized from the reversal of the U.K. and German valuation allowance associated with the utilization of their respective deferred tax assets will be recorded as a reduction to income tax expense.Taxes

~~For~~We ~~the nine~~are ~~months~~a ~~ended~~limited ~~September~~liability ~~30,~~company ~~2009,~~and wehave ~~did~~elected ~~not~~to ~~identify~~be ~~any~~treated ~~significant uncertain~~as a partnership for income tax ~~positions~~purposes. As ~~a result~~such, weour ~~did~~U.S. ~~not~~federal ~~accrue~~and ~~any~~state ~~interest~~income ~~or penalties~~taxes ~~associated~~(in ~~with~~the ~~uncertain~~states which tax ~~positions.~~limited Weliability ~~recognize~~companies ~~interest~~as ~~accrued related~~partnerships) toare ~~unrecognized~~the ~~tax~~direct ~~benefits~~responsibility inof ~~operating~~our ~~expenses~~members. Our Parent holds 100% of our Class A membership interests; and ~~penalties~~therefore, ~~in income~~our ~~tax~~activity ~~expense~~is inreported on our ~~Condensed~~Parent’s ~~Consolidated~~income ~~Statements~~ tax returns. Under the terms of ~~Operations~~the Contribution and Membership Interest Purchase Agreement dated December 3, 2004, as amended, among the Company, SkyTerra Communications, Inc., Wethe doDIRECTV ~~not~~Group, ~~believe~~Inc. ~~that~~(“DIRECTV”) and DTV Network Systems, Inc. (“DTV Networks”), DIRECTV retained the ~~unrecognized~~domestic tax benefits ~~will significantly~~of ~~increase~~the orCompany ~~decrease~~occurring ~~within~~prior to April 23, 2005 and has responsibility for all of the ~~next~~pre-closing ~~twelve~~domestic ~~months~~and foreign income tax liabilities of DTV Networks. ~~Following~~We ishave recorded a ~~description~~ ofliability in the ~~tax~~balance ~~years~~sheet ~~that~~for ~~remain~~the ~~subject~~estimated amount we may be required to ~~examination~~pay byto ~~major~~DIRECTV resulting from prepaid taxes exceeding tax ~~jurisdictions:~~ liabilities as of April 22, 2005.

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

For the three months ended March 31, 2010 and 2009, we recorded a net income tax expense of $1.2 million and a net income tax benefit of $0.7 million, respectively. Our income tax expense represents taxes associated with our foreign subsidiaries and state taxes in the states that recognize limited liability companies as taxable corporations.

~~Note~~Certain ~~13:~~of ~~Employee~~our ~~Share~~subsidiaries are expected to utilize a portion of their net operating loss carry-~~Based~~forwards ~~Payments~~during 2010. These subsidiaries have not met the more-likely-than-not criteria of ASC 740 “Income Taxes” and therefore maintain a full valuation allowance on their deferred tax assets as of March 31, 2010. Any benefit realized from the reversal of valuation allowance will be recorded as a reduction to income tax expense.

~~HCI’s 2006~~For ~~Equity~~the ~~and~~three ~~Incentive~~months ~~Plan~~ended March 31, 2010, we did not identify any significant uncertain tax positions. We do not believe that the unrecognized tax benefits will significantly increase or decrease within the next twelve months. Following is a description of the tax years that remain subject to examination by major tax jurisdictions:

In January 2006, HCI’s Board of Directors approved the HCI 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, employees, advisors and consultants of HCI and its subsidiaries who are selected by HCI’s Compensation Committee for participation in the Plan. We recorded compensation expense related to the restricted stock awards, issued to our employees, and restricted stock units, issued only to our international employees, after adjustment for forfeitures, of $0.7 million and $0.6 million for the three months ended September 30, 2009 and 2008, respectively and of $1.9 million and $2.1 million for the nine months ended September 30, 2009 and 2008, respectively. As of September 30, 2009, we had $3.5 million

United States - Federal		2007 and forward
United States - Various States		2005 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

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ofNote ~~unrecognized~~12: ~~compensation~~Employee ~~expense~~Share-Based ~~related to the restricted stock awards and restricted stock units, which is recognized over a weighted average life of 1.54 years.~~Payments

HCI’s 2006 Equity and Incentive Plan

In January 2006, HCI’s Board of Directors approved the HCI 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, employees, advisors and consultants of HCI and its subsidiaries who are selected by HCI’s Compensation Committee for participation in the Plan. We recorded compensation expense related to the restricted stock awards, issued to our employees, and restricted stock units, issued only to our international employees, after adjustment for forfeitures, of $0.6 million for each of the three months ended March 31, 2010 and 2009. As of March 31, 2010, we had $2.2 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 1.14 years.

Summaries of non-vested restricted stock awards, excluding awards issued to HCI’s directors, and restricted stock units are as follows:

Restricted Stock Awards

	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2008		144,100		$	47.41
Non-vested at December 31, 2009		72,360		$	47.58
Forfeited		(~~5,300~~500	)	$	4645.1802
Vested		(664,~~215~~175	)	$	4749.4241
Non-vested at September 30, 2009		72,585		$	47.48
Non-vested at March 31, 2010		67,685		$	47.48

The total fair value of vested shares for the nine months ended September 30, 2009 and 2008 were $3.1 million and $5.0 million, respectively.

Restricted Stock Units

	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2008		8,350		$	46.12
Granted		4,000		$	8.82
Vested		(1,500	)	$	50.00
Non-vested at September 30, 2009		10,850		$	31.83

As of December 31, 2009 and March 31, 2010, we had 8,675 non-vested restricted stock units with a weighted-average grant-date fair value of $28.73.

The fair value of vested shares was $ 0.1 million for the nine months ended September 30, 2009. None of the restricted stock units vested during the nine months ended September 30, 2008.

Stock Option Program

On April 24, 2008, HCI’s Compensation Committee made ~~awards of~~ stock ~~options~~option awards under the Plan (the “Stock Option Program”), which consisted of the issuance of non-qualified stock options to employees of HCI and its subsidiaries. ~~A total of 700,000 options (the “Option Pool”) have been authorized under the Stock Option Program for option awards during the period of April 24, 2008 to December 31, 2011.~~ The grant and exercise price of the stock options ~~was~~is the closing price of HCI’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. In accordance with the terms of the Stock Option Program, the Compensation Committee of HCI delegated to our Chief Executive Officer (“CEO”) and President the authority to award options, at his discretion, to the current and future employees of HCI and its subsidiaries. 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 ~~based on the assumptions noted in the table below~~.

~~Since~~On March 19, 2009, HCI ~~became~~ aoffered ~~public~~eligible ~~registrant~~participants in ~~February~~the ~~2006~~Stock ~~and~~Option ~~does~~Program ~~not~~the ~~have~~opportunity ~~sufficient history~~ to ~~measure~~exchange ~~expected~~(the ~~volatility~~“Exchange ~~using~~Offer”) ~~its~~all ~~own~~or ~~stock~~a ~~price~~portion ~~history~~of ~~and~~their ~~does~~eligible ~~not have~~outstanding ~~the~~stock ~~history~~options tofor ~~compute~~new ~~the expected term of the~~ stock options, ~~HCI utilized an average volatility based~~ on a ~~group~~one-for-one ofbasis, ~~companies~~through ~~identified~~an asexchange ~~its~~offer, ~~peers until~~which ~~such~~expired ~~time~~on ~~that~~April 16, ~~HCI~~2009. ~~has~~Each ~~adequate~~new ~~stock~~option ~~history~~(the of“New ~~its~~Options”) ~~own.~~has ~~HCI~~an ~~estimated the~~exercise ~~expected~~price ~~term~~ of ~~the stock options~~$14.47, which iswas ~~closely aligned with~~ the ~~identified~~ ~~peer~~closing ~~group,~~price ~~based~~of ~~upon~~our ~~the~~common ~~current~~stock ~~anticipated~~on ~~corporate~~April 15, ~~growth~~2009, ~~the currently~~and ~~identified~~a ~~market~~new ~~value~~vesting ofschedule ~~the~~to ~~stock~~reflect ~~price~~the atnew ~~issuance~~grant ~~and~~date ~~the vesting schedule~~ of ~~the~~April 16, ~~stock options~~2009. ~~The risk-free interest rate is based on the published U.S. Treasury~~

As a result of the Exchange Offer, 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 $2.3 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.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

OnA ~~March 19,~~summary ~~2009,~~of ~~HCI~~option ~~offered~~activity ~~eligible~~under ~~participants in~~ the Stock Option Program ~~the opportunity~~is topresented 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 Option”) 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.below:

As a result of the Exchange Offer, 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 $2.3 million was computed using the 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.

	Option Shares			Weighted-Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value(1)
Outstanding at December 31, 2009		648,050		$	16.77	9.37	$	6,326
Forfeited or expired		(4,650	)	$	14.47
Outstanding at March 31, 2010		643,400		$	16.78	9.12	$	7,263
Vested and expected to vest at March 31, 2010		579,060		$	16.78	9.12	$	6,537
Exercisable at March 31, 2010		-		$	-
(1) In thousands.

The ~~key assumptions~~compensation ~~for~~expense ~~the~~related to stock option awards ~~are~~is asrecognized ~~follows:~~on a straight-line basis over the four-year vesting period beginning on the date of grant. We recorded $1.0 million and $0.8 million of compensation expense for the three months ended March 31, 2010 and 2009, respectively. As of March 31, 2010, we had $9.1 million of unrecognized compensation expense for non-vested stock options, which will be recognized over a weighted average period of 3.1 years.

		Nine Months Ended
		September 30, 2009
Volatility range		47.92% — 55.00%
Weighted-average volatility		47.98%
Expected term		5 years
Risk-free interest rate range		1.50% — 1.71%
Weighted-average risk-free interest rate		1.71%

	Option Shares			Weighted-Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value*
Outstanding at December 31, 2008		552,400		$	53.67		9.32	$	-
Retired		(546,900	)	$	54.00
Granted		546,900		$	14.47		9.80	$	-
Forfeited or expired		(2,300	)	$	23.06
Outstanding at June 30, 2009		550,100		$	14.49		9.80	$	4,586
Forfeited or expired		(500	)	$	14.47
Outstanding at September 30, 2009		549,600		$	14.49		9.54	$	8,709
Vested and expected to vest at September 30, 2009		494,640		$	14.49		9.54	$	7,838
Exercisable at September 30, 2009		-		$	-
* In thousands.

The compensation expense related to stock option awards is recognized on a straight-line basis over the four-year vesting period beginning on the date of grant. We recorded $0.9 million and $0.8 million compensation expense for the three months ended September 30, 2009 and 2008, respectively, and $2.6 million and $1.3 million compensation expense for the nine months ended September 30, 2009 and 2008, respectively. As of September 30, 2009, we had $10.0 million of unrecognized compensation expense for non-vested stock options, which are expected to be recognized over a weighted average period of 3.54 years. No stock options vested during the three months ended September 30, 2009.

Bonus Unit Plan

In July 2005, we 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 the Company. Pursuant to the Bonus Unit Plan, if participants in the Bonus Unit Plan are employed by the Company at the time of the predetermined exchange dates, they are entitled to exchange their vested bonus units for shares of HCI’s common stock. The number of HCI’s 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 HCI’s 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 March 31, 2010 and 2009 related to the Bonus Unit Plan.

17The following table summarizes changes in bonus units under the Bonus Unit Plan:

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	Three Months Ended
	March 31,
	2010			2009
Non-vested, beginning balance		2,453,250			2,500,000
Forfeited		(13,750	)		-
Non-vested balance at March 31,		2,439,500			2,500,000

HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On September 19, 2008, we issued 310,000 bonus units to certain employees of the Company pursuant to the terms of the Bonus Unit Plan. The fair value of the new issuance of bonus units was determined using a forward pricing model. The total estimated compensation expense for the new issuance of bonus units is $1.7 million, after adjustment for a 10% estimated forfeiture rate. Pursuant to ASC 718, “Compensation—Stock Compensation,” we amortize the compensation expense of the Bonus Unit Plan over the vesting period beginning on the date of grant. We recognized compensation expense of $0.2 million and $0.1 million for the three months ended September 30, 2009 and 2008, respectively, and of $0.6 million and $0.2 million for the nine months ended September 30, 2009 and 2008, respectively. There were no bonus units granted or forfeited during the three and nine months ended September 30, 2009. As of September 30, 2009, there were 2.5 million non-vested bonus units outstanding.

Class B Membership Interests

Class B membership interests in the Company were issued to certain members of our senior management, two of our former senior management and a member of our Board of Managers and HCI’s Board of Directors. ~~Pursuant~~The Class B membership interests are subject to ~~ASC~~certain ~~718~~vesting requirements, ~~the~~with ~~Company determined~~50% ~~that~~of the Class B membership interests ~~had~~subject ~~nominal~~to ~~value~~time atvesting ~~the~~over ~~date of~~five ~~grant,~~years and ~~minimal~~the ~~compensation~~other ~~expense~~50% ~~was~~vesting ~~recorded~~based ~~for~~upon ~~each~~certain ofperformance criteria. The Class B membership interests subject to the ~~three months~~performance ~~ended~~criteria ~~September~~vested 30on April 23, ~~2009~~2010. ~~and~~At ~~2008~~the ~~and~~holders’ ~~$0.1~~election, ~~million~~vested ofClass ~~compensation expense~~B membership interests may be exchanged for ~~each~~our common stock. The number of ~~the~~shares ~~nine~~of ~~months~~our ~~ended~~common ~~September~~stock ~~30,~~to ~~2009~~be ~~and~~issued ~~2008.~~upon ~~There were~~such noexchange is based upon the fair market value of such vested Class B membership ~~interests~~interest ~~granted~~tendered orfor ~~forfeited~~exchange ~~during~~divided by the ~~three~~average ~~and nine~~closing ~~months~~trading ~~ended~~price ~~September~~of ~~30,~~our ~~2009.~~common Asstock for the 20 business days immediately preceding the date of ~~September~~such 30exchange. On September 25, 2009, ~~there~~HCI ~~were~~registered 375,~~656 outstanding~~000 shares of its 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.

~~Note 14: Long-Term Cash Incentive Retention Program~~15

In connection with the April 22, 2005 transaction between DIRECTV and SkyTerra, the Company established the Long-Term Cash Incentive Retention Program (the “Retention Program”), a one-time employee retention program, which was designed to retain a select group of employees chosen by the Company’s senior management. The Retention Program provides that participants, none of which are members of our executive management, will receive a cash payout equal to each participant’s individual target bonus amount if (i) the individual remains employed by the Company on the vesting date of April 22, 2009 and (ii) the Company successfully attains its earnings goal for 2008.

In accordance with the Retention Program, the Company established the earnings goal in March 2008, which was equivalent to its planned 2008 Adjusted EBITDA, defined as earnings before interest, tax, depreciation and amortization further adjusted to exclude certain adjustments consistent with the definition used in calculating the Company’s covenant compliance under its credit agreements and the indentures governing the Senior Notes. The Company successfully attained 100% of its Adjusted EBITDA goal for 2008. As a result, the Company paid $14.7 million, in the aggregate, to participants under the Retention Program in 2009.

Note 15: Transactions with Related Parties

In 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 Parent’s controlling stockholder.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pursuant to ASC 718 “Compensation—Stock Compensation,” the Company determined that the Class B membership interests had nominal value at the date of grant, and, accordingly, minimal compensation expense was recorded for each of the three months ended March 31, 2010 and 2009. There were no Class B membership interests issued or forfeited during the three months ended March 31, 2010. As of March 31, 2010, there were 3,330 outstanding Class B membership interests.

Note 13:

Long-Term Cash Incentive Retention Program

In 2005, the Company established a one-time employee retention program (“Retention Program”), which was designed to retain certain employees chosen by HNS’ senior management. As a result of HNS successfully attaining 100% of its earnings goal for 2008, as defined in the Retention Program, the Company paid an aggregate of $14.7 million to eligible participants under the Retention Program in 2009.

Note 14:

Transactions with Related Parties

Hughes Telematics, Inc.

In July 2006, we 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 we will be HTI’s preferred engineering services provider. The license is royalty-free, except that HTI has agreed to pay a royalty to us in the event HTI no longer has a commercial or affiliated relationship with us. ~~As contemplated by the license terms, we have commenced providing development services and equipment to HTI.~~

In October 2007, we entered into an agreement with HTI and a customer of HTI, whereby we 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, the Company and HTI have entered into a letter agreement pursuant to which HTI has agreed to take certain actions to enable us to assume HTI’s obligations in the event that such action is required. However, as a result of the Merger, as defined and described below, our obligations to HTI and its customer expired when HTI became a public company in March 2009 with an initial market capitalization value greater than $300.0 million.

In January 2008, we entered into an agreement with HTI for the development of 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. The agreement also provided that, subject to certain specified performance conditions, we will serve as the exclusive manufacturer and supplier of TCU’s for HTI.

In March 2009, HCI exchanged $13.0 million of HTI receivables for HTI convertible preferred stock (“HTI Preferred Stock”) 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, ~~wherein~~ HTI became a publicly traded company, and HCI’s HTI Preferred Stock was converted into HTI common stock (“HTI Shares”). There are certain restrictions and/or earn-out provisions applicable to the HTI Shares pursuant to the Merger agreement. If the full earn-out is achieved, HCI’s investment could represent approximately 3.8% of HTI’s outstanding common stock.

In August 2009, HTI terminated substantially all of the development engineering and manufacturing ~~activities~~ services with us as a result of the bankruptcy filing of one of HTI’s customers. WeOn ~~are~~December 18, ~~working~~2009, ~~closely~~the Company entered into a promissory note with HTI to(“Promissory ~~conclude~~Note”) for $8.3 million of account receivables that HTI owed to the ~~program~~Company. The Promissory Note has a maturity date of December 31, 2010 and toan ~~settle all~~interest ~~remaining~~rate ~~obligations~~of 12% per annum.

HTI is controlled by an affiliate of Apollo. Jeffrey A. Leddy, a member of our Board of Managers and HCI’s Board of Directors, is the CEO and a director of HTI and owns less than 1% of HTI’s equity as of September 30, 2009. In addition, Andrew Africk and Aaron Stone, members of our Board of Managers and HCI’s Board of Directors, are directors of HTI and partners of Apollo.16

Hughes Systique Corporation (“Hughes Systique”)

We have contracted with Hughes Systique for software development services. The founders of Hughes Systique include Pradman Kaul, our and HCI’s Chief Executive Officer (“CEO”) and President, and certain former employees of the Company, including Pradeep Kaul, who is the CEO and President of Hughes Systique, our former Executive Vice President and the brother of our CEO and President. HCI acquired an equity investment in Hughes Systique Series A Preferred shares of $3.0 million and $1.5 million in October 2005 and January 2008, respectively. As of September 30, 2009, on an undiluted basis, HCI owned approximately 45.23% of Hughes Systique’s outstanding shares, and our CEO and President and his brother, in the aggregate, owned approximately 25.61% of Hughes Systique’s outstanding shares. In addition, our CEO and President and Jeffrey A. Leddy, a member of our Board of Managers and HCI’s Board of Directors, serve on the board of directors of Hughes Systique.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

HTI is controlled by an affiliate of Apollo. Jeffrey A. Leddy, a member of our Board of Managers and HCI’s Board of Directors, is the CEO and a director of HTI and owns less than 1% of HTI’s equity as of March 31, 2010. In addition, Andrew Africk and Aaron Stone, members of our Board of Managers and HCI’s Board of Directors, are directors of HTI and partners of Apollo.

Hughes Systique Corporation (“Hughes Systique”)

We have contracted with Hughes Systique, an entity consolidated with our Parent, for software development services. The founders of Hughes Systique include Pradman Kaul, our and HCI’s Chief Executive Officer (“CEO”) and President, and certain former employees of the Company, including Pradeep Kaul, who is the CEO and President of Hughes Systique, our former Executive Vice President and the brother of our CEO and President. HCI acquired an equity investment in Hughes Systique Series A Preferred shares of $3.0 million and $1.5 million in October 2005 and January 2008, respectively. As of March 31, 2010, on an undiluted basis, HCI owned approximately 45.23% of Hughes Systique’s outstanding shares, and our CEO and President and his brother, in the aggregate, owned approximately 25.61% of Hughes Systique’s outstanding shares. In addition, our CEO and President and Jeffrey A. Leddy, a member of our Board of Managers and HCI’s Board of Directors, serve on the board of directors of Hughes Systique.

Hughes Communications, Inc.

We have a management and advisory services agreement with HCI, our Parent, pursuant to which HCI agrees to provide us, through its officers and employees, general support, advisory, and consulting services in relation to our business. Pursuant to the agreement, we reimburse HCI for its out of pocket costs and expenses incurred in connection with the services, including an amount equal to 98% of the compensation of certain HCI executives plus a 2% service fee. ~~On March 12, 2009, we transferred $13.0 million of receivables that Hughes Telematics, Inc. (“HTI”) owed to us to our Parent for $13.0 million in cash.~~

Agreement with 95 West Co., Inc.

In July 2006, we entered into an 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 us to operate SPACEWAY 3 at an orbital position where such parties have higher-priority rights. ~~Jeffery~~Jeffrey A. Leddy, a member of our Board of Managers and HCI’s Board of Directors, 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 Managers and HCI’s Board of Directors, is also a director of MLH. As part of the agreement, we 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 conditions in the agreement including our ability to operate SPACEWAY 3. As of ~~September 30~~March 31, ~~2009~~2010, the remaining debt balance under the capital lease was $5.3 million, which was included in “Capital lease and other” in the short-term and long-term debt tables included in Note 98—~~Short Term and Long-Term~~ Debt.

Smart & Final, Inc. ~~(“Smart & Final”)~~

As of ~~September~~ 30March 31, ~~2009~~2010, Apollo owned, directly or indirectly, 95% of Smart & Final, Inc. (“Smart & Final”). We provide broadband products and services to Smart & Final.

~~Intelsat Holdings Limited (“Intelsat”)~~17

We lease satellite transponder capacity from Intelsat. In addition, our Italian subsidiary, Hughes Network Systems, S.r.L., entered into a cooperation agreement with Intelsat, Telespazio and Telecom Italia. Under this agreement, the parties are cooperating to provide broadband satellite services for Italian businesses operating in Eastern Europe and North Africa. Effective February 4, 2008, Apollo divested its entire ownership interest in Intelsat, and as a result, Intelsat is no longer a related party.

Other

Certain members of our Board of Managers and officers serve on the boards of directors of some of our affiliates. In some cases, such members 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 comparable to stock-based compensation awarded to other non-executive members of the affiliates’ boards of directors.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other

Certain members of our Board of Managers and officers serve on the boards of directors of some of our affiliates. In some cases, such members 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 comparable to stock-based compensation awarded to other non-executive members of the affiliates’ boards of directors.

Related Party Transactions

Sales and purchase transactions with related parties are as follows (in thousands):

	Three Months Ended	~~Three Months Ended~~					~~Nine Months Ended~~
		September 30,					September 30,
	March 31,
		2009			2008		2009		2008
	2010			2009
Sales:
HTI	$	$301	~~7,567~~	$	$7,068	~~10,079~~	$	~~22,295~~	$	~~22,271~~
Smart & Final		123	~~129~~		152	~~198~~		~~395~~		~~613~~
Total sales	$	$424	~~7,696~~	$	$7,220	~~10,277~~	$	~~22,690~~	$	~~22,884~~
Purchases:
Hughes Systique		$	2,688		$	3,412	$	7,569	$	7,195
HCI	$	2,483		$	2,195
HCI			2,212			443		6,721		4,143
Hughes Systique		2,455			2,244
95 West Co.			-			-		-		750
Total purchases	$	4,938		$	4,439
Intelsat(1)			-			-		-		10,074
Total purchases		$	4,900		$	3,855	$	14,290	$	22,162
(1) Subsequent to February 4, 2008, Intelsat is no longer a related party.

Assets and liabilities resulting from transactions with related parties are as follows (in thousands):

	September 30,		December 31,
	March 31,		December 31,
	2009		2008
	2010		2009
Due from related parties:
HTI	$	118,~~631~~862	$	68,~~734~~652
Smart & Final		5851		3052
Total due from related parties	$	118,~~689~~913	$	68,~~764~~704
Due to related parties:
HCI	$	14,~~122~~478	$	12,~~112~~610
Hughes Systique		1,~~694~~669		1,~~507~~643
Total due to related parties	$	26,~~816~~147	$	24,~~619~~253

2118

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 1615: Segment Data

WeSet ~~have four~~forth ~~reportable~~below ~~segments,~~is ~~which~~selected wefinancial ~~operate~~information ~~and~~for ~~manage as strategic business units and organize by products and services. We measure and evaluate~~ our ~~reportable~~ ~~segments based on~~ operating ~~earnings of the respective~~ segments. ~~Our business segments include:~~ (~~i) the~~in ~~North America Broadband segment; (ii~~thousands) ~~the International Broadband segment; (iii) the Telecom Systems segment; and (iv) the Corporate segment~~. ~~The~~There ~~North~~were ~~America~~no ~~Broadband~~intersegment segment consists of the Consumer group, which delivers broadband internet service to consumer customers, and the Enterprise group, which provides satellite, wire line and wireless communication networks and services to enterprisestransactions. The International Broadband segment consists of the Enterprise group, which includes our international service companies. The International Enterprise group provides satellite, wire line and wireless communication networks and services to enterprise customers 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 provides development services and equipment to HTI and certain of its customers. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that enable mobile operators to connect their cell sites and fixed operators to provide wireless broadband services. The Corporate segment includes our corporate offices and assets not specifically related to another business segment.

There are no intersegment transactions. Selected financial information for our operating segments is as follows (in thousands):

	North America Broadband		International Broadband			Telecom Systems		HTS Satellite(1)			Corporate		Consolidated
As of or For the Three Months Ended March 31, 2010
Revenues	$	173,995	$	43,456		$	24,692	$	-		$	-	$	242,143
Operating income (loss)	$	9,616	$	(1,156	)	$	3,708	$	(858	)	$	-	$	11,310
Depreciation and amortization	$	25,519	$	3,426		$	1,024	$	-		$	-	$	29,969
Assets	$	636,622	$	168,771		$	45,877	$	99,515		$	224,430	$	1,175,215
Capital expenditures	$	26,138	$	4,187		$	153	$	32,767		$	3,589	$	66,834
As of or For the Three Months Ended March 31, 2009
Revenues	$	165,608	$	44,884		$	29,262	$	-		$	-	$	239,754
Operating income	$	1,750	$	1,231		$	5,489	$	-		$	-	$	8,470
Depreciation and amortization	$	18,185	$	2,708		$	967	$	-		$	-	$	21,860
Assets	$	641,150	$	174,992		$	59,684	$	-		$	186,520	$	1,062,346
Capital expenditures	$	24,844	$	3,324		$	457	$	-		$	2,391	$	31,016
(1) There were no activities for the three months ended March 31, 2009.

	North America Broadband			International Broadband		Telecom Systems		Corporate		Consolidated
As of or For the Three Months Ended September 30, 2009
Revenues	$	174,123		$	47,521	$	28,825	$	-	$	250,469
Operating income	$	10,629		$	3,616	$	2,642	$	-	$	16,887
Depreciation and amortization	$	22,179		$	3,419	$	1,111	$	-	$	26,709
Assets	$	682,433		$	184,348	$	48,178	$	286,813	$	1,201,772
Capital expenditures	$	38,611		$	1,923	$	233	$	2,443	$	43,210
As of or For the Three Months Ended September 30, 2008
Revenues	$	169,400		$	60,056	$	42,263	$	-	$	271,719
Operating income	$	4,296		$	6,390	$	8,645	$	-	$	19,331
Depreciation and amortization	$	15,411		$	2,396	$	986	$	-	$	18,793
Assets	$	645,279		$	198,851	$	65,842	$	179,530	$	1,089,502
Capital expenditures	$	7,355		$	2,961	$	352	$	1,928	$	12,596
As of or For the Nine Months Ended September 30, 2009
Revenues	$	514,973		$	142,925	$	87,431	$	-	$	745,329
Operating income (loss)*	$	(24,391	)	$	9,952	$	10,742	$	-	$	(3,697	)
Depreciation and amortization	$	60,601		$	9,135	$	3,052	$	-	$	72,788
Assets	$	682,433		$	184,348	$	48,178	$	286,813	$	1,201,772
Capital expenditures	$	84,942		$	11,836	$	1,051	$	6,439	$	104,268
As of or For the Nine Months Ended September 30, 2008
Revenues	$	487,431		$	170,121	$	116,677	$	-	$	774,229
Operating income	$	12,589		$	14,090	$	19,845	$	-	$	46,524
Depreciation and amortization	$	39,241		$	6,814	$	2,853	$	-	$	48,908
Assets	$	645,279		$	198,851	$	65,842	$	179,530	$	1,089,502
Capital expenditures	$	46,775		$	7,841	$	1,733	$	7,168	$	63,517
* Operating loss for North America Broadband includes the $44.4 million impairment loss related to our prepaid deposit. See Note 8—Other Assets for further discussion.

Note 16:

Comprehensive Loss

22Comprehensive loss is as follows (in thousands):

Table of Contents

	Three Months Ended
	March 31,
	2010			2009
Net loss	$	(5,459	)	$	(4,464	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(807	)		(1,407	)
Unrealized gain (loss) on hedging instruments		(2,323	)		5,337
Reclassification of realized (gain) loss on hedging instruments		1,368			(854	)
Unrealized gain on available-for-sale securities		2			-
Total other comprehensive income (loss)		(1,760	)		3,076
Comprehensive loss		(7,219	)		(1,388	)
Comprehensive income attributable to the noncontrolling interest		(307	)		(390	)
Comprehensive loss attributable to HNS	$	(7,526	)	$	(1,778	)

~~HUGHES NETWORK~~Note ~~SYSTEMS,~~17: ~~LLC~~Commitments and Contingencies

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 17: Comprehensive Income (Loss)

Comprehensive income (loss) is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Net income (loss)	$	(1,354	)	$	3,620		$	(51,078	)	$	7,782
Other comprehensive income (loss):
Foreign currency translation adjustments		530			(6,909	)		5,672			(7,375	)
Reclassification of realized loss onhedging instruments		1,310			727			3,275			1,330
Unrealized gain (loss) on hedging instruments		(2,729	)		(1,749	)		2,639			(1,922	)
Unrealized loss on available-for-sale securities		(2	)		(46	)		(2	)		(21	)
Total other comprehensive income (loss)		(891	)		(7,977	)		11,584			(7,988	)
Comprehensive loss		(2,245	)		(4,357	)		(39,494	)		(206	)
Comprehensive (income) loss attributable tothe noncontrolling interest		(293	)		372			(1,223	)		696
Comprehensive income (loss) attributable to HNS	$	(2,538	)	$	(3,985	)	$	(40,717	)	$	490

Note 18: Net Income Attributable to HCI and Transfer from the Noncontrolling Interest

	Nine Months Ended
	September 30,
	2009			2008
Net income (loss) attributable to HNS	$	(52,134	)	$	7,677
Transfers from the noncontrolling interest:
Decrease in HNS paid-in capital forpurchase of subsidiary shares		(391	)		-
Change from net income (loss) attributable to HNS andtransfers from the noncontrolling interest	$	(52,525	)	$	7,677

Note 19: Commitments and Contingencies

Litigation

We are periodically involved in litigation in the ordinary 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.

In March 2009, we received an arbitral award against Sea Launch entitling us to a full refund of the Sea Launch Deposit, 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. This award resulted from an arbitration proceeding initiated by the Company on June 28, 2007 relating to our SPACEWAY 3 satellite. Because of the material failure of a Sea Launch rocket that occurred on January 30, 2007, the launch of our SPACEWAY 3 satellite, scheduled for May 2007, was substantially delayed. We made alternative arrangements with another launch services provider to launch SPACEWAY 3 in August 2007 and in accordance with the Launch Service Agreement (“LSA”) we sent a notice of termination to Sea Launch. Under the LSA, we were entitled to terminate due to the 19

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~launch delay~~In ~~and~~October ~~receive~~2008, Hughes Telecommunicaçoes do Brasil Ltda. (“HTB”), a ~~refund~~wholly-owned subsidiary of ~~the~~ours, ~~Deposit~~received ~~made~~a totax ~~Sea~~assessment ~~Launch~~of inapproximately ~~anticipation~~$6.4 of million from the ~~SPACEWAY~~State 3of ~~launch~~São Paulo Treasury Department. ~~Sea~~The ~~Launch~~tax ~~refused~~assessment toalleges ~~refund~~that ~~our~~HTB ~~payments~~failed ~~and~~to ~~alleged that~~pay wecertain ~~had~~import ~~breached~~taxes to the ~~LSA~~State of São Paulo. ~~The~~We ~~arbitration~~do ~~hearings~~not ~~were~~believe ~~completed~~the ~~during~~assessment is valid and plan to dispute the ~~third~~ ~~quarter~~State of ~~2008,~~São Paulo’s claims and into ~~March~~defend ~~2009~~vigorously against these allegations. Therefore, we have not recorded a liability. It is the ~~arbitration~~opinion ~~panel~~of ~~rendered~~management ~~its decision~~that insuch litigation is not expected to have a material adverse effect on our ~~favor~~financial position, results of operations or cash flows.

~~On June 22,~~In March 2009, an arbitration panel ruled in the Company’s favor in its arbitration against Sea Launch ~~filed~~Limited aPartnership ~~voluntary~~and ~~petition~~Sea Launch Company, LLC (collectively, “Sea Launch”) entitling the Company to ~~reorganize~~a ~~under Chapter~~full 11refund of $44.4 million (the ~~U.S.~~“Deposit”) ~~Bankruptcy~~in ~~Code~~payments made to Sea Launch in connection with launch services for SPACEWAY 3, in addition to interest of 10% per annum on the U$44.S.4 ~~Bankruptcy~~million ~~Court~~from ~~for~~July 10, 2007 until payment on the ~~District~~ ofDeposit ~~Delaware~~is received in full. As a result of ~~this~~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 ~~against Sea Launch~~ have been stayed byunder the bankruptcy laws. ~~While~~We weare ~~still~~pursuing ~~intend~~the ~~to vigorously pursue~~ collection of our arbitral award, ~~we will have to do so~~ as part of Sea Launch’s bankruptcy process and in accordance with its timetable. Based upon information made available in the bankruptcy proceedings, ~~Sea Launch’s credit information~~ and ~~its~~other ~~ability to continue its operations~~factors, wethe Company concluded that the value of the previously-recorded Deposit was impaired and recorded an impairment loss of $44.4 million in ~~“Loss on~~June ~~impairment” in the accompanying unaudited Condensed Consolidated Statements of Operations~~2009.

On May 18, 2009, the Company and HCI received notice of a complaint filed in the U.S. District Court for the Northern District of California by two California subscribers to the HughesNet service. The plaintiffs complain about the speed of the HughesNet service, the 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, 2009, the Company and HCI received notice of a similar complaint filed by another HughesNet subscriber in the Superior Court of San Diego County, California. 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. Based on our investigation, we believe that the allegations in both complaints are not meritorious and we intend to vigorously defend these matters. As a result, we have not recorded a liability for either of these matters. Our management believes that such litigation is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

~~In October~~On ~~2008~~December 18, ~~Hughes Telecommunicaçoes do Brasil Ltda. (“HTB”)~~2009, athe ~~wholly-owned subsidiary~~Company ofand ~~ours,~~HCI received anotice ~~tax assessment~~ of ~~approximately~~a ~~$4.4~~complaint ~~million~~filed ~~from~~ in the ~~State~~Cook ofCounty, ~~São~~Illinois, ~~Paulo~~Circuit ~~Treasury~~Court ~~Department.~~by ~~The~~a ~~tax~~former ~~assessment~~subscriber ~~alleges that HTB failed~~ to ~~pay certain import taxes to~~ the ~~State~~HughesNet ~~of São Paulo~~service. The ~~Company~~complaint ~~does not~~seeks ~~believe~~a ~~the~~declaration ~~assessment~~allowing isthe ~~valid~~former ~~and~~subscriber ~~plans~~ to ~~dispute~~file ~~the~~a ~~State~~class ofarbitration ~~São Paulo’s~~challenging ~~claims~~early ~~and~~termination tofees ~~defend~~under ~~itself~~the ~~vigorously~~subscriber ~~against these allegations~~agreement. ~~Therefore,~~ ~~the~~Based ~~Company~~on ~~has~~our ~~not~~investigation, ~~recorded~~we abelieve ~~liability.~~that ~~It is~~ the ~~opinion~~allegations ~~of management~~in ~~that~~this ~~such~~complaint ~~litigation~~are is not ~~expected~~meritorious toand ~~have~~we aintend ~~material~~to ~~adverse effect~~vigorously ondefend ~~the~~this ~~Company’s financial position, results of operations or cash flows~~matter.

~~Other~~Commitments

In June 2009, we entered into an agreement with SS/L, under which ~~SS/L~~we will manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of our Jupiter satellite and have agreed to ~~pay~~make installment payments to SS/L upon the completion of each milestone as set forth in the agreement. As of March 31, 2010, the remaining obligation for the construction of Jupiter was $184.1 million. We anticipate launching Jupiter in the first ~~quarter~~half of 2012. In connection with the construction of Jupiter, we have entered into a contract with Barrett Xplore Inc. (“Barrett”), whereby Barrett has agreed to ~~acquire~~ lease user beams, and purchase gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

We are contingently liable under standby letters of credit and bonds in the aggregate amount of $1516.64 million that were undrawn as of ~~September~~March 3031, ~~2009~~2010. Of this amount, $32.01 million was issued under the Revolving Credit Facility; $1.6 million was secured by restricted cash; $01.80 million related to insurance bonds; and $1011.27 million was ~~secured by letters of credit~~ issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our Indian subsidiaries are secured by their assets. As of ~~September~~ 30March 31, ~~2009~~2010, these obligations were scheduled to expire as follows: $3.5 .3 million in ~~2009~~2010; $78.5 million in ~~2010~~2011; $10.83 million in ~~2011~~2012; and $2.83 million in ~~2012~~ 2013 and thereafter.

24Note 18: Subsequent Event

On April 30, 2010, we entered into an agreement with Arianespace for the launch of our Jupiter satellite in the first half of 2012. Pursuant to the agreement, the Ariane 5 heavy launcher will be utilized to launch Jupiter to a geosynchronous transfer orbit from Europe’s Spaceport in Kourou, French Guiana.

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2019: Supplemental Guarantor and Non-Guarantor Financial Information

Certain of the Company’s wholly-owned subsidiaries (HNS Real Estate LLC, Hughes Network Systems International Service Company, HNS India VSAT, Inc., HNS Shanghai, Inc. and Helius (together, the “Guarantor Subsidiaries”)) have fully and unconditionally guaranteed, on a joint and several basis, payment of the Senior Notes. In lieu of providing separate unaudited financial statements of the Co-Issuer and the Guarantor Subsidiaries, condensed financial statements prepared in accordance with Rule 3-10 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 “Guarantor Subsidiaries” includes the results of the ~~Guarantor~~guarantor ~~Subsidiaries~~subsidiaries along with the results of the Co-Issuer, a finance subsidiary which is 100% owned by the Company 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. 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 the Guarantor Subsidiaries are not presented because management has determined that they are not material to investors.

The following represents the supplemental condensed financial statements of the Company, 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.

Condensed Consolidated Balance Sheet as of September 30, 2009

Condensed Consolidated Balance Sheet as of March 31, 2010

(In thousands)

(Unaudited)

Guarantor

Non-Guarantor

Parent

Subsidiaries

Eliminations

Total

Assets

Cash and cash equivalents

~~193~~110,~~794~~448

~~1,084~~221

147,~~283~~667

~~209~~118,~~161~~336

Marketable securities

2543,~~078~~672

Receivables, net

~~118~~117,~~952~~495

~~3,018~~77

5451,~~482~~998

(10,~~844~~477

)

~~165~~159,~~608~~093

Inventories

5349,~~215~~309

~~145~~-

1312,~~866~~381

6761,~~226~~690

Prepaid expenses and other

97,~~440~~856

~~327~~36

13,~~778~~651

2321,~~545~~543

Total current assets

~~400~~328,~~479~~780

~~4,574~~334

9685,~~409~~697

(10,~~844~~477

)

~~490~~404,~~618~~334

Property, net

~~510~~577,~~860~~570

32,~~601~~857

2527,~~873~~972

~~569~~638,~~334~~399

Investment in subsidiaries

~~108~~113,~~443~~879

(~~108~~113,~~443~~879

)

Other assets

~~117~~101,~~454~~817

41,~~516~~810

2028,~~194~~855

~~(344~~-

)

~~141~~132,~~820~~482

Total assets

1,~~137~~122,~~236~~046

4135,~~691~~001

142,~~476~~524

(~~119~~124,~~631~~356

)

1,~~201~~175,~~772~~215

Liabilities and equity

Accounts payable

8281,~~567~~473

~~3,902~~163

27,~~516~~016

(10,~~844~~477

)

~~103~~98,~~141~~175

Short-term debt

21,~~088~~992

4,~~307~~514

6,~~395~~506

Accrued liabilities and other

~~138~~118,~~946~~238

~~951~~-

2821,~~491~~855

~~168~~140,~~388~~093

Total current liabilities

~~223~~201,~~601~~703

~~4,853~~163

6053,~~314~~385

(10,~~844~~477

)

~~277~~244,~~924~~774

Long-term debt

710,~~123~~428

43,~~703~~870

714,~~826~~298

Other long-term liabilities

1317,~~128~~177

Total HNS owners' equity

190,384

30,984

77,459

(108,443

)

190,384

Total HNS' equity

192,738

28,610

85,269

(113,879

)

192,738

Noncontrolling interest

56,~~854~~228

~~(344~~-

)

56,~~510~~228

Total liabilities and equity

1,~~137~~122,~~236~~046

4135,~~691~~001

142,~~476~~524

(~~119~~124,~~631~~356

)

1,~~201~~175,~~772~~215

2521

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Condensed Consolidated Balance Sheet as of December 31, 2008
Condensed Consolidated Balance Sheet as of December 31, 2009
(In thousands)
(Unaudited)
			Guarantor		Non-Guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Total
Assets
Cash and cash equivalents	$	75173,~~956~~991	$	21,~~013~~091	$	228,~~293~~651	$	-		$	~~100~~183,~~262~~733
Receivables, net		147,424		2,007		66,109		(15,281	)		200,259
Marketable securities		31,126		-		-		-			31,126
Inventories		57,453		666		7,366		-			65,485
Receivables, net		115,948		628		60,862		(14,632	)		162,806
Prepaid expenses and other		8,030		284		12,111		-			20,425
Inventories		47,437		138		12,669		-			60,244
Total current assets		288,863		4,970		107,879		(15,281	)		386,431
Prepaid expenses and other		7,421		234		13,321		-			20,976
Property, net		459,855		29,600		17,815		-			507,270
Total current assets		375,923		2,091		95,503		(14,632	)		458,885
Investment in subsidiaries		92,057		-		-		(92,057	)		-
Property, net		542,642		32,792		26,530		-			601,964
Other assets		173,531		10,614		2,261		-			186,406
Investment in subsidiaries		115,136		-		-		(115,136	)		-
Total assets	$	1,014,306	$	45,184	$	127,955	$	(107,338	)	$	1,080,107
Other assets		102,045		3,221		29,183		-			134,449
Total assets	$	1,135,746	$	38,104	$	151,216	$	(129,768	)	$	1,195,298
Liabilities and equity
Accounts payable	$	5797,~~488~~114	$	32,~~133~~272	$	3532,~~327~~759	$	(1514,~~281~~632	)	$	80117,~~667~~513
Short-term debt		42,~~391~~054		-		34,~~861~~696		-			86,~~252~~750
Accrued liabilities and other		~~128~~110,~~813~~088		~~761~~714		2923,~~841~~124		-			~~159~~133,~~415~~926
Total current liabilities		~~190~~209,~~692~~256		32,~~894~~986		6960,~~029~~579		(1514,~~281~~632	)		~~248~~258,~~334~~189
Long-term debt		~~574~~710,~~771~~259		-		34,~~527~~698		-			~~578~~714,~~298~~957
Other long-term liabilities		1816,~~005~~191		-		-		-			1816,~~005~~191
Total HNS owners' equity		230,838		36,658		55,399		(92,057	)		230,838
Total HNS' equity		200,040		29,197		85,939		(115,136	)		200,040
Noncontrolling interest		-		45,~~632~~921		-		-			45,~~632~~921
Total liabilities and equity	$	1,~~014~~135,~~306~~746	$	4538,~~184~~104	$	~~127~~151,~~955~~216	$	(~~107~~129,~~338~~768	)	$	1,~~080~~195,~~107~~298

2622

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2009
Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2010
(In thousands)
(Unaudited)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	~~216~~212,~~258~~471		$	~~3,918~~988		$	3432,~~568~~635		$	(43,~~275~~951	)	$	~~250~~242,~~469~~143
Operating costs and expenses:
Costs of revenues		~~158~~155,~~179~~328			~~2,237~~306			2524,~~744~~492			(3,~~620~~590	)		~~182~~176,~~540~~536
Selling, general and administrative		3741,~~667~~086			1,~~286~~372			56,~~906~~583			(~~655~~361	)		4448,~~204~~680
Research and development		4,~~792~~460			~~661~~455			-			-			54,~~453~~915
Amortization of intangible assets		~~1,103~~534			~~282~~168			-			-			~~1,385~~702
Total operating costs and expenses		201,~~741~~408			42,~~466~~301			31,~~650~~075			(43,~~275~~951	)		~~233~~230,~~582~~833
Operating income (loss)		1411,~~517~~063			(~~548~~1,313	)		21,~~918~~560			-			1611,~~887~~310
Other income (expense):
Interest expense		(1715,~~418~~793	)		-			(~~309~~320	)		-8			(1716,~~727~~105	)
Interest and other income, net		397			-			70			-			467
Interest and other income (loss), net		(359	)		870			50			(8	)		553
Equity in earnings of subsidiaries		1,181			-			-			(1,181	)		-
Equity in losses of subsidiaries		(246	)		-			-			246			-
Income (loss) before income tax expense		(15,~~323~~335	)		(~~548~~443	)		21,~~679~~290			~~(1,181~~246	)		(~~373~~4,242	)
Income tax expense		(~~247~~227	)		-(3	)		(~~734~~987	)		-			(~~981~~1,217	)
Net income (loss)		(15,~~570~~562	)		(~~548~~446	)		~~1,945~~303			~~(1,181~~246	)		(15,~~354~~459	)
Net (income) loss attributable to thenoncontrolling interest		-			(302	)		86			-			(216	)
Net (income) loss attributable to the noncontrolling interest		-			(141	)		38			-			(103	)
Net income (loss) attributable to HNS	$	(15,~~570~~562	)	$	(~~850~~587	)	$	~~2,031~~341		$	~~(1,181~~246	)	$	(15,~~570~~562	)

Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2008
(In thousands)
(Unaudited)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	225,447		$	4,951		$	47,806		$	(6,485	)	$	271,719
Operating costs and expenses:
Costs of revenues		171,634			2,358			34,522			(5,645	)		202,869
Selling, general and administrative		32,717			1,441			8,079			(840	)		41,397
Research and development		5,759			734			-			-			6,493
Amortization of intangible assets		1,347			282			-			-			1,629
Total operating costs and expenses		211,457			4,815			42,601			(6,485	)		252,388
Operating income		13,990			136			5,205			-			19,331
Other income (expense):
Interest expense		(13,732	)		-			(363	)		-			(14,095	)
Interest and other income, net		535			-			137			-			672
Equity in earnings of subsidiaries		2,853			-			-			(2,853	)		-
Income before income tax expense		3,646			136			4,979			(2,853	)		5,908
Income tax expense		(61	)		-			(2,227	)		-			(2,288	)
Net income		3,585			136			2,752			(2,853	)		3,620
Net (income) loss attributable to thenoncontrolling interest		-			(48	)		13			-			(35	)
Net income attributable to HNS	$	3,585		$	88		$	2,765		$	(2,853	)	$	3,585

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2009
Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2009
(In thousands)
(Unaudited)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	~~649~~209,~~308~~815		$	71,~~945~~832		$	~~103~~33,~~823~~802		$	(155,~~747~~695	)	$	~~745~~239,~~329~~754
Operating costs and expenses:
Costs of revenues		~~484~~159,~~072~~383			~~4,405~~665			7625,~~677~~524			(134,~~488~~821	)		~~551~~180,~~666~~751
Selling, general and administrative		~~112~~36,~~105~~779			31,~~844~~353			186,~~612~~539			(~~2,259~~874	)		~~132~~43,~~302~~797
Loss on impairment		44,400			-			-			-			44,400
Research and development		4,656			695			-			-			5,351
Research and development		14,414			2,088			-			-			16,502
Amortization of intangible assets		1,103			282			-			-			1,385
Amortization of intangible assets		3,311			845			-			-			4,156
Total operating costs and expenses		201,921			2,995			32,063			(5,695	)		231,284
Total operating costs and expenses		658,302			11,182			95,289			(15,747	)		749,026
Operating income (loss)		7,894			(1,163	)		1,739			-			8,470
Operating income (loss)		(8,994	)		(3,237	)		8,534			-			(3,697	)
Other income (expense):
Interest expense		(4613,~~389~~653	)		-			(~~717~~176	)		-			(4713,~~106~~829	)
Interest and other income, net		~~294~~147			-			~~206~~80			-			~~500~~227
Equity in earnings of subsidiaries		~~3,582~~932			-			-			(~~3,582~~932	)		-
Income (loss) before income tax expense		(51,507	)		(3,237	)		8,023			(3,582	)		(50,303	)
Income (loss) before income tax (expense) benefit		(4,680	)		(1,163	)		1,643			(932	)		(5,132	)
Income tax expense		(627	)		-			(148	)		-			(775	)
Income tax (expense) benefit		(174	)		-			842			-			668
Net income (loss)		(524,~~134~~854	)		(31,~~237~~163	)		72,~~875~~485			(~~3,582~~932	)		(514,~~078~~464	)
Net (income) loss attributable to thenoncontrolling interest		-			(1,440	)		384			-			(1,056	)
Net (income) loss attributable to the noncontrolling interest		-			(529	)		139			-			(390	)
Net income (loss) attributable to HNS	$	(524,~~134~~854	)	$	(41,~~677~~692	)	$	82,~~259~~624		$	(~~3,582~~932	)	$	(524,~~134~~854	)

Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2008
(In thousands)
(Unaudited)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	655,904		$	9,344		$	133,363		$	(24,382	)	$	774,229
Operating costs and expenses:
Costs of revenues		496,081			4,195			94,517			(21,698	)		573,095
Selling, general and administrative		103,920			4,125			24,600			(2,684	)		129,961
Research and development		17,705			2,040			-			-			19,745
Amortization of intangible assets		4,153			751			-			-			4,904
Total operating costs and expenses		621,859			11,111			119,117			(24,382	)		727,705
Operating income (loss)		34,045			(1,767	)		14,246			-			46,524
Other income (expense):
Interest expense		(36,170	)		-			(1,135	)		-			(37,305	)
Interest and other income, net		2,165			-			499			-			2,664
Equity in earnings of subsidiaries		7,757			-			-			(7,757	)		-
Income (loss) before income tax expense		7,797			(1,767	)		13,610			(7,757	)		11,883
Income tax expense		(120	)		-			(3,981	)		-			(4,101	)
Net income (loss)		7,677			(1,767	)		9,629			(7,757	)		7,782
Net (income) loss attributable to thenoncontrolling interest		-			(145	)		40			-			(105	)
Net income (loss) attributable to HNS	$	7,677		$	(1,912	)	$	9,669		$	(7,757	)	$	7,677

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2009
Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2010
(In thousands)
(Unaudited)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Total
Cash flows from operating activities:
Net income (loss)	$	(525,~~134~~562	)	$	(~~3,237~~446	)	$	~~7,875~~303		$	~~(3,582~~246	)	$	(515,~~078~~459	)
Adjustments to reconcile net income (loss)to net cash flows from operating activities		167,647			6,491			(3,587	)		3,582			174,133
Adjustments to reconcile net income (loss) to net cash flows from operating activities		18,845			218			1,607			(246	)		20,424
Net cash provided by operating activities		115,513			3,254			4,288			-			123,055
Net cash provided by (used in) operating activities		13,283			(228	)		1,910			-			14,965
Cash flows from investing activities:
Change in restricted cash		(1	)		-			~~(71~~89	)		-			~~(72~~88	)
Purchases of marketable securities		(2522,~~080~~615	)		-			-			-			(2522,~~080~~615	)
Expenditures for property		(80,308	)		(4,183	)		(9,462	)		-			(93,953	)
Proceeds from sales of marketable securities		10,000			-			-			-			10,000
Expenditures for capitalized software		(10,315	)		-			-			-			(10,315	)
Expenditures for property		(59,409	)		(642	)		(3,617	)		-			(63,668	)
Proceeds from sale of property		22			-			317			-			339
Expenditures for capitalized software		(3,166	)		-			-			-			(3,166	)
Long-term loan		(10,000	)		-			-			-			(10,000	)
Net cash used in investing activities		(75,191	)		(642	)		(3,528	)		-			(79,361	)
Other, net		(410	)		-			(345	)		-			(755	)
Net cash used in investing activities		(126,092	)		(4,183	)		(9,561	)		-			(139,836	)
Cash flows from financing activities:
Net decrease in notes and loans payable		-			-			(1,315	)		-			(1,315	)
Short-term revolver borrowings		-			-			1,999			-			1,999
Long-term debt borrowings		137,490			-			4,828			-			142,318
Repayments of revolver borrowings		-			-			(2,430	)		-			(2,430	)
Repayment of long-term debt		(4,461	)		-			(2,371	)		-			(6,832	)
Long-term debt borrowings		550			-			670			-			1,220
Debt issuance costs		(4,612	)		-			-			-			(4,612	)
Repayments of long-term debt		(443	)		-			(1,278	)		-			(1,721	)
Net cash provided by financing activities		128,417			-			1,142			-			129,559
Debt issuance costs		(1,742	)		-			-			-			(1,742	)
Effect of exchange rate changes on cashand cash equivalents		-			-			(3,879	)		-			(3,879	)
Net cash used in financing activities		(1,635	)		-			(1,039	)		-			(2,674	)
Net increase (decrease) in cash and cashequivalents		117,838			(929	)		(8,010	)		-			108,899
Effect of exchange rate changes on cash and cash equivalents		-			-			1,673			-			1,673
Cash and cash equivalents at beginning of period		75,956			2,013			22,293			-			100,262
Net decrease in cash and cash equivalents		(63,543	)		(870	)		(984	)		-			(65,397	)
Cash and cash equivalents at end of period	$	193,794		$	1,084		$	14,283		$	-		$	209,161
Cash and cash equivalents at beginning of the period		173,991			1,091			8,651			-			183,733
Cash and cash equivalents at end of the period	$	110,448		$	221		$	7,667		$	-		$	118,336

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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2008
Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2009
(In thousands)
(Unaudited)
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Total
Cash flows from operating activities:
Net income (loss)	$	7(4,~~677~~854	)	$	(1,~~767~~163	)	$	92,~~629~~485		$	(~~7,757~~932	)	$	7(4,~~782~~464	)
Adjustments to reconcile net income (loss)to net cash flows from operating activities		23,934			6,831			(5,903	)		7,757			32,619
Adjustments to reconcile net income (loss) to net cash flows from operating activities		45,235			550			(8,825	)		932			37,892
Net cash provided by operating activities		31,611			5,064			3,726			-			40,401
Net cash provided by (used in) operating activities		40,381			(613	)		(6,340	)		-			33,428
Cash flows from investing activities:
Change in restricted cash		~~3,579~~(1	)		-			~~(532~~95	)		-			~~3,047~~94
Proceeds from sales of marketable securities		3,000			-			-			-			3,000
Expenditures for property		(24,052	)		(220	)		(2,353	)		-			(26,625	)
Expenditures for property		(43,413	)		(4,808	)		(4,770	)		-			(52,991	)
Expenditures for capitalized software		(4,391	)		-			-			-			(4,391	)
Expenditures for capitalized software		(10,526	)		-			-			-			(10,526	)
Proceeds from sale of property		-			6			50			-			56
Proceeds from sale of property		26			-			78			-			104
Net cash used in investing activities		(28,444	)		(214	)		(2,208	)		-			(30,866	)
Acquisition of Helius, net of cash received		(10,543	)		-			-			-			(10,543	)
Net cash used in investing activities		(57,877	)		(4,808	)		(5,224	)		-			(67,909	)
Cash flows from financing activities:
Net increase in notes and loans payable		-			-			403			-			403
Net decrease in notes and loans payable		-			-			(509	)		-			(509	)
Long-term debt borrowings		8687			-			~~2,453~~846			-			~~2,539~~933
Repayment of long-term debt		(8,870	)		-			(2,579	)		-			(11,449	)
Repayments of long-term debt		(1,480	)		-			(589	)		-			(2,069	)
Net cash provided by (used in) financing activities		(8,784	)		-			277			-			(8,507	)
Net cash used in financing activities		(1,393	)		-			(252	)		-			(1,645	)
Effect of exchange rate changes on cashand cash equivalents		-			-			5,059			-			5,059
Effect of exchange rate changes on cash and cash equivalents		-			-			1,393			-			1,393
Net increase (decrease) in cash and cash equivalents		~~(35~~10,~~050~~544	)		~~256~~(827	)		3(7,~~838~~407	)		-			~~(30~~2,~~956~~310	)
Cash and cash equivalents at beginning of period		113,530			150			15,547			-			129,227
Cash and cash equivalents at beginning of the period		75,956			2,013			22,293			-			100,262
Cash and cash equivalents at end of period	$	78,480		$	406		$	19,385		$	-		$	98,271
Cash and cash equivalents at end of the period	$	86,500		$	1,186		$	14,886		$	-		$	102,572

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The 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.

Overview

Hughes Network Systems, LLC, a Delaware limited liability company, (“HNS” and, together with its consolidated subsidiaries, the “Company” or “we,” “us,” and “our”) is a telecommunications company. The Company is a wholly-owned subsidiary of Hughes Communications, Inc. (“HCI” or “Parent”). We provide equipment and services to the broadband communications marketplace. We have extensive technical expertise in satellite, ~~wire~~wireline ~~line~~ 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. ~~Our~~We provide broadband network services and systems ~~are provided~~ to the international and domestic enterprise markets, and ~~our~~ satellite broadband Internet access is ~~provided~~ 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.

Strategic Initiatives and Their Impact on Our Results of Operations

~~Net~~For ~~loss attributable to~~ the ~~Company was $1.6 million and $52.1 million for the~~ three ~~and nine~~ months ended ~~September~~March 3031, 2010 and 2009, ~~respectively, compared to a~~ net ~~income~~loss attributable to ~~the~~HNS ~~Company~~was of $35.6 million and $74.79 million, respectively,. ~~for~~The ~~the~~increase ~~same periods~~ in ~~2008.~~our ~~The~~net loss for the three months ended ~~September~~March 3031, ~~2009~~ 2010 was ~~mainly~~attributed ~~impacted~~to bythree ~~higher~~main ~~interest~~factors. ~~expense incurred from~~First, ~~the~~our ~~issuance in~~selling, ~~May~~general ~~2009~~and ofadministrative ~~$150~~expenses ~~million~~increased ofby 9$4.~~50%~~9 ~~senior notes maturing on April 15~~million, ~~2014~~mainly ~~(the~~associated ~~“2009~~with ~~Senior~~our ~~Notes”)~~North ~~and~~America ~~from~~operations ~~higher marketing~~as ~~costs~~we ~~due~~increased to our ~~expanded~~effort ~~efforts~~ in promoting our consumer business. ~~The~~ ~~loss for the nine months ended September 30~~Second, ~~2009~~we ~~was~~recognized ~~significantly impacted by the~~ $443.46 million ~~impairment~~of ~~loss~~interest ~~recognized~~expense inon ~~the~~our ~~second~~$150 ~~quarter~~million ofsenior ~~2009 associated~~notes ~~with~~maturing ~~our~~on ~~prepaid~~April 15, ~~deposit~~2014 (the “~~Deposit”)~~2009 ~~paid~~Senior ~~to Sea Launch Company, LLC (“Sea Launch~~Notes”)., ~~For~~which ~~further~~were ~~discussion~~issued ofin ~~the~~May ~~impairment~~2009. ~~loss~~Third, ~~see Note 8—Other Assets to~~ our ~~unaudited~~tax ~~condensed~~expense ~~consolidated~~increased ~~financial~~by ~~statements included in Part I-Item~~ $1 ~~of this report~~.9 Inmillion ~~addition~~resulting ~~to higher interest~~from ~~expense~~state onincome ~~the~~taxes ~~2009~~and ~~Senior~~income ~~Notes,~~earned ~~the~~from ~~commencement~~our offoreign ~~services~~subsidiaries. ~~on SPACEWAY~~The 3increase ~~network~~ in ~~April 2008, for which~~ the ~~Company~~net ~~recognized~~loss ~~$19.6~~was ~~million of~~partially ~~depreciation~~offset ~~expense~~by inhigher ~~2009~~profit ~~compared~~margin toof $126.56 million ~~in 2008, also contributed to the loss~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~ 2010.

Consumer Group— We have made significant investments in our Consumer group as we believe there is a large segment of this market that is underserved by terrestrial alternatives such as Digital Subscriber Line (“DSL”) and cable. We

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continue to review and adjust pricing policies relative to other competitive offerings in the marketplace in connection with our Consumer hardware and service offerings. In September 2008, we began offering customers the option to rent the equipment with a 24 month service contract. We believe that the consumer rental program will expand our customer base while providing customers with an economical alternative to purchasing the equipment. We have incurred and expect to continue to incur significant costs, including subscriber acquisition costs, related to hardware and associated marketing costs in our Consumer group. As of September 30, 2009, we had approximately 464,200 subscribers in our consumer business that generated consumer revenues of $107.1 million and $310.0 million for the three and nine months ended September 30, 2009, respectively.

Technology—We incorporate 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.

Acquisitions, Strategic Alliances and Divestitures—We continue to focus on expanding the identified markets for our products, services and network solutions in our North America Broadband, International Broadband and Telecom Systems segments. Consistent with this strategy to grow and improve our financial position, we also review our competitive position on an ongoing basis and, from time to time, consider various acquisitions, strategic alliances and divestitures which we believe would be beneficial to our business. The Company, from time to time, considers various alternatives related to the ownership structure of a new satellite, capacity features and other factors that would promote long term growth while meeting the needs of its customers.27

In June 2009, we entered into an agreement with Space Systems/Loral, Inc. to manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We anticipate launching Jupiter in the first quarter of 2012. In connection with the construction of Jupiter, we have entered into a contract with Barrett Xplore Inc. (“Barrett”), whereby Barrett has agreed to acquire user beams, gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

On May 27, 2009, we, along with its subsidiary, HNS Finance Corp., as co-issuer, completed the offering of the 2009 Senior Notes. The notes are guaranteed on a senior unsecured basis by each of our current and future domestic subsidiaries that guarantee any of our indebtedness or indebtedness of our other subsidiary guarantors. 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. After the original issue discount of $13.6 million and related offering expenses of approximately $4.5 million, we received net proceeds of approximately $133.6 million, including $1.7 million of prepaid interest received from the note holders, from the offering. We intend to use these net proceeds for general corporate purposes, which could include working capital needs, corporate development opportunities (which may include acquisitions), capital expenditures and opportunistic satellite fleet expansion.

In February 2008, we completed the acquisition of Helius, Inc., which was subsequently converted to a limited liability company, Helius, LLC (“Helius”). Helius operates within our North America Broadband segment due to the nature of its business activities, its customer base and similarities with the North America Enterprise group. We believe that the combination of Helius’ internet protocol television solutions and our extensive broadband networking experience and customer base will create synergies that facilitate long-term sales growth. For further discussion of this acquisition, see Note 2—Acquisition of Helius, Inc. to our unaudited condensed consolidated financial statements included in Part I-Item 1 of this report.

Key Business Metrics

Business Segments—We divide our operations into four distinct segments—the North America Broadband segment, the International Broadband segment, the Telecom Systems segment and the Corporate 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, wire line and wireless communication networks and services to enterprises. The International Broadband segment consists of the Enterprise group, which includes our international service companies.

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~~The International Enterprise group provides satellite~~Acquisitions, ~~wire~~Strategic ~~line~~Alliances and ~~wireless communication~~Divestitures—We ~~networks~~continue ~~and services~~ to ~~enterprise~~focus ~~customers~~on ~~worldwide.~~expanding ~~The Telecom Systems segment consists of~~ the ~~Mobile~~identified ~~Satellite~~markets ~~Systems~~for ~~group,~~our ~~the Telematics group~~products, services and ~~the~~network ~~Terrestrial~~solutions ~~Microwave~~in ~~group.~~our ~~The~~North ~~Mobile~~America ~~Satellite Systems~~Broadband, ~~group~~International ~~provides~~Broadband ~~turnkey~~and ~~satellite~~Telecom ~~ground~~Systems ~~segment systems to mobile system operators~~segments. ~~The~~Consistent ~~Telematics~~with ~~group~~our ~~provides~~strategy ~~development~~to ~~services~~grow and ~~equipment~~improve ~~to Hughes~~our ~~Telematics,~~financial ~~Inc. (“HTI”)~~position, awe ~~related~~also ~~party,~~review ~~and~~our ~~certain~~competitive ofposition ~~its~~on ~~customers. The~~an ~~Terrestrial~~ongoing ~~Microwave~~basis ~~group~~and, ~~provides~~from ~~point-~~time to~~-multipoint~~ ~~microwave~~time, ~~radio network~~consider ~~systems~~various ~~that~~acquisitions, ~~enable~~strategic ~~mobile~~alliances ~~operators~~and todivestitures ~~connect~~which ~~their~~we ~~cell~~believe ~~sites~~would ~~and fixed~~be ~~operators~~beneficial to ~~provide~~our ~~wireless broadband services~~business. ~~The~~We, ~~Corporate~~from ~~segment includes~~time ~~our~~to ~~corporate~~time, ~~offices~~consider ~~and~~various ~~assets~~alternatives ~~not specifically~~ related to ~~another business segment. Due to~~ the ~~complementary~~ownership ~~nature~~structure ~~and common architecture~~ of ~~our services~~a ~~and~~new ~~products across our business lines~~satellite, wecapacity ~~are~~features ~~able~~and toother ~~leverage~~factors ~~our expertise~~that ~~and~~would ~~resources~~promote ~~within~~long ~~our~~term ~~various~~growth ~~operating~~while ~~units~~meeting tothe ~~yield~~needs ~~significant cost~~of ~~efficiencies~~our customers.

In June 2009, we entered into an agreement with Space Systems/Loral (“SS/L”), Inc. to manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of Jupiter and have agreed to make installment payments to SS/L upon the completion of each milestone set forth in the agreement. We anticipate launching Jupiter in the first half of 2012. In connection with the construction of Jupiter, we have 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.

Key Business Metrics

Business 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 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, including our Jupiter satellite, which is currently under construction and/or the provision of satellite capacity. The Corporate segment includes 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.

Revenues—We generate revenues from the sale and financing of hardware and the provision of services. In our North America and International Broadband segments, we generate revenues from services and hardware. In our Telecom Systems segment, 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.

Services—Our services revenue is varied in nature and includes 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. For enterprise customers who receive services from our network operations, our services include the following:

Service Type Description Broadband connectivity • Provides basic transport, intranet connectivity services and internet 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 satellite backup for frame relay service and other terrestrial networks Managed network services • Provides one-stop turnkey suite of bundled services that include wire line and wireless satellite networks • Includes network design program management, installation management, network and application engineering services, proactive network management, network operations, field maintenance and customer care ISP services and hosted application • Provides internet connectivity and hosted customer-owned and managed applications on our network facilities • Provides the customer application services developed by us or in conjunction with our service partners • Includes internet access, e-mail services, web hosting and online payments Digital media services • Digital content management and delivery including video, online learning and digital signage applications Customized business solutions • Provides customized, industry-specific enterprise solutions that can be applied to multiple businesses in a given industry28

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Service Type	Description
Broadband connectivity	•	Provide basic transport, intranet connectivity services and internet service provider services
Broadband connectivity	•	Applications include high-speed internet access, IP VPN, multicast file delivery and streaming, point-of-sale credit transactions, enterprise back-office communications, and satellite backup for frame relay service and other terrestrial networks
Managed network services	•	Provide one-stop turnkey suite of bundled services that include wireline and wireless satellite networks
Managed network services	•	Includes network design program management, installation management, network and application engineering services, proactive network management, network operations, field maintenance and customer care
ISP services and hosted applications	•	Provide internet connectivity and hosted customer-owned and managed applications on our network facilities
	•	Provide the customer application services developed by us or in conjunction with our service partners
	•	Includes internet access, e-mail services, web hosting and online payments
Digital media services	•	Digital content management and delivery including video, online learning and digital signage applications
Customized business solutions	•	Provide customized, industry-specific enterprise solutions that can be applied to multiple businesses in a given industry

Our services to enterprise customers are negotiated on a contract-by-contract basis with price varying based on numerous factors, including number 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 customers. We also 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 have the option to purchase the equipment up front or, beginning in September 2008, to rent the equipment 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.

33We also provide specialized equipment to our Mobile Satellite Systems and Terrestrial Microwave customers. Through large multi-year contracts, we develop and supply turnkey networking and terminal systems for various operators who offer mobile satellite-based services. We also supply microwave-based networking equipment to mobile operators for back-hauling their data from cellular telephone sites to their switching centers. In addition, local exchange carriers use our equipment for broadband access traffic from corporations bypassing local phone companies. The size and scope of these projects vary from year to year by customer and do not follow a pattern that can be reasonably predicted.

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~~Our consumer~~Market ~~customers~~trends ~~have~~impacting ~~the~~our ~~option~~revenues—The tofollowing ~~purchase~~table ~~the~~presents ~~equipment up front or, beginning in September 2008, to rent the equipment with a 24-month service contract. Prior to September 2008, we offered~~ our ~~consumer~~revenues ~~customers~~by ~~the~~end ~~option to~~market ~~pay~~ for the ~~purchased~~three ~~equipment~~months ~~over~~ended aMarch 24-month period. Hardware revenues of the North American and International Enterprise groups are derived from: (i) network operating centers; (ii) radio frequency terminals (earth stations); (iii) VSAT components including indoor units31, ~~outdoor~~2010 ~~units,~~ and ~~antennas;~~2009 (~~iv) voice,~~dollars ~~video~~in ~~and data appliances; (v~~thousands) ~~routers and DSL modems; and (vi) system integration services to integrate all of the above into a system.~~:

We also provide specialized equipment to our Mobile Satellite Systems, Telematics, and Terrestrial Microwave customers. Through large multi-year contracts, we develop and supply turnkey networking and terminal systems for various operators who offer mobile satellite-based or telematics voice and data services. We also supply microwave-based networking equipment to mobile operators for back-hauling their data from cellular telephone sites to their switching centers. In addition, local exchange carriers use our equipment for broadband access traffic from corporations bypassing local phone companies. The size and scope of these projects vary from year to year by customer and do not follow a pattern that can be reasonably predicted.

	Three Months Ended
	March 31,				Variance
	2010		2009		Amount			%
Revenues:
Services revenues	$	186,890	$	161,904	$	24,986			15.4%
Hardware sales		55,253		77,850		(22,597	)		(29.0)%
Total revenues	$	242,143	$	239,754	$	2,389			1.0%
Revenues by end market:
North America Broadband segment:
Consumer	$	113,354	$	98,729	$	14,625			14.8%
Enterprise		60,641		66,879		(6,238	)		(9.3)%
Total North America Broadband segment		173,995		165,608		8,387			5.1%
International Broadband segment		43,456		44,884		(1,428	)		(3.2)%
Telecom Systems segment:
Mobile Satellite Systems		19,405		18,466		939			5.1%
Telematics		301		7,069		(6,768	)		(95.7)%
Terrestrial Microwave		4,986		3,727		1,259			33.8%
Total Telecom Systems segment		24,692		29,262		(4,570	)		(15.6)%
Total revenues	$	242,143	$	239,754	$	2,389			1.0%

~~Market~~The ~~trends~~following ~~impacting~~table presents our ~~revenues—The~~ ~~following~~churn ~~tables~~rate, ~~present~~average ~~our~~revenue ~~revenues~~per byunit ~~segment~~(“ARPU”), ~~for~~average ~~the three~~monthly gross subscriber additions, and ~~nine~~subscribers as of or for the three months ended ~~September 30~~March 31, ~~2009~~2010 and ~~2008 (in thousands)~~2009:

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

	As of or For the
	Three Months Ended March 31,				Variance
	2010		2009		Amount		%
Churn rate		1.98%		2.29%		(0.31)%		(13.5)%
ARPU	$	72	$	68	$	4		5.9%
Average monthly gross subscriber additions		19,200		17,700		1,500		8.5%
Subscribers		530,800		455,100		75,700		16.6%

	Three Months Ended
	September 30,				Variance
	2009		2008		Amount			%
Revenues:
Services revenues	$	175,305	$	156,859	$	18,446			11.8%
Hardware sales		75,164		114,860		(39,696	)		(34.6)%
Total revenues	$	250,469	$	271,719	$	(21,250	)		(7.8)%
Revenues by end market:
North America Broadband:
Consumer	$	107,085	$	95,817	$	11,268			11.8%
Enterprise		67,038		73,583		(6,545	)		(8.9)%
Total North America Broadband		174,123		169,400		4,723			2.8%
International Broadband:
Enterprise		47,521		60,056		(12,535	)		(20.9)%
Telecom Systems:
Mobile Satellite Systems		17,309		27,198		(9,889	)		(36.4)%
Telematics		8,709		10,079		(1,370	)		(13.6)%
Terrestrial Microwave		2,807		4,986		(2,179	)		(43.7)%
Total Telecom Systems		28,825		42,263		(13,438	)		(31.8)%
Total revenues	$	250,469	$	271,719	$	(21,250	)		(7.8)%

The following table presents our churn rate, average revenue per unit (“ARPU”), average monthly gross subscriber additions, and subscribers as of or for the three months ended September 30, 2009 and 2008:

	As of or For the Three Months Ended
	September 30,				Variance
	2009		2008		Amount		%
Churn rate		2.30%		2.62%		(0.32)%		(12.2)%
ARPU	$	71	$	68	$	3		4.4%
Average monthly gross subscriber additions		16,800		14,700		2,100		14.3%
Subscribers		490,000		420,700		69,300		16.5%

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North America Broadband Segment

Revenue from our Consumer group for the three months ended ~~September~~March 3031, ~~2009~~2010 increased by 1114.8% to $~~107~~113.1 4 million compared to the same period in ~~2008~~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 in geographic areas that have historically been underserved by DSL and cable; (ii) ~~targeted~~value-added ~~service~~services ~~plans,~~and ~~with~~mix ~~higher~~of ~~prices~~plans ~~coincident~~resulting ~~with higher~~in ~~broadband~~an ~~capacity~~increase toin ~~meet~~average ~~the~~monthly ~~consumer~~revenue ~~customer’s~~per ~~broadband access requirements~~subscriber; and (iii) ~~value-added~~improvements ~~services,~~in ~~resulting~~customer inretention anas ~~increase~~noted ~~in average~~by ~~monthly~~the ~~revenue~~reduction ~~per~~in ~~subscriber~~the churn rate.

As of ~~September~~ 30March 31, ~~2009~~2010 and ~~2008~~2009, we achieved a total subscription base of ~~490~~530,~~000~~ 800 and ~~420~~455,~~700~~100, respectively, which included 2530,~~800~~100 and 1418,~~800~~900, respectively, subscribers in our small/medium enterprise and wholesale businesses~~, respectively~~. ARPU is used to measure average monthly consumer subscription service revenues on a per subscriber basis. ~~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.~~ For the three months ended ~~September 30~~March 31, ~~2009~~2010, ARPU was $7172 compared to $68 for the same period in ~~2008~~2009.

Revenue from our North American Enterprise group for the three months ended ~~September 30~~March 31, ~~2009~~2010 decreased by 8.9.3% to $6760.06 million compared to the same period in ~~2008,~~ 2009. The decrease was primarily due to lower hardware sales asresulting afrom ~~result of~~ the ~~unfavorable condition~~ ofadverse ~~the~~ overall market and economy, as well as changes in the product mix where the emphasis on managed services has led to lower upfront hardware revenue. Enterprise service revenue is generally characterized by long term contracts, and anour enterprise backlog continues to increase inas ~~recurring~~a ~~service~~result ~~revenues~~of new orders for enterprise services.

~~International Broadband Segment~~30

Revenue from our International Enterprise group for the three months ended September 30, 2009 decreased by 20.9% to $47.5 million compared to the same period in 2008, primarily due to the completion of terminal shipments on a multi-year contract for a large lottery operator in the United Kingdom and the unfavorable impact of currency exchange rates of $3.9 million resulting from the appreciation of the U.S. dollar. Partially offsetting these decreases were higher revenues from our Mexico operations and from our Brazil operations as the number of sites in service in Brazil approached 11,000 as of September 30, 2009.

Telecom Systems Segment

Revenue from our Telecom Systems segment for the three months ended September 30, 2009 decreased by 31.8% to $28.8 million compared to the same period in 2008, primarily due to the reduction in revenue from our Mobile Satellite group. Our Mobile Satellite group revenues are opportunity driven and are subject to the life cycle of customer contracts as they move from design and development to delivery and maintenance of completed networks. As a result, revenues in the Mobile Satellite group may fluctuate on a quarter to quarter basis. Additionally, the decrease was partially impacted by the unfavorable economy in the automobile industry causing HTI to terminate substantially all of the development and manufacturing activities with us in August 2009 as a result of the bankruptcy filing of one of HTI’s customers. We expect our future revenue from the Telematics group will be reduced significantly.

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Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

	Nine Months Ended
	September 30,				Variance
	2009		2008		Amount			%
Revenues:
Services revenues	$	509,871	$	454,740	$	55,131			12.1%
Hardware sales		235,458		319,489		(84,031	)		(26.3)%
Total revenues	$	745,329	$	774,229	$	(28,900	)		(3.7)%
Revenues by end market:
North America Broadband:
Consumer	$	310,020	$	280,704	$	29,316			10.4%
Enterprise		204,953		206,727		(1,774	)		(0.9)%
Total North America Broadband		514,973		487,431		27,542			5.7%
International Broadband:
Enterprise		142,925		170,121		(27,196	)		(16.0)%
Telecom Systems:
Mobile Satellite Systems		55,144		81,351		(26,207	)		(32.2)%
Telematics		23,437		22,271		1,166			5.2%
Terrestrial Microwave		8,850		13,055		(4,205	)		(32.2)%
Total Telecom Systems		87,431		116,677		(29,246	)		(25.1)%
Total revenues	$	745,329	$	774,229	$	(28,900	)		(3.7)%

The following table presents our churn rate, ARPU, average monthly gross subscriber additions, and subscribers as of or for the nine months ended September 30, 2009 and 2008:

	As of or For the Nine Months Ended
	September 30,				Variance
	2009		2008		Amount		%
Churn rate		2.29%		2.36%		(0.07)%		(3.0)%
ARPU	$	70	$	68	$	2		2.9%
Average monthly gross subscriber additions		17,000		14,200		2,800		19.7%
Subscribers		490,000		420,700		69,300		16.5%

North America Broadband Segment

Revenue from our Consumer group for the nine months ended September 30, 2009 increased by 10.4% to $310.0 million compared to the same period in 2008. 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 in geographic areas that have historically been underserved by DSL and cable; (ii) targeted service plans, with higher prices coincident with higher broadband capacity to meet the consumer customer’s broadband access requirements; and (iii) value-added services, resulting in an increase in average monthly revenue per subscriber.

As of September 30, 2009 and 2008, we achieved a total subscription base of 490,000 and 420,700, respectively, which included 25,800 and 14,800 subscribers in our small/medium enterprise and wholesale businesses, respectively. For the nine months ended September 30, 2009, ARPU was $70 compared to $68 for the same period in 2008.

Revenue from our North American Enterprise group for the nine months ended September 30, 2009 decreased slightly by 0.9% to $205.0 million compared to the same period in 2008, primarily due to lower hardware sales as a result of the unfavorable condition of the overall market and economy, as well as changes in the product mix where the emphasis on managed services has led to lower upfront hardware revenue and an increase in recurring service revenues. The decrease in hardware sales was partially offset by the increase in services revenues resulting from an increase in our managed services business, new contracts awarded in 2008 that provided incremental service revenue in the third quarter of 2009 and the growth in our small/medium and wholesale subscriber base.

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International Broadband Segment

Revenue from our International ~~Enterprise~~Broadband ~~group~~segment for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~ 2010 decreased byslightly ~~16.0%~~ to $~~142~~43.95 million compared to the same period in ~~2008~~ 2009, primarily due to ~~the~~delays ~~completion~~in ofcustomer ~~terminal~~buying ~~shipments~~decisions onimpacting anew ~~multi-year~~hardware ~~contract~~orders. ~~for~~This ~~a large~~decrease ~~lottery~~was ~~operator~~offset inby the ~~United~~continued ~~Kingdom~~growth ~~and~~of ~~the~~our ~~unfavorable~~expanding ~~impact~~array of ~~currency~~ ~~exchange~~solutions ~~rates~~and ofglobal ~~$20.5~~services ~~million~~to ~~resulting~~enterprises ~~from~~and ~~the~~government ~~appreciation~~organizations ofin ~~the U.S.~~Brazil ~~dollar. Partially~~and ~~offsetting~~the ~~these~~Africa/Middle ~~decreases~~East ~~were~~region, ~~higher~~and ~~revenues~~$4.2 ~~from our~~million ~~Mexico~~resulting ~~operations and~~ from ~~our Brazil operations as~~ the ~~number~~favorable impact of ~~sites~~currency ~~in service~~exchange indue ~~Brazil~~to ~~approached~~the ~~11,000~~depreciation as of ~~September~~U.S. ~~30, 2009~~dollars.

Telecom Systems Segment

Revenue from our Telecom Systems segment for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~ 2010 decreased by 2515.16% to $8724.47 million compared to the same period in ~~2008, primarily~~2009. ~~due~~The todecrease ~~the reduction~~ in revenue from our Mobile Satellite group. Our Mobile Satellite group revenues are opportunity driven and are subject to the life cycle of customer contracts as they move from design and development to delivery and maintenance of completed networks. As a result, revenues in the Mobile Satellite group fluctuate on a quarter to quarter basis. Additionally, the decrease was ~~impacted~~primarily bydue ~~the unfavorable economy in the automobile industry causing HTI~~ to ~~terminate substantially all of~~ the ~~development~~reduction ~~and manufacturing activities with us~~ in ~~August 2009 as a result of the bankruptcy filing of one of HTI’s customers. We expect our future~~ revenue from ~~the~~our Telematics group ~~will be reduced significantly~~.

Cost of Services— Our cost of services primarily consists of transponder capacity leases, hub infrastructure, customer care, ~~wire~~wireline ~~line~~ 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.

Cost of Hardware Products Sold—We outsource a significant portion of the manufacturing of our hardware for our North America and International Broadband and Telecom Systems segments to third -party contract manufacturers. Our cost of hardware products sold relates primarily to direct materials and subsystems (e.g., antennas), salaries and related employment costs for those employees who are directly associated with the procurement and manufacture of our products and other items of indirect overhead incurred in the procurement and production process. Cost of hardware products sold also includes certain engineering and hardware costs related to the design of a particular product for specific customer programs. In addition, certain software development costs are capitalized in accordance with ~~the~~ ~~Financial~~ Accounting Standards ~~Board Accounting Standards~~ Codification ~~(“ASC”)~~ 985-20, “~~Accounting for the~~ Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,” and amortized to cost of hardware products sold over their estimated useful lives, not to exceed five years. As we have developed new product offerings, we have reduced product costs due to higher levels of component integration, design improvements and volume increases.

Subscriber acquisition costs (“SAC”) are associated with our Consumer group and are comprised of three 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 subsidy for cost of hardware and related cost of installation is deferred and amortized over the initial contract period or the useful life of the hardware as a component of cost of hardware products sold for hardware related sales or cost of services for activities related to the consumer rental program. The portion of SAC related to sales and 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.

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.

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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 (“R&D”)—R&D expenses primarily consist of the salaries of certain members of our engineering staff plus an applied overhead charge. R&D expenses also include engineering support for existing platforms and development efforts to build new products and software applications, subcontractors, material purchases and other direct costs in support of product development.

Results of Operations

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Revenues

	Three Months Ended
	September 30,				Variance
	March 31,				Variance
(Dollars in thousands)	~~2009~~2010		~~2008~~2009		Amount			%
Services revenues	$	~~175~~186,~~305~~890	$	~~156~~161,~~859~~904	$	1824,~~446~~986			1115.84%
Hardware sales		7555,~~164~~253		~~114~~77,~~860~~850		(3922,~~696~~597	)		(3429.60)%
Total revenues	$	~~250~~242,~~469~~143	$	~~271~~239,~~719~~754	$	~~(21~~2,~~250~~389	)		(71.8)0%
% of revenue to total revenues:
Services revenues		7077.02%		5767.75%
Hardware sales		3022.08%		4232.35%

Services Revenues

The increase in services ~~revenue~~revenues ~~for~~was ~~the~~attributable ~~three~~to ~~months~~our ~~ended~~North ~~September~~America ~~30,~~Broadband ~~2009~~segment. ~~was primarily~~Revenues ~~due~~from ~~higher~~our ~~revenue~~Consumer ofgroup increased by $1518.8 million ~~from our Consumer group~~ to $98106.2 0 million for the three months ended March 31, 2010 compared to $8287.42 million for the same period in ~~2008.~~2009 ~~The~~resulting ~~increase was~~ primarily ~~due~~from to the ~~growth~~increase ofin our consumer subscriber base. ~~and,~~The increase in ~~part,~~the toConsumer ~~the election~~group bywas ~~customers~~partly due to ~~utilize~~a larger percentage of our ~~consumer~~customers ~~rental~~utilizing ~~program~~the ~~introduced~~consumer ~~in September~~rental ~~2008~~program, for which ~~the~~we ~~Company~~ recognized ~~services revenue of~~ $47.9 1 million and ~~nominal for the three months ended September 30, 2009 and 2008, respectively. Also contributing to the increase in services revenues was revenue growth of~~ $1.69 million ~~from~~of ~~our~~services ~~North~~revenues ~~America Enterprise group to $40.4 million~~ for the three months ended ~~September~~March 3031, ~~2009~~2010 ~~compared~~and ~~to $38.8 million for the same period in 2008~~2009, mainly as a result of an increase in our managed services business, new contracts awarded in 2008 that provided incremental service revenue in the third quarter of 2009 and the growth in our small/medium and wholesale subscriber baserespectively.

~~Services~~ In addition, revenue from our ~~International~~North ~~Broadband~~America ~~segment~~Enterprise group increased by $56.54 million to $3147.16 million for the three months ended ~~September~~March 3031, ~~2009~~2010 compared to $2541.6 2 million for the same period in ~~2008~~2009. The increase reflected the growth in our managed services business, ~~primarily~~new ~~due~~contracts toawarded anin ~~increase~~prior periods that provided incremental service revenue in the ~~numbers~~ first quarter of ~~enterprise~~2010 ~~sites~~and inthe ~~service~~growth ~~across~~in ~~Europe~~our small/medium and ~~Brazil~~wholesale subscriber base.

~~Partially~~Furthermore, ~~offsetting the increase in~~ services revenue ~~was~~from aour ~~revenue~~International ~~decrease~~Broadband ofsegment increased by $4.5.8 million ~~from our Telecom Systems segment~~ to $531.69 million for the three months ended ~~September 30~~March 31, ~~2009~~2010 ~~compared~~from to $1026.1 million for the same period in ~~2008.~~2009, ~~The~~primarily ~~decrease~~due ~~was a~~to ~~result~~the continued growth of ~~the~~our ~~unfavorable~~expanding ~~impact~~array of ~~the~~solutions ~~economy~~and inglobal ~~the~~services ~~automobile~~to ~~industry causing~~enterprises ~~HTI~~and togovernment ~~terminate~~organizations ~~substantially~~in ~~all~~Brazil ofand the ~~development~~Africa/Middle ~~and~~East ~~manufacturing activities~~region. ~~with~~Also, uscontributing into ~~August~~the ~~2009~~increase was $3.8 million as a result of the ~~bankruptcy~~favorable ~~filing~~impact of ~~one~~currency ~~of HTI’s~~exchange ~~customers.~~due Weto ~~expect our future revenue from~~ the ~~Telematics~~depreciation ~~group~~of ~~will~~U.S. ~~be reduced significantly~~dollars.

Partially offsetting the increase was a decrease in revenue from our Telecom Systems segment of $6.0 million to $1.4 million for the three months ended March 31, 2010 compared to $7.4 million for the same period in 2009, mainly as a result of a significant reduction in revenues from the Telematics group.

Hardware Sales

Hardware sales decreased ~~primarily~~mainly due to ~~the~~a ~~reduction~~revenue indecrease ~~hardware~~of ~~sales~~$16.8 million from our ~~International~~ North America Broadband segment ~~of $18.1 million~~ to $1620.4 million for the three months ended ~~September~~March 3031, ~~2009~~2010 compared to $3437.52 million for the same period in ~~2008.~~ ~~The decrease was primarily due to the completion of terminal shipments on a multi-year contract for a large lottery operator in the United Kingdom~~2009.

38Despite the growth in the subscriber base, hardware sales in the Consumer group decreased by $4.1 million to $7.4 million for the three months ended March 31, 2010 compared to $11.5 million for the same period in 2009. The decrease was due to an increase in (i) the utilization of the consumer rebate program which reduced hardware revenues and (ii) customers utilizing the consumer rental program, which revenues are accounted for as services revenues, instead of the previously offered deferred purchase plan, which revenues were accounted for as hardware sales.

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Hardware ~~sales~~ revenue from our North America ~~Broadband~~Enterprise ~~segment~~group also decreased by $12.67 million to $3513.60 million for the three months ended ~~September~~March 3031, ~~2009~~2010 compared to $4825.2 7 million for the same period in ~~2008~~2009. ~~Hardware~~The ~~sales~~decrease ~~from~~was ~~the~~due ~~North America Enterprise group decreased by $8.1 million~~ to ~~$26.7~~a ~~million~~lower ~~for~~volume ~~the~~of ~~same~~shipments ~~period in~~as ~~2009~~customers ~~compared~~delayed totheir ~~$34.8~~buying ~~million~~decisions ~~for~~as ~~the~~well ~~same period in 2008~~ as athe ~~result of~~ changes in the product mix where the emphasis on managed services has led to lower upfront hardware revenue and an increase in recurring service ~~revenues~~revenue. Despite the growth in our consumer subscriber base, hardware sales in the Consumer group decreased by $4.5 million to $8.9 million for the three months ended September 30, 2009 compared to $13.4 million for the same period in 2008 as a result of changes in consumer plans in response to competitive pressures and the election by customers to utilize the consumer rental program.

~~Further contributing~~In toaddition, ~~the decrease in~~ hardware sales ~~was a reduction of hardware sales~~ from our ~~Telecom~~International ~~Systems~~Broadband segment ofdecreased $9by 7.02 million to $2311.26 million for the three months ended ~~September~~March 3031, ~~2009~~2010 compared to $3218.28 million for the same period in ~~2008,~~ 2009. The decrease was primarily due to ~~several~~the ~~development~~completion ~~contracts~~of the rollout of terminal shipments on a multi-year contract for a large lottery operator in the ~~Mobile~~United ~~Satellite group~~Kingdom ~~reaching~~and ~~their~~a ~~completion~~decrease ~~stage~~in shipment volume to our enterprise customers as delays in customer buying decisions impacting new hardware orders. These decreases were slightly offset by a $0.4 million favorable impact of currency exchange due to the depreciation of U.S. dollars.

Hardware sales from our Telecom Systems segment increased by $1.4 million to $23.3 million for the three months ended March 31, 2010 compared to $21.9 million for the same period in 2009, partly due to the change in the mix of customer programs in the Mobile Satellite group.

Cost of Revenues

	Three Months Ended
	September 30,				Variance
	March 31,				Variance
(Dollars in thousands)	~~2009~~2010		~~2008~~2009		Amount			%
Cost of services	$	~~108~~115,~~894~~650	$	~~105~~106,~~988~~546	$	29,~~906~~104			28.75%
Cost of hardware products sold		7360,~~646~~886		9674,~~881~~205		(2313,~~235~~319	)		(2417.09)%
Total cost of revenues	$	~~182~~176,~~540~~536	$	~~202~~180,~~869~~751	$	(204,~~329~~215	)		(102.03)%
Services cost as a % of services revenues		62.1%		67.6%
Hardware cost as a % of hardware revenues		98.0%		84.3%

Cost of Services

~~Cost~~The ~~of services~~increase ~~increased~~in ~~partly~~cost ~~due~~of toservices ~~higher~~reflects ~~fixed~~the ~~expenses~~growth ofin ~~$1.5 million from~~ our ~~North~~ ~~American~~consumer ~~Enterprise~~subscriber ~~group~~base ~~related~~and toour ~~the~~managed ~~commencement of SPACEWAY~~ services, ~~which~~businesses ~~began~~ in ~~April~~the ~~2008~~North ~~and~~America ~~primarily~~Broadband ~~consisted~~segment. ofSupport ~~SPACEWAY~~costs ~~related depreciation,~~for asthe ~~well~~growth asincluded ~~related~~customer ~~network operations center and support~~service, ~~operation~~ ofwireline ~~Traffic Off-load Gateways,~~ and ~~in-orbit~~wireless ~~insurance. These~~ costs ~~are~~, ~~generally~~field ~~fixed~~services, ~~in nature and are expected to be absorbed in the coming quarters as additional consumer customers are added to the SPACEWAY~~ network. ~~In addition,~~operations ~~other support costs including customer service~~ and depreciation expense, which increased by $811.18 million. ~~The increase in cost of services was partially offset by lower transponder capacity lease expense of $6.2 million~~ for the three months ended ~~September~~March 3031, ~~2009~~2010 compared to the same period in ~~2008, mainly~~2009. ~~resulting~~The ~~from~~increases ~~reduction~~were inpartially offset by lower transponder capacity lease expense ~~for the Consumer group as new consumer customers were added to the SPACEWAY network~~. We expect transponder capacity lease expense for the Consumer group to continue to decrease as more customers are placed on the SPACEWAY network.

~~Cost~~In addition, cost of services infrom our International Broadband segment increased by $34.58 million , primarily due to an increase in the number of enterprise and global service sites in service across ~~Europe~~ Brazil and ~~Brazil~~the Africa/Middle East region. The increase in cost of services was partially offset by a ~~reduction~~ ofdecrease ~~service costs in the Telematics group as a result~~ of ~~the unfavorable~~$4.7 ~~impact~~million ~~of the economy~~ in ~~the~~cost ~~automobile industry causing HTI to terminate substantially all~~ of ~~the~~services ~~development and manufacturing activities with us in August 2009 as a result of the bankruptcy filing of one of HTI’s customers. We expect our future revenue~~ from the Telematics group ~~will be reduced significantly~~.

Cost of Hardware Products Sold

Cost of hardware products sold decreased in conjunction with the reduction in hardware sales. The decrease was mainly ~~due~~attributable to a ~~reduction~~decrease in cost of ~~$10.6~~hardware ~~million~~products ~~in costs~~sold from our ~~International~~North America Broadband segment of $10.5 million to $1135.31 million for the three months ended ~~September 30~~March 31, ~~2009~~2010 compared to $2145.96 million for the same period in ~~2008~~ ~~and~~2009. aPartially ~~reduction~~offsetting ofthe ~~$7.7~~decrease ~~million~~ in ~~costs~~the ~~from our~~ North America Broadband segment towas ~~$43.4~~an ~~million~~increase ~~for~~in (i) the ~~three~~upfront ~~months~~recognition ~~ended~~of ~~September~~hardware 30costs, ~~2009~~which ~~compared to~~were ~~$51.1~~previously ~~million~~amortized, ~~for~~as ~~the~~a ~~same~~resulted ~~period~~of ina ~~2008~~change asin athe ~~result~~consumer ofdistribution ~~the~~process ~~decrease~~and ~~in hardware~~(ii) ~~sales.~~repair Incenter ~~addition~~costs, ~~cost~~which ofwas ~~hardware~~primarily ~~products~~driven ~~sold~~by ~~from~~the ~~our~~expansion ~~Telecom Systems~~of ~~segment~~the ~~decreased~~hardware byrefurbishment ~~$4.8~~effort ~~million~~related ~~mainly~~to ~~attributable~~the toreuse ~~lower~~of ~~sales~~equipment ~~in the~~returned ~~Mobile~~due ~~Satellite~~to ~~group~~churn, warranty and other factors.

39In addition, cost of hardware products sold from our International Broadband segment decreased by $4.6 million to $8.2 million for the three months ended March 31, 2010 compared to $12.8 million for the same period in 2009, primarily due to a decrease in hardware sales.

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The decrease in cost of hardware products sold was partially offset by the increase of $1.8 million in costs from our Telecom Systems segment resulting mostly from the change in the mix of customer programs in the Mobile Satellite group.

Selling, General and Administrative Expense

Three Months Ended

September 30,

Variance

March 31,

Variance

(Dollars in thousands)

~~2009~~2010

~~2008~~2009

Amount

Selling, general and administrative expense

4448,~~204~~680

4143,~~397~~797

24,~~807~~883

611.81%

% of revenue

1720.61%

1518.23%

~~The increase in~~ SG&A expense ~~was~~increased mainly adue ~~result~~to ofhigher: ~~our~~(i) ~~expanded efforts in promoting our consumer business which caused~~ marketing ~~expense~~costs toof ~~increase by~~ $43.5 million., ~~Partially~~primarily ~~offsetting~~in ~~the~~our ~~increase~~North ~~was~~America ~~lower~~operations ~~administrative costs~~ as we increased targeted spending for our ~~effort~~consumer inbusiness ~~reducing~~and ~~SG&A~~(ii) bad debt expense and ~~compensation~~bank ~~expense~~ fees for the three months ended ~~September~~March 3031, 2010 compared to the same period in 2009. From time to time, we modify our marketing strategy to attract new customers, which may impact our SG&A expense.

Research and Development

Three Months Ended

September 30,

Variance

March 31,

Variance

(Dollars in thousands)

~~2009~~2010

~~2008~~2009

Amount

Research and development

54,~~453~~915

65,~~493~~351

(~~1,040~~436)

)

(168.01)%

% of revenue

2.20%

2.42%

R&D decreased due to a reduction in development activities in our North America Broadband segment. This reduction was partially offset by a $0.8 million increase in development activities related to the construction of our Jupiter satellite.

Amortization of Intangible Assets

Three Months Ended

September 30,

Variance

March 31,

Variance

(Dollars in thousands)

~~2009~~2010

~~2008~~2009

Amount

Amortization of intangible assets

~~1,385~~702

1,~~629~~385

(~~244~~683

)

(1549.03)%

% of revenue

0.63%

0.6%

Amortization of intangible assets decreased primarily due to the impact of ~~adjustments~~certain tofully ~~our~~ depreciated intangible assets in 2008 to reflect the reversal of valuation allowances against deferred tax assets associated with our United Kingdom and German subsidiaries pursuant to the application of ASC 740-805, “Income Taxes—Business Combinations.”

Operating Income

Three Months Ended

September 30,

Variance

March 31,

Variance

(Dollars in thousands)

~~2009~~2010

~~2008~~2009

Amount

Operating income

1611,~~887~~310

198,~~331~~470

(2,~~444~~840

)

~~(12~~33.6)5%

% of revenue

64.7%

73.15%

The ~~decrease~~ increase in operating income was ~~mainly~~attributable ~~due~~ to higher ~~marketing~~profit ~~expense~~margin of $6.6 million as a result of ~~our~~higher ~~expanded~~revenues ~~efforts~~and inlower ~~promoting~~cost ~~our~~of ~~consumer~~revenues ~~business.~~for ~~Partially offsetting~~the months ended March 31, 2010 compared to the ~~decrease~~same period in 2009. The increase was ~~lower~~partially ~~R&D~~offset ~~costs~~by higher selling, general and ~~our~~administrative ~~effort~~expenses inof ~~reducing SG&A~~$4.9 ~~expense~~million, ~~for~~mainly ~~the~~associated ~~three~~with ~~months~~our ~~ended~~North ~~September~~America 30operations, ~~2009~~as we increased our effort in promoting our consumer business.

~~Interest Expense~~34

	Three Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount		%
Interest expense	$	17,727	$	14,095	$	3,632		25.8%

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Interest expense primarily relates to interest accrued on the 2009 Senior Notes, the $450 million unsecured senior notes (the “2006 Senior Notes”) and the $115 million borrowing under the term loan facility (the “Term Loan Facility”) less capitalized interest associated with the construction of our satellites. The increase in interest expense was mainly due to $4.1 million of interest incurred, which included the accretion of the original issue discount, relating to the 2009 Senior Notes offered in May 2009. The increase was partially offset by the capitalization of interest associated with the construction of the Jupiter satellite, which began in July 2009.

Interest and Other Income (Loss), Net

	Three Months Ended
	September 30,					Variance
(Dollars in thousands)	2009			2008		Amount			%
Interest income	$	468		$	666	$	(198	)		(29.7)%
Other income (loss), net		(1	)		6		(7	)		(116.7)%
Total interest and other income (loss), net	$	467		$	672	$	(205	)		(30.5)%

The decrease in total interest and other income (loss), net was primarily due to lower rates of return on our investments for the three months ended September 30, 2009 compared to the same period in 2008 as we invested our cash in secure but lower yielding investments.

Income Tax Expense

	Three Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount			%
Income tax expense	$	981	$	2,288	$	(1,307	)		(57.1)%

Changes in income tax expense are generally attributable to state income taxes and income earned from our foreign subsidiaries. For the three months ended September 30, 2009, our income tax expense was partially offset by the income tax benefit generated by our Indian subsidiary as a result of being engaged in telecommunications infrastructure development. Indian tax law provides for a deduction of 100% of profits and gains derived from qualifying infrastructure businesses for ten consecutive assessment years. This benefit is available to us through the tax assessment year of 2015/2016.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Revenues

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount			%
Services revenues	$	509,871	$	454,740	$	55,131			12.1%
Hardware sales		235,458		319,489		(84,031	)		(26.3)%
Total revenues	$	745,329	$	774,229	$	(28,900	)		(3.7)%
% of revenue to total revenues:
Services revenues		68.4%		58.7%
Hardware sales		31.6%		41.3%

Services Revenues

The increase in services revenue for the nine months ended September 30, 2009 was primarily due to an increase in revenue of $40.7 million from our Consumer group to $279.6 million for the nine months ended September 30, 2009 compared to $238.9 million for the same period in 2008. The increase was primarily due to the growth of our consumer subscriber base and, in part, to the election by customers to utilize the consumer rental program introduced in September 2008, for which the Company recognized services revenue of $10.0 million and nominal for the nine months ended

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September 30, 2009 and 2008, respectively. Also contributing to the increase in services revenues was revenue growth of $8.8 million from our North America Enterprise group to $121.8 million for the nine months ended September 30, 2009 compared to $113.0 million for the same period in 2008, mainly as a result of an increase in our managed services business, new contracts awarded in 2008 that provided incremental service revenue in 2009 and the growth in our small/medium and wholesale subscriber base.

Also contributing to the increase in services revenue was a revenue increase of $8.1 million from our International Broadband segment to $87.7 million for the nine months ended September 30, 2009 from $79.6 million for the same period in 2008, primarily due to the continued growth in the number of enterprise sites in service internationally.

Offsetting the increase in services revenue was a revenue decrease of $2.4 million from our Telecom Systems segment to $20.8 million for the nine months ended September 30, 2009 compared to $23.2 million for the same period in 2008. The decrease was a result of the unfavorable impact of the economy in the automobile industry causing HTI to terminate substantially all of the development and manufacturing activities with us in August 2009 as a result of the bankruptcy filing of one of HTI’s customers. We expect our future revenue from the Telematics group will be reduced significantly.

Hardware Sales

Hardware sales decreased mainly due to the decrease of $35.3 million in revenue from our International Broadband segment to $55.2 million for the nine months ended September 30, 2009 compared to $90.5 million for the same period in 2008. The decrease resulted from the completion of the rollout of terminal shipments on a multi-year contract for a large lottery operator in the United Kingdom.

In addition, hardware sales from our Telecom Systems segment decreased by $26.8 million to $66.7 million for the nine months ended September 30, 2009 compared to $93.5 million for the same period in 2008. The decrease was mainly due to several development contracts in the Mobile Satellite group reaching their completion stage.

Further contributing to the decrease in hardware sales was a reduction of $21.9 million from our North America Broadband segment to $113.6 million for the nine months ended September 30, 2009 compared to $135.5 million for the same period in 2008. Despite the growth in our consumer subscriber base, hardware sales in the Consumer group decreased by $11.3 million to $30.5 million for the nine months ended September 30, 2009 compared to $41.8 million for the same period in 2008 as a result of changes in consumer plans in response to competitive pressures and the election by customers to utilize the consumer rental program. Hardware sales from our North America Enterprise group decreased by $10.6 million to $83.1 million for the nine months ended September 30, 2009 compared to $93.7 million for the same period in 2008 as a result of changes in the product mix where the emphasis on managed services has led to lower upfront hardware revenue and an increase in recurring service revenues.

Cost of Revenues

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount			%
Cost of services	$	326,532	$	301,875	$	24,657			8.2%
Cost of hardware products sold		225,134		271,220		(46,086	)		(17.0)%
Total cost of revenues	$	551,666	$	573,095	$	(21,429	)		(3.7)%
Services cost as a % of services revenues		64.0%		66.4%
Hardware cost as a % of hardware revenues		95.6%		84.9%

Cost of Services

Cost of services increased partly due to higher fixed expenses of $13.2 million from our North American Enterprise group related to the commencement of SPACEWAY services, which began in April 2008 and primarily consisted of SPACEWAY related depreciation, as well as related network operations center and support, operation of Traffic Off-load Gateways, and in-orbit insurance. These costs are generally fixed in nature and are expected to be absorbed in the coming quarters as additional consumer customers are added to the SPACEWAY network. In addition, other support costs including

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customer service, network services, wire line and wireless costs, and depreciation expense increased by $21.8 million. The increase in cost of services was partially offset by lower transponder capacity lease expense of $12.1 million, mainly resulting from reduction in transponder capacity lease expense for the Consumer group as new consumer customers were added to the SPACEWAY network. We expect transponder capacity lease expense for the Consumer group to continue to decrease as more customers are placed on the SPACEWAY network.

Cost of services in our International Broadband segment increased by $4.2 million primarily due to an increase in the number of enterprise sites in service across Europe and Brazil. The increase in cost of services was partially offset by a reduction of service costs in the Telematics group as a result of the unfavorable impact of the economy in the automobile industry causing HTI to terminate substantially all of the development and manufacturing activities with us in August 2009 as a result of the bankruptcy filing of one of HTI’s customers. We expect our future revenue from the Telematics group will be reduced significantly.

Cost of Hardware Products Sold

Corresponding with the decrease in hardware sales, cost of hardware products sold within the respective group decreased for the nine months ended September 30, 2009 compared to the same period in 2008. Cost of hardware products sold from our Telecom Systems segment, International Broadband segment, and North America Broadband segment decreased by $18.7 million, $18.4 million and $8.9 million, respectively, for the nine months ended September 30, 2009 compared to $70.4 million, $56.3 million, and $144.4 million, respectively, for the same period in 2008.

Selling, General and Administrative Expense

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount		%
Selling, general and administrative expense	$	132,302	$	129,961	$	2,341		1.8%
% of revenue		17.8%		16.8%

The increase in SG&A expense was mainly a result of our expanded efforts in promoting our consumer business which caused marketing costs to increase by $12.2 million. The increase was partially offset by lower compensation expense of $8.4 million related to the Retention Program and lower administrative costs of $1.2 million as we increased our efforts in reducing SG&A expense in 2009.

Loss on Impairment

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount		%
Loss on impairment	$	44,400	$	-	$	44,400		*
% of revenue		6.0%		0.0%
* Percentage not meaningful.

As result of our evaluation of the Deposit, we concluded that the value of the Deposit was impaired and have recorded an impairment loss of $44.4 million in June 2009. For further discussion of the impairment loss, see Note 8—Other Assets to our unaudited condensed consolidated financial statements included in Part I-Item 1 of this report.

Research and Development

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount			%
Research and development	$	16,502	$	19,745	$	(3,243	)		(16.4)%
% of revenue		2.2%		2.6%

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R&D decreased due to a reduction in development activities in our North America Broadband segment.

Amortization of Intangible Assets

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount			%
Amortization of intangible assets	$	4,156	$	4,904	$	(748	)		(15.3)%
% of revenue		0.6%		0.6%

Amortization of intangible assets decreased due to the impact of adjustments to our intangible assets in 2008 to reflect the reversal of valuation allowances against deferred tax assets associated with our United Kingdom and German subsidiaries pursuant to the application of ASC 740-805.

Operating Income (Loss)

	Nine Months Ended
	September 30,					Variance
(Dollars in thousands)	2009			2008		Amount			%
Operating income (loss)	$	(3,697	)	$	46,524	$	(50,221	)		(107.9)%
% of revenue		(0.5)%			6.0%

Our operating income decreased significantly due to the $44.4 million impairment loss recognized in the second quarter of 2009 associated with the Deposit. For further discussion of the impairment loss, see Note 8—Other Assets to our unaudited condensed consolidated financial statements included in Part I-Item 1 of this report. Also contributing to the decrease in our operating income was (i) our expanded efforts in promoting our consumer business resulting higher marketing expense of $12.2 million and (ii) higher depreciation expense of $7.1 million related to our SPACEWAY 3, which was placed into service in April 2008. The decrease was partially offset by lower compensation expense of $8.4 million related to the Retention Program as it vested in the second quarter of 2009.

Interest Expense

Nine Months Ended

Three Months Ended

September 30,

Variance

March 31,

Variance

(Dollars in thousands)

~~2009~~2010

~~2008~~2009

Amount

Interest expense

4716,~~106~~105

3713,~~305~~829

92,~~801~~276

2616.35%

Interest expense primarily relates to interest ~~accrued~~ on the 2006 Senior Notes, the 2009 Senior Notes and the Term Loan Facility less capitalized interest associated with the construction of our satellites. ~~Interest~~The ~~expense~~increase ~~increased~~in byinterest ~~$4.3 million~~expense was primarily due to the ~~discontinuation~~recognition of ~~capitalized~~ interest, ~~associated~~accretion ~~with~~of the ~~construction~~ oforiginal ~~SPACEWAY~~issue 3discount ~~after~~and amortization of the ~~satellite~~debt ~~was~~issuance ~~placed~~cost ~~into~~of ~~service~~the in2009 ~~April 2008~~Senior Notes, which was partially offset by ~~the~~$2.0 ~~capitalization~~million of capitalized interest ~~related~~associated to with the construction of the Jupiter satellite. Wefor ~~also recognized $5.8 million of interest expense, which included~~ the ~~accretion~~three ofmonths ~~the~~ended ~~original~~March ~~issue discount~~31, on ~~the 2009 Senior Notes offered in May 2009~~2010.

Interest ~~and~~ ~~Other~~ Income ~~(Loss), Net~~

	Nine Months Ended
	Three Months Ended
	September 30,					Variance
	March 31,					Variance
(Dollars in thousands)	~~2009~~2010			~~2008~~2009		Amount			%
Interest income	$	~~865~~553		$	~~2,569~~227	$	~~(1,704~~326	)		~~(66~~143.3)6%
Other income (loss), net		(365	)		95		(460	)		(484.2)%
Total interest and other income (loss), net	$	500		$	2,664	$	(2,164	)		(81.2)%

44The increase in interest income was primarily due to interest earned on certain notes and deferred trade receivables.

~~Table~~Income ofTax ~~Contents~~(Expense) Benefit

The decrease in total interest and other income (loss), net was primarily due to lower rates of return on our investments for the nine months ended September 30, 2009 compared to the same period in 2008 as we invested our cash in secure but lower yielding investments.

	Three Months Ended
	March 31,					Variance
(Dollars in thousands)	2010			2009		Amount			%
Income tax (expense) benefit	$	(1,217	)	$	668	$	(1,885	)		(282.2)%

~~Income Tax~~Changes ~~Expense~~in income tax (expense) benefit are generally attributable to state income taxes and income earned from our foreign subsidiaries. Our income tax expense was partially offset by $0.2 million for the three months ended March 31, 2010 compared to an offset of $1.2 million for the same period in 2009 of income tax benefit generated by our Indian subsidiary as a result of it being engaged in telecommunications infrastructure development. Indian tax law provides for a deduction of 100% of profits and gains derived from qualifying infrastructure businesses for ten consecutive assessment years. This benefit is available to us through the tax assessment year of 2015/2016.

	Nine Months Ended
	September 30,				Variance
(Dollars in thousands)	2009		2008		Amount			%
Income tax expense	$	775	$	4,101	$	(3,326	)		81.1%

Changes in income tax expense are generally attributable to state income taxes and income earned from our foreign subsidiaries. For the nine months ended September 30, 2009, our income tax expense was partially offset by the income tax benefit generated by our Indian subsidiary as a result of being engaged in telecommunications infrastructure development. Indian tax law provides for a deduction of 100% of profits and gains derived from qualifying infrastructure businesses for ten consecutive assessment years. This benefit is available to us through the tax assessment year of 2015/2016.

Liquidity and Capital Resources

Nine Months Ended

Three Months Ended

September 30,

Variance

March 31,

Variance

(Dollars in thousands)

~~2009~~2010

~~2008~~2009

Amount

Net cash provided by (used in):

Operating activities

~~123~~14,~~055~~965

4033,~~401~~428

82(18,~~654~~463

)

~~204~~(55.62)%

Investing activities

(~~139~~79,~~836~~361

)

(6730,~~909~~866

)

7148,~~927~~495

~~105~~157.91%

Financing activities

~~129~~(2,~~559~~674

)

(81,~~507~~645

)

~~138~~1,~~066~~029

~~1623~~62.06%

Net Cash Flows from Operating Activities

The ~~increase~~ decrease in net cash provided by operating activities for the three months ended March 31, 2010 was primarily due to changes in our operating assets and liabilities of $7125.9 million~~. In addition~~, ~~our~~ ~~net~~which ~~income,~~was ~~prior~~partially tooffset ~~depreciation and amortization expense of $72.8 million and impairment loss of $44.4 million, increased~~ by ~~$9.4 million for~~ the ~~nine months~~increase ~~ended~~in ~~September~~our ~~30, 2009.~~net

~~Net Cash Flows from Investing Activities~~35

The increase in net cash used in investing activities was mainly due to: (i) an increase in capital expenditures of $40.8 million, as set forth in the table below; (ii) an increase in net investing activities of $28.1 million; and (iii) a long-term loan of $10.0 million made to a customer. Partially offsetting the increase was the Helius acquisition of $10.5 million that occurred in February 2008.

Capital expenditures for the nine months ended September 30, 2009 and 2008 are shown as follows (in thousands):

	Nine Months Ended
	September 30,
	2009		2008		Variance
Capital expenditures:
Capital expenditures—VSAT	$	69,055	$	17,939	$	51,116
Jupiter program		16,282		-		16,282
Capitalized software		10,315		10,526		(211	)
Capital expenditures—other		6,668		8,598		(1,930	)
SPACEWAY program		1,948		26,454		(24,506	)
Total capital expenditures	$	104,268	$	63,517	$	40,751

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income of $7.1 million prior to noncash depreciation and amortization expense of $30 million for the three months ended March 31, 2010.

Net Cash Flows from Investing Activities

The increase in net cash used in investing activities was mainly due to an increase in capital expenditures of $35.8 million set forth in the table below and (ii) a net increase in marketable securities of $12.6 million.

Capital expenditures for the three months ended March 31, 2010 and 2009 are shown as follows (in thousands):

	Three Months Ended
	March 31,
	2010		2009		Variance
Capital expenditures:
Jupiter program	$	31,638	$	-	$	31,638
Capital expenditures—VSAT		27,768		23,510		4,258
Capital expenditures—other		3,589		2,490		1,099
Capitalized software		3,166		4,391		(1,225	)
SPACEWAY program		673		548		125
VSAT operating lease hardware		-		77		(77	)
Total capital expenditures	$	66,834	$	31,016	$	35,818

Net Cash Flows from Financing Activities

The increase in net cash ~~provided~~used byin financing activities ~~was~~for ~~primarily~~the three months ended March 31, 2010 was due to the ~~net~~ ~~proceeds~~additional debt issuance costs of $~~133~~1.67 million ~~received~~associated ~~from~~with the ~~Company’s~~refinancing ~~offering~~ of ~~the~~our ~~2009 Senior~~revolving ~~Notes~~credit ~~completed~~facility onin ~~May~~March 272010, which ~~2009~~was partially offset by a decrease in the repayments of long-term debt.

Future Liquidity Requirements

As of ~~September~~ 30March 31, ~~2009~~2010, our Cash and cash equivalents and Marketable securities were $~~234~~162.20 million and our total debt was $~~721~~720.28 million. We are ~~significantly~~ leveraged as a result of our indebtedness.

On ~~May~~ March 2716, ~~2009~~2010, we, ~~along~~entered into a credit agreement with ~~our~~JP ~~subsidiary,~~Morgan ~~HNS~~Chase ~~Finance~~Bank, ~~Corp~~N.,A. ~~as co-issuer,~~and ~~completed~~Barclays aCapital ~~private~~to ~~debt~~amend ~~offering~~and ofrestate ~~$150.0~~our ~~million~~senior ofsecured 9.$50% ~~senior notes~~million ~~maturing~~revolving oncredit ~~April 15,~~facility ~~2014~~ (the “~~2009~~Revolving ~~Senior~~Credit ~~Notes~~Facility”). Pursuant ~~The~~to ~~2009~~the ~~Senior Notes~~terms ~~are~~of ~~guaranteed~~the onagreement, aamong ~~senior~~other ~~unsecured~~changes, ~~basis~~the bymaturity ~~each~~date of ~~our~~the ~~current~~Revolving ~~and future~~Credit ~~domestic~~Facility ~~subsidiaries~~was ~~that~~extended ~~guarantee~~to ~~any~~March of16, ~~our~~2014, ~~indebtedness~~subject ~~or indebtedness~~to ofan ~~our~~early ~~other~~maturity ~~subsidiary~~date ~~guarantors.~~of ~~Interest~~91 ondays ~~the~~prior ~~2009~~to ~~Senior Notes~~March is16, ~~accrued~~2014 in ~~from~~the ~~April~~event ~~15,~~our 2009 and is2006 ~~paid~~Senior ~~semi-annually~~Notes inand ~~arrears~~our ~~on April 15~~Term ~~and~~Loan ~~October 15~~Facility of(as ~~each~~defined ~~year,~~below) ~~beginning~~are onnot ~~October~~(i) ~~15,~~repaid ~~2009. After~~in ~~the~~full ~~original~~or ~~issue~~(ii) ~~discount~~refinanced ofwith ~~$13.6~~new ~~million~~debt ~~and~~(or ~~related~~amended) ~~offering~~with ~~expenses~~ maturities of ~~approximately~~no ~~$4.5~~earlier ~~million,~~than we91 ~~received~~days ~~net~~after ~~proceeds~~March ~~of approximately $133.6 million~~16, ~~including $1~~2014.7 The ~~million~~terms of ~~prepaid interest received from~~ the ~~note holders,~~Revolving ~~from~~Credit ~~the~~Facility ~~offering.~~was Weamended ~~intend~~ to ~~use~~be: ~~these~~(i) ~~net~~in ~~proceeds~~respect ~~for~~of ~~general corporate~~the ~~purposes~~interest rate, ~~which~~at ~~could~~our ~~include working capital needs~~option, ~~corporate development~~the ~~opportunities~~ABR (~~which~~as ~~may~~defined ~~include~~in ~~acquisitions),~~the ~~capital~~Revolving ~~expenditures and~~Credit ~~opportunistic~~Facility) ~~satellite~~plus ~~fleet expansion~~2.00% ~~The~~or ~~2009~~the ~~Senior~~Adjusted ~~Notes~~LIBOR ~~were~~(as ~~offered and~~defined ~~sold~~ in the ~~United~~Revolving ~~States~~Credit ~~only~~Facility) toplus ~~qualified~~3.00% ~~institutional~~and ~~buyers pursuant to Rule 144A of the Securities Act of 1933, as amended,~~ (~~the “Securities Act”~~ii) ~~and~~ in ~~offshore~~respect ~~transactions to non-United States persons in reliance on Regulation S~~ of the ~~Securities~~participation ~~Act.~~fee Infor ~~connection~~outstanding ~~with~~letters ~~the offering~~ of ~~the~~credit, ~~2009~~3.00% per ~~Senior Notes~~annum, wein ~~entered~~each ~~into~~case asubject ~~registration rights agreement requiring us~~ to ~~complete a~~downward ~~registered~~adjustment ~~exchange~~based ~~offer~~on ~~relating~~our toleverage ~~the 2009 Senior Notes within 360 days after May 27, 2009~~ratio. OnAs ~~August~~of 17March 31, ~~2009~~2010, wethe ~~completed~~total ~~the~~outstanding ~~registered~~letters ~~exchange offer~~of ~~pursuant~~credit toand the ~~registration~~available ~~rights~~borrowing ~~agreement.~~capacity ~~Accordingly,~~under the ~~2009 Senior~~Revolving ~~Notes~~Credit ~~have~~Facility ~~been~~was ~~registered~~$2.1 ~~under~~million ~~the~~and ~~Securities~~$47.9 ~~Act~~million, respectively. As of ~~September~~March 31, 302010, ~~2009,~~ the ~~2009~~Revolving ~~Senior~~Credit ~~Notes~~Facility ~~were~~was rated B1Baa3 and BBB- by Moody’s and ~~Standard & Poor (“~~S&P”), respectively. ~~As of September 30, 2009, we had recorded $6.5 million of accrued interest payable, including $1.7 million of prepaid interest received from the note holders, related to the 2009 Senior Notes.~~

~~Our~~In May 2009, we, along with our subsidiary, HNS Finance Corp., as co-issuer, completed a private debt offering of $~~450~~ 150.0 million of 9.50% senior notes maturing on April 15, 2014 (the “~~2006~~2009 Senior Notes”). The 2009 Senior Notes are guaranteed on a senior unsecured basis by ~~us and~~ each of our current and future domestic subsidiaries that guarantee any of our indebtedness or indebtedness of our other subsidiary guarantors. Interest on the ~~2006~~2009 Senior Notes is accrued from April 15, 2009 and is paid semi-annually in arrears on April 15 and October 15. As of ~~September~~each 30year, ~~2009~~beginning ~~and~~on ~~December 31~~October 15, ~~2008,~~2009. weWe ~~had~~received ~~recorded~~net ~~$19.6~~proceeds ~~million~~of ~~and~~ approximately $9133.06 million, ~~respectively,~~from ~~of accrued interest payable related to~~ the ~~2006 Senior Notes~~offering. AsWe ofhave ~~September~~used ~~30, 2009, the 2006 Senior Notes were rated B1~~ and B byintend ~~Moody’s~~to ~~and~~continue ~~S&P,~~to ~~respectively.~~use these

We have a senior secured $50 million revolving credit facility (the “Revolving Credit Facility”), which matures on April 22, 2011. The interest rate with respect to the Revolving Credit Facility, if any, is based on, at our option, the ABR rate (as defined in the Revolving Credit Facility) plus 1.50% or Adjusted LIBOR plus 2.50%. The Revolving Credit Facility is guaranteed by, subject to certain exceptions, our direct and indirect wholly-owned domestic subsidiaries and is secured by substantially all of our domestic tangible and intangible assets. For outstanding letters of credit issued under the Revolving Credit Facility, we pay a participation fee of 2.50% per annum and an issuance fee of 0.25% per annum. In addition, we are charged a commitment fee of 0.50% per annum for any unused portion of the Revolving Credit Facility. As of September 30, 2009, the total outstanding letters of credit under the Revolving Credit Facility was $3.0 million. As a result, the available borrowing capacity under the Revolving Credit Facility as of September 30, 2009 was $47.0 million. As of September 30, 2009, the Revolving Credit Facility was rated Baa3 and BB- by Moody’s and S&P, respectively.36

In February 2007, we borrowed $115 million from a syndicate of banks pursuant to a senior unsecured credit agreement (the “Term Loan Facility”), which matures on April 15, 2014. The Term Loan Facility is guaranteed, on a senior unsecured basis, by all of our existing and future subsidiaries that guarantee our existing 2006 Senior Notes and the Revolving Credit Facility. The interest on the Term Loan Facility is paid quarterly at Adjusted LIBOR (as defined in the Term Loan Facility and the existing Revolving Credit Facility) plus 2.50%. To mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into an agreement to swap the Adjusted LIBOR for a fixed 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. The Term Loan Facility is subject to certain mandatory and optional prepayment provisions and contains negative covenants and

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~~events~~net ~~of default,~~proceeds infor ~~each~~general ~~case~~corporate purposes, ~~substantially~~which ~~similar~~could toinclude ~~those~~working ~~provisions~~capital ~~contained~~needs, ~~in the~~corporate ~~indentures~~development ~~governing~~opportunities ~~the~~(which ~~Senior~~may ~~Notes.~~include ~~The~~acquisitions), ~~net~~capital ~~interest~~expenditures ~~payments based on the Swap Agreement~~ and ~~the~~opportunistic ~~Term~~satellite ~~Loan~~fleet ~~Facility are estimated to be approximately $8~~expansion.8 ~~million~~As ~~for~~of ~~each~~March 31, of2010, the ~~years~~2009 ~~ending~~Senior ~~December 31,~~Notes ~~2009~~were ~~through~~rated ~~2013~~ B1 and ~~$3.3~~B ~~million~~by ~~for~~Moody’s ~~the~~and ~~year~~Standard & ~~ending~~Poor ~~December 31~~(“S&P”), ~~2014~~respectively. As of ~~September~~March 31, 302010, ~~2009,~~ ~~the~~we ~~Term~~had ~~Loan~~recorded ~~was~~$6.5 ~~rated~~million B1of ~~and~~accrued Binterest bypayable ~~Moody’s~~related ~~and~~to ~~S&P, respectively~~the 2009 Senior Notes.

~~Although the~~ In ~~terms~~February ~~and covenants with respect to the 2006 Senior Notes are substantially identical to the 2009 Senior Notes~~2007, ~~the~~we ~~2009~~borrowed ~~Senior~~$115 ~~Notes~~million ~~were~~from ~~issued under~~ a ~~separate~~ ~~indenture~~syndicate ~~and do not vote together with the 2006 Senior Notes. Each~~ of ~~the~~ ~~indentures~~banks ~~governing~~pursuant ~~the~~to ~~2006~~a ~~Senior~~senior ~~Notes~~unsecured ~~and~~credit ~~2009~~agreement ~~Senior Notes~~ (~~collectively,~~ the “~~Senior~~Term ~~Notes~~Loan Facility”), ~~the~~which ~~agreement~~matures ~~governing~~on ~~the~~April 15, ~~amended Revolving~~2014. ~~Credit~~The ~~Facility and the agreement governing the~~ Term Loan Facility ~~require~~ usis toguaranteed, ~~comply~~on ~~with~~a ~~certain~~senior ~~affirmative~~unsecured ~~and~~basis, ~~negative~~by ~~covenants: (i) in~~all ~~the~~of ~~case~~our ofexisting ~~the~~and ~~indentures,~~future ~~for~~subsidiaries sothat ~~long~~guarantee asour ~~any~~existing 2006 Senior Notes ~~are outstanding;~~and ~~(ii) in~~ the ~~case of the amended~~ Revolving Credit Facility,. ~~for so~~The ~~long~~interest ason the ~~amended~~Term ~~Revolving~~Loan ~~Credit~~ Facility is inpaid ~~effect;~~quarterly ~~and~~at Adjusted LIBOR (~~iii) in the~~as ~~case~~defined ofin the Term Loan Facility,) ~~for~~plus so2.50%. ~~long~~To asmitigate the ~~Term~~variable ~~Loan~~interest ~~Facility remains~~rate ~~outstanding.~~risk ~~Negative~~associated ~~covenants~~with ~~contained~~the inTerm ~~these~~Loan ~~agreements~~Facility, ~~include limitations~~we onentered ~~our~~into ~~ability~~an ~~and/or~~agreement ~~certain of our subsidiaries’ ability~~ to ~~incur additional~~swap ~~indebtedness;~~the ~~issue~~Adjusted ~~redeemable~~LIBOR ~~stock~~for ~~and~~a ~~subsidiary~~fixed ~~preferred~~rate ~~stock; incur~~of ~~liens;~~5.12% per ~~pay~~annum ~~dividends~~(the or“Swap ~~distributions~~Agreement”). orAs ~~redeem~~a ~~or repurchase capital stock; prepay~~result, ~~redeem~~the orTerm ~~repurchase~~Loan ~~debt;~~Facility ~~make~~has ~~loans~~a ~~and~~fixed ~~investments;~~interest ~~enter~~rate ~~into agreements~~of ~~that~~7.62% per ~~restrict~~annum ~~distributions from our subsidiaries; sell assets~~ and ~~capital~~ ~~stock~~is ofsubject ~~our~~to ~~subsidiaries; enter into~~ certain ~~transactions~~mandatory ~~with affiliates;~~and ~~consolidate~~optional orprepayment ~~merge~~provisions ~~with~~and orcontains ~~into,~~negative orcovenants ~~sell~~and ~~substantially~~events ~~all~~ of ~~our assets to~~default, ~~another~~in ~~person;~~each ~~and~~case, ~~enter~~substantially ~~into~~similar ~~new lines of business. In addition~~ to ~~these~~ ~~negative~~those ~~covenants,~~provisions ~~the~~contained ~~amended~~in ~~Revolving Credit Facility,~~ the indentures governing the Senior Notes. ~~and/or~~The ~~the~~net ~~agreement~~interest ~~governing~~payments on the Term Loan Facility ~~contain~~ ~~affirmative~~are ~~covenants~~estimated ~~that~~to ~~require~~be usapproximately ~~to:~~$8.8 ~~(i) preserve~~million ~~our businesses~~for ~~and~~each ~~properties;~~of ~~(ii) maintain~~the ~~insurance~~years ~~over~~ending ~~our assets; (iii)~~December ~~pay~~31, ~~and~~2010 ~~discharge~~through ~~all~~2013 ~~material taxes when due;~~ and ~~(iv) furnish the~~$3.3 ~~lenders’~~million ~~administrative agent our financial statements~~ for ~~each~~the ~~fiscal quarter~~year ~~and~~ending ~~fiscal year~~December 31, ~~certificates~~2014. ~~from~~As ~~a financial officer certifying that no Event~~ of ~~Default or Default has occurred during the fiscal period being reported~~March 31, ~~litigation and other notices~~2010, ~~compliance~~the ~~with~~Term ~~laws,~~Loan ~~maintenance of records and other such customary covenants. Management believes that the Company~~ was inrated ~~compliance~~B1 ~~with~~and ~~all~~B ofby ~~its~~Moody’s ~~debt~~and ~~covenants as of September 30~~S&P, ~~2009~~ respectively.

~~Our subsidiaries~~In ~~primarily~~April ~~meet~~2006, ~~their~~we ~~working~~issued ~~capital~~$450 ~~requirements~~million ~~through~~of ~~their respective~~9.50% ~~operations~~senior ornotes ~~the~~maturing ~~utilization~~on ofApril 15, ~~local~~2014 ~~credit~~(the ~~facilities. Occasionally~~“2006 Senior Notes”), ~~the~~which ~~subsidiaries~~are ~~utilize~~guaranteed ~~temporary~~on ~~advances~~a ~~to/from~~senior usunsecured tobasis ~~meet temporary~~by ~~cash~~us ~~requirements.~~and ~~Our~~each ~~Indian~~of our current and ~~Brazilian~~future domestic subsidiaries ~~maintain various~~that ~~revolving~~guarantee ~~and~~any ~~term~~of ~~loans~~our ~~funded~~indebtedness byor ~~local~~indebtedness ~~banks~~of inour ~~Indian~~other ~~Rupees~~subsidiary ~~and Brazilian~~guarantors. ~~Reais,~~Interest ~~respectively.~~on ~~The~~the ~~balances~~2006 ~~outstanding~~Senior asNotes ofis ~~September~~paid ~~30,~~semi-annually ~~2009 and~~in ~~December~~arrears ~~31,~~on ~~2008~~April 15 ~~were~~and anOctober 15. ~~aggregate~~As of ~~$4.1~~March 31, ~~million~~2010, ~~and~~we had recorded $219.6 million~~, respectively.~~ ~~Our~~of ~~Indian~~accrued ~~subsidiary~~interest ~~may~~payable berelated ~~restricted~~to ~~from~~the ~~paying~~2006 ~~dividends~~Senior ~~to us~~Notes. ~~under~~As of March 31, 2010, the ~~terms~~2006 ofSenior ~~these~~Notes ~~loans~~were rated B1 and B by Moody’s and S&P, respectively.

Although the 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 2009 Senior Notes (collectively, the “Senior Notes”), the agreement governing the amended Revolving Credit Facility and the agreement governing the Term Loan Facility require us 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, for 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 our ability and/or certain of our subsidiaries’ ability 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 our 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. Management believes that the Company was in compliance with all of its debt covenants as of March 31, 2010.

Our subsidiaries primarily meet their working capital requirements through their respective operations or the utilization of local credit facilities. Occasionally, the subsidiaries utilize temporary advances to/from us to meet temporary cash requirements. Certain of our foreign subsidiaries maintain various revolving lines of credit and term loans funded by their respective local banks in local currency. As of March 31, 2010, the aggregate balance outstanding under these loans was $3.7 million. Our subsidiaries may be restricted from paying dividends to us under the terms of these loans.

The Company and its subsidiaries are separate and distinct legal entities and, except for our existing and future subsidiaries that are or will be guarantors of the Senior Notes, the Term Loan Facility and the Revolving Credit Facility, they will have no obligation, contingent or otherwise, to pay amounts due under the Senior Notes, Term Loan Facility and the Revolving Credit Facility, or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment.

On February 4, 2008, our Parent, HCI, completed the acquisition of Helius, Inc. in connection with the merger agreement that HCI entered into on December 21, 2007 (the “Merger Agreement”) with Helius, Inc., Utah Acquisition Corp., a wholly-owned subsidiary of the Company and The Canopy Group, Inc. and Canopy Ventures I, L.P., the primary shareholders of Helius, Inc. Pursuant to the Merger Agreement, HCI paid $10.5 million after certain adjustments at the closing of the acquisition. Immediately after the acquisition, Helius, Inc. was converted to a limited liability company, Helius, LLC (“Helius”). As part of the Merger Agreement, we have a remaining contractual obligation for contingent consideration of up to $20.0 million (“Contingent Payment”) as additional purchase price, if any, to be payable in April 2010 by us or Helius, as the surviving corporation, subject to Helius achieving certain post-closing performance goals. As of September 30, 2009, we performed an evaluation on Helius’ operating results and expect that Helius will not meet the performance goals. As a result, we do not expect to pay the Contingent Payment.37

In July 2006, we entered into an agreement with 95 West Co., Inc. (“95 West Co.”) and its parent, Miraxis License Holdings, LLC (“MLH”), pursuant to which 95 West Co. and MLH agreed to provide a series of coordination agreements allowing the Company to operate SPACEWAY 3 at the 95° West Longitude orbital slot where 95 West Co. and MLH have higher priority rights. Our remaining obligations with 95 West Co. as of September 30, 2009 are subject to conditions in the

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In July 2006, we entered into an agreement with 95 West Co., Inc. (“95 West Co.”) and its parent, Miraxis License Holdings, LLC (“MLH”), pursuant to which 95 West Co. and MLH agreed to provide a series of coordination agreements allowing the Company to operate SPACEWAY 3 at the 95° West Longitude orbital slot where 95 West Co. and MLH have higher priority rights. Our remaining obligations with 95 West Co. as of March 31, 2010 are subject to conditions in the agreement including our ability to operate SPACEWAY 3, and are as follows: $0.75 million for the year ending December 31, 2010 and $1.0 million for each of the years ending December 31, 2011 through 2016.

In June 2009, we entered into an agreement with ~~Space Systems/Loral, Inc. (“~~SS/L”), under which ~~SS/L~~we will manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of our Jupiter satellite and have agreed to ~~pay~~make installment payments to SS/L upon the completion of each milestone as set forth in the agreement. As of March 31, 2010, the remaining obligation for the construction of Jupiter was $184.1 million. We anticipate launching Jupiter in the first ~~quarter~~half of 2012. In connection with the construction of Jupiter, we have entered into a contract with Barrett ~~Xplore Inc. (“Barrett”)~~, whereby Barrett has agreed to ~~acquire~~lease user beams, and purchase gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

Based on our current and anticipated levels of operations and conditions in our markets and industry, we believe that our cash on hand, cash flow from operations and availability under our Revolving Credit Facility will enable us to meet our requirements for working capital, capital expenditures, debt service, research and development, remaining ground infrastructure expenditures for SPACEWAY 3, new acquisitions, initial milestone payments for development of our Jupiter satellite and, to a lesser extent, other on-going capital and operating expenditures. However, our ability to fund these needs and to comply with the financial covenants under our debt agreements depends on our future operating performance and cash flow, which is subject to prevailing economic conditions, the level of spending by our customers and other factors, many of which are beyond our control. Any future acquisitions, joint ventures, acquisition of a satellite, or other similar transactions will likely require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms, if at all.

Contractual Obligations

~~Except~~On ~~as discussed~~March 16, ~~below~~2010, we entered into an amended and asrestated ~~disclosed~~credit inagreement with JP Morgan Chase Bank, N.A. and Barclays Capital to amend and restate our ~~Annual~~senior ~~Report~~secured on$50 ~~Form~~million ~~10-K~~revolving credit facility (the “Revolving Credit Facility”). See the Future Liquidity Requirements section for the ~~year ended~~discussion ~~December~~of ~~31,~~the ~~2008,~~Revolving ~~there~~Credit Facility. There have been no other material changes to our contractual obligations since December 31, ~~2008~~2009, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

The 2009 Senior Notes mature on April 15, 2014. Interest payments on the 2009 Senior Notes are paid semi-annually in arrears on April 15 and October 15, beginning on October 15, 2009, and are estimated to be approximately $10.1 million for the year ending December 31, 2009 and $14.3 million for each of the years ending December 31, 2010 through 2014.

In June 2009, we entered into an agreement with SS/L, under which SS/L will manufacture a next-generation, high throughput geostationary satellite (“Jupiter”). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of Jupiter and have agreed to pay SS/L upon the completion of each milestone as set forth in the agreement. We anticipate launching Jupiter in the first quarter of 2012. In connection with the construction of Jupiter, we have entered into a contract with Barrett Xplore Inc. (“Barrett”), whereby Barrett has agreed to acquire user beams, gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

Commitments and Contingencies

For a discussion of commitments and contingencies, see Note 1917—Commitments and Contingencies to our unaudited condensed consolidated financial statements included in Part I-Item 1 of this report.

Off-Balance Sheet Arrangements

~~The Company~~We isare required to issue standby letters of credit and bonds primarily to support certain sales of ~~its~~our equipment to international government customers. These letters of credit are either bid bonds to support contract bids, or to support advance payments made by customers upon contract execution and prior to equipment being shipped, or guarantees of performance issued in support of its warranty obligations. Bid bonds typically expire upon the issue of the award by the customer. Advance payment bonds expire upon receipt by the customer of equipment, and performance bonds typically expire when the warranty expires, generally one year after the installation of the equipment.

As of ~~September~~ 30March 31, ~~2009~~2010, we had $1516.64 million of contractual obligations to customers and other statutory/governmental agencies, which were secured by letters of credit issued through us and our subsidiaries’ credit facilities. Of this amount, $2.1 million was issued under the Revolving Credit Facility; $1.6 million was secured by restricted cash; $1.0 million related to insurance bonds; and $11.7 million was issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our Indian subsidiaries are secured by their assets.

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facilities. Of this amount, $3.0 million was issued under the Revolving Credit Facility; $1.6 million was secured by restricted cash; $0.8 million related to insurance bonds; and $10.2 million was secured by letters of credit issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our Indian subsidiaries are secured by their assets.

Seasonality

Like many communications infrastructure equipment vendors, a significant amount of our hardware sales occur in the second half of the year due to our customers’ annual procurement and budget cycles. Large enterprises and operators usually allocate their capital expenditure budgets at the beginning of their fiscal year (which often coincides with the calendar year). The typical sales cycle for large complex system procurements is 6 to 12 months, which often results in the customer expenditure occurring towards the end of the year. Customers often seek to expend the budgeted funds prior to the end of the year and the next budget cycle. As a result, interim results are not indicative of the results to be expected for the full year.

Inflation

Historically, inflation has not had a material effect on our results of operations.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. We evaluate these estimates and assumptions on an ongoing basis. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and conditions. For a description of our critical accounting policies, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as included in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009 filed with the Securities and Exchange Commission on March 53, ~~2009~~2010 (File number 333-138009).

New Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 1—Organization, Basis of Presentation and Summary of Significant Accounting Policies to ~~our~~the Company’s unaudited condensed consolidated financial statements included in Part I-Item 1 of this report.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The following discussion and the estimated amounts generated from the sensitivity analyses referred to below include forward-looking statements of market risk which assume for analytical purposes that certain adverse market conditions may occur. Actual future market conditions may differ materially from such assumptions because the amounts noted below are the result of analyses used for the purpose of assessing possible risks and the mitigation thereof. Accordingly, you should not consider the forward-looking statements as projections by us of future events or losses.

General

Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and changes in the market value of ~~its~~ our equity investments. We manage our exposure to those market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. We enter into derivative instruments only to the extent considered necessary to meet our risk management objectives and do not enter into derivative contracts for speculative purposes.

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Foreign Currency Risk

We generally conduct our business in United States dollars. However, as our international business is conducted in a variety of foreign currencies, it is exposed to fluctuations in foreign currency exchange rates. Our objective in managing our exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign exchange rate fluctuations. Accordingly, we may enter into foreign exchange contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions. As of ~~September 30~~March 31, ~~2009~~2010, we had an estimated $12.45 million of foreign currency denominated receivables and payables outstanding, ofand ~~which~~ $52.60 million ~~had hedge contracts in place to partially mitigate foreign currency risk. The differences between the face amount~~ of ~~the~~ ~~foreign exchange contracts and their estimated fair values were not material as of September 30, 2009.~~hedge

The impact of a hypothetical 10% adverse change in exchange rates on the fair value of foreign currency denominated net assets and liabilities of our foreign subsidiaries would be an estimated loss of $7.4 million as of September 30, 2009.39

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contracts in place to partially mitigate foreign currency risk. The differences between the face amount of the foreign exchange contracts and their estimated fair values were not material as of March 31, 2010.

Marketable Securities Risk

We have a significant amount of cash that is invested in marketable securities which is subject to market risk due to ~~changes in~~ interest ~~rates~~rate fluctuations. We have established an investment policy which governs our investment strategy and stipulates that we diversify investments among United States Treasury securities and other high credit quality debt instruments that we believe to be low risk. We are averse to principal loss and seek to preserve our invested funds by limiting default risk and market risk.

Interest Rate Risk

Our Senior Notes and outstanding borrowings related to very small aperture terminal hardware financing arrangements are not subject to interest rate fluctuations because the interest rate is fixed for the term of the instrument. We are subject to variable interest rates on certain other debt including the Revolving Credit Facility and the Term Loan Facility. To the extent ~~that~~ we draw against the credit facility, increases in interest rates would have an adverse impact on our results of operations.

To mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into the Swap Agreement to swap the variable LIBOR based interest on the Term Loan Facility for a fixed interest rate of 5.12% per annum. 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, ~~2009~~2010 through 2013 and $3.3 million for the year ending December 31, 2014. The security for our interest obligation under the Swap Agreement is the same as the security for the Revolving Credit Facility described in Note 98—Debt to our unaudited condensed consolidated financial statements included in Part I-Item 1 in this report.

Market Concentration and Credit Risk

We provide services and extend credit to a number of ~~communications~~ equipment customers, service providers, and a large number of consumers, both in the United States and around the world. We monitor our exposure to credit losses and maintain, as necessary, allowances for anticipated losses. Financial instruments which potentially subject us to a concentration of credit risk consist of cash, cash equivalents and marketable investments. Although we maintain cash balances at financial institutions that exceed federally insured limits, these balances are placed with high credit quality financial institutions.

Commodity Price Risk

All of our products contain components whose base raw materials have undergone dramatic cost fluctuations in the last 24 months. Fluctuations in pricing of raw materials have the ability to affect our product costs. Although we have been successful in offsetting or mitigating our exposure to these fluctuations, such changes could have an adverse impact on our product costs. We are unable to predict the possible impact of changes in commodity prices.

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Item 4T.

Controls and Procedures

Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, we ~~have~~the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that ~~our~~the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Our management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all frauds. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.40

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Our management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures will prevent all errors and all frauds. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in ~~our~~the Company’s internal control over financial reporting that occurred during the ~~third~~first quarter of ~~2009~~2010 that have materially affected, or are reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting. WeThe ~~continue~~Company continues to review ~~our~~its disclosure controls and procedures, including ~~our~~its internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that ~~our~~ the Company’s systems evolve with ~~our~~its business.

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PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

In March 2009, we received an arbitral award against Sea Launch Limited Partnership and Sea Launch Company, LLC (collectively, “Sea Launch”) entitling us to a full refund of $44.4 million (the “Deposit”) in payments made to Sea Launch, 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. This award resulted from an arbitration proceeding initiated by us on June 28, 2007 relating to our SPACEWAY 3 satellite. Because of the material failure of a Sea Launch rocket that occurred on January 30, 2007, the launch of our SPACEWAY 3 satellite, scheduled for May 2007, was substantially delayed. We made alternative arrangements with another launch services provider to launch SPACEWAY 3 in August 2007 and in accordance with the Launch Service Agreement (“LSA”) we sent a notice of termination to Sea Launch. Under the LSA we were entitled to terminate due to the launch delay and receive a refund of the $44.4 million in payments made to Sea Launch in anticipation of the SPACEWAY 3 launch. Sea Launch refused to refund the Deposit and alleged that we had breached the LSA. The arbitration hearings were completed during the third quarter of 2008, and in March 2009, the arbitration panel rendered its decision in our favor.

On December 18, 2009, the Company and HCI 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. Based on our investigation, we believe that the allegations in this complaint are not meritorious and we intend to vigorously defend this matter.

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

Item 1A.

Risk Factors

For a discussion of the risk factors affecting the Company, see “Risk Factors” in Part I-, Item 1A of the Annual Report on Form 10-K filed with respect to the Company’s fiscal year ended December 31, ~~2008~~2009. There have been no material changes in the risk factors previously disclosed in such Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

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Item 3.

Defaults Upon Senior Securities

None.

Item 4. ~~Submission~~( ofRemoved ~~Matters~~and ~~to a Vote of Security Holders~~Reserved)

The Company held an annual meeting of the Class A member on August 6, 2009. The Board of Directors of Hughes Communications, Inc., in its capacity as the sole Class A member of the Company, unanimously appointed each of the following individuals to the Board of Managers of the Company to hold such office until the next annual meeting of the Class A member and until their respective successors are duly elected and qualified: Andrew Africk, Aaron Stone, Pradman Kaul, and Jeffrey Leddy.

Item 5.

Other Information

None.

~~Item 6. Exhibits~~42

Exhibit
Number		Description
31.1*		Certification of Chief Executive Officer of Hughes Network Systems, LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer of Hughes Network Systems, LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*		Certification of Chief Executive Officer and Chief Financial Officer of Hughes Network Systems, LLC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*	Filed herewith.

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Item 6

Exhibits

Exhibit
Number		Description
10.1*		Amendment Agreement dated March 16, 2010 among Hughes Network Systems, LLC, the lenders party thereto, JP Morgan Chase Bank, as administrative agent, Barclays Capital, as syndication agent, to the Credit Agreement dated as of April 22, 2005, as amended and restated as of June 27, 2005, and as further amended and restated as of April 13, 2006, among Hughes Network Systems, LLC, the lenders from time to time party thereto, Bear, Sterns Corporate Lending Inc., as the administrative agent, Morgan Stanley Senior Funding, Inc., as syndication agent, and Bear, Stearns & Co. Inc. and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint book managers.
10.2*		Credit Agreement dated as of April 22, 2005, as amended and restated as of June 27, 2005, as further amended and restated as of April 13, 2006, as further amended and restated as of March 16, 2010, among Hughes Network Systems, LLC, JP Morgan Chase Bank, N.A., as administrative agent, Barclays Capital, as syndication agent, J.P. Morgan Securities Inc., as sole lead book runner, and J.P. Morgan Securities Inc. and Barclays Capital, as joint lead arrangers.
31.1*		Certification of Chief Executive Officer of Hughes Network Systems, LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer of Hughes Network Systems, LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*		Certification of Chief Executive Officer and Chief Financial Officer of Hughes Network Systems, LLC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 4, 2009	HUGHES NETWORK SYSTEMS, LLC
Date: May 5, 2010	HUGHES NETWORK SYSTEMS, LLC
	(Registrant)
		/s/ Pradman P. Kaul
	Name:	Pradman P. Kaul
	Title:	Chief Executive Officer and President
		(Principal Executive Officer)
		/s/ Grant A. Barber
	Name:	Grant A. Barber
	Title:	Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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