EchoStar has secured a financial lifeline from Elon Musk, whose SpaceX has agreed to pay $17 billion to acquire large amounts of its wireless spectrum.
The parent company of Dish Network has been transitioning to wireless over the past few years as the pay-TV business continues to erode. Wrong-footed by fluctuating interest rates, it found itself on the brink of bankruptcy several months ago. Along with the sale of the spectrum, the deal with Musk also includes funding for $2 billion in cash interest payments on EchoStar’s debt through November 2027.
The transaction also encompasses a long-term commercial agreement for EchoStar’s Boost Mobile subscribers to access SpaceX’s Starlink direct-to-cell service. EchoStar also said it will resolve a FCC investigation of the company’s wireless operations.
While AT&T, Verizon and T-Mobile continue to lead the wireless sector, the merger of T-Mobile and Sprint forced the sale of spectrum assets. EchoStar and Dish now control that spectrum and are making a run at becoming a viable fourth provider of wireless services.
News of the agreement boosted shares in EchoStar by more than 20% in pre-market trading. They had already more than doubled over the past two weeks amid speculation about a possible rescue by Musk.
“For the past decade, we’ve acquired spectrum and facilitated worldwide 5G spectrum standards and devices, all with the foresight that direct-to-cell connectivity via satellite would change the way the world communicates,” EchoStar CEO Hamid Akhavan said in a statement. The deal with StarLink, he added, will enable the company to “realize the direct-to-cell vision in a more innovative, economical and faster way for consumers worldwide.”
Gwynne Shotwell, president & COO, SpaceX, said the privately held company was “so pleased to be doing this transaction with EchoStar as it will advance our mission to end mobile dead zones around the world.”
