EchoStar needs additional financing to pay debts coming due and plans to use its spectrum holdings as leverage
The newly merged EchoStar needs to raise additional capital to pay debts due in the coming months, and is unlikely to be able to afford to exercise its option to buy 800 MHz spectrum from T-Mobile US which was part of the original DoJ deal on asset divestiture that enabled the Sprint/T-Mo merger to go through. Dish, prior to its re-merging with EchoStar, had gotten an extension on that option deadline and also tested operations in the spectrum, also claiming to have already spent more than a billion dollars on 800 MHz-ready radios.
In EchoStar’s annual report filing with the Securities and Exchange Commission, as well as in remarks on its most recently quarterly call, the company laid out its strategic position and the risks and opportunities it sees ahead. EchoStar noted that it has spent, cumulatively, around $30 billion on spectrum licenses. And in mid-2020, as part of the Boost Mobile acquisition, Dish (now EchoStar) struck a spectrum purchase agreement to buy even more: to acquire a nationwide footprint of former-Sprint 800 MHz licenses.
However, with time running out before the deadline by which it must exercise that purchase option and billions of dollars in other debts that must be paid this year, EchoStar has conceded that it is unlikely to make that purchase.
“Throughout 2023, we were actively involved in negotiations with counterparties to obtain the financing necessary to exercise the 800 MHz purchase option. However, we have been unsuccessful in our attempts to reach terms for a definitive financing agreement,” EchoStar said in its filing. “Due to the relatively short time remaining before the 800 MHz purchase option’s expiration on April 1, 2024, we no longer believe it is probable that we will exercise the option.” It still retains the first right to purchase the spectrum until that date, although T-Mobile US can look for other spectrum buyers in the meantime.
EchoStar already made a $100 million payment to T-Mobile US as part of the original agreement. The spectrum at issue totals about 13.5 megahertz of nationwide airwaves at 817-824 MHz/862-869 MHz, which Dish has an option to purchase for $3.59 billion. Just about a year ago, Dish was testing operations in those airwaves in anticipation of making the spectrum purchase.
The company took a $1.793 billion write-down on the value of its option to purchase T-Mo’s spectrum, now that it no longer considers the exercise of that option likely.
Company executives said they have cash on-hand to make a debt payment this month, but will need financing to make a $2 billion payment due in November as well as for continued investments in its 5G network.
On its quarterly call, Hamid Akhavan, president and CEO of EchoStar, said, “We are in active discussions with numerous parties right now to secure financing to meet these obligations … . We have significant inbound interest right now, from very reputable parties and counter-parties.” He went on to add that “We have the runway to make a proper decision and evaluate, and make a measured decision that is long-term oriented.” He said that EchoStar does not want “a solution that just kicks the can down the road” or is a “rash decision.” (EchoStar Chairman Charlie Ergen did not participate in the most recent quarterly call, which was on his birthday; when an analyst asked about his absence, Akhavan replied: “I[ am] here and with a confident team that we have around this table can answer all the questions for you. So I’m delighted that Charlie has felt comfortable enough to let me run the business and so we can focus on bigger picture opportunities in the future.”)
EchoStar and its subsidiaries now operate a business with four segments: Pay TV under the Dish and Sling brands, retail wireless via the Boost Mobile, Boost postpaid and Gen Mobile brands (still largely operating as an MVNO but transitioning to a MNO as EchoStar commercializes its newly built network; T-Mobile US and AT&T provide network services); 5G network deployment, and broadband and satellite services.
Akhavan said that the company has a unique combination of assets plus a lack of legacy obligations, which will allow it to be disruptive. “When we merged EchoStar and Dish, both companies were at a crossroads, as each was transitioning from building capabilities to commercializing them,” he added. “At Dish, we built the world’s first Standalone 5G Open RAN cloud-native wireless network. At EchoStar, we launched the largest ever commercial broadband satellite. Over the past 90 days, we have sharpened our focus on taking our newly combined capabilities to market and leveraging synergies across our diverse portfolio of products.” He continued: “Work is well underway to improve our capital structure, reset our retail wireless business and grow customer traffic on our network, taking full advantage of our unique combination of assets.”
In terms of its wireless network, EchoStar says that Dish Wireless not only has met its build-out obligations to the FCC but also has the largest commercial deployment of 5G Voice over New Radio in the world, which covers approximately 200 million Americans, with its overall 5G broadband service reaching approximately 250 million people. The company added that it is “currently activating subscribers onto our 5G Network in markets where we have reached voice over new radio.” Meanwhile, EchoStar also noted that its EchoStar XXIV satellite began providing service in December 2023, bringing additional broadband capacity to both North and South America. The company plans to use that satellite to serve consumer, enterprise and government markets.
“This merger combined Dish Network satellite technology, streaming services, engineering expertise, retail wireless business and nationwide 5G network with EchoStar’s premier satellite communication solutions, enterprise go-to-market capabilities and US based manufacturing,” Akhavan said during the EchoStar call, adding later that considering all of the newly combined company’s assets and areas of expertise, “collectively, it creates a new kind of athlete in global telecom, and for EchoStar to be a leader in terrestrial and non-terrestrial wireless connectivity and entertainment services exceeding any other company.”
In its SEC filing, the company said: “The adoption of NTN as a part of the worldwide wireless [3GPP] standards has created significant opportunities for our industry by combining satellite networks with terrestrial 5G networks,” EchoStar said in its filing. “We believe our combination of resources, investments, know-how, and partnerships are second to none and intend to capitalize on this opportunity.” EchoStar said that it is in the process of applying for and receiving additional satellite spectrum permissions around the world, and it has a newly announced contract with small satellite system company Astro Digital for construction of a global S-band MSS network constellation for IoT and related data services, slated to start in 2025.
On the intersection of satellite and 5G, EchoStar said: “We believe we are at the forefront of the industry with deep expertise and capabilities in satellite technologies and services as well as 5G networks and services.” While it expects the emerging Non-Terrestrial Networks market to be competitive, EchoStar expects to be able to compete on basis of its “strong spectrum position, expertise in satellite and 5G technologies and … global industry relationships.”
