In the second leg of its spectrum divestiture, EchoStar has agreed to sell its AWS-4 and H-block spectrum licenses to SpaceX for approximately $17bn, including up to $8.5bn in cash and up to $8.5bn in SpaceX stock.
The transaction – along with EchoStar’s previously announced spectrum sale to AT&T – appeased Federal Communications Commission (FCC) Chair Brendan Carr enough to end the agency’s investigation into EchoStar’s spectrum licenses and usage.
With the two spectrum transaction announcements, EchoStar has slipped the noose, securing the capital to address its impending debt maturities while also placating a regulator determined to see the company’s spectrum holdings divvied up and put to use elsewhere.
While the first deal will add midband heft to AT&T’s 5G network and help scale the operator’s fixed wireless access (FWA) service, this second transaction will add vertical synergies to Starlink and parent SpaceX’s position in the direct-to-device (D2D) market, providing the dominant rocket player and owner of the largest low Earth orbit (LEO) constellation with dedicated spectrum for mobile satellite service.
EchoStar gets itself out of regulatory and financial hock
The $40bn that EchoStar stands to reap from its spectrum transactions would end a long, winding drama surrounding the company’s ability to overcome its debt problems. Moreover, the deals also get the FCC off its back. EchoStar’s tussle with the US telecoms regulator – instigated by SpaceX founder and majority stakeholder Elon Musk publicly agitating for access to EchoStar’s AWS-4 spectrum – had effectively frozen the company’s ability to raise capital.
The timing is fortuitous for EchoStar’s investors. The company had been teetering increasingly closer to bankruptcy, a situation that could have bogged its spectrum assets down in quagmires of litigation and debt creditor red tape. The leaps and bounds by which EchoStar’s stock price jumped after each of its spectrum transaction announcements showcase the relief on that front.
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By GlobalDataStill, while the deal stipulates that EchoStar’s Boost Mobile outfit will be able to access Starlink’s next-generation D2D constellation, it’ll be some time before Boost can reap those benefits. Device manufacturers will need to get on board with incorporating the band into their antenna configurations, and that next-generation constellation still needs to be manufactured and launched into orbit. Still, this facet of the transaction could add juice to Boost Mobile’s chances at stoking disruption in its new form.
Starlink gains exclusive spectrum access to build on D2D head start
Of course, Starlink and its mobile network operator (MNO) partner in the US, T-Mobile, already have a tremendous leg up pursuing the mobile D2D opportunity. While rivals such as AST SpaceMobile, which is partnered with AT&T and Verizon, remain mired in launch delays and have only a handful of birds in orbit, Starlink has launched well over 600 D2D-capable satellites. Furthermore, the T-Satellite service powered by Starlink is already a differentiating commercial reality.
Regulatory approval for the deal shouldn’t be too onerous a challenge, given the government’s role in bringing EchoStar’s spectrum selloff into existence. Once the ink dries, Starlink will gain exclusive access to a tranche of spectrum designated specifically for mobile satellite service thanks to its suitability for space-to-ground communications.
Adding that spectrum to parent SpaceX’s dominant position in the launch ecosystem will tilt the table for the D2D opportunity significantly in the company’s favor. SpaceX’s launch capabilities mean Starlink can get satellites in orbit faster than any rival, which will no doubt be a boon when it’s time to launch the proposed next-generation constellation. Moreover, owning EchoStar’s AWS-4 spectrum will also free SpaceX/Starlink from relying solely on operator partners’ terrestrial spectrum to provide service, opening its aperture for wholesale opportunities.
Three MNOs and a case study
While the US’s status as a three-player MNO market could prove a net negative for consumer service prices in the years ahead, EchoStar’s failure to make Boost Mobile work as the fourth facilities-based US MNO could ultimately result in an interesting new case study.
The company may call the model a ‘hybrid MNO,’ but EchoStar will actually be serving up a new take on the mobile virtual network operator (MVNO) paradigm in the US with its cloud-native 5G core, terrestrial roaming relationships with AT&T and T-Mobile, and now potential D2D capabilities via Starlink.
