Faced with an FCC investigation into its spectrum licenses and large debts that could have pushed it into bankruptcy, EchoStar has agreed to sell the company's 3.45 GHz and 600 MHz spectrum licenses (a total of 50 MHz of nationwide spectrum) to AT&T for about $23 billion.
The deal will allow Echostar to pay down debt, refocus its operations and help resolve the current FCC investigation that had raised fears it might file for bankruptcy.
"I'm enormously proud of the EchoStar team for deploying the world's first Open RAN network in record time, despite industry skepticism and in the face of the many challenges raised by the COVID-19 pandemic," said Charlie Ergen, co-founder and chairman, EchoStar. "EchoStar and Boost Mobile have met all of the FCC's network buildout milestones. However, this spectrum sale to AT&T and hybrid MNO agreement are critical steps toward resolving the FCC's spectrum utilization concerns."
The deal has major implications for the wireless business, where it will strengthen AT&T’s position in the 5G and home internet business. But the deal is likely to also have an impact on cable operators and broadband providers.
The $23 billion acquisition will add an average of approximately 50 MHz of low-band and mid-band spectrum to AT&T’s holdings – covering virtually every market across the U.S. That will improve the company’s ability to add converged subscribers with both 5G wireless and home internet services in more places.
The agreement ends EchoStar’s dreams of becoming a major wireless, 5G provider but the deal allows EchoStar participation in wireless industry through long-term wholesale network services agreement with AT&T for its Boost Mobile’s service.
Through Boost Mobile's hybrid MNO infrastructure, subscribers will continue to receive service from Boost Mobile's cloud-native 5G core connected to AT&T's nationwide network, EchoStar said.
While primary connectivity will be provided by AT&T's towers, Boost Mobile subscribers will continue to have access to the T-Mobile network. Customers will experience no interruptions to service. As a result of this transaction, elements of Boost Mobile's radio access network (RAN) will be decommissioned over time, EchoStar reported.
"This transaction puts our business on a solid financial path, further facilitating EchoStar's long-term success, and enhancing our ability to innovate and compete as a hybrid network operator. The proceeds of this transaction will be used for, among other things, retiring certain debt obligations and funding EchoStar's continued operations and growth initiatives," said Hamid Akhavan, CEO and president, EchoStar. "We continue to evaluate strategic opportunities for our remaining spectrum portfolio in partnership with the U.S. government and wireless industry participants."
The agreement also has important implications for major cable operators and broadband providers. By strengthening AT&T’s ability to provide both 5G and home internet services it will create increased competition for their broadband and wireless services, which have become the backbone of their operations amid an ongoing decline in pay TV subs.
The deal also weakens their position for negotiating MVNO deals for spectrum for their own wireless services as reduces the main wireless players to three—T-Mobile, AT&T and Verizon.
If the deal passes regulatory muster, Echostar will also retain a smaller, but significant package of spectrum that it would sell to other companies like Verizon or Elon Musk’s SpaceX. Musk has been trying to get the FCC take away some of those EchoStar licenses.
