SpaceX strengthens Starlink network with $17B spectrum deal
What's the story
Elon Musk's SpaceX has signed a massive deal worth some $17 billion with EchoStar, an American telecommunications company. The agreement is for the acquisition of spectrum licenses to strengthen its Starlink satellite network. The deal covers EchoStar's AWS-4 and H-block spectrum licenses, with SpaceX paying up to $8.5 billion in cash and an equal amount in stocks.
Debt coverage
SpaceX to pay EchoStar's debt obligations
As part of the deal, SpaceX has also agreed to cover around $2 billion in interest payments on EchoStar's debt obligations until November 2027. This long-term commercial agreement will let EchoStar's Boost Mobile subscribers access SpaceX's next-generation Starlink Direct-to-Cell service. The move comes as a major step toward enhancing connectivity for users across different platforms.
Regulatory concerns
Earlier, EchoStar sold spectrum licenses to AT&T for $23 billion
Prior to the SpaceX deal, EchoStar sold some of its wireless spectrum licenses to AT&T for $23 billion. The sale was part of a strategy to address regulatory concerns over the underutilization of its assets for 5G service expansion. The Federal Communications Commission (FCC) had raised questions about whether EchoStar was meeting its obligations to deploy 5G in the US, prompting these transactions.
Strategic moves
EchoStar is working with FCC to resolve issues
In response to the FCC review, EchoStar said it was working with the commission to ensure beneficial use of "scarce spectrum resources." The company has been trying to shield its assets from revocation threats by the FCC. It missed some interest payments due to these regulatory challenges, which it hopes will be resolved with the AT&T and SpaceX transactions.