Elon Musk's SpaceX to Spend $17 Billion to Expand Starlink's Direct-to-Cell Service

SpaceX has acquired the AWS-4 and H-band spectrum licenses from EchoStar Corporation for approximately $17 billion and will assume the interest on EchoStar's $2 billion debt.

SpaceX, the American aerospace manufacturer and space transportation company, has agreed to purchase wireless spectrum from EchoStar Corporation for approximately $17 billion.

On Monday (September 8th) local time, EchoStar issued a statement saying that it had reached a final agreement with SpaceX to sell its AWS-4 band (also known as the 2GHz band) and H-band spectrum licenses to SpaceX.

SpaceX will pay EchoStar up to $8.5 billion in cash and up to $8.5 billion in SpaceX stock. SpaceX has also agreed to pay a total of approximately $2 billion in cash interest on EchoStar's debt by November 2027.

SpaceX and EchoStar will enter into a long-term commercial agreement that will enable EchoStar's Boost Mobile customers to access SpaceX's next-generation Starlink Direct to Cell service through its cloud-native 5G core.

EchoStar said that it will use the proceeds from the transaction to repay part of its debt and support its subsequent operations and growth plans. Affected by this news, EchoStar's stock price soared by more than 60% in pre-market trading in the U.S., and the increase narrowed to around 20% after the opening.

Analysis points out that satellite operators like SpaceX, if seeking to provide "direct-to-device" space mobile communication services, usually need to cooperate with at least one operator holding a terrestrial mobile license.

Although SpaceX has established a partnership with T-Mobile, this acquisition of the spectrum will enable it to launch its own direct-to-device service more independently. The AWS-4 band is designated to carry both terrestrial mobile communications and communications between satellites and terrestrial infrastructure.

Hamid Akhavan, the CEO of EchoStar, said in a press release that this new deal will combine EchoStar's spectrum with SpaceX's rocket launch and satellite capabilities to "realize the vision of direct connection to mobile phones in a more innovative, cost-effective, and faster way."

Gwynne Shotwell, the President and COO of SpaceX, wrote that this deal "will advance our mission to eliminate global mobile signal dead zones."

EchoStar said that this transaction, together with the recent sale of spectrum to AT&T, is expected to resolve the relevant investigation by the Federal Communications Commission (FCC). In May this year, the FCC accused EchoStar of failing to effectively utilize the acquired spectrum and threatened to revoke some valuable licenses.

It is worth mentioning that this accusation originated from SpaceX's complaint: Elon Musk has repeatedly complained that EchoStar occupies valuable wireless bands without providing commercial services. Therefore, SpaceX requested the FCC to pressure EchoStar to share the bands.

In 2011, Charlie Ergen, the founder of EchoStar, acquired full rights to this band by purchasing the bankrupt satellite companies DBSD and Terrestar.

The FCC's accusation triggered a series of urgent transactions by EchoStar. At that time, the company once faced a bond default and considered filing for bankruptcy - fortunately, the price of its bonds rebounded significantly after the transaction with AT&T.

This article is from the WeChat official account "Science and Technology Innovation Board Daily". Author: Zhao Hao. Republished by 36Kr with permission.