SpaceX spends $17 billion to acquire EchoStar Wireless

SpaceX, under Elon Musk, announced on September 8 local time that it has agreed to acquire the wireless spectrum of EchoStar Corp. for approximately $17 billion for use in its Starlink satellite network.

On the same day, EchoStar also issued a statement saying that the company has reached a final agreement with SpaceX to sell its AWS - 4 frequency band (also known as the 2GHz band) and H - band spectrum licenses to SpaceX.

According to the announcement, SpaceX will pay a total of $17 billion, of which $8.5 billion will be in cash and another $8.5 billion will be paid in non - publicly traded shares of SpaceX. In addition, SpaceX will also assume EchoStar's debt interest of approximately $2 billion as of the end of 2027.

The AWS - 4 frequency band is designated by the U.S. Federal Communications Commission (FCC) for terrestrial mobile transmission and communication between satellites and ground infrastructure. In 2011, EchoStar's founder acquired the usage rights of the entire frequency band from the bankrupt satellite companies DBSD and Terrestar.

In May this year, the FCC launched an investigation to review whether EchoStar has fulfilled its obligations regarding wireless and satellite spectrum rights and threatened to revoke some valuable licenses. The investigation stemmed from a complaint by SpaceX. In the spring of this year, SpaceX also applied to the FCC for permission to share the use of the AWS - 4 frequency band.

This acquisition, combined with EchoStar's recent spectrum sale to AT&T, is expected to resolve the FCC's investigation into EchoStar's spectrum usage.

After the acquisition is completed, SpaceX will obtain the crucial AWS - 4 frequency band resources, which will help its Starlink business expand direct - to - device services and reduce its reliance on terrestrial mobile operators. SpaceX said that the additional spectrum will "increase its cellular capacity by more than 100 times." Gwynne Shotwell, President and Chief Operating Officer of SpaceX, also emphasized that this acquisition will help the company "eliminate mobile dead zones globally." As of June, Starlink had approximately 5 million users in more than 100 countries, far exceeding its competitors.

As part of the deal, SpaceX and EchoStar will also sign a long - term commercial cooperation agreement. Users of Boost Mobile, a virtual operator under EchoStar, will be able to access SpaceX's Starlink direct - to - phone service.

However, this agreement has also raised questions about EchoStar's previous $13 billion contract with Canada's MDA Space. The contract originally planned to build a non - terrestrial network (NTN) to support its direct - to - device (D2D) services. After reaching a cooperation with SpaceX, EchoStar no longer needs to build its own satellite network, and the previous agreement is very likely to be cancelled.

EchoStar said that the company 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 rose more than 60% in pre - market trading in the U.S. stock market and remained around 20% after the opening.

Before agreeing to sell spectrum licenses to AT&T for approximately $23 billion last month, EchoStar had a debt of up to approximately $26.4 billion. EchoStar had previously skipped bond payments and considered filing for bankruptcy, saying that the FCC's investigation hindered its decision - making ability regarding the 5G network.

This article is from "Jiemian News", author: Shen Xiaoge. Republished by 36Kr with permission.