BY Fraser Tennant
US space technology company SpaceX is to acquire wireless spectrum licences from mobile satellite communication services provider EchoStar in a transaction valued at approximately $17bn.
Under the terms of the definitive agreement, the licences will be sold for up to $8.5bn in cash and up to $8.5bn in SpaceX stock. The agreement also provides for SpaceX to fund an aggregate of approximately $2bn of cash interest payments payable on EchoStar debt through November 2027.
The acquisition of EchoStar’s AWS-4 and H-block licences is seen by SpaceX as crucial to the expansion of its Starlink satellite network’s 5G connectivity business.
In connection with the transaction, SpaceX and EchoStar will enter into a long-term commercial agreement, which will enable EchoStar’s Boost Mobile subscribers – through its cloud-native 5G core – to access SpaceX’s next generation Starlink ‘Direct to Cell’ service.
“For the past decade, we have acquired spectrum and facilitated worldwide 5G spectrum standards and devices, all with the foresight that direct-to-cell connectivity via satellite would change the way the world communicates,” said Hamid Akhavan, president and chief executive of EchoStar. “The combination of AWS-4 and H-block spectrum from EchoStar with the rocket launch and satellite capabilities from SpaceX allows us to realise the direct-to-cell vision in a more innovative, economical and faster way for consumers worldwide.”
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.
The deal comes months after the Federal Communications Commission questioned EchoStar’s use of mobile-satellite service spectrum and raised concerns about whether it was meeting its obligations to deploy 5G in the US. EchoStar anticipates that the transaction with SpaceX and its previous deal with AT&T will resolve the FCC’s inquiries.
“This transaction with EchoStar will advance our mission to end mobile dead zones around the world,” said Gwynne Shotwell, president, chief executive and chief operating officer of SpaceX. “SpaceX's first generation Starlink satellites with Direct to Cell capabilities have already connected millions of people when they needed it most – during natural disasters so they could contact emergency responders and loved ones – or when they would have previously been off the grid.”
The closure of the proposed transaction is expected to occur after all required regulatory approvals are received and other closing conditions are satisfied.
Mr Akhavan concluded: “This transaction with SpaceX continues our legacy of putting the customer first.”
News: SpaceX buys wireless spectrum from EchoStar in $17 billion deal