- It looks as though EchoStar finally got the financial lifeline it needed – in the nick of time
- EchoStar President and CEO Hamid Akhavan said they’re playing to win in the wireless business and now it’s time to execute
- Will it work? That’s the $10 gazillion dollar question
Leave it to EchoStar co-founder and Chairman Charlie Ergen to shepherd, by some accounts, one of the largest and most comprehensive out-of-court M&A and balance sheet restructurings to date. Question is: How can he use some of those same wits to make EchoStar a viable fourth facilities-based U.S. wireless operator?
EchoStar this week unveiled a suite of transactions, all designed to accelerate EchoStar’s mission to be a nationwide facilities-based wireless service provider that competes (for real this time) with AT&T, T-Mobile and Verizon. This came as EchoStar was nearing a $2 billion debt maturation deadline in November 2024.
Before this week, many analysts predicted EchoStar would file for bankruptcy protection any time now. But Ergen saved the day, having successfully negotiated with myriad players, from AT&T to private equity firm TPG.
Perhaps EchoStar President and CEO Hamid Akhavan put it best when he described the set of transactions in a call with investors: “I think of it as landing two or three 747s on the same runway at the same time without crashing.”
Ever since March, Ergen has been, unfortunately, absent on EchoStar earnings calls. An EchoStar spokesman told Fierce back in May that Ergen is still “very much involved” in the company, but as chairman, he’s focused more on “longer-term strategic development of the business, not day-to-day business.”
In other words, Akhavan is the public-facing exec at the company while Ergen works his magic in the background.
Akhavan assured everyone on this week’s conference call that EchoStar, which is consummating the “inevitable” by selling Dish and Sling TV to satellite provider DirecTV, is serious about the wireless business. And he gave Ergen credit for masterminding the whole scenario.
“With Charlie’s vision and Charlie’s insight, he’s been the driver of all of this. He’s been creating this opportunity for all of us – with that vision and our drive, I don’t expect us to sit here and do nothing,” he said. “We’ve worked very hard to position ourselves to win and now it is our job to go try to execute.”
This series of transactions basically wipes the slate clean. It provides $5.5 billion in new capital for EchoStar to complete its 5G network and fund growth of Boost’s consumer business while chasing the enterprise and wholesale opportunity for at least the next three years, according to New Street Research analysts.
But it’s far from a done deal, in the sense that it’s contingent on a number of key players signing on, including creditors that are being asked to write off a chunk of their investment. As Bloomberg reports, early indications are that at least some noteholders see the terms as inadequate even if the deal as a whole creates a stronger company.
Network vs. customer acquisition
Akhavan reiterated that EchoStar will meet its federal 5G buildout requirements. The Federal Communications Commission recently gave EchoStar more time to reach 5G build commitments – and it doesn’t have to spend so much money building out in more rural markets where the economics don’t pencil out.
Beyond that, “I can’t tell you that today we definitively are going to spend more on the network or definitively more on customer acquisition. I think there’s a right balance. Nothing good comes out if you have the greatest network on Earth that covers every corner of every neighborhood, but you don’t have enough money to get great customers,” Akhavan said.
The reverse is also true. You can’t get great customers without fantastic coverage, “which we have today,” he said. “The good news is that we do have the ability to roam” on MVNO partners AT&T and T-Mobile. “That takes some pressure off of us in terms of allocating our capital to infrastructure versus go to market.”
Chasing D2D
One of the opportunities they expect to pursue is direct-to-device (D2D), an increasingly crowded space where SpaceX, AST SpaceMobile and Skylo already play to some degree or another. It’s not entirely clear how big a D2D market there’s going to be by the time EchoStar gets to the finish line here.
But they’re going to try. Ergen previously talked up their S-band holdings and Akhavan said “we think we are uniquely positioned for it,” although he acknowledged there’s nothing cheap about the satellite business.
“This is a very large undertaking,” Akhavan said. “We think it’s one of the greatest, if not the single greatest opportunity left in this space right now in terms of the impact on consumers and global relevance and financial return.”
Righting the retail ship
The bigger challenge right now is righting the Boost Mobile retail ship. Boost lost 16,000 wireless subscribers in Q2 of 2024, which was better than the decrease of 188,000 it had in the same period a year ago, but it’s still moving in the wrong direction. The business, which now has about 7 million customers – down from 9 million in 2020 – got off to a bad start and for a boatload of reasons, things further spiraled down from there.
Recon Analytics Founder Roger Entner gave Dish/EchoStar “big kudos” for executing on its 5G standalone network using open Radio Access Network (RAN) technology. However, its marketing efforts are decidedly less impressive.
“They built it and nobody came,” he told Fierce. “They have not been able to credibly communicate why somebody should have them as their service provider of choice. It’s a marketing and sales problem. It’s not a technical problem and not a buildout problem. There are many ways they could have done this differently.”
Even with the latest financing package, some Wall Street analysts still don’t believe it’s going to succeed.
“Does EchoStar really plan to build a network? We are, unfortunately, no closer to knowing,” analyst Craig Moffett wrote in a research report. “We’ve long argued that the bull case for EchoStar is entirely premised on the spectrum sale scenario – we don’t know anyone who imagines EchoStar can actually succeed as a wireless operator.”
As for where EchoStar goes from here, “the company can now concentrate its efforts and resources on standing up the wireless business,” wrote TD Cowen analyst Gregory Williams. However, “with three entrenched U.S. wireless providers, lack of retail distribution and the potential for wireline/wireless ‘convergence’ to become real, Boost will be fighting an uphill battle.”
Boost still doing Boost
To its credit, Boost Mobile earlier this year unveiled a reboot of its brand, combining its prepaid and postpaid offerings into a single brand. The strategy includes Boost 5G plans starting at $25/month, a 30-day money-back guarantee and national ad campaign.
In September, Boost Mobile seized on the latest iPhone launch with what it called “unmatched” value with iPhone 16.
“I think you’ll find that we have the best offer for an iPhone 16 in the wireless market right now,” Jeremy McCarty, SVP of Partnerships and Growth at Boost Mobile, told Fierce in a recent interview. “This is the only plan available from a carrier that can get you the latest iPhone up to $1,000 off without a trade-in. That offer resonates really well with our customer base.”
Given EchoStar’s finances, how are they able to do these deals and make a profit? McCarty noted that the way Dish built its modern network – using open RAN technology – means they can pass their savings onto consumers.
“When you sort of look at the approach that we’re taking from a challenger perspective, I think we’re really trying to take the things that customers really want from a carrier and be very forward about them,” he said, adding that Boost guarantees a $25/month “price lock” forever.
McCarty spoke highly of the momentum they’re building heading into the back half of this year, which is historically the busiest season for wireless carriers.
More competition is better. But it still has a long, long way to go. Telecom execs and analysts like to say: Never underestimate Charlie Ergen. Let’s see if he can work his magic again.