- New financing came through, eliminating doubts about EchoStar as an “ongoing concern”
- But bondholders rejected a deal that’s key to selling Dish’s satellite TV service to DirecTV
- EchoStar management insists they can continue to grow the business regardless
Two out of three of EchoStar’s 747s appear to have landed safely. One remains in the air due to bondholders rejecting a debt exchange offering that’s key to the planned merger of Dish’s satellite TV service with DirecTV.
That in a nutshell is how analysts at New Street Research (NSR) described EchoStar’s current financial situation.
On a call in September announcing a complicated series of transactions to keep EchoStar from spiraling into bankruptcy, EchoStar CEO Hamid Akhavan described the transactions as akin to “landing three 747s on the same runway at the same time without crashing.”
On Tuesday, EchoStar announced the successful completion of a string of strategic transactions designed to reinforce its balance sheet. The company will be able to meet its $2 billion debt obligation due this Friday, and there are no longer immediate doubts about its ability to remain an “ongoing concern.” Fortified with $5.2 billion in additional spectrum-backed financing, it intends to continue deploying a nationwide 5G wireless service “to vigorously compete with incumbent wireless carriers.”
But bondholders who rejected a debt exchange offer are holding up the third deal. The offer is a prerequisite to selling Dish’s DBS TV service to DirecTV. For the deal to go through, Dish DBS debtholders would have had to agree to taking a so-called “haircut” of about $1.57 billion on the debt. That makes the path forward more uncertain and complicated.
While that roadblock remains, Akhavan said on Tuesday’s earnings call that EchoStar’s business will continue to operate with or without the sale of the DBS business. He declined to comment on specific cash flows, but “we certainly can develop the business regardless of the developments that happen at DBS,” he said.
ACP losses pile up
As for EchoStar’s wireless business, the company lost 359,000 Affordable Connectivity Program (ACP) subscribers. If not for those losses, Boost Mobile would have added 62,000 subscribers in Q3.
Boost finished Q3 with 6.98 million wireless subscribers, about 3 million subscribers lower than when they entered the wireless business in 2020.
“The Boost business, whether prepaid or postpaid, was always supposed to be just a jump start for a facilities-based 5G ORAN business,” wrote MoffettNathanson analyst Craig Moffett in a note for investors Tuesday.
But EchoStar has dramatically cut capital spending on their 5G network deployment, he said. In Q3 2024, EchoStar invested $235 million in its network deployment compared to $686 million in Q3 2023. For the full year 2024, EchoStar expects capex to be roughly half of what it was in 2023.
“They have slashed the operating expenses associated with their wireless build by round after round of headcount reductions,” Moffett said. “Still, their 5G network build is burning through cash rapidly.”
The ‘Trump bump’
Moffett has long argued that Dish, through parent EchoStar, will eventually exit the wireless business and sell its spectrum. Fortuitously, “the value of EchoStar’s asset portfolio has almost certainly benefited from a ‘Trump bump,’” he said.
“To be sure, a Trump Administration obviously doesn’t guarantee an auction result that would yield proceeds in excess of EchoStar’s indebtedness. There is still a very real chance that EchoStar’s equity is zero in a bankruptcy. But the possibility of a non-zero outcome has risen. That’s … something,” Moffett said.
The next year or so will determine whether EchoStar – aka Dish aka Boost Mobile – will succeed in wireless. If not, it could start selling some spectrum when FCC restrictions ease in 2026.
“We think Dish will spend the next two to three years doing everything they can to build a successful business,” wrote NSR analyst Jonathan Chaplin. “If they fail, they will sell the spectrum. Investors will win either way, though if the business struggles, they will have to wait at least two to three years to see the value.”