Tue 08/01/2023 11:53 AM
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Summary Highlights:
  • DISH Network continues to face a myriad of capital requirements, including $12.75 billion in maturities through 2026, billions in further 5G network buildout spend, billions in possible AWS-3 spectrum re-auction backstop amounts and retail wireless subscriber acquisition costs.
  • While DISH’s flexible debt documents provide multiple levers to address its maturities through liability management exercises, in our view, in light of the magnitude of the company’s ongoing capital needs, DISH would be better served by pursuing potential enterprise-enhancing partnership opportunities.
  • DISH Chairman Charlie Ergen is not known to use the “standard” playbook. A re-combination of DISH with EchoStar, approximately 93% controlled by Ergen, could open a new set of market-expanding opportunities. The combined company would feature complementary licenses in both the U.S. terrestrial and global satellite spectrum, an underutilized U.S. 5G network and an installed satellite broadband subscriber base that could potentially unlock a range of partnership opportunities, possibly with well-capitalized low earth orbit, or LEO, satellite providers such as SpaceX’s Starlink or Amazon’s Project Kuiper. While EchoStar CEO Hamid Akhavan said EchoStar had not “contemplated” a DISH combination on the first-quarter call, such a merger might ameliorate potential third-party governance concerns.
  • SpaceX’s pursuit of 5G satellite direct-to-device services with T-Mobile’s spectrum directly adjacent to EchoStar and DISH’s 2 GHz S-band holdings further validates EchoStar’s ambitions to pursue a 5G satellite direct-to-device network with its international LEO and European geosynchronous orbit, or GEO, S-band satellite rights. The combined company could supplement these bands with DISH’s similar-frequency U.S. mobile satellite service (MSS)/AWS-4 band licenses as well.
In early July, press reports noted that Charlie Ergen, controlling shareholder of both DISH and EchoStar, had engaged bankers to explore a combination of the two companies. Some market participants are focused on the potential benefits to DISH from EchoStar’s $1.8 billion in pro forma March 31 liquidity. However, DISH and EchoStar’s complementary licenses in both the U.S. terrestrial and global satellite spectrum, DISH’s underutilized U.S. 5G network and installed satellite broadband subscriber base may have the potential to unlock a range of more significant opportunities with the combined entity.

To the extent that a DISH-EchoStar partnership or merger were to accelerate the rollout of a 5G satellite direct-to-device solution, furthering rural U.S. broadband connectivity, such a development might allow for additional creativity in addressing DISH’s 2025 geography-focused Federal Communications Commission deadlines.

DISH continues to confront a myriad of capital funding requirements, including:
  • Upcoming maturities: In 2024 alone, DISH faces the maturity of $1 billion in DISH topco convertible notes and $2 billion DBS unsecured notes on March 15 and Nov. 15, respectively. In total, the company must address $12.75 billion in debt maturities through 2026.
  • 5G network buildout: On July 17, DISH certified its compliance with its nationwide 5G buildout commitment, noting that, as of June 14, it offered 5G broadband services as defined in the FCC’s 2020 buildout order, to 73.56% of the total U.S. population. The company faces another series of 5G buildout deadlines on June 14, 2025, related to geographic and population-combined thresholds. Ergen on the first-quarter call said that in the second half of 2023, DISH will “take a little bit of a pause” on its market expansion before resuming new-market buildouts in “the late 2024 or early 2025 time frame.” Reorg estimates that as of March 31, DISH had spent about $5 billion to $6 billion of the total $10 billion initially estimated, indicating the potential for another $4 billion to $5 billion in buildout expenses.
  • Retail wireless subscriber acquisition costs: Buildout of DISH’s post-paid retail wireless business will require significant subscriber acquisition costs, including sales, marketing and likely future equipment spend. On Saturday, July 26, the company announced it is now offering its post-paid Boost Infinite on Amazon, potentially as a means of defraying certain subscriber acquisition costs.
  • Potential AWS-3 capital calls: On June 30, the U.S. Supreme Court declined to review DISH noncontrolled entity Northstar Wireless’ appeal related to its loss of eligibility for 25% bidding credits for certain AWS-3 spectrum licenses. This moved the FCC closer to a re-auction of the AWS-3 spectrum licenses that DISH was determined to be ineligible to receive through credits. Under a re-auction, DISH will have to backstop the FCC for up to $2.9 billion, which is equivalent to the bidding credits that were deemed incorrectly sought, less interim payments. The ultimate cost of this backstop to DISH will depend upon the winning price in the new auction, with DISH responsible for any decline in the price from the previous auction, up to $2.9 billion. Additionally, managers for the AWS-3 license holding entities have exercised puts that obligate DISH to purchase their interests at a future date. As of March 31, the put amounts totaled $485 million.
Additionally, T-Mobile on Sunday, July 27, reported that it extended DISH’s approximately $3.6 billion option to purchase certain 800-megahertz spectrum licenses to “on or about” Aug. 11 from June 1. T-Mobile CEO Mike Sievert said that the companies are in conversations to determine “whether or not there might be a win-win that's different from [DISH’s] initial privilege.” When asked if T-Mobile is interested in acquiring “more mid-band spectrum, either from DISH or others,” Sievert responded, “You know we’ve never met spectrum, we didn’t like,” perhaps hinting at the possibility of a spectrum license swap in lieu of a cash payment.

Given the strategic importance of DISH’s contiguous AWS-4 and H-block spectrum licenses along with its AWS-3 licenses, which all combine to form Band 70, the company’s 3.45-3.55-gigahertz licenses might be the preferred spectrum licenses for a spectrum swap or sale-leaseback. To the extent that DISH does not exercise its option with T-Mobile and no alternative arrangement is achieved, DISH would owe T-Mobile a $72 million break fee.

DISH / EchoStar Combination

On July 29, EchoStar announced the successful launch of its geosynchronous, or GEO, satellite JUPITER 3/EchoStar XXIV, which had been delayed by over two years. Management said on its first-quarter call that the satellite should achieve full service in the fourth quarter. For EchoStar, which has operated without a CFO since October 2022, successfully operating the new satellite might remove an overhang to a merger or other strategic opportunities. This development would remove execution uncertainty and provide EchoStar’s Hughes with much-needed broadband capacity. As an example of the issues attendant with launching satellites, ViaSat’s recently launched GEO ViaSat-3 satellite suffers from a serious malfunction, which could render it a total loss.

While DISH has multiple levers to address the company’s maturities utilizing this flexibility, in our view, in light of the magnitude of its ongoing capital needs, DISH would be better served by pursuing enterprise-enhancing partnership opportunities with EchoStar rather than less creditor-friendly actions. Reorg Covenants has highlighted the significant flexibilities in DISH’s debt documents, including over $20 billion in restricted payments capacity at the cash-generating DBS credit box.

DISH could likely raise debt by using its unencumbered H-block and AWS-4 or other unencumbered spectrum licenses as collateral, similar to the 11.75% secured notes backed by its 600 MHz spectrum licenses. However, the addition of high-priced incremental cash interest costs to the company’s already ample current cash needs does not appear to be an attractive option. This type of transaction would also likely raise capital at a significant discount to the market value of such licenses - the 11.75% secured notes include a 35% loan-to-value covenant.

Larger partnership opportunities with DISH and EchoStar’s combined spectrum holdings and other assets might generate more attractive, albeit possibly dilutive, capital raising opportunities. While partnership opportunities with the low earth orbit, or LEO, providers, such as SpaceX’s Starlink or Amazon’s Project Kuiper, could exist without merging the entities, combining the two companies might ameliorate potential third-party governance concerns.

As of June 21, Ergen, who serves as the chairman of both companies, owned a majority of both DISH and EchoStar and over 90% of voting control of both companies, potentially easing the path of any such transaction.

When asked on EchoStar’s first-quarter earnings call “under what … circumstances would it make sense … for DISH and EchoStar to recombine,” EchoStar CEO Hamid Akhavan said EchoStar had not “contemplated” a combination and added:
“[W]e are not limited with respect to any opportunities in the existing situation we have with DISH … We’ve not had any issues with respect to the companies not being able to come to an arm’s length agreement on any aspect of the opportunities … we find ourselves in a number of cases where there’s mutually beneficial opportunities, [we] seem to have somewhat … complementary assets … in many ways, but we have not had any limitations on being able to put those two … classes of assets to use in an opportunity.”

Providing evidence that an EchoStar-DISH combination has been contemplated for a number of years, as discussed further below, EchoStar’s change of control covenants specifically carve out entities with majority voting power held by Charlie Ergen, meaning in an acquisition DISH would be able to leave EchoStar’s bonds in place. The two companies have a long history of agreements and transactions between them and were operated as a combined company named EchoStar Holding Co. until EchoStar’s 2008 spinoff.

The pro forma March 31 EchoStar capital structure below reflects the company’s receipt of a $148 million loan repayment from GlobalStar in “early April.” Accounting for the loan repayment, EchoStar held $1.8 billion in pro forma liquidity as of March 31, including $1.1 billion in cash and $755 million in marketable securities.
(Click HERE to enlarge.)

DISH’s March 31 capital structure is shown below:
(Click HERE to enlarge.)

EchoStar Satellite Direct-to-Device Ambitions

EchoStar’s Akhavan on the company’s fourth-quarter 2022 earnings call stated that satellite direct-to-device development is a “very large,” “fundamental,” “game changing” opportunity for EchoStar. EchoStar has highlighted that it intends to power its satellite direct-to-device ambitions with the company’s global S-band rights, which include overlapping frequencies with DISH’s spectrum holdings, highlighting a key rationale for a tie-up between the companies.

Akhavan labeled DISH and EchoStar’s global S-band spectrum filings, which it intends to use for its direct-to-device ambitions, and are summarized further below, “very complementary” on the first-quarter of 2023 earnings call. Akhavan highlighted that EchoStar has “satellite S-band coverage over Europe” and that DISH has “satellite S-band coverage over United States and Canada and North America essentially.” In addition, EchoStar holds certain non-geostationary, or LEO, “global spectrum rights for S-band mobile satellite services.” On the fourth-quarter 2022 call, Akhavan said that EchoStar’s aims to develop a “true [wide]-band system, which will have a natural use of your smartphone,” similar to what you would use on a “terrestrial network.”

Akhavan said on the first-quarter call that EchoStar is in the “design and engineering phase of a larger system, which we expect to come into service just a couple of years later after Lyra,” which is EchoStar’s recently announced 28-satellite LEO constellation. He continued, “you should expect that in the second half of this decade, we’ll have 5G, what we call, wideband service, based on a new constellation, much larger constellation that we are working on.” Later in the call, Akhavan said he expects such a service’s “first impacts” to begin in “2026, 2027.”

Spurring industry satellite direct-to-device development, in March 2022, the global mobile broadband standards body, the 3rd Generation Partnership Project (3GPP), unveiled standards for 5G non-terrestrial networks, or NTN, standards. EchoStar continues to “actively engage with companies across the 5G NTN ecosystem to leverage the opportunities of the 3GPP Release 17 in developing a truly global 5G non-terrestrial network,” Akhavan stated on the first-quarter call. As discussed further below, T-Mobile, AT&T and Apple among others are currently pursuing satellite direct-to-device opportunities.

Competition Increasing Satellite, Terrestrial Network Convergence

As EchoStar looks to compete with lower latency satellite network alternatives, the potential synergies achievable from the use of DISH’s 5G network or DISH’s mobile virtual network operator, or MVNO, arrangements with T-Mobile and AT&T could prove decisive. DISH’s 12 GHz band might also be a candidate to power EchoStar’s HughesNet Fusion’s terrestrial wireless needs.

SpaceX’s Starlink continues to escalate competition in the satellite broadband market as it looks to launch additional Gen2 Starlink satellite capacity. CNBC reported in May that Starlink’s fleet included over 4,000 LEO satellites. Starlink reportedly had over 1.5 million subscribers in May compared with 1.18 million at EchoStar’s Hughes on March 31.

SpaceX’s LEO satellite constellation boasts superior latency characteristics, meaning a shorter time delay, in comparison with legacy GEO-satellite broadband offerings from EchoStar and ViaSat. Latency complicates broadband uses such as video conferencing, streaming and gaming among others. A summary of existing industry satellite systems is shown below:
Source: Ericsson.

To compete with a lower latency alternative, in September 2022, EchoStar introduced its new multipath HughesNet Fusion service that “blends GEO satellite and wireless technologies.” While EchoStar management has declined to identify the provider of its terrestrial wireless network, whether through an arms-length agreement or a combined basis, potential synergies could be achieved through the use of DISH’s 5G network or DISH’s MVNO arrangements with T-Mobile and AT&T.

In a debate between DISH and Starlink among other industry participants, the FCC in May denied DISH’s request to use its 12.2 GHz to 12.7 GHz spectrum licenses for terrestrial mobile usage, but it left open the possibility that such frequencies could be used for terrestrial fixed wireless access, or FWA. Ergen on the DISH first-quarter of 2022 call labeled the 12 GHz as “an ideal frequency” for FWA and asserted that the band “could get millions of customers in fixed wireless, particularly in rural America.”

DISH/EchoStar’s Strategic, Complementary Spectrum Rights

A combination of DISH’s H-block and AWS-4 licenses with EchoStar’s global satellite spectrum holdings, which are located at the same frequencies, creates an attractive set of assets for well-capitalized LEO satellite constellation operators such as SpaceX or Amazon’s Project Kuiper, which plans to offer subscribers services by the end of 2024.

In a continuation of dueling-spectrum repurposing filings by DISH and SpaceX, the FCC on April 18 announced that it was seeking public comment on SpaceX and T-Mobile’s request modify to T-Mobile’s terrestrial personal communications service (PCS) G-block licenses to allow for SpaceX’s Gen2 satellites to provide supplemental coverage to T-Mobile’s network. Specifically, SpaceX and T-Mobile are seeking to modify the paired bands located at the 1910 MHz-1915 MHz (uplink) and 1990 MHz-1995 MHz (downlink) frequencies.

In a May 18 petition to dismiss or deny the request, DISH argued that SpaceX had failed to “explain how SpaceX will avoid excessive out-of-band emissions in the adjacent H Block and AWS-4 spectrum licensed to DISH.” As shown below, DISH’s contiguous H-Block and AWS-4 spectrum licenses, located at the 1995 MHz to 2020 MHz range, provide the downlink band under 3GPP’s Band 70 and are directly adjacent to the G-block downlink spectrum that SpaceX and T-Mobile are seeking to repurpose.
Sources: FCC, Reorg analysis.

SpaceX’s pursuit of satellite direct-to-handset services with just 5 MHz mid-band spectrum directly below DISH’s 25 MHz-wide adjacent spectrum licenses demonstrates the perceived viability of such services in this frequency range. The development also indicates SpaceX’s likely interest in DISH’s similarly located H-block and AWS-4 spectrum licenses.

EchoStar / DISH Combination Considerations, Capital Structures

To the extent that a DISH-EchoStar combination is pursued, in the context of DISH’s considerable capital funding requirements, Reorg believes that an all-stock acquisition of EchoStar by DISH appears to be the most ideal structure.

DISH’s $24 billion total enterprise value, or TEV, is many multiples larger than EchoStar’s $1.4 billion TEV. On a market-capitalization basis, DISH’s $4.2 billion market cap is 2.6x the size of EchoStar’s $1.6 billion market cap.

Similar to DISH Network, EchoStar features a dual-class share structure where Class A shares are entitled to one vote per share and Class B shares are entitled to 10 votes per share. Ergen beneficially owns all of the Class B shares of DISH and EchoStar.

The table below displays a range of combined company ownership and voting percentages based on various premiums to the current EchoStar share price. The table also disaggregates voting control of the combined company based on two scenarios:
  • Ergen receives DISH Class B shares for his EchoStar Class B shares; or
  • Ergen receives DISH Class A shares for his EchoStar Class B shares.
As shown below, under either consideration scenario, Ergen maintains voting control of the combined entity:

As mentioned above, EchoStar held $1.8 billion in pro forma cash and marketable securities as of March 31. Reorg estimates that EchoStar’s indentures include ample restricted payments capacity to transfer this cash to DISH following an acquisition.

DISH and EchoStar’s articles of incorporation designate the Eighth Judicial District Court of Clark County of the State of Nevada as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by shareholders.

Change of Control Put Provision - Ergen, Related Parties Carve-out

Both EchoStar’s secured and unsecured indentures include change of control covenants. These require the issuer, Hughes Satellite Systems Corp., upon a transaction whereby a new entity owns a majority of the then-ultimate parent company’s total voting power, to make an offer to repurchase each holder’s notes at a price of 101% of par.

However, Ergen and his family are carved out of these provisions. As discussed above, Ergen beneficially owned approximately 90.3% of DISH and approximately 93.4% of EchoStar voting control, as of June 21. In each of the scenarios above, Reorg estimates that Ergen would maintain beneficial voting power of the combined company and thereby not trigger the change of control provisions.

Specifically, the indentures define a change of control as: “any transaction or series of transactions the result of which is that any Person (other than the Principal or a Related Party) individually owns more than 50% of the total voting power of the then-ultimate parent company of the Company.” “Principal” is defined as Charles W. Ergen and “Related Party” is defined as “with respect to the Principal, (a) the spouse and each immediate family member of the Principal, (b) each trust, corporation, partnership or other entity of which the Principal, the Principal’s spouse and/or immediate family members beneficially holds an 80% or more controlling interest and (c) all trusts, including grantor retained annuity trusts, established by the Principal for the benefit of his family.”

EchoStar Org Structure

Summary EchoStar Corporate Structure

The company provided the following simplified organizational chart in April 2017:

DISH Org Structure

Reorg’s estimated DISH summary organizational structure is shown below:
(Click HERE to enlarge.)

DISH / EchoStar Spectrum License Overview

DISH Spectrum Licenses

A summary of DISH’s spectrum licenses, including estimated values for the company’s low- and mid-band licenses on a per MHz-POP (population)-basis, based on the company’s carrying values, is shown below. DISH reported $29.6 billion of spectrum book value as of March 31.
(Click HERE to enlarge.)

DISH purchased its previously discussed AWS-4/S-band mobile satellite service, or MSS, spectrum licenses, which overlap with EchoStar’s global S-band rights, through its March 2012 acquisitions of reorganized DBSD North America Inc., fka ICO North America Inc., for $1.364 billion and reorganized TerreStar Networks Inc. for $1.382 billion. DISH acquired the debt of both DBSD and TerreStar and converted their positions to equity through the companies’ bankruptcy proceedings. DISH created the licenses for approximately $2.86 million in total, inclusive of $114 million in net settlement-related payments to Sprint related to “costs allegedly incurred by Sprint to relocate users from the spectrum now owned by DBSD North America and TerreStar.”

When DISH acquired the DBSD North America and TerreStar spectrum licenses, both licenses were authorized for MSS and its associated ancillary terrestrial component, rather than full terrestrial use. Following the acquisitions, in December 2012, DISH successfully requested that the FCC allow it to use the licenses for terrestrial services. The FCC then termed the 40 MHz of spectrum, which is specifically located at 2,000 MHz-2020 MHz and 2180 MHz-2200 MHz, the AWS-4 band. Separately, through the FCC’s Auction 96 ending in February 2014, DISH acquired 10 Mhz of H-block-paired spectrum licenses, including 5 MHz of downlink spectrum directly adjacent to the AWS-4/MSS S-band frequencies. The H-block licenses are located at the 1915 MHz-1920 MHz (uplink) and 1995 MHz-2000 MHz (downlink) frequency ranges.

DISH carries its nationwide AWS-4 licenses at a $1.94 billion valuation, which implies a $0.14 MHz-POP valuation. However, this value appears to vastly understate the market value of the licenses. The AWS-4 licenses’ 40 MHz of depth is the widest depth among DISH’s low- and mid-band spectrum licenses and were obtained through an alternative, non-FCC auction process. Further, the strategic location of the licenses’ 2000 MHz-2020 MHz band, which is adjacent to DISH’s H-block’s 1995 MHz-2000 downlink band, enhances the value of the AWS-4 licenses. DISH carries its H-block licenses, which were more recently obtained in a nearly-decade-old FCC auction, at $1.67 billion, implying a $0.50 per MHz-POP valuation.

Simply applying this valuation metric to the AWS-4 holdings implies a $6.69 billion valuation for those licenses rather than the $1.94 billion carrying amount. While the nearby H-block licenses’ implied dollars per MHz POP valuation imply a 3.4x greater valuation for the AWS-4 spectrum, this does not even account for the combined AWS-4 and H-block licenses’ contiguity and inclusion in the 3GPP’s Band 70.

For additional context on recent spectrum valuations:
  • In connection with DISH’s 11.75% secured notes issuance in January, an independent appraiser valued the company’s important low-band 600 MHz spectrum licenses at $10.044 billion or approximately $1.67 per MHz-POP; and
  • The FCC’s 2022 Auction 110 produced an aggregate valuation of $0.733 MHz-POP, according to Raymond James via Light Reading.
The FCC’s estimated percentage spectrum holdings by carrier is shown below:

EchoStar S-Band Holdings

Following DISH’s 2012 purchases of the S-band MSS/AWS-4 licenses, EchoStar in 2014 acquired rights to operate S-Band MSS frequencies in all EU member states. EchoStar acquired the rights through its acquisition of Solaris Mobile Ltd. from Eutelsat and SES,

Subsequently, in October 2019, EchoStar acquired nongeostationary “global spectrum rights for S-band mobile satellite services [MSS].” The company obtained the rights, which include S-band spectrum rights at the 2000-2020 MHz (uplink) and 2180-2200 MHz (downlink) frequencies, through its October 2019 acquisition of Helios Wire Corp. and its Australian subsidiary, Sirion Global Pty. Ltd., which had previously obtained the licenses “[p]ursuant to Australian authorization and International Telecommunication Union (ITU) filings.”

On the third-quarter call of 2019, when asked if the frequencies of EchoStar’s “rights in Europe,” “the Helios Wire filing,” and DISH’s U.S. GEO rights “can be integrated or if they are “co-joined,” former Chief Strategy Officer Anders Johnson replied, “They are the same frequencies.” He explained that “the frequencies are authorized with the ITU for both geostationary and nongeostationary systems.”

EchoStar, DISH S-Band Development

Sirion Global LEO ITU Rights

EchoStar launched two nano-satellites in the third quarter of 2020 to fulfill the requirements under its ITU radio regulations to bring the Australian Sirion Global Pty Ltd. filing into use. However, both nano-satellites experienced technical anomalies that precluded them from fulfilling their intended regulatory milestone missions. The company obtained milestone relief for these events under force majeure.

In the second quarter of 2021, EchoStar completed the process of fulfilling the remaining requirements under the ITU to bring the Australian filing into use with a third nano-satellite. However, EchoStar lost contact with the third nano-satellite in the first quarter of 2023 and it notified the ITU, asking it to suspend its related filing. The company has three years from the date the filing was suspended to place a new S-band spacecraft at the prescribed altitude under the filing, according to EchoStar’s first-quarter 10-Q.

EchoStar on Feb. 1 announced an agreement with Astro Digital to construct a 28-satellite S-band LEO constellation named EchoStar Lyra. EchoStar expects “the first group” of Lyra satellites to be launched “well in advance of the three-year replacement timeline” under the ITU filing, according to its 10-Q. The constellation will be operated by EchoStar Global with a 2024 planned operational date.

The constellation, which is guided to launch in 2024, is expected to provide global Internet of Things, or IoT, machine-to-machine, or M2M, and other data services. “We see a lot of demand for that and this is something as a result of our early trials in Europe of last year using our GEO satellites,” Akhavan said of Lyra’s IoT offerings on the first-quarter call. On the fourth-quarter 2022 earnings call, when asked if the constellation would cost $100 million to $200 million, Akhavan responded, “You would be not too far from the ballpark. … I think that those numbers are … close” to the plan.

EU MSS Rights

EchoStar’s subsidiary EchoStar Mobile Ltd. in June 2017 launched S-band MSS GEO satellite EchoStar XXI. EchoStar Mobile Ltd. in July 2022 announced the deployment of a pan-European long range, or LoRa, IoT network utilizing EchoStar XXI’s S-band. Akhavan said on the first-quarter call that the network continues to “bring on new customers” and the company announced seven multi-year agreements for the LoRa network with IoT service providers on July 3.

EchoStar “recently demonstrated [its] direct-to-smartphone capabilities in Europe using NTN-IoT over [its] EchoStar XXI satellite,” Akhavan noted on the call. He added that the company is “testing similar services in North American markets using two DISH Network satellites and we are actively working to expand our services into additional global markets.” As discussed below, DISH’s D1 and T1 satellites operate on the S-band. These deployment “learnings” are refining EchoStar’s Lyra constellation plans, according to Akhavan.

As highlighted above, Akhavan said on the first-quarter call that EchoStar is currently in the “design and engineering phase of a larger system,” which is expected to be in service “just a couple of years later after Lyra.” He declined to provide exact timing and specifics as the project is “still in development and somewhat strategic.” 3GPP 5G-compliant direct-to-device “chipsets are just beginning to be manufactured,” noted Akhavan. He provided the following comments on direct-to-device timing:
“[It] will take a year-and-a-half cycle for [GPP 5G-compliant] chipsets to be ready. Then it takes another year for the chipsets to get to the phones. So phones get out to market, and on [the] very first day, when the phones are introduced … that’s not too many phones … For that base to grow, it takes another year. So when you add that up, you’re talking about … from here [a] three- to four-year window, and that’s exactly the same window that the satellites will take to be prepared. These are hundreds of satellites in large sizes to be produced. And so as I said, this will be vastly impactful in the second half of this decade. I would say, starting with 2027 timeline, you should expect to see very material, meaningful revenues from then forward.”

DISH S-Band MSS Licenses

DISH uses its North American GEO satellite S-band MSS rights via two S-band satellites:
  • D1: DBSD North America launched this satellite in April 2008 and it was formerly known as EchoStar G1 and ICO G1;
  • T1: TerreStar launched this satellite in July 2009 and it was formerly known as EchoStar T1 and TerreStar 1.

EchoStar Business Overview

Leading up to the July 29 launch of Jupiter-3/EchoStar XXIV, “in most areas of the U.S.,” Echostar’s Hughes broadband services had neared or reached capacity, resulting in its consumer subscriber base becoming increasingly limited. Hughes’ Latin America consumer subscriber base in certain areas has also become capacity constrained, according to the company.

Amid the capacity constraints, EchoStar turned its market focus to enterprise and government opportunities as well as continuing its focus on finding operational efficiencies and yield optimization of its North American satellite fleet, according to management on the fourth quarter of 2022 earnings call.

In response to premium offerings from competitors SpaceX and ViaSat, EchoStar adjusted its focus to “higher capacity, higher-priced plans” and improving ARPUs, COO Paul Gaske noted on the first-quarter call. He pointed to the company’s enhanced HughesNet and HughesNet Fusion as examples of such plans. As discussed above, EchoStar launched multipath (satellite/terrestrial network) HughesNet Fusion in September 2022. The service is available in certain parts of the United States.

Akhavan on the first-quarter call described EchoStar’s enterprise business as including “high expertise, a lot of manufacturing of our own products, solutions that we home-create and unique IP involved in some of those.” EchoStar’s Hughes segment, which is discussed further below, accounts for all of the company’s equipment revenue. Hughes Network Systems disclosed an enterprise services agreement with OneWeb in September 2021 and announced in December 2020 an order from OneWeb for 10,00 Hughes LEO terminals.

EchoStar is primarily focusing on the “highest margin, highest profitability” differentiated enterprise businesses, according to Akhavan on the first quarter call. He said that EchoStar has “very large sized” enterprise orders “coming” but that the company is “not yet in position for competitive reasons … to … dissect the new business that we're getting. But you should assume that it involves some groundbreaking new areas where we have not done business before.”

A summary of EchoStar’s consolidated financials is shown below:

A summary of EchoStar’s historic cash flows are shown below. On the fourth-quarter 2022 call, management stated that despite Jupiter-3-specific capex lapsing after the launch, capital expenditures are expected to remain consistent with prior periods as the company spends to acquire customers.


SpaceX launched Hughes Network Systems’ “ultra high-density satellite” JUPITER 3/EchoStar XXIV on Saturday, July 29. EchoStar ordered manufacture of the satellite with Maxar subsidiary Space Systems Loral (SSL) in April 2017. The initial cost of the satellite was $445 million, according to Via Satellite. EchoStar initially planned to launch the satellite in early 2021. However, the delivery of the satellite was delayed by more than two years. Gaske stated on the first-quarter call that the company expected the satellite to launch full service in the fourth quarter.

Gaske said that “[i]n preparation for the launch … the team is focused on developing service plans with higher speeds and more data, along with higher speed HughesNet Fusion plans, creating the ultimate high speed, low latency satellite Internet experience to rival any LEO satellite in that service.” Regarding project-specific costs, he noted that the company has “already … ingested a lot of the costs since the ground network has been in place now for over a quarter” but that it will incur further sales and marketing expense to acquire

Following a further delay notification from Maxar in November 2022, EchoStar subsidiary EchoStar XXIV LLC “referenced its rights” under its contract and amended the contract. The amendment provided “relief to the Company on future payments under the Contract, including approximately $14 million in payments through orbit-raising, and $44.5 million, plus 6% interest on such amounts, in deferred in-orbit incentive payments.” In addition, the company stated that EchoStar XXIV LLC and Maxar will enter into an agreement under which the EchoStar XXIV LLC will provide Maxar “with certain products and/or services during 2023 in exchange for payments that deliver a margin to the Company of at least $30 million.” The company received $15 million in payment from Maxar in the first quarter, and Akhavan said on the first-quarter call that the company expects to receive $15 million in each of the second and third quarters.

EchoStar Segments

EchoStar operates two segments, Hughes and EchoStar Satellite Services, or ESS.

The Hughes segment serves both consumer and enterprise customers and accounts for over 90% of revenue:
  • Consumer: Hughes provides broadband satellite technologies and broadband internet products and services. The company identifies SpaceX and ViaSat as its primary North American consumer market competitors.
  • Enterprise: Hughes provides broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to government and enterprise customers. In addition, it designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers. The Hughes segment designs, provides and installs gateway and terminal equipment to customers for other satellite systems.
The company competes with both satellite and terrestrial networks in the enterprise market. In the very small aperture terminal, or VSAT, market Echostar competes with Gilat Satellite Networks Ltd., ViaSat, and ST Engineering iDirect Inc.

As further outlined in the EchoStar satellite fleet summary below, the Hughes segment serves its customers with capacity from its owned and leased satellites, including additional satellite capacity leased from third-party providers to provide services to customers. Hughes also uses other multi-transport capacity that includes cable, fiber, 5G and 4G/LTE, which provides a further overlap with DISH’s wireless offering.

The ESS segment provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. These services are provided via the EchoStar IX satellite and the EchoStar 105/SES-11 satellite and related infrastructure. Management on the fourth-quarter 2022 call described ESS’ business as “third-party leasing on the EchoStar 105 and ECHO IX satellites.”

This segment competes with Intelsat, SES, Telesat and Eutelsat and sells three types of services:
  • Fixed satellite services: These include services to broadcast news organizations, internet service providers and content providers who use satellites to deliver programming and internet. The satellites are also used for the transmission of live sporting events, internet access, disaster recovery and satellite news gathering services.
  • Government services: These include satellite and technical services to U.S. government service providers.
  • Network services: These include private networks that allow delivery of video and data services for corporate communications.
EchoStar’s segment financials are shown below:

EchoStar’s annual revenue backlog as of Dec. 31 is shown below. The company’s significant 2018-to-2019 backlog decline coincides with its September 2019 spinoff of its BSS business and its merger with DISH. The BSS business managed, marketed and provided (i) broadcast satellite services primarily to DISH, Dish Mexico S de RL de CV and their respective subsidiaries and (ii) telemetry, tracking and control services to satellites owned by DISH and a portion of EchoStar’s other businesses.

Hughes’ broadband subscribers since EchoStar’s acquisition of the company in June 2011 are shown below:

EchoStar Satellite Fleet

Including Jupiter 3/EchoStar XXIV, EchoStar utilizes a constellation of 11 GEO satellites. The company’s fleet is summarized below:
(Click HERE to enlarge.)

The European Space Agency’s satellite spectrum overview, which details band names by frequency, is shown below. DISH’s new JUPITER-3 / EchoStar XXIV satellite also utilizes the Q- and V-bands located at the 33 GHz to 50 GHz and 40 GH to 75 GHz frequency bands, respectively, according to Kratos.

NTN Standardization / Direct-to-Device

In March, the global mobile broadband standards body, 3GPP, completed its Release 17 5G standards to facilitate direct-to-device applications. The body included its first standards for nonterrestrial networks. Akhavan commented on the first-quarter call, “We continue to actively engage with companies across the 5G NTN ecosystem to leverage the opportunities of the 3GPP Release 17 in developing a truly global 5G nonterrestrial network for real, anytime, anywhere device connectivity that is ubiquitous and transparent.”

While Apple’s 2022 iPhone 14 models include “Emergency SOS” emergency services messaging via Globalstar’s L- and -S band LEO satellites, other carriers and equipment manufacturers are pursuing deeper direct-to-device opportunities, including:
  • T-Mobile/SpaceX: T-Mobile and SpaceX announced plans in August 2022 to develop technology to provide customers with “text coverage practically everywhere in the continental US, Hawaii, parts of Alaska, Puerto Rico and territorial waters, even outside the signal of T-Mobile’s network starting with a beta in select areas by the end of next year after SpaceX’s planned satellite launches.” Following this development, the companies plan to “pursue the addition of voice and data coverage,” according to T-Mobile.

    In March, TechCrunch reported that an unnamed SpaceX executive said that SpaceX and T-Mobile “will begin testing a new service to bring satellite connectivity to cell phones this year.”
  • AST SpaceMobile: The company has agreements and understandings with more than 35 mobile network operators globally, including AT&T and Vodafone, to develop direct-to-device capabilities. AT&T CEO John Stankey said last fall that the partnership is roughly 18 months ahead of T-Mobile and SpaceX’s direct-to-device efforts, according to Fierce Wireless. AST SpaceMobile claimed in April that it completed its first direct voice connection from space to an unmodified smartphone. The company stated in June that it achieved 4G service direct to an unmodified device with its BlueWalker 3 LEO satellite.
  • Iridium/Qualcomm: Wireless technology company Qualcomm and satellite company Iridium announced an agreement to develop two-way messaging for Android smartphones in January. “We’ve completed our qualification work with Qualcomm, but know there’s development and integration work required for the smartphone OEMs that adopt this new satellite technology,” Iridium CEO Matt Desch told investors on July 25, according to Via Satellite. “We don’t have very good visibility in the timing or volume of specific smartphones, but from what we do know, we now expect the first activations will move into 2024.”
DISH-EchoStar Transactions and Agreements Illustrate a History Of Working Together

Prior to 2008, DISH Network and EchoStar operated as a combined company called EchoStar Communications Corp. The DISH predecessor executed a spinoff of EchoStar Holding Corp. into an independent publicly traded company on Jan. 1, 2008. EchoStar subsequently changed its name to EchoStar Corp.

In the January 2008 transaction, DISH retained its pay-TV business, while EchoStar held the digital set-top box business, six owned satellites, two leased satellites, related uplink and satellite transmission assets, real estate and other assets and related liabilities formerly held by DISH. Immediately prior to the spinoff, EchoStar entered into a broadcast agreement with a subsidiary of DISH to provide broadcast services including teleport services such as transmission and downlinking, channel origination services, and channel management services from EchoStar to enable DISH to deliver satellite television programming to subscribers.
  • March 1, 2014, tracking stock transaction: In the transaction:
    • DISH received preferred tracking stock in both EchoStar and Hughes Satellite Systems Corp.;
    • DISH transferred five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV) to EchoStar including related in-orbit incentive obligations and interest payments of approximately $58.9 million. DISH also provided approximately $11.4 million in cash to EchoStar and HSS.
Following the transaction DISH began leasing certain satellite capacity on the five transferred satellites. Each of the five DISH satellites had experienced anomalies prior to the transaction.
  • Feb. 28, 2017, share exchange transaction: In a series of transactions:
    • EchoStar transferred to DISH certain assets and liabilities related to the design, development and distribution of digital set-top boxes, satellite uplinking services and development and support of streaming video technology, its managed fiber backhaul network “serving all U.S. DMAs,” a 10% stake in Sling TV, wireless local multipoint distribution service, or LMDS, spectrum licenses covering Cheyenne, Kansas City, Phoenix and San Diego markets in the 28 GHz band and certain real estate properties
    • In exchange, DISH returned to EchoStar the preferred tracking stock issued by EchoStar and preferred tracking stock issued by Hughes Satellite Systems Corporation in the March 2014 tracking stock transaction.
  • Sept. 10, 2019, master transaction: EchoStar transferred to DISH nine direct broadcast satellites (EchoStar VII, EchoStar X, EchoStar XI, EchoStar XII, EchoStar XIV, EchoStar XVI, EchoStar XXIII, Nimiq 5 and QuetzSat-1) and the certain key employees responsible for satellite operations, licensing for the 61.5-degree orbital slot, and select real estate properties to DISH in exchange for approximately 22.9 million shares of DISH Network Corp. stock that were distributed to EchoStar shareholders.
--Adam Rhodes
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