Direct-to-device (D2D) is one of the areas EchoStar will pursue with vigor in the wake of a complex series of financial moves and the proposed sale of Dish's pay-TV business. Those moves aim to extend a lifeline to EchoStar, giving the company years of runway as wireless becomes the cornerstone of the business.
EchoStar didn't spell out precisely how it will pursue a D2D platform that enables smartphones to expand coverage by connecting to satellites.
President and CEO Hamid Akhavan views D2D as "one of the greatest, if not the single greatest opportunity, left in the space right now in terms of the impact on consumers and global relevance and also financial return."
EchoStar is "very focused" on D2D, Akhavan said Monday on a call with reporters and analysts. "We have the spectrum rights and opportunity to make direct-to-device a global business."
He acknowledged that D2D represents an expensive endeavor, noting that EchoStar will likely explore partnerships to build up such a strategy. He didn't say who EchoStar will be working with, but peers such as AT&T, Verizon and T-Mobile have already picked some D2D dance partners such as SpaceX, AST SpaceMobile and Skylo.
"We do believe it's better for us to work with partners, not necessarily because of the capital availability, which is very important, but also from a perspective that it's a global offering and you'd like to have more participants in there in order to advance its chance of success and deployment," Akhavan said. "In due time we'll talk more about that ... We think we're uniquely positioned for it."
It's not clear when EchoStar will pull the trigger on its plan, but Akhavan said the company will try to make D2D a reality "as soon as possible."
Transforming EchoStar into a 'growth' company
Akhavan spent a good portion of Monday's call walking through a handful of transactions aimed at giving the company some much-needed financial runway amid a debt wall that threatened to push the company into bankruptcy.
Among those moves, EchoStar notched $2.5 billion in standalone financing that will help the company cover its financial obligations in 2024 and into 2025. Tied in is the proposed sale of the Dish pay-TV business (including both the Dish satellite TV and Sling TV businesses) for $1, plus the assumption of $9.87 billion in debt, to TPG. Additionally, EchoStar raised $5.1 billion in spectrum-backed financing.
Here's a high-level view of those transactions:
EchoStar financial transactions slide from presentation given on September 30, 2024. (Source: EchoStar)
Akhavan called it "one of the largest and most comprehensive, simultaneous out-of-court M&A and balance reconstructions to date." He likened it to "landing two or three 747s on the same runway at the same time, without crashing."
Put together, EchoStar believes the transactions will enable it to put a laser focus on wireless and satellite connectivity and position it as a "growth" company.
EchoStar will require bondholders to approve some of its proposed transactions. Securing an agreement "is far from guaranteed" as an ad hoc group of Dish bondholders plan to gather today to discuss the options and consider a response, Bloomberg reported.
Akhavan is confident the bondholders will be agreeable. "We are offering them something that in our view is highly attractive and hope they recognize it and see it," he said.
Big shift in revenue composition
The new version of EchoStar will include Boost Mobile, which has 20,000-plus sites up and running along with more than 7 million wireless subscribers, a portfolio of strategic spectrum assets and a satellite connectivity business (via the Hughes unit) that sports 570,000 commercial sites across 43 countries and roughly 1 million broadband subs.
EchoStar's revenue composition will also get a makeover.
Pay-TV currently represents 67.4% of EchoStar revenues versus retail wireless (21.9%), broadband and satellite services (10%) and 5G network deployment (0.7%). Excluding pay-TV, retail wireless would represent 66.9% of revenues, compared to broadband and satellite services (30.6%) and 5G network deployment (2.2%).
While there will be a huge step-down on revenues volumes, EchoStar will establish "a much more growth oriented revenue profile," and give the company a runway of at least 24 to 36 months, Akhavan reasoned.
EchoStar will now focus on developing a new, comprehensive business plan based on its new resources, including how it will allocate dollars toward its 5G network build and the marketing of its Boost-branded prepaid and postpaid mobile offerings. EchoStar intends to be aggressive overall, but will share details on its roadmap for investing and spending at a later date.
"But we are playing to win in the wireless business, no doubt about it," Akhavan said.
EchoStar intends to make good on a revised, FCC-blessed 5G network buildout plan that pushes some milestones into 2026. "We don't intend to miss any obligations or any deadlines, immediately or longer term," Akhavan said.
What growth?
Some industry experts remain skeptical that EchoStar can transition itself into a growth company and establish itself as a successful fourth facilities-based player in the US mobile market.
"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," MoffettNathanson analyst Craig Moffett explained in a research note (registration required).
Regarding growth, he points out that Boost is shrinking, not growing – EchoStar shed 16,000 retail wireless subs in Q2, closing the quarter with 7.28 million. However, it would've added 32,000 if not for the demise of the Affordable Connectivity Program (ACP).
Moffett also questions the market's appetite for EchoStar's spectrum assets amid some recent activity. T-Mobile's decision to sell about 15MHz of spectrum in the 3.45GHz block to Columbia Capital shows that it's now a buyer rather than a seller at the moment. Meanwhile, Verizon announced it is selling the rights to lease, operate and manage 6,339 wireless towers to Vertical Bridge for a cool $3.3 billion.
"For EchoStar's creditors, to say nothing of their equity holders, this turn of events must surely give one pause," Moffett noted.
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