Elon Musk’s SpaceX has reached a $17 billion agreement to acquire wireless spectrum from EchoStar Corp., a transaction that will strengthen the rocket company’s satellite internet capabilities while derailing EchoStar’s competing constellation plans.
Under the agreement, SpaceX will provide $8.5 billion in cash plus equity valued at $8.5 billion for the AWS-4 and H-block spectrum rights. The company will additionally fund approximately $2 billion toward EchoStar’s debt obligations through November 2027.
The spectrum sale led EchoStar to terminate its recently announced satellite manufacturing agreement with Canada’s MDA Space Ltd. The $1.3 billion contract, unveiled in early August, would have produced 100 satellites for EchoStar’s planned constellation.
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“This is a very unexpected event,” MDA Space CEO Mike Greenley said on a hastily arranged analyst call. “This is obviously very sudden and a drastic change to the entire trajectory of EchoStar’s business … That’s a highly, highly unusual situation.”
MDA Space shares fell sharply on the Toronto Stock Exchange, dropping 20% to 25% according to various reports, while EchoStar stock surged on news of the spectrum sale.
The agreement follows mounting scrutiny from federal regulators over EchoStar’s spectrum deployment. The FCC opened a review in May examining whether the company was meeting its obligations to utilize the wireless airwaves it controls. SpaceX had previously pushed regulators to compel EchoStar to make the spectrum available for sharing.
EchoStar said the deal, combined with a separate $23 billion spectrum sale to AT&T announced in August, should resolve the FCC inquiries.
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“This transaction with SpaceX continues our legacy of putting the customer first … to realize the direct-to-cell vision in a more innovative, economical and faster way for consumers worldwide,” said Hamid Akhavan, EchoStar’s president and CEO.
For SpaceX, the spectrum acquisition provides dedicated airwaves for its Starlink “Direct to Cell” service, which aims to provide satellite internet directly to smartphones. The company had previously relied on sharing terrestrial spectrum for such services.
“With exclusive spectrum, SpaceX will develop next-generation Starlink Direct to Cell satellites, which will have a step change in performance … to enhance coverage for customers wherever they are in the world,” said Gwynne Shotwell, SpaceX president.
The deal is one of the largest acquisitions in SpaceX’s history. It further consolidates the company’s position in the growing satellite communications market. MDA Space said it will be compensated for termination costs under its contract with EchoStar and maintains a $4.6 billion backlog of other projects.
The transaction requires regulatory approval before closing.
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