- AT&T closed its $23 billion EchoStar spectrum deal, picking up nationwide 3.45 GHz and 600 MHz airwaves
- AT&T says the added spectrum will boost 5G capacity, download speeds and its “AI-ready” network ambitions
- The deal closure comes after EchoStar’s Dish bankruptcy filing, which was tied in part to delays in closing the AT&T transaction
AT&T closed its transaction with EchoStar to acquire about 30 MHz of nationwide 3.45 GHz mid-band spectrum and about 20 MHz of nationwide 600 MHz low-band spectrum for about $23 billion.
The spectrum deal was announced last August and the closure puts a final end point to EchoStar Chairman Charlie Ergen’s bid to own and operate a facilities-based wireless network. EchoStar blames last year’s Federal Communications Commission (FCC) investigation for creating a “force majeure” situation that forced it to sell its spectrum, the basis of which formed its 5G network.
For its part, AT&T has already been able to boost the capacity of its network with the 3.45 GHz spectrum because it was able to deploy a lot of it through a lease agreement with EchoStar. AT&T rolled out 3.45 GHz spectrum to nearly 23,000 cell sites in a matter of a few weeks last year.
“The added spectrum enables AT&T to boost its 5G capacity and download speeds while helping the company deliver an AI-ready connected experience as it engineers the spectrum to enhance the superior uplink capabilities of its wireless network,” AT&T said in a press release Tuesday.
It will probably be more than a year before AT&T is able to deploy the 600 MHz spectrum it acquired from EchoStar because it’s not currently supported in AT&T’s network portfolio and AT&T needs to develop and procure new radios to support it.
Dish Wireless bankruptcy tie-in
The closure of the spectrum deal is notable for more ways than one.
EchoStar subsidiaries Dish DBS and Dish Wireless filed for prepackaged Chapter 11 bankruptcy protection on June 30 and said they filed that day because “due to unforeseen delays” it had not yet closed the AT&T spectrum transaction. Without the funds from the spectrum sale, Dish was unable to make a senior secured notes payment that was due July 1.
There was some speculation that the AT&T deal had not closed because they were still waiting for the green light from the Department of Justice (DoJ), which is what drove Dish into becoming a fourth facilities-based wireless network operator via the T-Mobile/Sprint merger in the first place.
Earlier this month, a U.S. District Court judge signed off on the DoJ’s request to relieve Dish/EchoStar of its 5G network buildout obligation. The DoJ said EchoStar can’t operate a wireless network without the spectrum and that the separate spectrum sales to AT&T and SpaceX represented the best outcome under the circumstances.
AT&T sets up $2.4B trust fund
The closure of the AT&T deal also coincides with the establishment of a $2.4 billion FCC-mandated trust fund.
The FCC approved the transfer of the spectrum from EchoStar to AT&T on the condition that the $2.4 billion trust fund be established to pay entities that are still owed money by Dish/EchoStar. AT&T provided the cash to establish the fund.
The trust fund will be used to pay three different tiers: claims of $100,000 or less; claims for outstanding amounts due under agreements related to “covered” activities; and claims for lost future rents, profits and other future amounts, according to an EchoStar Securities and Exchange Commission filing today.
Hughes Network Systems
The Wall Street Journal reported Tuesday that EchoStar’s Hughes Network Systems is planning to file for bankruptcy to avoid paying a $1.5 billion debt maturity due August 1.
In a note for investors, New Street Research analyst David Barden said he’s waiting to see if the receipt of the AT&T cash has any impact on those plans.
“Is Charlie ready to turn the business over? Or is he simply looking for bondholders to take a haircut? With access to abundant cash, and our belief that there is some residual value in the business, we believe a negotiated agreement with bondholders is the cleanest path forward,” Barden wrote.
“The more profitable path, however, may be to turn the keys over to bondholders and use the money to instead repurchase EchoStar shares, and fight out any litigation in court. While significant for Hughes bondholders, we are not sure that either of these options makes a material difference to the overall EchoStar story trading at a strong discount to what we believe is fair value,” he concluded.
More Fierce stories about AT&T and EchoStar:
AT&T lights up EchoStar’s 3.45 GHz spectrum in record time
EchoStar off hook for operating own mobile network
Dish’s bankruptcy exposes the messy aftermath of its 5G gamble
Dish Wireless bankruptcy fight gets messier