What’s behind the speculation about a Dish bankruptcy?

There’s a lot of talk in the financial world this week, speculating that Dish Network will file for bankruptcy.

The talk seems to be stemming from the fact that Dish has made some complicated corporate and financial maneuvers in the last few months.

Late last year, EchoStar Corporation acquired Dish Network. Previously Dish was the parent company and EchoStar was a subsidiary of Dish. But now, that’s reversed. Hamid Akhavan has become president and CEO of EchoStar. Charlie Ergen is still the chairman of EchoStar and Dish.

Kicking off 2024, EchoStar has filed a flurry of press releases and SEC statements that are so complicated, only wizards of Wall Street are likely to comprehend them.

For instance, on January 12, EchoStar said it had “commenced offers to exchange (i) any and all of the 0% Convertible Notes due 2025 (the "DISH Network 2025 Notes") issued by its subsidiary DISH and (ii) any and all of the 3.375% Convertible Notes due 2026 issued by DISH (the "DISH Network 2026 Notes," and together with the DISH Network 2025 Notes, the "Existing DISH Notes"), each for 10.00% Senior Secured Notes due 2030 to be issued by EchoStar Corporation.”

Fierce Wireless reached out to a legal expert, who does not wish to be named, for an understanding of what’s going on.

This source said it appears that EchoStar is reorganizing its assets and liabilities. “It may have moved liabilities into entities within the Dish structure," said the source. "They didn’t say why they did this. The speculation is they’re looking ahead, maybe not in 2024 but possibly in 2025 when some of their buildout requirements will come due. It’s possible they might file for bankruptcy."

To be clear, Dish Network has not filed for bankruptcy. There is simply speculation that it might file for bankruptcy because it’s terribly short on cash, heavily loaded with higher-interest debt and coming up on a deadline of April 1, 2024 to either pay T-Mobile approximately $3.5 billion for 800 MHz spectrum or forego purchasing that spectrum.

Bankruptcy could potentially allow Dish to reorganize its finances so that it can emerge in a sustainable fashion.

Dish’s 5G network

But bankruptcy proceedings can take a long time. And the prospect of Dish filing for bankruptcy is further complicated by the fact that it’s building a nationwide greenfield 5G network. And this new network was part of the rationale for the Department of Justice (DoJ) allowing T-Mobile to acquire Sprint in 2020.

T-Mobile, Sprint and Dish convinced the DoJ that Dish’s new wireless network would bring a fourth major wireless competitor to the U.S. If Dish were to file for bankruptcy, it’s not at all clear how the DoJ and the FCC might respond.

New Street Research’s policy analyst Blair Levin penned a note over the weekend, saying the DoJ and FCC might respond in a number of ways. They could support Dish’s bankruptcy because they really want a fourth facility-based wireless competitor. They could look to another wireless upstart to fill that role. Or they could throw up their hands and say that three wireless operators is enough.

Dish’s spectrum

Meanwhile, Charlie Ergen continues to play 8-dimensional chess with no one (possibly not even Charlie Ergen) knowing what the end game is.

Our legal source speculated that EchoStar might be making all these current financial filings to try and protect its treasure trove of valuable spectrum, no matter what the future holds.

Dish is under a deadline to cover 75% of the U.S. population — in areas where it holds spectrum — by mid-June 2025. Although the company met its deadline last summer to cover 70% of the U.S. population, it did that by focusing on densely populated urban areas. But the 2025 deadline will be far more expensive to complete because it will require coverage in less dense areas of the country.

If Dish doesn’t meet this deadline it could lose its spectrum licenses. And that is something that Ergen does not want to happen no matter what.

Dish owned spectrum that it was at risk of losing when Ergen jumped into the deal between T-Mobile and Sprint. Agreeing to build a 5G wireless network gave him the extension on his existing spectrum. “The question is: are they really prepared to move forward and finish the job?” said the source. “Or is this basically maneuvering to get some protection from the FCC coming after their licenses?”