Elon Musk's space blueprint expands again, SpaceX bids $17 billion for EchoStar's valuable spectrum resources

According to media reports on Monday, Elon Musk's SpaceX has agreed to acquire EchoStar's AWS-4 and H-block spectrum licenses for approximately $17 billion in cash and stock. This deal will enable the Starlink satellite network to provide direct connectivity services more independently, reducing reliance on terrestrial mobile operators.

SpaceX will pay up to $8.5 billion in cash and up to $8.5 billion in SpaceX stock. Following the news, EchoStar's stock price surged by 64% in pre-market trading on Monday, having risen nearly 200% year-to-date.

The transaction is expected to resolve the Federal Communications Commission (FCC) investigation into EchoStar's spectrum usage. The FCC initiated the review earlier this year, questioning whether EchoStar had fulfilled its obligations regarding its wireless and satellite spectrum rights.

Upon completion of the acquisition, SpaceX will gain access to critical 2GHz band resources, aiding its Starlink business in expanding direct connectivity services. As of June, Starlink has approximately 5 million users in over 100 countries, far surpassing its competitors.

Huge Deal Helps EchoStar Escape Debt Crisis

EchoStar will use the proceeds from the transaction to pay down some debt and fund ongoing operations and growth plans. According to a statement on Monday, SpaceX also agreed to provide approximately $2 billion in cash interest payments for EchoStar's debt by November 2027.

This deal, along with EchoStar's recent sale of spectrum to AT&T, is expected to resolve the FCC's related investigation. Media reports previously indicated that federal regulators had been pushing EchoStar to sell some of its spectrum resources.

EchoStar had previously skipped bond payments and considered filing for bankruptcy, stating that the FCC's investigation hindered its decision-making capabilities regarding its 5G network. Last month, the company agreed to sell spectrum licenses to AT&T for approximately $23 billion.

Regulatory Game Behind the Spectrum Resource Battle

The FCC launched an investigation in May to review whether EchoStar had fulfilled its obligations regarding its wireless and satellite spectrum rights. This investigation stemmed from a complaint by SpaceX, accusing EchoStar of failing to adequately utilize its valuable spectrum resources.

The AWS-4 band, also known as the 2GHz band, has been designated by the FCC for terrestrial mobile transmission as well as communication between satellites and ground infrastructure. In 2011, Charlie Ergen acquired the rights to the entire band from the bankrupt satellite companies DBSD and Terrestar.

This spring, SpaceX applied to the FCC for permission to share the use of the 2GHz band, and the assets sold to AT&T had previously been offered to other potential buyers, including Starlink In addition, satellite operators typically need to collaborate with at least one mobile company that holds a ground mobile license to provide direct-to-device mobile services from space. SpaceX currently has a partnership with T-Mobile, but this spectrum acquisition will enable it to offer direct-to-device services more independently