In a significant move for the telecommunications and aerospace industries, EchoStar Corp. has announced plans to offload additional wireless spectrum licenses to Elon Musk's SpaceX, a deal valued at approximately $2.6 billion. This transaction will be compensated with stock in SpaceX, the company behind the Starlink satellite internet network.
This latest agreement builds on an existing $17 billion partnership established in September, both of which are contingent on securing the necessary regulatory clearances. The licenses in question, known as AWS-3, cover a broad range of airwaves across the United States, essential for supporting both mobile and satellite communication services. EchoStar's decision to divest these spectrum assets follows a U.S. government investigation into whether the company was unduly retaining licenses intended for public use. Prior to this, EchoStar had already committed to selling a portion of its spectrum to AT&T Inc. for $23 billion in August, subsequently entering into the initial agreement with SpaceX for satellite and mobile communication spectrum. These divestitures led to the Federal Communications Commission concluding its inquiry into EchoStar's spectrum utilization.
The announcement coincided with EchoStar's release of its third-quarter financial results. The company reported revenues of $3.61 billion, which fell short of analysts' projections of $3.75 billion. Furthermore, EchoStar recorded a loss per share of $44.37, primarily attributed to a substantial one-time, non-cash loss of $16.48 billion incurred from the decommissioning of unused segments of its 5G network. Following these developments, EchoStar's shares on the Nasdaq saw a 1.3% increase to $73.25 in pre-market trading, rebounding after a 4% dip in the previous session. Year-to-date, the company's stock value has more than tripled. While the stock exhibits strong momentum with favorable medium and long-term trends, an analysis of its fundamentals suggests limited underlying support for the recent rally, particularly concerning growth and value metrics.
This strategic divestment by EchoStar and acquisition by SpaceX highlights a dynamic shift in the allocation of critical telecommunication resources, driving innovation and expanding access to advanced communication technologies. The ongoing consolidation and re-evaluation of spectrum usage pave the way for more efficient and widespread connectivity, ultimately benefiting users and fostering technological progress.