EchoStar has entered into a significant agreement worth $1.3 billion with MDA Space to develop low Earth orbit (LEO) satellites for a new non-terrestrial network (NTN) aimed at its direct-to-device (D2D) satellite constellation. The deal comes at a time when the company’s financial stability is under scrutiny, with analysts highlighting uncertainties surrounding its future.
The contract encompasses the design, manufacturing, and testing of the first batch of over 100 software-defined D2D satellites. EchoStar has outlined plans for an initial configuration of 200 satellites, with potential growth to thousands based on market demand. The company anticipates that the satellites will be delivered by 2028, with commercial services expected to commence the following year. The total investment in the LEO constellation is projected to reach $5 billion.
On a recent earnings call for the second quarter, which concluded on June 30, EchoStar’s CEO and President Hamid Akhavan stated that this wideband LEO constellation will be self-funded. He emphasized that the D2D service would complement existing terrestrial offerings in areas lacking connectivity, potentially reducing the need for operators to construct or replace cell towers.
While competing services from companies like T-Mobile, Starlink, and Apple, through its partnership with Globalstar, focus on satellite-based SOS and messaging, EchoStar aims to provide voice, text messaging, and video services globally via standard 5G NTN handheld devices. Akhavan described the upcoming service as “indistinguishable from what you already have on your iPhone or your Android phone,” claiming it represents a significant advancement over current satellite messaging and SOS options.
EchoStar’s plans extend to operators worldwide, though Akhavan did not dismiss the possibility of offering services directly to consumers. Additional details regarding the service are expected to be unveiled at the upcoming World Space Business Week event in Paris.
Financial Challenges and Regulatory Scrutiny
EchoStar has recently resumed bond payments, including interest on defaulted amounts, marking a challenging period for the company. In a filing with the US Securities and Exchange Commission on August 1, EchoStar acknowledged the uncertainty of its financial future, stating, “substantial doubt exists about our ability to continue as a going concern.”
The company is actively seeking additional capital and exploring options to restructure its existing debt. EchoStar’s situation has led analysts like Craig Moffett from MoffettNathanson to suggest that bankruptcy may be imminent, stating, “the only question is when.”
The Federal Communications Commission (FCC) is also examining EchoStar’s operations related to its 5G network expansion and AWS-4 spectrum licenses, particularly in light of concerns raised by SpaceX. FCC Chair Brendan Carr has reportedly urged EchoStar to sell its AWS-4 band in a bid to resolve ongoing issues surrounding mobile satellite services.
Despite these challenges, EchoStar remains authorized to deliver mobile satellite services over its AWS-4 spectrum, which supports its ambition to launch the LEO constellation. Akhavan indicated that the company would pause its 5G network expansion until a resolution with the FCC is achieved.
Q2 Performance Overview
In its latest quarterly report, EchoStar combined its prepaid and post-paid phone subscriber figures, showing a net gain of 212,000 wireless subscribers in the quarter, a notable improvement compared to a loss of 16,000 subscribers during the same period last year. The company concluded the quarter with 7.4 million subscribers and a churn rate of 2.69 percent, reflecting a decrease of 24 basis points.
Wireless revenue reached $935 million, marking an increase of 4.7 percent. However, total revenue fell to $3.7 billion, down by 5.8 percent, alongside a net loss of $306 million, compared to a loss of $205 million in the previous year.
As EchoStar moves forward with its satellite initiatives, the company will need to navigate significant financial hurdles and regulatory challenges to secure its position in the competitive telecommunications landscape.
