Facing Big Debt Payment, EchoStar Will Use Spectrum Assets to Raise Needed Cash

Facing $2 billion in debt coming due in November and likely short of the cash on hand it will need to operate in Q4, EchoStar plans to use spectrum assets to raise the funding it needs, CEO Hamid Akhavan said Friday as the company announced Q2 earnings. EchoStar has more spectrum than it needs for its wireless plans, Akhavan said. But the company doesn't intend to dispose or relinquish ownership of spectrum holdings, he said. Instead, it's considering financing options that don't require selling.

Only its 600 MHz spectrum is encumbered with debt; everything else could be used to raise capital, CFO Paul Orban said. "We have so much dry powder, per se," Akhvan said.

EchoStar's financing challenge comes as it experiences operational woes, albeit lessening ones. Akhavan said there have been "fundamental changes" to the business and that what were huge declines in subscriber numbers have greatly slowed and should continue to.

Revenue for Q2 was $3.95 billion, down 9% year over year as it lost subscribers across all business lines, Orban said. It finished the quarter with 8.1 million pay-TV subscribers -- 6.1 million Dish and 2 million Sling TV. It lost 104,000 in the quarter, compared with a reduction of nearly 300,000 in Q2 2023. Gary Schanman, video services group president, said a focus for the second half of the year is on sales of video services bundled with HughesNet broadband or Boost Mobile wireless.

EchoStar ended Q2 with 7.3 million retail wireless subscribers and said it would have added 32,000 retail wireless subscribers in the quarter if not for roughly 50,000 subscribers lost due to the end of the affordable connectivity program. The loss of 16,000 wireless subscribers in the quarter was a big improvement over the 180,000 who left in Q2 2023, showing positive momentum, Akhavan said. He said EchoStar's Boost Mobile network now reaches more than 200 million Americans with 5G voice service and more than 250 million with 5G mobile broadband.

Chief Operating Officer Paul Gaske said broadband subscriber losses were down sizably from Q2 2023 due to the commencement of commercial service late last year on its Jupiter 3 high-throughput satellite (see 2312190002). EchoStar ended the quarter with 955,000 broadband subscribers. It lost 23,000 in the quarter, compared with a loss of 55,000 in Q2 2023. Gaske said Jupiter 3 satellite capacity has allowed EchoStar to offer high-speed unlimited data service plans and upgrade existing subscribers on similar plans on Jupiters 1 and 2.

Having met all its FCC-set milestones, EchoStar remains on track with its completed and in-progress wireless network construction to meet its June 14, 2025, milestones regarding its 600 MHz, 700 MHz H Block and AWS-4 spectrum licenses, Akhavan said. However, for the remaining licenses, EchoStar hasn't yet built facilities needed to meet those buildout requirements and will need to raise more money toward its 5G network deployment, he said. It spent $237 million in Q2 on network deployment.

In a note to investors, MoffettNathanson reiterated its stance that an EchoStar bankruptcy seems inevitable (see 2402120007) -- probably within four to six months. It said that while Boost Mobile is showing signs of improvement, including that it would have grown its base in the quarter if not for ACP, EchoStar's cash needs mean new retail stores aren't likely, nor is much building of network facilities.

The transfer of Dish spectrum licenses in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America (see 2402230063) should close within 30 days, Akhavan said. "The likelihood of competitive harm is low," the FCC Office of International Affairs said in a docket 24-55 order released Friday approving the transfer. It said the deal should mean enhanced competition in Puerto Rico and the U.S. Virgin Islands due to Liberty having additional spectrum resources available for network capacity and to improve service quality.