SpaceX, founded by Elon Musk, announced on Monday that it will invest approximately $17 billion to purchase the wireless spectrum licenses of EchoStar for its Starlink project. This transaction is crucial for the expansion of Starlink’s emerging 5G connectivity business.
The two companies also reached an agreement that allows Boost Mobile users of EchoStar to access the Starlink network directly on their smartphones, thereby extending satellite services to areas with no signal.
This spectrum purchase enables SpaceX to start building and deploying upgraded laser-link satellites. SpaceX stated that this will increase the capacity of smartphone networks by “more than 100 times.”
Gwynne Shotwell, President and COO of SpaceX, mentioned that this deal will help the company “eliminate global mobile signal blind spots.” With exclusive spectrum, SpaceX will develop the next generation of Starlink satellites directly for smartphone services, bringing significant performance improvements and expanding coverage for customers worldwide.
Upon the announcement, EchoStar’s stock price surged 19% in early trading. US wireless operators AT&T and T-Mobile saw their stocks drop over 3%, while Verizon fell over 2%.
This move comes at a time of rapid wireless usage growth. The CTIA industry organization stated on Monday that by 2024, Americans’ mobile data usage is expected to reach a record-breaking 132 exabytes, 35% higher than the previous peak.
Since 2020, SpaceX has launched over 8,000 Starlink satellites, creating a dispersed network in low Earth orbit favored by the military, transportation companies, and rural consumers.
About 600 of these satellites, dubbed as “cell towers in space” by SpaceX, have been launched since January 2024 for the company’s direct-to-smartphone network. Their closer orbit to Earth distinguishes them from other satellites in the constellation.
The deployment of these large satellites is crucial for SpaceX’s giant next-generation rocket, Starship, whose development has been ongoing for about a decade. The increasingly complex test launches bring this rocket closer to its first operational Starlink mission scheduled for early next year.
A few months ago, the Federal Communications Commission (FCC) raised concerns about EchoStar’s use of mobile satellite service spectrum and its compliance with obligations to deploy 5G networks in the US.
EchoStar stated that the deal with SpaceX and with AT&T would address the FCC’s inquiries.
An FCC spokesperson mentioned, “The transactions between EchoStar, AT&T, and Starlink could enhance competition, offer innovative services to millions of Americans, and bolster America’s leadership in next-generation network connectivity.”
In August, the company sold part of its national wireless spectrum licenses to AT&T for $23 billion. AT&T agreed to acquire 50MHz of national mid-band and low-band spectrum.
Previously, President Donald Trump urged EchoStar and FCC Chairman Brendan Carr to reach a friendly agreement regarding the company’s wireless spectrum licenses.
SpaceX will pay up to $85 billion in cash and issue up to $85 billion in stocks. SpaceX has also agreed to pay EchoStar approximately $20 billion in debt interest by the end of 2027.
After the sale, EchoStar will continue to operate its satellite TV service Dish TV, streaming TV platform Sling, internet service Hughes, and its Boost Mobile brand.
SpaceX has been actively pushing the FCC to reallocate underutilized spectrum for satellite phone service, accusing EchoStar of failing to fulfill certain obligations.
In a letter to the FCC in April, SpaceX stated that EchoStar’s spectrum in the 2GHz band “still meets conditions for sharing among next-generation satellite systems” and that the company has “long failed to fully utilize valuable mid-band spectrum.”
The collaboration with EchoStar will allow SpaceX to operate its Starlink direct-to-smartphone service using its own frequencies instead of relying solely on leased frequencies from providers like T-Mobile.
In May of this year, the FCC approved Verizon’s $20 billion acquisition of fiber-optic network provider Frontier Communications. Verizon had previously spent $52 billion in 2021 acquiring and clearing crucial spectrum.
(This article references relevant reports from Reuters)