EchoStar sells spectrum to SpaceX, cancels MDA satellite contract

WASHINGTON — EchoStar has abandoned its plans to create a direct-to-device satellite constellation in low Earth orbit, selling spectrum to SpaceX while canceling a brand-new contract with MDA Space.

EchoStar announced Sept. 8 it reached an agreement to sell the rights to its AWS-4 and H-block spectrum to SpaceX for $17 billion, evenly split between cash and SpaceX stock. SpaceX will also make about $2 billion in cash interest payments on EchoStar debt through November 2027.

As part of the deal, customers of Boost Mobile, EchoStar’s terrestrial wireless service, will gain access to Starlink direct-to-cell services.

The S-band spectrum sale marks the end of EchoStar’s efforts to use that spectrum for its own direct-to-device service. That effort appeared to be buoyed by an Aug. 26 deal where EchoStar sold terrestrial wireless spectrum to AT&T for $23 billion. Analysts expected EchoStar to use some of the proceeds of the deal to fund development of that satellite constellation, estimated to cost $5 billion.

EchoStar awarded MDA Space a contract worth $1.3 billion Aug. 1 for 100 satellites, to be delivered by 2028. The contract included a $1.2 billion option for an additional 100 satellites.

MDA Space, in a separate announcement Sept. 8, said it received a notice from EchoStar that it was terminating that contract, citing “a sudden change to EchoStar’s business strategy” and the sale of spectrum to SpaceX. MDA said it will provide more details in a conference call later in the day.

EchoStar and SpaceX had sparred for months about the spectrum transferred in the deal. SpaceX, in filings with the Federal Communications Commission, alleged that EchoStar was not making proper use of the spectrum, prompting an investigation by the commission.

EchoStar argued in a statement that selling the spectrum made better business sense than trying to build its own constellation.

“This transaction with SpaceX continues our legacy of putting the customer first as it allows for the combination of AWS-4 and H-block spectrum from EchoStar with the rocket launch and satellite capabilities from SpaceX to realize the direct-to-cell vision in a more innovative, economical and faster way for consumers worldwide,” said Hamid Akhavan, president and chief executive of EchoStar.

The transaction is one of the biggest ever for SpaceX, which has rarely acquired companies or made large deals like this. Gwynne Shotwell, president of SpaceX, said the new spectrum will support next-generation Starlink direct-to-device services.

“In this next chapter, with exclusive spectrum, SpaceX will develop next-generation Starlink Direct to Cell satellites, which will have a step change in performance and enable us to enhance coverage for customers wherever they are in the world,” she said in the statement.