- EchoStar continues talks to sell off spectrum after striking multibillion-dollar deals with AT&T and SpaceX
- Verizon is said to be in talks to acquire AWS-3 spectrum
- Analysts say AWS-3 could boost Verizon’s capacity, closing a spectrum gap with rivals AT&T and T-Mobile
Shares in EchoStar were up more than 2% today after Bloomberg reported that the company is in talks to sell some of its wireless spectrum to Verizon.
The talks revolve around EchoStar’s AWS-3 licenses, according to the report, which cited people familiar with the situation who didn’t want to be identified because the discussions are private.
The report comes after EchoStar agreed to sell 600 MHz and 3.45 GHz spectrum to AT&T for $23 billion and AWS-4 and PCS H-band spectrum to SpaceX for $17 billion. The AWS-3 assets in question are reportedly valued at $9.8 billion.
EchoStar Chairman Charlie Ergen and President and CEO Hamid Akhavan talked about their spectrum holdings during an investor presentation at World Space Business Week in Paris earlier this month.
The 600 MHz spectrum was the low band driving Boost Mobile’s network and AWS-4 was used for mid-band capacity. Once those bands were gone, they pretty much no longer had a network.
“If you transacted on either one of those pieces of the spectrum, you were forced to do the second transaction,” Akhavan said.
AWS-3 spectrum is deployed in all three of the major national carriers’ networks, he noted, but didn’t name any specific carrier that might be interested in acquiring it. EchoStar still has CBRS, 700 MHz spectrum and millimeter wave spectrum that hasn’t yet been offloaded.
Analyst: Verizon needs it
Having seen its spectrum position erode over the last decade, first by T-Mobile’s acquisition of Sprint and more recently, AT&T’s purchase of EchoStar spectrum, Verizon has been under pressure to narrow the spectrum holdings gap, said BNP Paribas analyst Sam McHugh in a note for investors today.
However, it wasn't clear whether Verizon would look to acquire EchoStar’s AWS-3 spectrum or wait for the FCC to auction the upper C-band frequencies.
“If this [EchoStar] deal were to transpire, then (price dependent), we would see it as broadly neutral for Verizon, a small positive for AT&T/T-Mobile and a small negative for the U.S. cable players,” McHugh said.
EchoStar’s 21 MHz of AWS-3 spectrum would add about 7% to Verizon’s overall spectrum ownership, likely boosting its capacity for more fixed wireless access (FWA) subscribers over time, he said. Verizon’s current FWA target is between 8 million and 9 million customers by 2028.
Prospects for regulatory approval
EchoStar’s spectrum sales still must get regulatory approvals. The Federal Communications Commission's (FCC's) approval would seem to be a shoo-in since FCC Chairman Brendan Carr pressed for EchoStar to give up spectrum. But the Department of Justice (DoJ) doesn’t appear to be on the same page as the FCC when it comes to competition in the wireless sector, New Street Research analyst Blair Levin noted in an investor report today.
In a statement approving T-Mobile’s acquisition of UScellular assets, the DoJ expressed concerns about continued spectrum aggregation on the part of the Big 3 wireless carriers.
However, Levin said he doesn’t expect the DoJ to block EchoStar from selling its spectrum to the Big 3.
“We have long been of the view that if Ergen decides EchoStar cannot succeed as a fourth network, the DoJ and FCC would allow EchoStar to sell its spectrum to the Big Three,” Levin said. “We still hold that view… at the end of the day, it will be difficult for the DoJ to block a spectrum sale to the big three.”
In a separate note, Levin said a government shutdown, which could happen at 12:01 a.m. Wednesday, is unlikely to delay any FCC spectrum auctions, which are off in the distance.
Based on a report the FCC published in March for an “orderly shutdown” in case the U.S. government closed due to Congress not funding appropriations, spectrum auction staff won’t be furloughed, limiting any potential delays, he noted.
But pending transactions will face delays in approvals, he said, as will applications for equipment certifications that are required for devices like new cell phones, Wi-Fi routers and Bluetooth gadgets.