The $23 billion deal announced today between AT&T and EchoStar to transfer EchoStar’s 600 MHz and 3.45 GHz spectrum is far more than just a spectrum transaction. It has several strategic consequences related to market structure that will unfold over the next few months. I’m listing some thoughts here upon announcing this deal today. The story will certainly evolve as more information comes out.
EchoStar Bows Out: The Three-Carrier Reality
The first outcome of this deal is that EchoStar’s ambitions to become a fourth facilities-based national carrier are gone. EchoStar will no longer be competing with AT&T, Verizon, and T-Mobile. The market proved that it can only support three national carriers and not one more. It’s a statement on how difficult competition is in mobile services, where scale is crucial. EchoStar was just too late to the market. As a consequence, EchoStar will revert to an MVNO model under the Boost Mobile brand. Financially, this means thin margins, as is commensurate with the profile of this business line. It also means that EchoStar will divest additional spectrum assets in its possession, so more spectrum will come to market in the next few months.
From Ground to Space: EchoStar’s NTN Pivot
The second outcome is positioning EchoStar as a competitor to SpaceX, AST SpaceMobile, and a host of other new entrants into the non-terrestrial networks (NTN) market. EchoStar revealed its intent earlier to launch the Lyra constellation to provide direct-to-device services (D2D). I expect some of the $23 billion will go toward funding this constellation. It would take at least $5–6 billion to initiate a first phase of a LEO satellite constellation, so some of the proceeds will go to that aside from paying outstanding debts (If I recall, they exceed $23 billion). This should have AST SpaceMobile on edge because of its market position and relationship with AT&T. Who says the deal between EchoStar and AT&T stops at this spectrum transaction, and nothing else could materialize beyond that? The NTN segment will be one to watch, certainly.
A Blow to RAN-Entrants Dreams
The third outcome is broadly a by-product of this deal. It’s a major blow to OpenRAN as a concept of an interoperable multi-vendor network. I stress this qualification of OpenRAN because OpenRAN as an interoperable fronthaul interface will still be around. In other words, the damage falls on companies like Mavenir, Rakuten Symphony, and others who were espousing a multi-vendor RAN. The industry structure would not have allowed that, and no amount of marketing dollars could have changed it. As for OpenRAN as an interoperable fronthaul interface, operators will continue to demand it as insurance against industry consolidation.
Regulatory Hurdles?
EchoStar and the current FCC seem to be at odds over use of spectrum and overall strategic outlook. The question will be on the position of the FCC, which had consulted on EchoStar’s spectrum utilization following complaints from SpaceX regarding EchoStar’s use of AWS-4/MSS spectrum. One issue to note is that the 3.45 GHz band has a spectrum aggregation limit of 40 MHz. AT&T will need a waiver to go beyond that. The FCC granted AT&T waivers for this specific spectrum on smaller lease transactions only a few days ago. So AT&T and EchoStar have some reasonable degree of confidence, if not a prior FCC nod, that they would have the blessing for this deal. In any case, this is an issue to watch, as it is otherwise rife with speculation, and I don’t claim to have any deep insight into this complex aspect.
Crunching the Numbers: Spectrum Valuation Breakdown
I’ve run some numbers to get a sense of the value. My numbers factor in acquisitions at auctions and don’t include secondary market transactions, of which I don’t think there were many, and not of a scale that impacts conclusions.
The average price of combined 600 MHz and 3.45 GHz spectrum at a $23 billion total valuation is $1.5/MHz-PoP.
There were a few secondary market transactions that provide comparable benchmarks. For instance, in 2023, Comcast sold 600 MHz spectrum to T-Mobile for about $2.24/MHz-PoP, with an option for additional licenses that would increase the price to $2.38/MHz. This puts a floor on EchoStar’s 600 MHz assets at close to $12.5 billion.
Last year, T-Mobile sold its 3.45 GHz assets to Columbia Capital and SoniqWave. The bulk of spectrum that went to Columbia Capital was valued at around $0.8/MHz-PoP. This puts a value of about $7.6 billion for EchoStar’s spectrum, slightly above the auction price. The combined total comparable puts the value at around $20 billion, or a roughly 15% premium paid by AT&T, not accounting for breadth of portfolio, inflation, and other aspects.
Concluding Thoughts: More Than Just Spectrum
I’ll end where I started: this deal is not as much about spectrum as it is about rearranging market structure. There is an inherent risk in the new model pursued by EchoStar, which is focused on NTN services. The story is just beginning, and we’ll need to see more details.
Note: There are many questions related to remaining spectrum that come up. The issue of AWS-4 is particularly complex. For specific discussion on topic, see our Insight Note: Dish AWS Spectrum: The Whole is Greater than the Sum of its Parts