Elon Musk’s SpaceX has agreed to pay $17 billion for wireless spectrum licenses from EchoStar to build out its Starlink satellite network, the telecommunications firm said Monday.
The deal includes $8.5 billion in cash and up to $8.5 billion of SpaceX’s stock portfolio for two blocks of wireless spectrum that could expand its reach to cellphone users.
SpaceX also agreed to pay about $2 billion of cash toward interest payments on EchoStar’s debt through November 2027.
The deal comes after the FCC in May warned EchoStar it was investigating its commitment to provide 5G service in the US, questioning its buildout extension and mobile-satellite service.
In a letter to the company, FCC Chairman Brendan Carr said EchoStar wasn’t effectively competing with major wireless carriers using the licenses at its disposal — threatening to strip the company of some of those valuable spectrum rights.
Charlie Ergen, the company’s chairman, met with President Trump in June. Trump later called Carr to take part in the meeting.
EchoStar said Monday it expects the SpaceX deal to resolve the FCC’s inquiries – sending shares in the company soaring 21.6%.
SpaceX could use the new licenses to beef up its home broadband provider through Musk’s Starlink business. SpaceX has also ventured into mobile phones through a deal with T-Mobile.
EchoStar’s wireless licenses would improve Starlink’s ability to connect with cellphones in remote areas out of reach of cellphone towers.
The deal includes rights to provide ground-based 5G cellphone and broadband service.
SpaceX could use the licenses to build a new cellphone service or share spectrum with telecom partners.
T-Mobile is in talks to lease some of the spectrum rights that SpaceX plans to acquire, people familiar with the matter told the Wall Street Journal.
EchoStar recently clinched a deal with AT&T, which agreed to pay $23 billion for wireless spectrum licenses to improve its traditional cellphone service.
AT&T CEO John Stankey called the deal “an opportunistic and pre-emptive asset acquisition,” while EchoStar said the deal is part of its efforts to resolve the FCC’s concerns.
Last year, US satellite TV provider DirecTV terminated its agreement to acquire EchoStar’s satellite television business, which includes rival Dish TV, over a failed debt-exchange offer.
This story originally appeared on NYPost
