This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
SpaceX will likely lease out some terrestrial spectrum to T-Mobile after spending a surprising $17 billion yesterday to buy spectrum from EchoStar. The deal sent EchoStar's shares soaring by a whopping 19.9% yesterday as investors became more positive on the firm's ability to remain solvent. In a note released after the deal, Deutsche Bank upgraded EchoStar's share price target to $102 from $67 as it commented that the deal with SpaceX adds to the firm's after-tax spectrum value.
EchoStar Has Roughly $11.6 Billion Of Spectrum Left In Its Portfolio, Says Deutsche Bank
EchoStar's shares have continued their momentum from yesterday and are up by roughly 3% in premarket trading today. SpaceX's $17 billion deal announcement also sent shockwaves through the telecommunications industry as it expanded the space for the firm to operate in the sector.
SpaceX is the world's leading launch services provider, and most of its launches are for the Starlink satellite internet constellation. Starlink is the world's largest low Earth orbit internet service, and SpaceX also provides direct-to-cellular capability through its partnership with T-Mobile.
This partnership was also the reason T-Mobile's shares led major telecommunications carriers in losses yesterday. The stock closed 3.9% lower while Verizon and AT&T closed 2.4% and 2.3% lower, respectively.
Deutsche Bank, which raises EchoStar's share price target to $102 from $67, notes that media reports that T-Mobile "is in talks to lease terrestrial mobile rights from SpaceX" make sense for SpaceX since the leasing could "help to defray what is a hefty purchase price for satellite spectrum."
As for EchoStar, the bank notes that it has increased the share price target since it had "because Echostar seemed to be moving forward with its plans to launch a LEO constellation that would utilize this spectrum." As a result, the spectrum's value was not included in the share price target, says Deutsche Bank.
The bank also estimates that EchoStar has roughly $11.6 billion of spectrum left in its portfolio. "We expect Echostar to next announce a transaction to sell AWS-3, which could be packaged with 700 MHz and CBRS," it says.
EchoStar's AWS-3 spectrum is valued at $9.9 billion, according to Deutsche, and the bank believes that "the most likely buyer is Verizon given that Verizon trails AT&T by an estimated 50 MHz, on average, nationwide, and trails T-Mobile by 80 MHz, on average; especially considering that Verizon has more retail (residential + business) subscribers and more wholesale business than AT&T and T-Mobile."
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
Follow Wccftech on Google to get more of our news coverage in your feeds.
