SpaceX has paid EchoStar $8.5 billion in its stock to buy its Mobile Satellite Services (MSS) and S-band spectrum as part of its plans to expand the direct-to-cell capabilities of the Starlink satellite internet constellation. The deal, valued at $17 billion, sees SpaceX secure a strong foothold for itself in the MSS market as it had previously encountered tough opposition from EchoStar to develop the Starlink direct-to-satellite service. The tussle between the two came to a head earlier this month when the FCC started investigating EchoStar after SpaceX claimed that the firm was not using the 2GHz band in its MSS spectrum.
SpaceX Will Pay EchoStar $17 Billion For Foothold in MSS Network
Courtesy of its workhorse Falcon 9 rocket, SpaceX has successfully built one of the largest direct-to-cell satellite internet constellations and started providing the service to users through its partnership with T-Mobile.
SpaceX aims to remove coverage dead zones with its cellular service, and the firm aims to significant upgrade the constellation once it is confident that the Starship rocket is capable of regularly launching satellites to low Earth orbit (LEO). Starship's latest test flight saw the upper stage ship successfully launch dummy Starlink satellites for the first time to provide SpaceX with the confidence to leverage its test rocket for operational satellite launches.
The new direct-to-cell satellites will grow their data throughput 20 times over their predecessor, said SpaceX in a blog post announcing its EchoStar deal. According to the company, the satellites will achieve higher throughput by using in-house silicon and phased array antennas.
Overall, the new satellites will deliver more than 100x the capacity over the first-generation Starlink direct-to-cell constellation and provide 5G connectivity similar to terrestrial LTE levels, believes SpaceX.
For its deal to buy EchoStar's spectrum, SpaceX will pay the firm $17 billion. Out of this, $8.5 billion will be in cash and the remainder in SpaceX stock. Crucially for EchoStar, whose ability to pay interest had been in question for most of the year, SpaceX will also pay $2 billion of interest payments for the firm's debt.
EchoStar's shares, which are already up by 196% year-to-date on the back of an earlier $23 billion spectrum deal with AT&T, have gained roughly 24% in premarket trading. SpaceX has lofty goals with its latest spectrum transaction, as the firm aims to eliminate cellular dead zones worldwide, according to its President and Chief Operations Officer, Gwynne Shotwell.
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