Things were getting difficult for Charles Ergen for some time.
In autumn of 2023, the estimated net worth of the satellite tycoon fell below 800 million dollars, since its maximum of 20,100 million dollars. It was then that the price of the shares of their companies Echostar and Dish reached historical minimums and 25 years, respectively. Dish lost money, with a debt of less than 21,000 million dollars and a loss of payment television subscribers. Meanwhile, the future of the wireless network that had promised to develop the government seemed uncertain. Many analysts believed that their businesses were destined for bankruptcy.
Now Ergen, a former poker player, seems to have improved his financial situation. On Tuesday, Echostar announced that AT&T had agreed to buy its 600 MHz spectrum licenses and 3.45 GHz – among the most valuable – for about 23,000 million dollars. The price of Echostar shares closed at $ 50.87 on Tuesday, 70 % more than the previous day. This figure is the highest since the DISH split in 2008 (the companies merged again in the late 2023 and now operate under the Echostar brand). Estimated Ergen Net Heritage shot with him, reaching 6,600 million dollars on Tuesday, compared to $ 3.6 billion of the previous day. At the close of Wednesday, his fortune had more than duplicate, reaching 7.8 billion dollars.
But after their good personal fortune more complex consequences for consumers are hidden. The sale condemns its promised national mobile network to failure, and with it, the hope of a more competitive cellular service market in the near future. Echostar will not be able to develop that network without the low and middle band spectrum that has just yielded; His press release acknowledged that the elements of the network “will be dismantled over time.” (Echostar did not respond to a request for comments).
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Charles Ergen’s net assets doubles after the controversial sale of AT&T
The Federal Communications Commission (FCC) had approved the fusion of T-Mobile and Sprint in 2019 with the requirement that a new mobile operator replaced Sprint; Otherwise, the United States would stay alone with the “great three”: T-Mobile, AT&T and Verizon. Ergen, who had been buying spectrum licenses since 2008, was the most indicated to meet. The FCC extended its licenses, which were about to expire, and allowed you to buy the sprint prepaid mobile phone brand. The condition: I needed to launch a postpaago brand to compete with the “three big” and develop a generalized 5G network.
The Commission demanded that Ergen fulfill a series of strict deadlines for the development of said network and forbade him to sell his 600 MHz licenses to the three great operators before the end of 2026. They did not want Ergen to do exactly what he is doing now: to make an initial public effort to become a fourth contender, but quickly leave the attempt and sell his spectrum. Even at that time, some observers suspected that Ergen’s plan was to buy spectrum at a low price and then sell it at a higher price.
In May, the Commission initiated an investigation to determine if Ergen was complying with the development deadlines of the 5G network. Echostar said the investigation endangered his business, breached the payment of the interest of his loans and seemed to be about to declare himself in bankruptcy. Subsequently, Ergen met with President Trump and the president of the FCC in June and, in some way, solved the problem, he reported Bloomberg . The commission went from pressing it to build a network to press it to sell its capabilities to do so.
Tuesday’s spectrum agreement also involves the death sentence for part of the Vanguardia Software of Echostar. The company was developing the first “open radio access network” (O -ran) in the United States. With a native cloud design, it was intended to be faster, economical and customizable than other networks.
“That is how unfortunate I see in all this,” says Roy Chua, founder and director of Avidthink. “The mobile network they built was quite innovative, and they did it in record time with a very efficient investment.” (Some of Echostar innovations in O -ran have spread throughout the world, he adds, and therefore have not been completely lost).
The agreement is undoubtedly a great advantage for Ergen, who founded Echostar (then called Echosphere) with his future wife, Cantey. Although Echostar could eventually close – as customers continue to migrate from paying television to streaming, the future of their satellite television provider and the Internet is barely more promising than that of the 5G network -, the company probably now can make the most of the sale of its participations for a considerable sum. He still has approximately two thirds of his spectrum, which could generate an unexpected gain as large as AT&T, says Chua. Among the potential clients are the “Grandes”, as well as Starlink by Elon Musk.
Another promising element to throw is that AT&T is paying a premium for the spectrum. Will disburse 23 billion dollars; Ergen acquired licenses for a total of $ 13,500 million between 2017 and 2022. The sale will also give it the necessary liquidity to liquidate much of its debt of 26 900 million dollars. The transaction is expected to close in mid -2026, unless regulators block it. Morningstar estimates that risk in 25 %.
Shareholders bet on the success of the agreement. “I doubt that no one has believed that echostar would really be a viable business for at least two or three years,” says Craig Moffett, senior executive director of Moffettnathanson. “If one possessed the capital, he believed that, regardless of whether or not he declared bankruptcy, when the spectrum was settled, he would be sold at a price high enough to remain money for shareholders.” He adds that he could have distributed even more effective if Echostar had declared bankruptcy, since then his Torres lease contracts would probably have been canceled, which would have reduced the liability: “It is a strange situation, in which shareholders would possibly be better if the company declared bankruptcy.”
Echostar still has Boost, the cell phone brand that would be supposed to compete with market giants. But now it will continue to operate on the AT&T network and, to a lesser extent, on T-Mobile, instead of migrating to its own network. Boost’s business is emerging to remain much smaller than he had suggested. It could have difficulty staying competitive.
Moffett says: “Maybe we all go to the grave without ever knowing if Charlie once intended to be a telecommunications operator.”
This article was originally published by Forbes Us.
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