SpaceX partner EchoStar struggles to reach escape velocity
Charlie Ergen’s future will probably be guided by what happens to Elon Musk’s company
Wealth and kindness do not grow in tandem. The relationship may even be inversely proportional. Consider Charlie Ergen, the US billionaire and former professional poker player who runs telecoms company EchoStar. Despite being much enriched via a stake in Elon Musk’s SpaceX — an investment that could launch his company on a new trajectory — Ergen seems more sharp-elbowed than ever.
EchoStar sold off more than $40bn of telecoms spectrum last year at the behest of the Trump administration, which felt Ergen had been too slow in building a national mobile network. The buyers in the deal, which has yet to close, included AT&T and SpaceX, which paid in its own private stock.
That wasn’t enough to give EchoStar a clean break. It retained contracts with suppliers and cell tower companies, some of which are now coming unstuck. Crown Castle this week cancelled a lease with an EchoStar subsidiary, Dish Wireless, saying Dish had defaulted on its cell tower rent, and owed $3.5bn. That is a significant amount for Crown Castle, equivalent to about a tenth of its market capitalisation.
Nor is it the only one feeling bruised by Ergen’s hasty exit from mobile telecoms. Another infrastructure vendor, American Tower, sued in federal court over halted lease payments, a figure analysts at MoffettNathanson say exceeds $3bn.
On one hand, Ergen seems to think there’s a middle ground to be struck. In November, he suggested “lawyers talking to lawyers” was less productive than “business people talking to business people”. On the other, EchoStar argues, somewhat boldly, that because it was forced by the government to sell its spectrum, “force majeure” allows it to shed its obligations. Declaring bankruptcy through a subsidiary is one possible avenue to terminate the tower leases but hold on to the cash.
It’s not obvious Ergen would need to quibble about such sums, though. SpaceX was valued at $400bn when the assets-for-stock swap with EchoStar was announced. Now, Musk’s rocket company is targeting an $800bn valuation or more. EchoStar’s own market capitalisation has quadrupled since August, to $38bn, and Ergen’s personal stake is valued at more than $9bn.
EchoStar has other loose ends to tie up, including spectrum yet to be sold, and its satellite business Dish Network. But Ergen’s future will probably be guided by what happens to SpaceX. EchoStar might even become a vessel through which Musk’s company could smoothly go public. Wherever he ends up, future counterparties should note from these latest bare-knuckle dealings that the new Charlie Ergen is very much like the old one.