- EchoStar CEO Charlie Ergen blames the FCC’s spectrum probe for setting off a “force majeure” event
- Analysts say EchoStar has not-so-subtly threatened to bankrupt its own subsidiary, Dish Wireless, to shield the parent company’s assets
- EchoStar’s spectrum deals still must get regulatory approval, which is where stiffed vendors could get some relief
If EchoStar’s prospects are looking bright – thanks to an up-and-coming cash infusion of more than $40 billion in spectrum license sales – why can’t its Dish Wireless subsidiary pay contractors for building its 5G network?
That’s the question on more than a few minds.
EchoStar Chairman and CEO Charlie Ergen sort of addressed it during the company’s Q3 earnings call last week. He was asked during the Q&A for an update on negotiations with tower companies after American Tower filed suit last month over Dish’s attempt to dodge contractual obligations.
He explained that the FCC threw an “unprecedented kind of curveball” at EchoStar when earlier this year it started an investigation into its use of spectrum and threatened to take it away. Ergen’s company interprets that as a “force majeure” event, i.e., an extraordinary event beyond its control that prevents it from fulfilling contract obligations. American Tower obviously disagrees.
Ergen expressed a willingness to work with all of his company’s vendors but said the tower litigation sort of soured his ability to talk to people. “Once things go into litigation, it’s lawyers talking to lawyers and it’s not business people talking to business people,” he said.
That’s unfortunate. But here’s where it gets tricky. Dish is a subsidiary of EchoStar, so one would think that EchoStar is the one on the hook here. But no. This is Ergen’s show, and he insists the Dish network was “obviously an independent company” when it was created and remains so to this day. Ergo: EchoStar isn’t the one on the hook; it’s Dish.
Fishy? Yeah, but there’s more
Dish isn’t commenting on its vendor relationships, citing the ongoing litigation. But it’s not just the big tower companies that are getting screwed. Multiple sources representing wireless construction firms told Wireless Estimator last month that EchoStar/Dish is putting pressure on assorted vendors to accept steep “after the fact” discounts on already-approved and completed projects.
In a letter to a rooftop manager obtained by Steel in the Air President Ken Schmidt, EchoStar claims that Dish Wireless isn’t entitled to any of the proceeds from EchoStar’s spectrum sales and that Dish is excused from its contract obligations due to the force majeure event – even though parent EchoStar is getting that whopping $40 billion (and more) for the spectrum that Dish was supposed to be using.
“Perhaps foolishly, we assumed that EchoStar, now flush with cash, would actually pay its bills. Silly us,” wrote MoffettNathanson analyst Craig Moffett in a November 7 research note for investors (registration required).
“EchoStar has not-so-subtly threatened to bankrupt its own subsidiary, Dish Wireless LLC, in order to shelter the parent company’s cash from the liabilities incurred in EchoStar’s erstwhile effort to build a wireless network,” Moffett said. “Not for the first time in the past few years, Dish’s creditors will be left to fight over issues of asset conveyance. Creditor on creditor violence. Get your popcorn. And your lawyers.”
Lawyer up, indeed.
That’s what Schmidt is advising his wireless site leasing clients to do. He suspects Dish is using its letters to vendors in an attempt to put public pressure on their stocks in the hopes of driving investor pressure to negotiate.
EchoStar’s spectrum deals still must get regulatory approval, which sounds like a no-brainer from the FCC’s perspective because FCC Chairman Brendan Carr started the whole Dish investigation in the first place to put spectrum into the hands of entities that will use it. No doubt, he’s all in on the spectrum sales.
But Carr is also well-known for climbing towers and engaging with the tower industry workforce. He announced his Build America agenda at a Vikor tower climber training center in Sioux Falls, South Dakota, last summer. Perhaps he will sympathize with the tower and rooftop vendors and require Dish to play nice and pay its bills?
“Carr seems genuinely concerned about the contractors and vendors who support this industry, and I have a hard time believing that they would let Dish just walk from debt after collecting $40 billion from these companies,” Schmidt told Fierce.
That’s why he’s urging his clients to submit comments to the FCC requesting that conditions be put on the AT&T/EchoStar and SpaceX/EchoStar spectrum transactions so that Dish will be held to its contractual commitments.
EchoStar/Dish radios still on network
Ergen was also asked during the earnings call about when they can unplug the radios from the network and whether that depends on the closure of the spectrum transactions.
“We really need to work with regulators on that and so those discussions are ongoing,” he said, adding: “It wouldn't be appropriate to discuss that. But obviously, we'll have more color on that early next year.”
Here’s an idea. Since everyone is still wondering if Elon Musk wants to become a fourth wireless terrestrial/satellite operator, why not sell the Dish 5G network to SpaceX? Surely the world’s richest man has enough money to pay wireless tower contractors.