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EchoStar: “We are a going concern”

March 4, 2024

As Mark Twain said when a newspaper incorrectly published his obituary, “The reports of my death are greatly exaggerated.” The same phrase could be used for last week’s commentaries on EchoStar’s results with more than a few experts suggesting that bankruptcy was more likely than ever.

Even EchoStar’s own Form 10K SEC filing admitted that bankruptcy was a real risk. “Because we do not currently have committed financing to fund our operations for at least 12 months from the issuance of these consolidated financial statements, substantial doubt exists about our ability to continue as a going concern,” the company said in the obligatory ‘boiler plate’ in the 10K risk segment.

EchoStar’s predicament isn’t helped by subscriber losses (314,000) and chairman Charlie Ergen’s somewhat complicated attempts at financial restructuring and all wrapped up in the corporate marriage between Dish Network and EchoStar. EchoStar’s Q4 losses were a thumping $2.03 billion.

Indeed, the squeeze on revenues has affected all of EchoStar’s divisions including Hughes Network which has 1 million consumer broadband subscribers as of December 31st 2023, down 18.2 per cent from a year ago and a 31.5 per cent decline since the end of 2021. Most of those lost subscribers would appear to have taken Starlink services. Numerous reports on Social Media criticise HughesNet when users have switched to Starlink.

Analysts MoffettNathanson, not exactly fans of EchoStar, in a note described the company’s situation as “dire” adding that the company “is losing subscribers in every business. Revenues are declining in all segments. Each quarter comes with new defections of senior management. It is simply not realistic to expect a turnaround.”

Even a bankruptcy filing would be complicated, Craig Moffett added. But a debt load of some $26 billion cannot be ignored, with interim debt repayments of $951 million due this month and another $1.98 billion due in November. The company is sitting on cash reserves of $2.4 billion.

Moreover, Ergen himself was noticeably absent from the quarterly results analysts call on February 29th, and the rumour-mill went into overdrive. It later emerged that it was Ergen’s birthday and “he had been given the day off” said CEO Hamid Akhavan.

EchoStar’s stock price has evaporated in value as the negative news continued (currently $13.22) and has fallen from $24 last August and a much healthier $45 in May 2019.

Nevertheless, EchoStar stressed the game was far from over and it was exploring “many avenues” to solve the financial gap. Akhavan said the company is “not under the gun” to strike deals to fix EchoStar’s financial structure. “The window is long enough for us to make a sound decision” for the long term, he told analysts.

There is also a very real upside in the value of the terrestrial wireless spectrum that EchoStar owns, which New Street Research estimates could be worth $58 billion in potential spectrum value.

Akhavan told analysts that this year was one of transition as far as EchoStar’s cellular plans were concerned.

“The one thing I want to emphasise here and I stand behind – the network is awesome,” he added.

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