A report on EchoStar from analysts at Bond research specialist, Gimme Credit, looks at the newly-merged operation (with EchoStar absorbing DISH Network) and is blunt saying they expect the company to continue losing subscribers during 2024, which would lead to a decrease in revenue of around 6 per cent.

The report expects EchoStar to be restrained in terms of the amount of cash it has available to invest in its cellular network deployment and by more than 50 per cent. The report asks: “But the lower spending brings into question the viability of its network. In any case, free cash flow will likely be too modest to lead to meaningful debt reduction.”

“We suspect EchoStar could generate more earnings and free cash flow if it could make further investments in its wireless network,” says the report. “But at this point the company is capital constrained. At year end EchoStar had more than $2.4 billion in cash, equivalents, and marketable investment securities, aided by the recent merger. But roughly $1 billion was needed for the convertible notes that matured last week. So, EchoStar does not have sufficient funds to pay the $2 billion bond maturity in November. We are extremely doubtful that the company will be able to handle the $9 billion of maturities in 2026.”

“Earlier this year EchoStar held discussions with a group of creditors regarding potential exchange offers that would have extended debt maturities and reduced the amount outstanding. However, the offers were rejected by debt holders. One rating agency considered the exchanges to be equivalent to a default. Management hopes to use unencumbered assets such as spectrum to raise funding. If EchoStar does not get the funding, it may not meet FCC requirements with regard to network coverage,” says Gimme Credit.

The analyst share the view of other investment banks that (Chairman) Charlie Ergen’s absence from the Q4 Earnings Call was a “grave concern”.

The report admits that the value of the company’s spectrum assets could enable bondholders to realise considerable recoveries in a bankruptcy scenario. However, it questions whether regulators would allow any of the major wireless operators to buy that valuable spectrum.

The report stays with a ‘SELL’ recommendation to clients.

Other posts by Chris Forrester:

1. Virgin Galactic in stock split
2. Thuraya-3 suffers major problem
3. AST SpaceMobile hit by Class Action
4. Optimism under threat at SES
5. Rivada visits Terran Orbital’s manufacturing HQ
6. Avanti wins spectrum debt obligation case
7. SpaceX breaks records for re-use launchers
8. IRIS2 already in trouble?
9. Intelsat contemplates next steps

Categories: Blogs, Business, Inside Satellite

Tags: charlie ergen, dish, Dish Network, Echostar