Dish Network’s 5G future will now be as a subsidiary of sister company EchoStar. It's a reversal of the original terms of an arrangement that was made to bolster financial support for both entities that are controlled by telecom veteran Charlie Ergen. The swap comes as the entities also received a first-ever satellite de-orbiting fine from the Federal Communications Commission (FCC).

In a Securities and Exchange Commission (SEC) filing, Dish Network stated that it will now become a wholly owned subsidiary of EchoStar following the close of a convoluted arrangement announced in early August. This is counter to the original arrangement when the deal was announced.

In the latest SEC filing, Dish Network explained that the change was made due to financial reasons.

“The determination to revise the structure was made in part to increase the financial and operational flexibility of the combined company,” it stated in the filing. “Among other things, the revised structure is expected to enhance shareholder value by enabling more efficient capital allocation and better facilitating potential future strategic transactions.”

The deal continues to call for Dish Network and EchoStar to merge, with Dish Network shareholders controlling a 69% ownership stake in the new entity. That entity will also include EchoStar’s Hughes Network Systems and count nearly 18 million total customers across Dish Network’s mobile telecommunications and satellite television services, and EchoStar and Hughes enterprise/government connectivity verticals.

Company executives stated the deal will provide a targeted $150 million per year in earnings before interest, taxes, depreciation and amortization (EBITDA) savings. “That will create a more robust capital structure and provide financial flexibility [and] position the company for growth and value creation,” Ergen said when the deal was announced.

This savings will also be boosted by a near-term drop in capex by Dish Network, which recently hit a 5G coverage milestone that allows it to take a deployment investment breather. As well as EchoStar successfully completing its Jupiter 3 satellite launch that allows for reduced near-term capex investments.

That cost savings should also come in handy as Dish Network moves through its eventual network expansion plans.

The carrier, to this point, has been spending billions of dollars to build out its cloud-native 5G network to meet FCC coverage deadlines tied to the $34 billion it has spent on wireless spectrum licenses. Ergen had previously noted that the carrier’s full build could run up to $10 billion, and late last year it was forced to dip into the finance markets at a time when interest rates spiked.

Ergen more recently noted that the carrier would begin to cut spending once it hit the 70% coverage requirement. That spending lull will be a self-admitted important time for Dish Network to prove it can be a competitive wireless carrier in the market.

“We have a narrow window of opportunity here … to perform and execute and address our capital structure,” Ergen said during Dish Network’s first-quarter earnings call. “We have to do a lot of things right. We have a small margin of error but it’s all doable.”

Despite the financial juggling, some analysts have remained skeptical.

“Dish has $3 billion of debt maturing in 2024,” Dave Novosel, analyst at Gimme Credit, wrote in a report following the original announcement of the merger. “Cash on hand and the cash from EchoStar could take care of that but might leave the company with too little liquidity. The merger definitely improves the financial flexibility of Dish, but we doubt that it is sufficient.”

The Dish Network-EchoStar deal this week also had its expected completion date pushed back a couple of months from the original Feb. 8, 2024, quasi-deadline, to an April 2, 2024, date. The arrangement maintains the condition that if the deal does not close by that date, an automatic three-month extension to close will kick in.

The companies noted that shareholders from both companies had already approved the deal, which when announced was expected to close by the end of 2023.

Not changing is the financial structure of the deal and the resulting change in management.

The deal change comes as Dish and EchoStar were hit with a $150,000 fine from the FCC tied to “failure to properly deorbit its EchoStar-7 satellite.” The fine was the first “space debris enforcement action” from the government agency.

In its ruling, the FCC found Dish had decommissioned the 20-year-old satellite at a lower altitude than what it had originally promised. The satellite was supposed to be shifted to an orbit 300 kilometers above its original geostationary arc, but due to a lack of propellant Dish was only able to retire the satellite 122 kilometers above that arc. “At this lower altitude, it could pose orbital debris concerns,” the FCC noted in its ruling.

Loyaan Egal, FCC Enforcement Bureau Chief, explained this is a growing concern due to the increasing number of communication satellites being launched into orbit.

“As satellite operations become more prevalent and the space economy accelerates, we must be certain that operators comply with their commitments,” Egal wrote. “This is a breakthrough settlement, making very clear the FCC has strong enforcement authority and capability to enforce its vitally important space debris rules.”

This issue is becoming increasingly important as more companies begin launching low-cost satellite communication infrastructure.

A recent GlobalData report noted that SpaceX has more than 4,000 satellites currently in orbit, with plans to launch 90 more this year, and OneWeb has 648 satellites in space. ABI Research noted late last year that more than “70 satellite service providers [are] currently providing services worldwide.”