EchoStar CEO Hamid Akhavan and Chairman Charlie Ergen.

EchoStar’s run at being a legitimate fourth nationwide wireless operator came to a financially lucrative end, but recent comments from Chairman Charlie Ergen and CEO Hamid Akhavan call into question just how legitimate those plans were to begin with.

Ergen and Akhavan this week held what the latter repeatedly stated was a hastily assembled news conference to lay out the company’s future direction. The event that lacked firm details beyond the fact EchoStar is now sitting in a much better financial position than it was a few weeks ago.

The presentation was held at the World Space Business Week in Paris and was important enough to draw Ergen’s attendance. Ergen had been a regular attendee and frequent point of information for years during EchoStar’s but had recently stopped attending those updates.

From a financial perspective, Akhavan said EchoStar’s recent deals will net the company about $24 billion in cash, around $13 billion in pro-forma debt, and around $8.5 billion of equity in SpaceX. This is on top of more modest spectrum holdings EchoStar will continue to hold, mostly in the 700 MHz, AWS-3, and Consumer Broadband Radio Services (CBRS) bands; its commercial Dish TV and Sling streaming services; its enterprise-focused Hughes satellite service; and its evolving Boost Mobile cellular service.

“We will have enough resources to make sure everything is properly fed and developed, and we have the flexibility of being a public company, so accessing our portfolio, individual companies that we have, whether you like Hughes, whether you like Dish, and then a content business we have, whether you like to participate in our Boost trajectory and any of the assets associated with it, we remain as a public company. This is something that is available to the marketplace,” Akhavan said.

Ergen later added that EchoStar could look to further cash in those remaining spectrum licenses and will look to leverage its new cash position to expand.

“I think our core is we want to be builders of things,” Ergen said, before adding that EchoStar has found success in investing. “We've been in that situation where we've been investors in things, but in our core, we're builders. I think there's going to be a lot of storm clouds on the horizon for companies that were like EchoStar that were asset rich and cash poor. So I think there's going to be some storm clouds there, interest rates, certainly long-term interest rates probably won’t come down so much.”

What were the Boost plans?

Despite the storm clouds looming over some of EchoStar’s businesses, Akhavan did reiterate that the company was “on target to create an incredible platform for EchoStar” based on its terrestrial and space-based infrastructure,” but that the letter EchoStar received from the Federal Communications Commission (FCC) in May threw those plans into question.

That letter questioned EchoStar’s timely use of its expansive spectrum license holdings. EchoStar had gained deployment extensions for those licenses in late 2019, extensions that were tied to T-Mobile US’ acquisition of Sprint.

EchoStar had repeatedly stated that it had met every spectrum license deployment deadline tied to that extension, and had even garnered third-party testing accolades for its unique cloud-native 5G network deployment. But, it was also having to juggle precarious financial obligations that required deft maneuvering by EchoStar’s management.

However, Akhavan indicated that the FCC “froze our business in a way that really we would be at the risk of losing an entire business, and we were looking at a bankruptcy as potentially the only option ahead.”

EchoStar’s management duo was notably asked for more details on the timing of its interactions with the FCC. That question was specifically around Ergen and Akhavan telling this week’s audience that the letter from the FCC in May froze EchoStar’s plans, yet in early August EchoStar announced ambitious plans to launch hundreds of new satellites into space.

Ergen explained that EchoStar did not think “the FCC could do what they said in the letter,” adding, “that’s never happened, but we would win the battle, lose the war because we were frozen at that point in time. How do you build a network? How do you get a return to shareholders when you don't know how long the proceedings or will take a court to solve that?”

EchoStar dropped those ambitious satellite plans when it announced the SpaceX spectrum deal.

Ergen also downplayed Boost Mobile’s open radio access network (RAN) architecture, stating that technology innovation paled in comparison to the carrier’s underlying cloud architecture.

“We thought open RAN would be the big difference, but it turned out it was cloud,” Ergen said. “And it turns out open RAN really hasn't moved as fast as possible, and that cost is now being borne by a partner in AT&T, not by us. So we get the flexibility of doing things in the cloud.”

EchoStar’s management had repeatedly touted opportunities it would create from its unique cloud-based open RAN network architecture, including Ergen himself stating during one earnings call that “it boils down to we have a modern, 5G, smart network based in the cloud on open RAN principles. ... That's Netflix versus Blockbuster. It took Netflix some time. Wall Street was very skeptical of them early on. It took them time to prove the concept. But it was better, faster, cheaper. And it's pretty hard to fail in business if you're better, faster, cheaper. And our network is going to be better, faster, cheaper.”

However, EchoStar struggled to gain those expected operational efficiencies.

Boost Mobile CTO Eben Albertyn during a trade show earlier this year admitted to those struggles, which the executive explained were caused by it being one of the first in the world to push a greenfield cloud-native deployment.

“I think open RAN and the technologies that we've used goes far and beyond just that of the radio, it changes the entire way of interacting with your supply chain and your landscape, and there is a lot more control that allows you to manipulate cost and quality in a way that suits your situation,” Albertyn said. “We didn't want to go through all of these pains. We didn't want to go through these changes, but we were, I think, extremely grateful that we had the opportunity to change at will when you're in the situation changed.”

Those changes included having to become the de-facto systems integrator (SI) for its own network deployment, which it initially wanted to have its vendors deal with.

“We were of the conviction that we could go into this journey with the use of partners, and they would actually help us to do most of the heavy lift. That couldn’t have been further from the truth. We actually crashed and burned completely,” Albertyn explained. “We had to become the systems integrator ourselves. We had to become an architect and the creator of the underlying infrastructure of the network itself. And we had to become the hub of the spokes around. That was a surprise and a huge slap in the face. We realized that the route that we fashioned was a complete dead end.”

However, EchoStar was unable to unlock operational rewards from that multi-billion-dollar investment and is now set to run as a completely different organization.

“At the end of the day, looking at every business unit with the lens of what we can do to maximize the value of that platform, it is the focus going forward,” Akhavan said of that new direction. “It has always been there, but now we have more flexibility, freedom, and resources to structure those investments differently. So we're going to take a look at them with a different lens. It's too early for me to give you any indication of what we're going to do, but I can tell you that we love our children and all these investment companies now in the future will be handcrafted and closely developed under the lens of Charlie and myself.”