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Larry’s been two steps ahead of the Federal Reserve for years, predicting the 2022 rate hikes as well as this year’s pause. And he’s helped his readers navigate the markets through both.
And now, he’s alerting his readers that those who prepare ahead of the September 17 Fed meeting may have a shot at some of the biggest gains of their lives.
He’s revealing all the details – including his top ticker to trade to take advantage of this opportunity – at his Fed Decision Advance Warning event on September 10 at 8 p.m. ET.
So make sure you go here to sign up with one click, and mark your calendar for this Wednesday evening.
It was the plan all along…
Over the last two weeks, EchoStar’s (SATS) share price has come to life, almost tripling since August 20.
It has been a surprising change of pace for a company whose share price hasn’t done much at all for the last five years.
One-Year Chart of EchoStar (SATS) | Source: Bloomberg
The catalyst?
A series of radio frequency (RF) spectrum sales that will transform EchoStar into something else entirely.
This is such an interesting story…
And it’s a rare example of a corporation developing a corporate strategy that’s entirely different than its core business as a public company…
And executing on that greater strategy over the last 15 or so years.
It’s the long game.
Very few have the stomach for it… and it almost sent EchoStar into bankruptcy.
Back in 2008, EchoStar spun out Dish Network, a satellite-based, multi-channel pay TV operator, into a public company. The move raised capital for EchoStar and Dish Network and removed the operational expenses of running the pay TV operator from EchoStar’s balance sheet.
EchoStar knew what was coming… a deluge of streaming services and a painful death for multi-channel cable TV and satellite TV operators.
Dish Network’s subscriber numbers began flattening out around the 2009–2010 time frame and began a relentless decline, which started in 2013, falling by more than 60% to today’s subscriber count.
What’s interesting is that EchoStar’s executive chairman, Charlie Ergen, maintained control over Dish Network through his majority voting stock while it was a public company. This allowed Ergen to control the asset and free up EchoStar to play the long game.
Ergen used Dish Network to acquire RF spectrum in a series of auctions from the Federal Communications Commission (FCC):
When a company acquires RF spectrum from the FCC, it is technically licensing that spectrum – which is a public good – for the use of deploying services.
The license comes with clearly defined obligations by the licensee, who is required to deploy services over that spectrum within a specified period of time.
In other words, use it or lose it.
Ergen’s strategy was to do the least amount of work possible to demonstrate that the spectrum was being put to use, in order to squat on the RF spectrum licenses.
The financial media and the press wrote only about how Dish/EchoStar would become a viable fourth 5G wireless operator to benefit U.S. consumers and provide an alternative to AT&T, T-Mobile, and Verizon…
Bleeding Edge subscribers have always known differently.
I’ve been writing for years about Ergen’s real strategy, which has always been to sit on the RF spectrum, spend the least amount of capital possible to demonstrate use of the spectrum, and then sell it when the time is right… and make a fortune.
For example, here’s the June 28, 2022, Bleeding Edge…
What’s more, the Federal Communications Commission (FCC) requires the companies that purchase spectrum to put it to use within a reasonable period of time. This prevents companies from simply squatting on spectrum in hopes of selling it for a higher price down the road. The FCC’s requirement ensures that companies use the spectrum to build out a wireless network.
So the industry was wondering what Dish Network was up to here. Why was it buying up 5G spectrum? Was it going to become America’s fourth major wireless operator?
My answer has always been “no chance.” I’ve long maintained that Dish Network wasn’t really serious about building a nationwide 5G network.
And the company’s recent move just provided us with even more insight into the company’s strategy […]
… this is really just a shrewd move by Dish to effectively squat on its spectrum, while doing the minimum amount of work required to maintain a 5G wireless operation – which now primarily leverages T-Mobile’s nationwide network.
In a few years, I predict that we’ll see Dish Network sell its networks and all of its spectrum to one of the three major wireless companies at a multibillion-dollar profit. When it’s all said and done, I think Dish will pocket a few billion dollars on this.
Well, that time has come.
At the end of last month, EchoStar announced it was selling both the 600 MHz and 3.45 GHz spectrum to AT&T for $23 billion.
That nets EchoStar a gross profit of $9.5 billion on its original $13.5 billion cost to license the spectrum.
EchoStar, cleverly, utilized primarily the UHF spectrum (600 MHz) to build out a “5G” network that covers about 70% of the U.S. population.
The rub is that the UHF frequencies are much cheaper from an infrastructure buildout, but the performance is more like a 4G network. This was done intentionally to reduce the capital expenditures required to meet the FCC’s utilization and coverage conditions.
Its “5G” wireless operator, Boost Mobile, only has about 7 million wireless subs, while the big three mentioned above control about 90% of the total market in the U.S.
AT&T wanted EchoStar’s spectrum, as it provides coverage in more than 400 markets in the U.S., which will benefit its own 5G wireless network operations.
And arguably the most exciting development was just announced early this morning…
SpaceX stepped up to acquire the AWS-4 and H-Block spectrum from EchoStar for a cool $17 billion. EchoStar’s cost basis for that spectrum was $2.775 billion.
The signal that Ergen was getting ready to sell off his spectrum assets happened in December 2023, when Ergen merged Dish Network back into EchoStar.
On the surface, EchoStar is netting $9.5 billion from AT&T and $14.225 billion from SpaceX for a total of $23.725 billion. How’s that for a plan that began 13 years ago?
But that’s not the most interesting part of the story…
The structure of the SpaceX deal is the most interesting.
SpaceX will “pay”:
It’s that third bullet point that’s the kicker.
SpaceX is easily one of the most exciting growth stories in history, and the most exciting aerospace company the industry has ever seen, despite being a private company. It’s now worth $400 billion, and it’s still early days.
As we learned in The Bleeding Edge – A Starlink IPO?, about 80% of SpaceX’s revenue is driven by its space-based broadband internet service, Starlink – a business that EchoStar is very familiar with, as it owns a competitive (not really) service provider called Hughes.
And here’s the rub…
SpaceX has the potential to become the world’s second $10 trillion company. The first, of course, will be NVIDIA (NVDA).
However, once SpaceX commercializes the Starship, which will happen in the first half of next year, and begins to launch several Starships every month, all bets are off.
SpaceX is the single infrastructure company for the entire space economy, which will become a multi-trillion-dollar industry.
EchoStar managed to get enough cash from AT&T and SpaceX to reduce its debt, avoid bankruptcy, and restructure its debt to buy itself a lot more time.
What does SpaceX get for $17 billion?
That’s easy…
This spectrum will give SpaceX the ability to deliver a direct-to-cellphone (from satellite) service nationwide in the U.S., enabled by Starlink, without the need to partner with wireless operators at all.
This will enable data and messaging services in remote locations to smartphones that are out of range from wireless networks…
But with the launch of Starlink version 3 satellites, which will operate in very low Earth orbit, SpaceX will have the ability to launch a mobile service that could now be an alternative to the big three wireless operators.
The only shortcoming of such a service offering is that it would only work when outside, with direct line-of-sight to an overhead satellite. However, the service could also work when connected to Wi-Fi networks indoors.
As usual, Elon Musk has very big plans.
As for Ergen, he wanted a piece of SpaceX equity. It was intentional. It will be invaluable on a long enough time horizon, as he will easily make 10X on his “investment,” – all it will take is patience. And he’s proven he’s got that.
And if EchoStar ever needs some cash, it will be able to sell a portion of its SpaceX equity in secondary transactions. There will always be buyers for SpaceX equity.
What a shrewd transaction by Ergen and EchoStar, and a perfect fit for EchoStar’s corporate strategy…
… playing the long game.
Jeff
P.S. As stated above, SpaceX is a private company… but there’s another way to position yourself to profit from it.
One of the most urgent opportunities with SpaceX lies in the Starlink network of low Earth orbit satellites.
And we’ve found a way for everyday folks to claim a stake in this private venture before the IPO – what we believe may be one of the biggest IPOs of the decade – starting with as little as $500.
You can go here to learn more.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
