EchoStar sheds more subs as possible bankruptcy looms

EchoStar’s story remained relatively unchanged in the second quarter of 2024, as the company lost more mobile, pay-TV and broadband subs in the face of a cash crunch that’s pushing the company toward the brink of bankruptcy.

Analysts are painting a bleak picture for EchoStar (which combined with Dish Network last year seeking synergies and cash to fuel its 5G network buildout) unless the company can raise more cash – and soon. However, a cash-raising scenario is complicated by a bondholder lawsuit over the aforementioned merger.

“We’ve made our view clear. We see EchoStar’s odds of success as a wireless operator to be vanishingly small,” MoffettNathanson analyst Craig Moffett said in a research note (registration required) issued today following the release of EchoStar’s Q2 results. “We believe EchoStar is instead highly likely to go bankrupt, quite possibly by the end of the year.”

Absent of more funding, Moffett sees bankruptcy “in the next four to six months as the most likely outcome.”

“The level of brinksmanship is rising,” New Street Research analyst Jonathan Chaplin agreed in a research note issued this morning. He points to $4 billion of debt maturing in 2024 and 2025 an additional $9 billion maturing in 2026.

The big question now, Chaplin added, is when EchoStar will raise cash, and if it can do so with the lawsuit hanging over its head. “We think it will be very difficult for the Company to raise cash at DBS or any of its unrestricted subsidiaries until the shareholder lawsuit has been resolved,” Chaplin wrote.

EchoStar has warned of its precarious financial position, noting in a 10-K earlier this year that its cash burn rate “raises substantial doubt about [the company’s] ability to continue as a going concern.” EchoStar ended Q2 with $521 million of cash on hand, worse than the $583 million anticipated by New Street.

EchoStar/Dish is trying to reduce its cash burn. Wireless capex tied to the company’s 5G network build, for example, was $237 million in Q2 2024, well down from $801 million in the year-ago period.

Analysts see EchoStar’s spectrum holdings as a potential financial life raft but have quibbles about those assets.

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