EchoStar Corporation (SATS) Q4 FY2025 Earnings Call Transcript & Summary

Greetings, and welcome to EchoStar Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Dean Manson. Thank you. You may begin.

Thank you. Welcome to EchoStar's Third Quarter -- Year-End 2025 Earnings Call. We will begin with opening remarks from Hamid Akhavan, CEO of EchoStar Capital; followed by Charlie Ergen, CEO and Chairman of EchoStar. We request that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recording, which we ask that you respect. All statements we make during this call, other than statements of historical fact constitute forward-looking statements made pursuant to the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2025, filed today, March 2, and our subsequent filings made with the SEC. This information and supplemental materials related to today's call will be posted on our Investor Relations website. All cautionary statements we make during this call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. We refer to OIBDA and free cash flow during this call. The comparable GAAP measure and a reconciliation for OIBDA is presented in our earnings release and in the case of free cash flow in our Form 10-K as filed today with the SEC. Before we begin, I will also note that EchoStar has filed an application that would allow us to participate in the FCC's upcoming AWS-3 spectrum auction designated as Auction 113. Pursuant to the FCC's anti-collusion rules, we are currently in a quiet period. Accordingly, we will not be making any comments or responding to any questions that relate to Auction 113. With that, I'll turn it over to Hamid.

Thank you, Dean. Welcome, everyone, and thank you for joining us today to discuss our 2025 end-of-year results. Before I hand over to Charlie, I would like to briefly comment on a few topics relevant to EchoStar Capital. As we await final regulatory approvals for our spectrum sale and the resulting influx of capital expected during the first half of this year, we remain committed to being excellent stewards of capital. We're preparing to allocate and utilize these funds based on our view of how we might maximize shareholder returns with actions spanning from immediate to over a long horizon. Our decisions are based on many considerations, including paying down expensive or maturing debt obligations, our current and anticipated tax liabilities and any mitigating avenues and investments and development opportunities at EchoStar Capital versus returning excess capital to the shareholders through the common short-term remuneration options. These considerations are both complex and interrelated, further complicated by dynamic external factors such as the possibility and the timing of a potential SpaceX IPO. With this context as background, it would be difficult and potentially misleading for us to provide significant detail on most of these topics at this time. EchoStar is in midst of a large-scale positive transformation arising from its vision, long horizon of strategic bets and decades of diligent execution. We feel confident about our ability to continue operating on the same success principles, and navigate for the best shareholder outcome in the long run. With that, I will now turn the call over to Charlie.

Thanks, Hamid. And as you guys know, I don't have any -- I don't normally have any opening statements and I don't today. So we will just jump into questions.

[Operator Instructions] Our first question comes from Sebastiano Petti with JPMorgan.

Charlie or Hamid, I want to see if you could update us on how you're thinking about passive versus active investments within EchoStar Capital notwithstanding your prepared remarks, is that still the right avenue or how you're kind of thinking about it? And within that context, given anticipated IPO of SpaceX, would increasing or EchoStar's stake within SpaceX be something you would be considering? And then Charlie, big picture question. EchoStar did have an announcement about a D2D constellation, which obviously you will not be pursuing, but how do you think you see -- how do you see that ecosystem evolving having spent decades around the industry, particularly the convergence of wireless and satellite? I think you have a unique perspective. So I just love to hear your thoughts. Do you see this as complementary? Do you see this as a threat to the incumbents having experience trying to be a fourth player yourself?

I will try to -- Sebastiano, I'll try to answer the first few questions, are all wrapped in one. I apologize if I missed some of it. Please repeat that. Look, EchoStar Capital, as I mentioned, we are looking at every possibility for utilization of the liquidity and cash when it arrives. As I mentioned, we're looking at short-term options, traditional, return to the shareholders through the best means. Obviously, we're looking at the long horizon for creating value, all of this in the context of taxation and how the net return to the shareholders may be. We're obviously looking at our opportunities every single day and judging that against what other options may be available. So it's a long answer to a short question, but honestly, that is the case. It would be foolish to do anything other than that. We don't -- actually until the closing, we don't have actually SpaceX as equity. So that is not something that we can make any plans on until we actually get the equity. We have a right to it, but we don't have the -- we actually don't have that equity yet. So we'll see how that plays out. IPO may happen. Obviously, it will happen independent of our plans, but we'll make sure that we maximize our options around the timing whenever that shows up and what options we might have. In terms of holding the size of the equity we have from SpaceX, I think we're very happy with that at this point. I don't think we are actively looking necessarily to make any transactions at this point based on that. So that remains on our balance sheet until we get it. And then after that, we'll decide how to proceed depending on the conditions at that time. I am looking at both active and passive investments, again, depending on the return. So we'll keep you posted as soon as we get to a point that we actually have that cash at hand and ready to make some transactions. Charlie, I think the rest is for you.

Yes. So on direct-to-device, I mean, obviously, we're disappointed that we weren't able to continue with something we've built over 17 years. And I think we're proud of the fact that we've helped create an ecosystem for a direct-to-device. And I think that we're also pleased that -- and we've made our bet and that's with SpaceX and Starlink, we see them as the most viable company to do that. And with their tremendous technology and launch capabilities, they're well positioned to certainly be a leader in that. We're -- and as we publicly disclosed, we already have an agreement with them to provide that to our customers. They obviously are going to -- Mobile World Congress is going on now, I expect there'll be quite a few announcements there. There'll be other players in the marketplace. But I don't think you're going to see too much from anybody except SpaceX in the near term or Starlink in the near term. And I think that based on our experience, that's the company we think will be the leader.

Our next question is from Brent Penter with Raymond James.

First one from me, a follow-up on Sebastiano's question on SpaceX. So based on the deals, I think you all were supposed to get around a 2.8% stake, which at the time was valued at $400 billion. As you mentioned, those deals haven't closed yet, but they've since announced the merger with xAI. So how does that xAI deal affect your ownership in terms of percentage? And how can we think about any kind of mark-to-market associated with that deal?

Yes. This is Charlie. I don't think we know. I mean, I think we're not privy to what that IPO -- if an IPO happens or what it would happen, when it looked like. I think the merger appeared publicly to be something like 80-20 between xAI and Starlink. So that's probably gives you a feel for what our investment might look like. But we just don't have any -- we don't have any internal information there today.

Okay. That makes sense. And then the tower companies. The tower companies have announced that you all stopped paying them and you all talked about the litigation in your 10-K. Last quarter, you had said you believe that you were relieved of these payments but now you've actually stopped paying them. So I'm just wondering what actually went in the decision to take that next step and stop paying?

Well, yes, thanks for the question. The first thing most important to us was, of course, to make sure that all of our customers on our network were not disenfranchised by the existential threat that we got when the FCC informed us of an investigation to take our spectrum. So we believe that without question, is a force majeure event. But we want to, first and foremost, take care of our customers, which we did, and we've moved successfully all our customers last year in the fourth quarter, we moved all our customers off of our network. At that time, given the force majeure event and the FCC's action, obviously, we have a network that generates -- we had a network that generate no income. So it -- we informed all of our vendors that we had a force majeure event as we're allowed as we have per contracts. So -- and as you know, since that time, several companies have commenced litigation against our independent DISH wires entity, which is party to the relevant tower agreements. And I'm disappointed in that because by contrast, those companies who haven't litigated, we've had good open faith negotiations, and we've settled hundreds of contracts. And most recently, we signed a settlement agreement with a large tower company who didn't commence litigation because at that point, principles can talk to principles. When the other companies, it's lawyers. And so you can expect -- my experience has been that, that will be protracted litigation because the lawyers talk to the lawyers, and they don't typically in a hurry to get anything done. And it's just different than when business people talk to business people. I wish we weren't here. I wish -- it's an ongoing and evolving situation, but we'll continue to appropriately respond to any litigation that's been commenced. We'll assess all of our available steps in front of any courts or venues, and we'll engage with more tower companies to seek good consensual solutions. And we'll consider all our alternatives available to the company -- to the company that's party to the tower group contracts to resolve these matters. And -- but it's obviously for the tower companies that commenced litigation, that's all public and that likely typically, the wheels of justice don't move very quick, and that will probably take some time before we actually know all the results of that. But we don't believe -- just to be clear, we don't believe we owe any money. And I think it shows our good faith that we've settled with a lot of people and attempted to engage in negotiations when people don't pick litigation.

Okay. And can you remind us what assets exactly are held at that DISH wireless entity?

In general, Paul, do you want to take that?

Yes, sure. In general, it's the 5G network build. So it's all the assets that were deployed to build the network and have it operational. So antennas servers so forth. Anything you would need, radios and so forth and so on. So yes.

So kind of the other segment that you're now reporting?

Correct. The other segment has those assets in it, yes.

Our next question comes from David Barden with New Street Research.

Two, if I could. First would be just, Hamid, could you talk about how the approach to the vendor payment situation impacted fourth quarter results in the wireless segment from an EBITDA perspective? And how -- when you do reach a settlement, how does that all run through? Is there -- I guess, we're not going to be able to predict it, but it would be fun to know how it's all working. And then I guess, second, Charlie, just to confirm, you don't have an anti-dilution provision, it sounds like. But when you see Elon kind of plucking $1 trillion of valuation for SpaceX out of the air when it was $400 billion in June and $250 billion for xAI. As a large shareholder where a large part of your stock value is this holding, how much credence do you put in that? Like what do you really think it's worth? Because -- or do you really believe that it's worth $1.25 trillion put together?

Let me take the first part, and I'm going to generally answer -- I mean, take the second part, and I'll generally answer the first part and turn it maybe over to Paul. But again, I think that, again, our -- having spent decades on direct-to-device and space, it's our belief that SpaceX is a one-of-a-kind company. And I can't speak to the valuations. Markets or up and down. But space is going to be an increasingly important aspect commercially, but obviously, you're seeing militarily and other things as well. So in direct-to-device, when you can connect -- it's not just phones. It's IoT, it's cars, it's anything mobility. When you connect any square in the planet, that's just a big business. And so I can only say we -- I can only say it this way that SpaceX is a company, and I'm not talking about just [deal], I'm talking about the company and the management of that company. They've been the best company I've ever worked with them 45 years. They're just responsive, they're creative. They move at a pace that most companies don't. So I think -- I don't think any amount of valuation is probably crazy there. Obviously, we're not privy to their numbers. So we invested on faith and we invest in people, and we got the best people we can invest in. So I'm anxious to see if they do, in fact, do an IPO, obviously, there'll be a lot of things to look at. I'm anxious to look at that. But we're not -- we don't have insight as to what -- we don't have -- we don't know what the value is, right, other than we believe in the transaction that we did, we thought that initially, we weren't getting the value for our spectrum. We thought with the growth of SpaceX that we likely could see that we could get to the value that we thought that our spectrum held and it remains to be seen. As far as what the question was about the cost of the network?

Yes. So let me address that. Thank you for the question. First of all, it's a little complicated. You have to go back to Q3 where we took the impairment charge that we recorded. In that impairment charge were costs related to any future commitments where we had contracts. So for instance, the tower expenses would have been accrued for in that impairment charge. So you don't see those in the Q4 numbers. However, what you do see is just normal operating costs and accruals for normal operating costs that you have to run the network that's running through Q4. Hopefully, that makes sense.

[Operator Instructions] Our next question comes from Bryan Kraft with Deutsche Bank.

I had a couple, if you don't mind. First, I wanted to ask what the path is to getting the wireless business to profitability on an EBITDA basis? Secondly, I just wanted to ask you, how quickly do those connectivity expenses in the other segment go away over the course of 2026? It looks like about 70% might have been gone in 4Q based on the math I did. I don't know if that's right. But trying to figure out, does that go to 0 in 1Q or 2Q? And then the last part of my question is, is it still your expectation that total decommissioning costs will be in that $7 billion to $10 billion range? And is there any further granularity that you could share on the tax liability component of that?

Paul, do you want to take that?

Yes. So the first on the Q4 cost that you had for the other segments. What you're going to see is over time, as we decommission all of our tower sites that, that number will decline. As you pointed out, it's not down to 0 yet, but you'll see a big decrease in that in Q1 and Q2. One thing to keep in mind, though, those numbers do include that -- if you back into that number, it does include the noncash accretion on the lease liability. So like we talked about in the Q3 earnings call, we discounted back to today's dollars, the amounts that we owed on the lease and took that as an impairment charge. We need to accrete that up over time. And so that's probably about half of the number that you're seeing going through the P&L there.

Okay. And then on the -- on how do we get DISH Wireless positive, profitable. I've now been involved in the last couple of months in the day-to-day operations. And so the -- it's disappointing where we are after 4 years. But we're very, very close to a breakeven business there. And I can tell you the way I look at it. The way I look at it is I look at the total cost of running that, including the hybrid core because that obviously has cost. It doesn't have as much cost as the network, but it obviously has cost. And then I look at it for every new customer we get, are they a profitable customer. In other words, I know we're making profit on the customers we have today. We've already invested in those customers. [Technical Difficulty] I've seen and that we can do that. And -- but every company that we have here has to stand on its own. And we're not -- we're for-profit companies, and we have to make a profit in every -- in all our businesses. And so that will be the focus there. But we're close to being where we need to get to turn the corner, but we're not there yet. And then there was one other question, which -- I didn't quite understand the other question.

Is your expectation on the decommissioning cost in the $7 billion to $10 billion range that you had previously given. Is that still what you expect? And is there any further update you could give on the tax liability on the spectrum transactions?

Yes. I think that the -- I think we've written off about $16 billion on the network decommissioning, which included all the operational costs. And so it's a significant -- I mean we made a significant investment, and I think we wrote off about $16 billion. We think that in terms of taxes and further decommissioning that, that is somewhere in the -- I think we believe that's in the $5 billion to $7 billion range today. I think that's what we announced last quarter, but it's definitely -- there's nothing -- there's been no movement in our analysis of that yet. And obviously, it may take some time -- given the litigation, it may take some time to get the final answer. But it's in the $5 billion to $7 billion range is where we are today.

So sorry, $5 billion to $7 billion is your updated view versus the $7 billion to $10 billion previously or -- just trying to clarify that?

I think our really initial reaction was $7 billion to $10 billion. And I think when in Paris, maybe that number came out. But I think last quarter, I think we -- I think there was a range even in Paris of 5% to 10%, and I think we got that down to 5% to 7%. That doesn't mean -- I mean that's our best guess today, right, for taxes and decommissioning costs.

And to clarify, that's cash payments that we think we would make.

It's dynamic, as I mentioned in my opening remarks, taxes, liabilities, investments, everything else, value with SpaceX, everything else is interrelated. It's a dynamic picture. It's impossible, literally impossible to nail it down right now, given all the movements, some internal, some external beyond our control. So anything we give you outside of the estimation that we have, even the estimation we have is just an estimation. I mean, things are changing very rapidly, and it will be misleading for us to give you a very precise number that can change tomorrow afternoon. So just -- that's the best we could do today. But obviously, as the variables get reduced over time, we can give you a much narrower range.

Our next question comes from John Hodulik with UBS.

A couple of questions for Charlie, if I could. First, Charlie, any high-level thoughts on the Paramount-Warner Bros. deal? What that means for linear TV distribution? And maybe do you think it will affect the industry's ability to offer skinny bundles going forward, which seem to be driving a lot of the improvement we've seen in cord cutting? And then number two, I don't know how much you can comment on this given the upcoming auction, but just anything you can say about further spectrum sales, maybe timing or whether we should expect them and sort of the value of your sort of remaining spectrum holdings?

Yes. Well, on Paramount-Warner Bros, I'd say, we've had good relationships with both of those companies for a long, long time. Obviously, they're going to have a lot -- they're going to have a long regulatory process. So we'll have to see how that goes. But it's further concentration in an industry that is changing and -- technically. And I always worry when you're competing against your own distributors. I mean, when they have a direct line to the consumer and you're competing against that, and they're a valued vendor, that obviously will -- is something that we have to keep our eye on. But we'll wait for their filings, and they're both great companies and great management for both of those 2. So we'll see at the appropriate time whether we have any concerns. The -- and then on -- what was the second question?

Spectrum sales.

Spectrum sales, again, because of the auction, I'll be very -- I'm going to be very careful here. But look, it -- I think we agree with the leadership of the FCC that -- which is one of the things to do here is to get spectrum and get it used as quickly as we can. And that's led to the kind of situation that we're in today. And I think our goal is to find the spectrum that we continue to use -- continue to have is find a home for that, for the -- make sure that, that's going to get used in the quickest and fastest and the best way for consumers and for leadership, technical leadership in the United States. And I hope maybe we play a part in that, but we may not. So -- but it's still obviously a valuable asset that we have. So I don't think we have any further questions. So I just want to make one thing. We are not going to -- we don't plan today to have a conference call in a couple of months after the first quarter. We certainly will have filings, but I don't think we'll have a lot to add to what we had today. I think we do plan to have a conference call after the second quarter. I think that hopefully, regulatory and our company looks and Hamid's had time to get some structure around what he's doing. And I think we can give you a pretty good snapshot of where we're going. But we're -- obviously, we're optimistic about what we have and our ability to compete. And so we look forward to August. If there's material changes in the marketplace or something, we could have a call. But at this point, we believe it's going to be August or -- right into July or early August before we have another call unless something happens in the meantime, which we could have a call at any time, if that was the case. So thanks, everybody, for joining.

Thank you, everyone.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.