Musk’s SpaceX to Buy EchoStar Spectrum for $17 Billion

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1:55Alexis Christoforous:And more deal-making for Elon Musk. His SpaceX has reached a deal worth about$17 billion with EchoStar for spectrum licenses that it's going to use to beef up its Starlink satellite network. We want to talk more about this deal and what it means for both companies and the stock of EchoStar, which is doing quite nicely today. We want to bring in John Butler, Bloomberg Intelligence Senior Telecom Analyst. He's joining us from our Bloomberg Princeton office. John, good to see you. Let's just talk about what this deal is going to allow SpaceX to do that it can't currently do. So the key to this deal, Alexis, is a spectrum called AWS-4.

2:38So if you look at Starlink and its rivals in the satellite space, they all hold spectrum, but they're not allowed to offer wireless spectrum. I'm sorry, wireless services over that spectrum. AWS for spectrum, according to the FCC, can be used flexibly. It's called flexible use spectrum, meaning the satellite providers can offer anything from mobile services to satellite data, download services, video, whatever. It's open use spectrum, if you want to think of it that way. And so Starlink getting its hands on this key spectrum will allow them at some point in the future to potentially enter the wireless market as a competitor to AT &T, Verizon, and T-Mobile.

3:30Alexis Christoforous:So EchoStar's shareholders seem to like this deal. The stock is up about 14 % right now. What are they going to do with the proceeds? What will EchoStar do with the proceeds of the sale? So for EchoStar, it's a very good deal as well. They have really struggled to get their wireless service off the ground. They've been building this 5G wireless network and have a relatively weak prepaid brand called Boost in it. And they've really struggled there. So this brings in much needed funds for them to pay down debt. They've been a bit stretched on that front, over leveraged. and, you know, this deal together with a deal a couple of weeks ago with AT &T is going to bring in billions of dollars to reduce debt.

4:17That's number one. And number two, it brings in fresh capital for them to invest in the business. And I have a feeling they're probably going to take a step back and reevaluate the strategy here based on the fresh funding and decide what the best avenues of growth may be going forward.

4:36Alexis Christoforous:And I'm wondering if this is going to satisfy the FCC, this deal, because I know that they were sort of on EchoStar's case, if you will. They wanted them to sell some of their airwaves as the company looks to roll out its 5G technology. I know they sold some spectrum licenses to AT &T recently. So do you think this is going to sort of take the FCC off their backs? I do. I mean, I think Starlink was working with the FCC. They had written a letter about EchoStar's underuse of this spectrum. Starlink obviously really wants to get their hands on it. And I think the FCC really took their side on this one.

5:18I think they understood that Echostar, being the only owner of this flexible use spectrum, had not really put it to use to date. So in their view, it was being underutilized and being such a critical asset, felt that, you know, a sale might make sense. And so they really, Echostar really got into it with the FCC trying to protect those licenses. But in the end here, I think if you want to think of it this way. The FCC won the day. And net-net, I think it's a good deal for both EchoStar and Starlink and the FCC.

5:56Alexis Christoforous:Now, I know SpaceX or Starlink had a deal with T-Mobile, right? How is this spectrum acquisition with EchoStar different, if at all? So, I think ultimately, Starlink could go from being a partner with T-Mobile to being a competitor editor of T-Mobile's. As I said a moment ago, this spectrum opens the door for them to get into wireless directly without having to partner with a terrestrial carrier. The current deal with T-Mobile basically has Starlink. I think the best way to think about it is they're almost like a tower company. They're providing the space-based cell sites, if you will, to carry T-Mobile traffic, and they get paid a fee for that, but they're not earning the level of profits that you could as a direct carrier.

6:50So down the road, Starlink understanding this wants to enter the cellular business directly. They have a lot to do before that happens, but I think it longer term puts the deal with T-Mobile in jeopardy.

7:06Alexis Christoforous:And in the remaining seconds, we have a$17 billion of fair price for these Spectrum licenses, do you think? You know, Spectrum's a very illiquid market, so it's tough to gauge valuations. But in my mind, I look at it as a fair price, given the potential, again, for Starlink to enter this huge market down the road. And they're very well capitalized, as you know. So I think those two factors together probably make it a good deal. Stay with us. More from Bloomberg Intelligence coming up. after this. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal.

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9:57Alexis Christoforous:or watch us live on YouTube. We've got a big bank merger to talk about here this Monday. PNC agreeing to buy Colorado's first bank for about$4 billion. This is a big push by PNC to really go coast to coast. And here to break it down for us is Herman Chan, Bloomberg Intelligence's senior analyst for U.S. regional banks, joining us live here in our New York studios. Herman, good to see you. Thanks for having me. First off, I'm just wondering, are regulators going to be okay with this? because the combined company is going to hold 15 % of deposits in, what is it, Colorado? Yeah, in the Denver market.

10:32So that was a real push for this deal in particular. But the regulatory landscape has been really great for banking and getting bank deals done. That's why you've seen some more bank deals over the past couple months. You saw Huntington, which is based in Ohio, go into Texas for Veritex. And you've seen a merger of vehicles in the southeast with Synovus and Pinnacle. And this is sort of like the third large regional bank deal over the past couple months. So it just sort of signals that the Trump administration is really open for a bank of an aim. And this is not PNC's first attempt at really expanding its Colorado presence.

11:10It had previously sought to open 16 locations in Colorado. Why is Colorado such a hot market for PNC? I would take a step back and sort of highlight that PNC, which is mostly in the Northeast, mid-Atlantic, Midwest. They've expanded across the Sunbelt states and Colorado with the 2021 deal for BBVA USA. And they sort of doubled down on those markets with this expansion plan to grow organically by opening up new branches. And this deal today that they announced really sort of supports that growth and accelerates it in Colorado and in Arizona.

11:48Alexis Christoforous:So Herman, you obviously, you're a specialist here in U.S. regional banks. This is your sweet spot. So I'm just wondering, as you look out onto the landscape now, who might be the next takeover candidate? Who might we be talking about in the not too distant future? Yeah. So you've seen some of these deals where these slower growth Midwest banks grow into areas like Texas, Florida, Colorado. So the banks are sort of smaller in size. And we're talking about, First Bank's about$20 billion in assets. So banks of somewhere that size in these higher gross markets are really attractive to some of these larger institutions.

12:28So with this purchase, PNC's total assets approaches$600 billion. It will bring it closer to the number one regional bank, which is U.S. Bancorp. Is U.S. Bancorp still a regional bank? I would say there are three super regional banks. And I would put PNC, U.S. Bancorp, and Truist, where they're sort of below that 750 mark, but larger than your typical regional bank. And PNC now is a coast-to-coast lender and have operations all from the Northeast all the way down to Florida, Texas, California. So you can't really call them a regional bank at this point. I would view them as more super regional.

13:11Alexis Christoforous:And I want to tie it back to the Fed next week and interest rates, because don't all roads really lead there at this point? And I want to talk about what, again, if this is going to be an environment of lower interest rates for the foreseeable future, what is this going to mean for the banks, but especially these smaller regional banks? Because I'm thinking it may even squeeze their profitability more. Yeah, yeah. It's interesting because we had a few Fed rate cuts at the end of last year. And the regional banks that I cover were able to navigate that pretty well. They're able to keep their net interest margins, which is a key metric for profitability, fairly stable.

13:44And that's one of the reasons why they've been able to do that is they've been able to lower their deposit costs, which was one of the things that really is a key metric for banks to really show top line growth. On top of that, lower interest rates could help loan growth. You've seen some companies like Rockets Mortgage be very ebullient for lower interest rates. And so that could help improve some of the demand for lending. And that's something that we're seeing so far over the first half of the year. So they'll make it up in volume. What they lose in profitability, they plan to make up in volume.

14:23They can make it in volume. you'll see some dents in like the rates that they charge for loans, but they'll also make it up in volume and lowering their funding costs. When you look at the landscape overall of M &A in the banking sector, it feels like we've been waiting for something to happen for a long time. And maybe this is kind of the domino, the first domino that falls. Will the big banks, and here I'm talking about the JP Morgan's, the Bank of America's, Wells Fargo's, will they play any role in this consolidation? They're already too big. So they are prohibited from doing such deals because they just have dominant market share in their markets.

15:02One thing that we did see during the height of the regional banking crisis a couple years back is that JPMorgan bought First Republic in an FDIC failed bank acquisition. So in the sense that if we do get to a place like that, that's when the big banks can play. but in a straight M &A type scenario. To clean up messes. They can clean up messes. They can clean up messes, but they can't outwardly buy a bank at this point. They're just way too big.

15:32Alexis Christoforous:And just what about the consumer out there only shopping for the best deal? You know, it used to be that these smaller regional banks would be the place to go for the better CD rates, right? Or a more friendly mortgage terms. Is that still the case in the 30 seconds we've got? Yeah, sure. So that's really great about these markets that PNC is going to, where they can have really dominant market share in Denver and Arizona. And just having that marketing and having the branches really helps with deposit taking and helping your consumer out. Stay with us. More from Bloomberg Intelligence coming up after this.

16:10Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Amazon Health AI presents Painful Thoughts.

16:46Why did I search the internet for answers to my cold sore problem? Now I'm stuck down a rabbit hole filled with images of alarmingly graphic sores in various stages of ooze. I can clear my search history, but I can never unsee that. Don't go down the rabbit hole. Amazon Health AI gets you the right care fast. Healthcare just got less painful. Innovation is what gets your business to market. And Wasabi is designed to give every business a shot at competition. How? Break free from skyrocketing storage costs and unpredictable egress fees from old and top-heavy legacy providers. You know, the big guys.

17:28Wasabi is the world's hottest cloud storage company and the go-to provider for professional and collegiate sports teams and leagues around the world. And here's why. Innovation. From Wasabi's AI-enabled intelligent media storage, Wasabi Air, to the industry's only cloud storage service with triple protection against cybercriminals, data deletion and ransomware, the world's top companies trust Wasabi. Remember, Wasabi is up to 80 % less than market competition and doesn't charge a cent for businesses to access their own data. Wasabi, another championship story. Check them out for free at wasabi.com.

18:06Wasabi Hot Cloud Storage, proud partner of iHeart Podcast Network.

18:13you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple car play and android auto with the bloomberg business app listen on demand wherever

18:24Alexis Christoforous:you get your podcasts or watch us live on youtube want to uh talk a little commercial real estate now call me crazy but i actually get excited scarlet about commercial real estate because Right, John? Because I think it tells us a lot about the broader economy when we look at how it's doing. Yeah, it's long term investments. And so they don't move. Things aren't reacting to day to day movements and expectations on interest rates. But once rates are moving down, then you can expect slow, gradual movement. But see change in how people perceive it. So where are we now? Right after years of high inflation, limited growth is the commercial real estate industry coming back to life.

19:02Alexis Christoforous:We wanted to bring in a pro. She's here in our New York studio, Lisa Nee, managing partner and head of real estate at Eisner Amper. Lisa, thanks so much for being with us. Just in my little cosmic world here in Midtown East of Manhattan, I'm seeing storefronts that had gone empty for so long. Now having tenants, I'm going to call it a mini upswing. Am I right in saying that? Well, thank you for having me. And yes, I get excited too when we talk about commercial real estate. So we're in the right group. So office in New York has definitely taken a new surgence again. And so I think I made a prediction at the beginning of this year that's saying by the end of 2026, that we were going to be pretty much at capacity for New York city and vacancy for office is definitely moving down.

19:45And so rents in New York city are about little under$75 a square foot. And the level of volume is really close to 2019, which is really amazing when you're seeing that. So pre-pandemic levels. Pre-pandemic levels is the amount of volume that we've seen in office leasing in New York City. And you can be excited about other cities, San Francisco as well. We talked about earlier in the year with AI dollars being spent. So when you look at$55 billion of AI that has been spent in San Francisco, rents there are about$72 a foot. So for class, I know that's really exciting. So for class A buildings in San Francisco area, that's where the money's going.

20:22Now, whether we have a bubble or a boom or what's going on with AI, it remains to be seen. But people are initial reports are that people are excited and they do see productivity with AI dollars being spent. So, you know, the excitement, I'm excited. It's there. It's real. We can feel it from you, Lisa. So it makes sense in San Francisco. It's an AI story. What's the story here in New York? Because the call for folks to return to work, the city being busy once again, has been in process for a couple of years now. Is there anything that kind of flipped a switch? So it's, again, what's here in the market in demand.

20:57And so there wasn't a lot of office being put back into the market. And so now people are absorbing those office units are there. We always know New York is still a hub for financial, for entertainment, for all the still capital of the world. So people want to be here. They want to live here. They want to work here and they want to be in that environment. So just creating that excitement around New York again is really going to help with the vacancies and bring back the retail and the retail experience to life, which what you noticed earlier on.

21:24Alexis Christoforous:Yeah, I mean, there's a big high rise going up not too far from where I live. And I'm just wondering who the anchor stores on the bottom will be, because sometimes those those buildings go up and those anchor stores remain empty for a long time. So most of those projects have the anchor tenants pretty much in place when when they're penciling or they're doing their mapping out the deals. And so making sure that it really does create that energy and that vibe for that, for the multifamily. And again, when you look at multifamily, you really have to make sure that you're able to sustain the construction costs and the zoning.

21:54And so a lot of goes into those projects to make sure that those will really work. And everybody wants it to work. That's why we have the city of yes mandates now and things are going through. So really the excitement I think is there. And I think it's just, as you had said before, it's the long-term planning. It's not going to change overnight. it's really knowing that where we're going to be in the next five to 10 years with some of these properties. But the rules of the road have changed, right? You had the one big beautiful bill, which, you know, the president is a former property developer and in many ways still is a property developer.

22:26So, I mean, he knows what the industry wants and likes. What did you see in your industry from that bill? So the real estate industry fared fairly well with one big beautiful bill. There's lots of incentives for both affordable housing, for low income housing credits that were awarded by the federal government. What the states do are now a different story of how they award those experience points for affordable housing. Same thing with qualified opportunity zones, where there is in the one big beautiful bill, there are incentives to go for some of these economic zones and create new spaces in there, things with bonus depreciation.

23:00So the incentives are there in one big beautiful bill. It's whether or not the states and the federal governments are going to be able to work together to make sure that developers can still build in those areas that really, really do need economic development