The Real Bear Case For $SATS
DOJ's Psychotic Need to Preserve a Fourth Network; A Battle of Ideology and Economic Reality
I feel like the three worse-case scenarios for SATS that I wrote about here are not satisfying. They treat the actors as irrational but ignore the real-world constraints that might make those actions look irrational only to outsiders. Well - here’s a real and satisfying bear case that would explain why EchoStar is trading at a 0.3x intrinsic value. Are you as excited about this as I am?
The Real Bear Case: DOJ Blocks a Spectrum Sale to the Big 3 Carriers
When a telecom player like EchoStar teeters on the brink of bankruptcy, you might think its assets would find a natural buyer in the big 3 carriers: Verizon, AT&T, or T-Mobile. After all, spectrum is scarce, mid-band is hot, the FCC wants to free up more spectrum and DISH holds a trove of underutilized licenses. But there’s a regulatory catch. The Department of Justice (DOJ), with its hawkish antitrust posture, might block any attempt to sell these licenses to the Big 3. That may seem strange from an investor’s perspective since EchoStar is a failed fourth network and what da hell are they going to do with the spectrum anyway! But before you poo poo on the idea, let’s look at this situation from the DOJ’s perspective.
DOJ's Enforcement Ideology in the Wireless Industry
The DOJ enforces a theory of competition. In the wireless industry, that theory is structural: four facilities-based carriers are better than three. More competition means lower prices, more innovation, and less consolidation of power. It doesn’t matter if the fourth player is inefficient and losing a boatload of money. It matters that it exists. There’s a lot of technical stuff that goes into this theory, which I won’t list here, but suffice to say, this idea has been entrenched at the Antitrust Division of the DOJ. Both Delrahim in 2020 and Slater now are big buyers of this idea. Three competitors will foster eventual price collusion, whereas four competitors will not. The bankruptcy of the fourth network is not an appropriate pushback to this ideology.
Historically, the DOJ has prioritized market structure over transactional efficiency. This is why it intervened in the AT&T/T-Mobile merger (blocked in 2011) and why it demanded the creation of a fourth carrier during the T-Mobile/Sprint merger (approved in 2019, but with strings attached). On 7/10/2025, in connection with the approval of the T-Mobile/U.S. Cellular transaction, Slater of the Antitrust Division of the DOJ said, “It is of concern to the United States that continued spectrum aggregation by the Big 3 threatens to impede the path for a fourth national player to emerge and challenge the entrenched incumbents with new and innovative offerings. Where future spectrum consolidation transactions threaten this path, the Antitrust Division stands ready to investigate and, if warranted by the facts and evidence, use its enforcement power to protect competition and American consumers.”
The legal weapon of choice for the DOJ is Section 7 of the Clayton Act, which prohibits acquisitions that may "substantially lessen competition."
How the DOJ Painted Itself into a Corner with the T-Mobile/Sprint Deal
In 2020, the DOJ approved the T-Mobile/Sprint merger, but only with the explicit condition that DISH Network would step into Sprint’s shoes as the fourth national wireless carrier. This was the linchpin of the entire decision.
DOJ enshrined this in a consent decree. They laid out detailed obligations for DISH to build a nationwide wireless network. And in doing so, the DOJ created a structural commitment: if DISH fails, the entire rationale for approving the merger collapses.
Now, with DISH/EchoStar facing financial distress, the DOJ is boxed in. If they allow the Big 3 to buy the spectrum, they would be conceding that the fourth network was a failed experiment, undermining not just their own credibility and the legal foundation of the 2020 deal but their competitive theory for the last 20 years in the wireless industry. It’s going to be an uphill battle to reverse the T-Mobile/Sprint merger, and breaking up the 3 carriers into 4 carriers has major legal ramifications.
If the Fourth Network Fails, What Are DOJ’s Options?
Becoming a viable fourth network is hard. DOJ’s insistence on it doesn’t mean unicorns and rainbows. Here are the three basic paths the DOJ could take if/when SATS fails:
1. Abandon the vision of a fourth network
Maybe they will reverse their stance on the fourth network like how they reversed themselves in the Jeffrey Epstein case recently, ha! This would be the easiest path procedurally, but the hardest politically and institutionally. It would invite scrutiny from Congress and the courts. It would also make it far more difficult for DOJ to justify future structural remedies in mergers. This is a bad precedent and probably the last resort for the DOJ.
2. Block any sale of spectrum to the Big 3
This is the 2nd least preferred outcome for the DOJ. The DOJ has consistently opposed consolidation of spectrum holdings among the incumbents, especially when it threatens to entrench their dominance. A distressed asset sale to AT&T, Verizon, or T-Mobile would almost certainly be challenged under Section 7 of the Clayton Act. DISH would sue the DOJ and most likely lose (the bar is very high and historical precedents are not encouraging). But even if the DOJ wins and the spectrum licenses are reclaimed by the FCC after years of litigation, those licenses would still be auctioned off to the big 3 carriers, defeating the original purpose of the DOJ. DOJ in this case would get nothing for blocking the sale of the spectrum, other than to discourage other players from becoming a fourth network. That’s a bad outcome for the DOJ and obviously DISH, not to mention the FCC. Everybody loses in this scenario. SATS equity would be a donut. I have a hard time believing this is the ultimate outcome, not because SATS equity would be a donut, but because this outcome doesn’t serve anybody.
It would also be unbecoming for the DOJ to treat DISH like a red-headed stepchild after DISH had agreed to step in as the fourth network. But the DOJ doesn’t owe anything to DISH - DISH stepped in to facilitate a merger that was going to be rejected otherwise.
3. Facilitate the creation of a new fourth network
This is the best option for the DOJ and the most ambitious option. DOJ could work behind the scenes to coordinate a structured transaction that transfers EchoStar’s spectrum, infrastructure, and possibly Boost Mobile to a new, better-capitalized player, whether that’s cable or even Starlink. DOJ’s treatment of DISH will be gentle, for it needs to induce the future sucker into its competitive vision.
A Coordinated Transaction to Rebuild a Fourth Network
If SATS files for bankruptcy and the spectrum sale is blocked, a coordinated transaction to rebuild a fourth network becomes the only way to preserve the DOJ's vision and equity value for SATS shareholders. The FCC will be happy with this outcome, as either cable or Starlink would use this spectrum much better than EchoStar.
In this scenario, the DOJ would likely engage with the FCC, bankruptcy court, and potential acquirers to structure an outcome where
EchoStar’s spectrum is preserved as a contiguous portfolio
A buyer commits to nationwide deployment and retail service
DISH’s Boost Mobile brand and MVNO contracts are transferred
DOES THAT LOOK FAMILIAR? Déjà vu. This transaction would require regulatory creativity and real capital. But it may be the only path that satisfies the DOJ’s structural goals.
The best and probably the only viable fourth network is CHTR/CMCSA. And they definitely know it.
The Worst-Case Scenario: Predation by Cable and the Big 3
So after all that, let’s talk about the real worst-case scenario. The real bear case isn’t incompetence or irrational behavior - it’s cold, rational predation.
In this scenario, a coordinated rescue deal materializes only because the Big 3 and Cable choose to wait and get the best price possible on DISH’s spectrum. They know DISH/EchoStar is running out of time and liquidity. So they stall, lowball, and wait for the inevitable: a forced liquidation where the alternative for DISH is a prolonged lawsuit against the DOJ that it will likely lose.
Does Grandpa Malone look like a nice guy? Maybe old age has softened him, but let’s look at his exploits in the cable industry, shall we?
Working Backwards: What Must EchoStar Do Now to Avoid This Outcome?
If EchoStar wants to avoid the worst-case scenario, it needs to do these things now:
Proactively engage with regulators - Shape the narrative now, not after Chapter 11. Build alignment with the DOJ and FCC on potential buyers, deal structures, and deployment commitments.
Position itself as the nucleus of the next fourth network - Whether through partnerships, asset splits, or strategic equity, EchoStar must pitch itself not as a failed experiment, but as the foundation for what comes next. The most obvious is to reach out to CHTR/CMCSA to proactively form MVNO partnerships and investment arrangements where EchoStar allies itself with the future fourth network.
Conclusion
How comfortable are investors with this narrow path? Can Ergen avoid the predation scenario? Is this why Ergen persists in his path to build the consumer business despite all signs of failure? Can Ergen hold on long enough for CHTR/CMCSA to become equally desperate to have their own mobile network?
In this previous write-up, we proposed that the scenario where Ergen pushes forward in the consumer wireless industry despite the poor odds as he lights money on fire is due to his grit. Maybe this scenario is the most likely scenario because he is a hamster on a wheel over the open water. He needs to run as fast as he can and hope to make it to shore before he drowns.
When Ergen signed up to become the fourth network in 2019, did he have any agreement with the DOJ on spectrum sales if he is not successful in becoming a 4th network? What was his plan B in that case, knowing that the DOJ is adamant on building up a fourth network?