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

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And we're deal making for Elon Musk. His SpaceX has reached a deal worth about seventeen billion dollars 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. I want to bring in John Butler, Bloomberg Intelligence senior at Telecom Analyst. He's joining us from our Bloomberg Princeton office. John,

So the key to this deal alexis is a spectrum called AWS four. So if you look at Starlink and its sprivals 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 four 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

So Echostars shareholders seem to like this deal. The stock is up about fourteen percent right now. What are they going to do with the proceeds? What will Echo Star do with the proceeds of the sale?

So for Echostarre, 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 five G wireless network and have a relatively weak prepaid brand called Boost 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 and T is going to bring in

And I'm wondering if this is going to satisfy the FCC this deal, because I know that they were sort of on Echo Star's case, if you will. They wanted them to sell some of their airwaves as the company looks to roll out its five G technology. I know they sold some spectrum licenses to AT and 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 Echostars under use of this spectrum. Starlike obviously really wants to get their hands on it. And I think the FCC really took their side on this one. I think they understood that EchoStar, being the only owner of this flexible use.

Now I knew 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 of Team Mobiles. 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

And in the remaining seconds we have is seventeen billion dollars a fair price for the spectrum licenses? Do you think?

You know? Spectrums a very i liquid market, so it's tough to gauge valuations. But in my mind, I look at it as a fare price given the potential again for Starlink to enter this huge market down the road, and they're very well capped bpitalized as you know, so I think those two factors together probably make it a good deal.

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I've got a big bank merger to talk about here this Monday, PNC agreeing to buy Colorado's first bank for about four billion dollars. This is a big push by PNC to really go coast to coast and here to break it down for US as Herman Shan Bloomberg Intelligence as senior analyst for US regional banks joining us live here in a New York studios. Herman, good to see you.

Thanks for having me.

First off, I'm just wondering our regulator is going to be okay with this because the combined company is going to hold fifteen percent of deposits in what is it, Colorado.

Yeah, in the Denver market. So that's what's real push for this deal in particular. But the regulartory 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 of months. You saw Huntington, which is based in Ohio, go into Texas for Vera tex And you've see in emerging vehicles in the Southeast with so Novas and Pinnacle, And this is sort of like the third large regional bank deal over.

The past couple of months.

So it just sort of signals that the bank, the Trump administration is really open for bank of an am.

And this is not PNC's first attempt at really expanding its Colorado presence. It had previously sought to open sixteen locations in Colorado. Why is Colorado such a hot market for P ANDC?

Right?

I would take a step back and sort of highlight that the P and C, which is mostly in the Northeast, mid Atlantic a Midwest, that they've expanded across the sun Belt states in Colorado with the twenty twenty one deal for BBVA US and they sort of double 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.

So, Herman, you obviously you're a specialist here in US 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 the first banks about twenty billion in assets, So banks of Slummer of that size in these higher growth markets are really attractive to some of these larger institutions.

So with this purchase, PNC's total assets approaches six hundred billion dollars. It will bring closer to the number one regional bank, which is US Bank Corp.

Is US Bankrup still a regional bank?

Yeah, I would say there are three super regional banks, and I will put P and C, US Bank Corp and Truest where they're sort of below that seven to fifty mark, but larger than your typical regional bank. And they P and C now is a coast to coast lender, so 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.

And I want to tie it back to the FED next week in interest rates, because don't all roads really lead there? At this point, 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 federick cut 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. And 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

Loan growth.

You've seen some companies like Rockets Mortgage be very abuiliant 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.

They 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 and 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. Yeah, well, the big banks and I'm here, I'm talking about the JP Morgans, the Bank of America's well as Fargo's.

Will they play any role in this consolidation.

They're already too big, so there's that they are prohibited from from doing such deals because they just have dominant market share in their markets. One thing that we did see during the height of the regional banking crisis a couple of years back is that JP Morgan bought First Republic in an FDIC failed bank acquisition. So if we in the sense that if there we do get to a place like that, that's when the big banks can play, but in a straight M and A type scenario.

To clean up messes. They can clean can't.

Clean up messes, but they can't outwardly buy a bank at this point, they're just way too big.

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 thirty seconds we've got Yeah?

Sure.

So that's what really great about these markets that P and C 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.

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I want to talk a little commercial real estate. Now, call me crazy, but I actually get excited, Scarlett about commercial real estate, right, John, because I think it tells us a lot about the broader economy. Let me 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? We wanted to bring in a pro. She's here in on New York studio, Lisa, the 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.

Well, thank you for having me, And yes, I get excited too while we talk about commercial real estate.

So we're in the right group.

So office in New York has definitely taken a new surgeons again. And so I think I made a prediction at the beginning of this year that's saying by the end of twenty twenty six that we were going to be pretty much at capacity for New York City, and

San Francisco as well.

We talked about earlier in the year with AI dollars being spent. So when you look at fifty five billion dollars of AI that was gone has been spent in San Francisco rents, there are about seventy two dollars 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.

Now, 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 it's there, it's real.

We can feel it from you, Lisa, So it makes sen sense. 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? And 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 that, it's still a 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 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 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 they're penciling or they're doing they're mapping out the deals and so making sure that it really does create that energy and that vibe 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 and so a lot of goes into those projects to make sure that those

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, So 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 fed fairly well with One Big Beautiful Bill. There's 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's 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 appreciation. So 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 and growth.

You talked about Class A buildings a moment ago. I know Boston has been having some real struggles there and what happens to the non Class A buildings. So all the other buildings that would need to be retrofitted or that people they just don't seem that desirable anymore given these new buildings coming up with amenities.

So I was in Boston maybe a month ago, and that Seaport district looks great and vibing and.

Doing really things.

So the A market, as you said.

Before, is going to fare very well.

The bee and the obsolete buildings are really going to be the ones that struggle, and that's what's going to remain the scene is does the capital markets, which there's a lot of money out there, where are they going to put those investments to put back into the marketplace. Is it going to continue in the Class A or is somebody going to come and try to revamp those Class bs and the obsolete buildings or what are we

I was there just dropping off my son to college a couple of weeks ago, and we went for some seafood down by the seaport and it was bustling and it was hard to get a reservation.

Yeah, I mean that feels like every city these days. I'm telling you, Lisa, how much of your day or how many of your conversations focus around data centers, because that is an area you're smiling alright aside.

Can tell us Polley, would you say more than half?

I wouldn't say more than half, but it's definitely an area of interest of where people are dedicating to time to see where it makes sense if they should be investing in data centers building data centers.

It's interesting we talk.

With real estate about square feet everything square foot, but on data centers it's on energy consumption and how much energy usage it is in those centers.

So it's a little bit different of a mine shift and change.

And the places that or the regions that can house these centers are much different than when we're talking the downtown Boston and so really it's an entirely different niche within industrial figuring out to make sure that if where dollars get allocated and the excitement around those data centergy and energy, I have to make sure I say it energy consumption.

In the thirty seconds, we have left the most affordable commercial real estate market right now. Oh that's a tough one.

That is a tough one.

I think when people are looking everyone still likes the sun belts and the mountain regions.

Sure is still because.

Again, when we talk about affordable, it has to be where people want to be, and so you need to look to see where people are moving towards and where they want to be around interest rates matter because when we talk affordable, it's what we're going to see what happens, what the Feds do in this month, how many basis points that they reduce interest rates and affordable definitely goes hand in hand with worth seeing that, and we didn't talk about tariffs, thankfully.

But both both are uncertain days.

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