SpaceX's Biggest Victim Yet? Starlink's 55-Year-Old Rival Files for Bankruptcy

SpaceX (NASDAQ: SPCX ) has reshaped the satellite and space industry, and its first earnings report since going public highlighted plans to expand that disruption.

One early casualty may be Hughes, the satellite internet business owned by EchoStar Corporation (NASDAQ: ECHO ), which filed for Chapter 11 bankruptcy ahead of SpaceX’s report.

EchoStar announced Monday that Hughes filed for voluntary reorganization to strengthen its balance sheet and shift its strategy away from consumer growth toward B2B, government and defense customers.

In EchoStar’s release, the commentary centered on bondholders and stakeholders and a plan for capital structure, suggesting that debt is the key reason for the bankruptcy and restructuring.

Debtors have $1.5 billion in principal that matured on Aug.

1, with payments due on Aug.

3, 2026.

A court filing says the debtors are not able to pay back those notes.

The court filing also mentions a dispute between the debtors, EchoStar, and non-Debtor subsidiaries, including claims of alleged fraud by EchoStar and its management team.

A letter claims that Hughes paid out dividends to EchoStar, made income tax reimbursements to EchoStar.

The claims also say that EchoStar now refers consumer subscribers to SpaceX, potentially hurting the Hughes business.

Hughes Blames Low-Earth Orbit Rivals for Its Collapse Founded in 1971, Hughes has sold satellite internet since 1996.

Thirty years later, the company is declaring bankruptcy and SpaceX’s plans to launch Starlink Mobile may be the reason.

In the bankruptcy court filing, Chief Restructuring Officer Robert Del Genio spells out the low-earth orbit (LEO) companies to blame. "That calculus has now changed as competitors that have successfully deployed LEO satellite constellations have established themselves in the market, including Space Exploration Technologies Corp ("SpaceX"), Amazon Leo, and other operators," Del Genio said.

Del Genio says the LEO satellites are able to deliver "much faster service" and with "reduced costs for consumers." "Competitors have achieved significant scale and coverage across North America and Latin America, competing directly with the Company’s HughesNet service" Read Also: SpaceX Stock Falls: Gene Munster Calls Q2 ‘A Blow Out’ — ‘Market Missing the Point’ Starlink’s Growing Customer Base On Wednesday, SpaceX announced that its paying Starlink subscribers had more than doubled year-over-year, hitting 12 million.

The most recent earnings report from EchoStar saw the company report 622,000 broadband subscribers, down by around 59,000 in the quarter.

The company has seen its broadband subscribers decline by more than 50% since early 2022, when the figure was around 1.4 million.

As mentioned in the court filing above, EchoStar is now part of a fee-based referral program that allows subsidiaries like HughesNet to refer customers directly to Starlink.

That comes as part of a spectrum deal made between EchoStar and SpaceX.

The deal brought in around $8.5 billion in cash and $8.5 billion in SpaceX stock to EchoStar.

The stock is estimated to represent around 2 to 3% ownership of SpaceX, worth around $28.8 billion to $43.2 billion at the time of writing.

SpaceX President Gwynne Shotwell sent a warning call out to AT&T (NYSE: T ), Verizon Communications (NYSE: VZ ) and T-Mobile US (NASDA:TMUS) during Wednesday’s conference call.

Shotwell said she expects Starlink Mobile to compete with the Big 3 and their $600 billion annual market.

The SpaceX president said Starlink will take "quite a few" customers from the three competitors.

With a focus on eliminating dead zones and reliability, Shotwell is betting on Starlink.

For decades, Hughes and others dominated the satellite internet game.

Starlink is a relatively new player in that market, but as one bankruptcy court filing shows, could be taking companies out along the way.

Read Also: SpaceX Caught in a ‘Capex Tug of War’ — Dan Ives Says Investors Are ‘Buying Musk, Buying the Vision’ Photo Courtesy: JOCA_PH on Shutterstock.com