Property and Equipment and Intangible Assets

12 Months Ended

Dec. 31, 2020

Property and Equipment and Intangible Assets

Property and Equipment and Intangible Assets

9.     Property and Equipment and Intangible Assets

Property and Equipment

Property and equipment consisted of the following:

	Depreciable
	Life			As of December 31,
	(In Years)			2020		2019
				(In thousands)
Equipment leased to customers	2	-	5	$	1,736,660	$	1,861,668
Satellites (1)	2	-	15		1,734,024		1,855,096
Satellites acquired under finance lease agreements	10	-	15		888,940		888,940
Furniture, fixtures, equipment and other	2	-	20		2,091,271		2,010,094
Buildings and improvements	5	-	40		370,941		349,347
Land		-			17,810		17,810
Construction in progress (1)		-			126,303		278,083
Total property and equipment					6,965,949		7,261,038
Accumulated depreciation					(4,783,616)		(4,554,856)
Property and equipment, net				$	2,182,333	$	2,706,182

(1) During the year ended December 31, 2020, we wrote down the T1 satellite net book value of $48 million (net of accumulated depreciation of $18 million) and the D1 satellite net book value of $55 million to their estimated fair value of zero. In addition, during the year ended December 31, 2020, we impaired $227 million for capitalized costs of equipment, labor and other assets related to the narrowband IoT deployment that would not be utilized in our 5G Network Deployment. As a result, we recorded a $330 million non-cash impairment charge in “Impairment of long-lived assets” on our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 2 for further information.

Construction in progress consisted of the following:

	As of December 31,
	2020		2019
	(In thousands)
Software	$	43,555	$	51,493
Wireless (1)		72,817		207,814
Other		9,931		18,776
Total construction in progress	$	126,303	$	278,083

(1) During the year ended December 31, 2020, we impaired the capitalized costs of equipment, labor and other assets related to the narrowband IoT deployment that would not be utilized in our 5G Network Deployment, resulting in a $227 million non-cash impairment charge in “Impairment of long-lived assets” on our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 2 for further information.

Depreciation and amortization expense consisted of the following:

	For the Years Ended December 31,
	2020		2019		2018
	(In thousands)
Equipment leased to customers	$	290,081	$	371,292	$	444,928
Satellites (1)		202,724		115,100		100,343
Buildings, furniture, fixtures, equipment and other		128,876		136,783		137,055
Intangible assets (2)		92,871		7,402		29,698
Total depreciation and amortization	$	714,552	$	630,577	$	712,024

(1) The increase in 2020 resulted from the Master Transaction Agreement pursuant to which, on September 10, 2019, certain satellites were transferred to us. See Note 20 for further information.

(2) The increase in 2020 resulted from the completion of the Boost Mobile Acquisition and the Ting Mobile Acquisition. See Note 6 for further information.

Cost of sales and operating expense categories included in our accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) do not include depreciation expense related to satellites or equipment leased to customers.

Satellites

Pay-TV Satellites. We currently utilize 13 satellites in geostationary orbit approximately 22,300 miles above the equator, eight of which we own and depreciate over their estimated useful life. We currently utilize certain capacity on one satellite that we lease from EchoStar, which is accounted for as an operating lease. We also lease four satellites from third parties: Ciel II, which is accounted for as an operating lease, and Anik F3, Nimiq 5 and QuetzSat-1, which are accounted for as financing leases, are each depreciated over their economic life.

As of December 31, 2020, our pay-TV satellite fleet consisted of the following:

		Degree	Lease
	Launch	Orbital	Termination
Satellites	Date	Location	Date
Owned:
EchoStar VII (1)	February 2002	119	N/A
EchoStar X (1)	February 2006	110	N/A
EchoStar XI (1)	July 2008	110	N/A
EchoStar XIV (1)	March 2010	119	N/A
EchoStar XV	July 2010	61.5	N/A
EchoStar XVI (1)	November 2012	61.5	N/A
EchoStar XVIII	June 2016	61.5	N/A
EchoStar XXIII (1)	March 2017	67.9	N/A
Leased from EchoStar (2):
EchoStar IX	August 2003	121	Month to month
Leased from Other Third Party:
Anik F3	April 2007	118.7	April 2022
Ciel II	December 2008	129	January 2022
Nimiq 5 (1)	September 2009	72.7	September 2024
QuetzSat-1 (1)	September 2011	77	November 2021

(1) Pursuant to the Master Transaction Agreement, on September 10, 2019 these satellites and satellite service agreements were transferred to us. See Note 20 for further information.

(2) See Note 20 for further information on our Related Party Transactions with EchoStar.

AWS-4 Satellites. On March 2, 2012, the FCC approved the transfer of 40 MHz of wireless spectrum licenses held by DBSD North America, Inc. (“DBSD North America”) and TerreStar Networks, Inc. (“TerreStar”) to us. On March 9, 2012, we completed the acquisitions of 100% of the equity of reorganized DBSD North America and substantially all of the assets of TerreStar, pursuant to which we acquired, among other things, certain satellite assets and 40 MHz of spectrum licenses held by DBSD North America (the “DBSD Transaction”) and TerreStar (the “TerreStar Transaction”), which licenses the FCC modified in March 2013 to add AWS-4 authority (“AWS-4”). See Note 16 for further information. As a result of the DBSD Transaction and the TerreStar Transaction, we acquired three AWS-4 satellites, including two in-orbit satellites (D1 and T1) and one satellite under construction (T2). During the fourth quarter 2014, EchoStar purchased our rights to the T2 satellite for $55 million.

		Degree	Estimated
	Launch	Orbital	Useful Life
Satellites	Date	Location	(Years)
Owned:
T1	July 2009	111.1	14.25
D1	April 2008	92.85	N/A

GAAP requires that a long-lived asset be reviewed for impairment when circumstances indicate that the carrying amount of the asset might not be recoverable.

During the first quarter 2020, in light of, among other things, certain developments related to the Sprint-T-Mobile merger, we determined that revisions to the AWS-4 build-out deadlines were probable, which we determined to be a triggering event. Accordingly, we quantitatively assessed the value of the AWS-4 satellites (T1 and D1) and wrote down the fair value of the satellites to their estimated fair value of zero, resulting in a $103 million non-cash charge recorded in “Impairment of long-lived assets” during the year ended December 31, 2020 on our Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2019 and 2018, management concluded that no triggering event occurred for either year for the AWS-4 satellites.

Satellite Anomalies

Operation of our DISH TV services requires that we have adequate satellite transmission capacity for the programming that we offer. While we generally have had in-orbit satellite capacity sufficient to transmit our existing channels and some backup capacity to recover the transmission of certain critical programming, our backup capacity is limited.

In the event of a failure or loss of any of our owned or leased satellites, we may need to acquire or lease additional satellite capacity or relocate one of our other owned or leased satellites and use it as a replacement for the failed or lost satellite. Such a failure could result in a prolonged loss of critical programming or a significant delay in our plans to expand programming as necessary to remain competitive and thus may have a material adverse effect on our business, financial condition and results of operations.

In the past, certain of our owned and leased satellites have experienced anomalies, some of which have had a significant adverse impact on their remaining useful life and/or commercial operation. There can be no assurance that future anomalies will not impact the remaining useful life and/or commercial operation of any of the owned and leased satellites in our fleet. See Note 2 for further information on evaluation of impairment. There can be no assurance that we can recover critical transmission capacity in the event one or more of our owned or leased in-orbit satellites were to fail. We generally do not carry commercial launch or in-orbit insurance on any of the satellites that we own and therefore, we will bear the risk associated with any uninsured launch or in-orbit satellite failures.

Intangible Assets

As of December 31, 2020 and 2019, our identifiable intangibles subject to amortization consisted of the following:

	As of December 31,
	2020				2019
	Intangible		Accumulated		Intangible		Accumulated
	Assets		Amortization		Assets		Amortization
	(In thousands)
Technology-based	$	63,078	$	(58,453)	$	63,077	$	(57,414)
Trademarks (1)		133,428		(40,283)		37,010		(32,619)
Contract-based (1)		41,500		(23,000)		4,500		(4,500)
Customer relationships (1)		515,576		(89,301)		23,633		(23,633)
Total	$	753,582	$	(211,037)	$	128,220	$	(118,166)

(1) The increase in intangible assets resulted from the completion of the Boost Mobile Acquisition and the Ting Mobile Acquisition. See Note 6 for further information.

These identifiable intangibles are included in “Intangible assets” on our Consolidated Balance Sheets. Amortization of these intangible assets is recorded on a straight-line basis over an average finite useful life primarily ranging from approximately one to 20 years. Amortization was $93 million, $7 million and $10 million for the years ended December 31, 2020, 2019 and 2018, respectively. The increase in amortization expense during 2020 primarily resulted from the Boost Mobile Acquisition and the Ting Mobile Acquisition.

Estimated future amortization of our identifiable intangible assets as of December 31, 2020 is as follows (in thousands):

For the Years Ended December 31,
2021	$	157,105
2022		130,198
2023		127,809
2024		69,512
2025		11,676
Thereafter		46,245
Total	$	542,545

Goodwill

Goodwill represents the excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed as of the acquisition date and is not subject to amortization but is subject to impairment testing annually or whenever indicators of impairment arise. The non-recurring measurement of fair value of goodwill is classified as Level 3 in the fair value hierarchy. As of December 31, 2020 and 2019, our goodwill was $218 million and $126 million, respectively, which substantially all relates to our wireless segment. The increase in goodwill during 2020 resulted from the completion of the Boost Mobile Acquisition. See Note 6 for further information.

FCC Authorizations

As of December 31, 2020 and 2019, our FCC Authorizations consisted of the following:

	As of December 31,
	2020		2019
	(In thousands)
Owned:
DBS Licenses	$	677,409	$	677,409
700 MHz Licenses		711,871		711,871
MVDDS Licenses		24,000		24,000
AWS-4 Licenses		1,940,000		1,940,000
H Block Licenses		1,671,506		1,671,506
600 MHz Licenses		6,211,154		6,211,154
28 GHz Licenses		2,883		2,883
24 GHz Licenses		11,772		11,772
37 GHz, 39 GHz & 47 GHz Licenses		202,533		—
Subtotal		11,453,128		11,250,595
Non-controlling Investments:
Northstar		5,618,930		5,618,930
SNR		4,271,459		4,271,459
Total AWS-3 Licenses		9,890,389		9,890,389
Capitalized Interest (1)		5,560,422		4,638,519
Total	$	26,903,939	$	25,779,503

(1) See Note 2 for further information.