Sept 8 (Reuters) - EchoStar on Monday agreed to sell wireless spectrum licenses to SpaceX for its Starlink satellite network for about $17 billion, in a bid to allay regulatory concerns over its underutilization of assets for 5G service expansion.

The news sent shares of the satellite communications provider surging nearly 21% in morning trading.

Telecommunications stocks slipped after the announcement, T-Mobile and Iridium fell 5%; AT&T fell 4%; Verizon fell 3%.

Satellite firm AST SpaceMobile also fell 5%.

The deal comes months after the U.S. Federal Communications Commission questioned EchoStar's use of mobile-satellite service spectrum and raised concerns about whether it was meeting its obligations to deploy 5G in the country.

U.S. President Donald Trump had also prodded EchoStar and FCC Chair Brendan Carr to reach an amicable deal for the company's wireless spectrum licenses.

EchoStar said it anticipates that the transaction with SpaceX and a previously announced spectrum sale will resolve the FCC's inquiries.

The company in August sold some wireless spectrum licenses to AT&T for $23 billion, its first move to resolve the regulatory probe.

Under the terms of the latest agreement, SpaceX will pay up to $8.5 billion in cash and issue up to $8.5 billion in stock. SpaceX has also agreed to cover roughly $2 billion in interest payments on EchoStar's debt obligations through late 2027.

The companies have also entered into a commercial agreement, which will enable EchoStar's Boost Mobile subscribers to access Starlink direct-to-cell service.

After the sale, EchoStar will lose control of major spectrum for 5G deployment but will continue operating its satellite television service Dish TV, streaming TV platform Sling, internet service Hughes and its Boost Mobile brand.

The FCC had earlier said it was working with EchoStar to ensure beneficial use of "scarce spectrum resources".

SpaceX had aggressively pressed the FCC to reallocate underused airwaves for satellite-to-phone service after alleging EchoStar failed to meet certain obligations.

In a letter to the FCC in April, SpaceX said EchoStar's spectrum in the 2 gigahertz band "remains ripe for sharing among next-generation satellite systems" and that the company has left "valuable mid-band spectrum chronically underused".

EchoStar, which had been trying to shield its assets from the revocation threat by the FCC, had previously said that the commission's review was harming its "ongoing deployment" and threatening "its viability as a wireless provider."

It also cited the probe as a reason for the company missing roughly $500 million in interest payments.

The deal with EchoStar will allow SpaceX to operate Starlink direct-to-cell services on frequencies it owns, rather than relying solely on those leased from mobile carriers like T-Mobile.

Shares of U.S. wireless carriers AT&T, T-Mobile and Verizon were down about 4% in premarket trading.

SpaceX has launched more than 8,000 Starlink satellites since 2020, building a distributed network in low-Earth orbit which has seen demand from militaries, transportation firms and consumers in rural areas.