Talk of Dish-EchoStar merger continues

Rumours over the possible merger of Dish Network and EchoStar continue to swirl as the industry speculates that Charlie Ergen is looking to shore up the financials of one of his companies at the expense of the other.

Dish and EchoStar have both hired advisors to hammer out what a merger deal could look like, Semafor reported late last week, citing sources familiar with the matter. The story has done the rounds since then, but there has been no official comment from either of the companies involved, nor from Mr Ergen himself, co-founder of both.

This is not so much a merger story as it is a re-marriage. Dish Network was spun out of EchoStar in 2008, taking with it the services arm of the business and leaving EchoStar with the technology, essentially. The set-top boxes part of the operation went over to Dish just under a decade later, and a few years ago Dish also took control of EchoStar’s broadcast satellite services business; that left Echostar where it is today, as a satellite communications solutions provider.

There seems to be no great strategic advantage to recombining the two operations. This deal, should it happen, is all about finances.

As Semafor pointed out, EchoStar is financially stronger than Dish, the latter battling against a declining customer base in its core pay-TV business while shelling out huge sums to build out its mobile network.

Dish is spending around US$10 billion on the rollout of a cloud native Open RAN 5G network of its own. It recently hit an FCC-imposed milestone of 70% population coverage, but most of its traffic is still carried by MVNO hosts AT&T and T-Mobile US. And as time goes on, its coverage targets will become more costly to reach.

According to Semafor, Dish’s debt stands at $22 billion, more than 10 times its annual cash flow, while EchoStar is basically debt-free. Indeed, the satellite firm’s accounts show that it had cash and cash equivalents of $1.7 billion as of the end of March.

“The business continues to pursue new avenues of growth, laying the operational foundation to drive increased revenues once our upcoming EchoStar XXIV/Jupiter 3 satellite enters into service and taking tangible steps toward fulfilling our vision of a global 5G network in the S-band,” said EchoStar chief executive Hamid Akhavan, in a comment accompanying the firm’s Q1 numbers.

The Jupiter 3 launch has been subject to delays, but could happen any day now. All of which is a way of saying that while Dish has some financial challenges, EchoStar is in a much more solid position. Hence, the merger rumour.

While bringing the two businesses together – or indeed back together – might seem like a neat solution for Charlie Ergen, there are, of course, big questions over whether such a merger would gain the support of EchoStar shareholders. But that’s really a question for the businessman to grapple with, while the two companies carry on doing their day jobs.

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