- M&A
- August 8, 2023
- 3 minutes read
Billionaire Charlie Ergen Strikes Deal To Reunite Telecoms Empire
Charlie Ergen, an American billionaire telecoms entrepreneur, has struck a deal to reunite his telecoms empire. His two publicly-traded companies,…
Charlie Ergen, an American billionaire telecoms entrepreneur, has struck a deal to reunite his telecoms empire. His two publicly-traded companies, Dish Network (NASDAQ: DISH) and EchoStar (NASDAQ: SATS), have announced a merger agreement.
Dish is a television provider and also offers a mobile wireless service called Dish Wireless. EchoStar is a vendor of satellite communication and internet systems. Ergen owns more than half of the outstanding shares in Dish and nearly 60% of EchoStar. Dish has a market value of $4bn, and EchoStar is roughly half of that.
The two companies have an intertwined history. Ergen founded EchoStar Communications Corporation, a satellite television equipment distributor, in 1980 and later launched a TV broadcast service. In 2008, EchoStar Communications changed its name to Dish Network and spun off its technology division into a new publicly-traded company called EchoStar Corporation. Dish Network and EchoStar Corporation are now reuniting.
- Ergen’s Dish Network is pivoting away from satellite TV to focus on mobile wireless services. It entered the wireless retail market in 2020 by acquiring Boost Mobile for $1.4bn. Combining with EchoStar gives Ergen a better shot at building a wireless networking giant.
- Dish has spent heavily on its wireless expansion and amassed over $20bn in debt. Its free cash flow plunged into negative territory last year, driving the company’s bonds into distressed levels and its stock to all-time lows. Ergen has been trying to win investor confidence as they question if his wireless strategy will bear good fruits, especially when billions of dollars of debt come due in the coming years.
- Combining Dish and EchoStar gives Ergen a better shot at achieving his wireless goals. EchoStar is contributing an established satellite network business that brought in $177mn in profits on $2bn in revenue in 2022. Dish still has a decent Pay-TV business but has continuously lost subscribers over the years. Its growth prospects lie in wireless services, which the company has set its sights on.
Under the merger terms, EchoStar shareholders will receive 2.85 shares of Dish stock for each share they own. The exchange represents a 13% premium to EchoStar’s closing price on July 6 when reports of an imminent merger sufficed. EchoStar’s chief executive Hamid Akhavan will lead the combined firm, and Ergen will serve as executive chairman.
