The combined company aims to ‘create a global leader in terrestrial and non-terrestrial wireless connectivity’
Fifteen years after Dish and Echostar were split into commercial satellite and satellite TV businesses, the two companies will re-combine in an all-stock deal to form a company that now includes not only satellite broadband and television services, but also a terrestrial 5G wireless network.
In a release, the two companies said that combining Dish and Echostar’s satellite services, streaming services and 5G network (which they note has “full commercialization underway”) will create a “global leader in terrestrial and non-terrestrial wireless connectivity” and that the combined company “will be well-positioned to deliver a broad set of communication and content distribution capabilities, accelerating the delivery of satellite and wireless connectivity solutions desired by customers.”
Non-terrestrial network connectivity, combined with terrestrial 5G, is of increasing interest across the industry and is being formally integrated into cellular standards. While having broader satellite assets could give Dish a leg up on that front in the longer-term, the merger with Echostar is likely to have more practical, short-term implications for Dish’s finances—which Ergen emphasized in speaking about the deal.
“This is a strategically and financially compelling combination that is all about growth and building a long-term sustainable business,” said Charlie Ergen, who is chairman of the board of both companies. “Dish’s substantial past investments in spectrum and its wireless buildout, combined with EchoStar’s recent launch of [its new satellite] Jupiter 3, are expected to significantly reduce near-term CapEx requirements. The transaction is expected to generate significant cost and revenue synergies, and the strong asset portfolio of the combined company paired with its enhanced free cash flow generation capability and strengthened capital structure are expected to drive long-term value creation for our shareholders and other stakeholders.”
Hamid Akhavan, who is president and CEO of Echostar, will be president and CEO of the combined company and Ergen will be its executive chairman. John Swieringa, who is currently president and COO of Dish Wireless, will be president, technology and COO of the combined company. Erik Carlson, who is president and CEO of Dish Network, will continue in that role until the transaction closes, “at which time he will depart the business,” the company said.
“From unconnected individuals in the most rural and remote regions of the world to the constantly evolving networks of private enterprises and government institutions, the connectivity landscape is rapidly changing,” said Akhavan.”As a combined company, we will offer a broad suite of robust connectivity services, using a superior portfolio of technology, spectrum, engineering, manufacturing and network management expertise. Dish shares our customer-first culture, and together we will be well positioned to further scale and accelerate our strategy.”
The news of the recombination overshadowed the lackluster second quarter results of both companies, also reported today. Echostar saw its consolidated revenues drop 9.3% year-over-year, with the company citing fewer broadband customers as part of the reason; net income was down $1.4 million from the same period last year. Echostar’s satellite-based Hughes Broadband service lost 106,000 customers in the quarter, leaving it with a customer base of about 1.22 million. The new Jupiter 3 satellite has been launched but needs to undergo significant testing before it can be put into service, which is expected later this year.
Meanwhile, Dish Wireless also continues to lose customers. Dish Network’s numbers were down across the board for the second quarter of this year, and it posted six-figure losses for both its pay-TV and its wireless subscribers. Dish saw retail wireless net subscribers drop by about 188,000 in the second quarter, compared to a loss of 210,000 subs in the year-ago quarter.
Recent analysis painted a bleak picture of Dish’s finances, noting that the company has significant amounts of debt, with $5 billion coming due in 2024 and 2025—and suggested that perhaps by combining the two companies, Echostar could provide more assets to borrow against. Dish said in its second quarter 2023 filing with the Securities and Exchange Commission that though it has repurchased tens of millions of dollars of its debt, it still has $995 million in convertible notes due in March 2024. “We do not currently have cash, marketable investment securities balances and/or projected future cash flows to fully fund our convertible notes due in 2024 with a remaining aggregate principal balance of $995 million, which mature on March 15, 2024,” Dish said.
