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Dish, EchoStar Housecleaning Prelude to Sale?

1 Feb, 2017 By: Erik Gruenwedel

Dish Network’s asset reorganization with EchoStar Corp., a Denver-based satellite TV manufacturer and distributor, could be the precursor to a bigger financial merger in a new era of reduced regulation and lower corporate taxes, among other issues, say Wall Street analysts.

Dish Jan. 31 assumed control of the EchoStar Technologies hardware and software development group, which included an over-the-top video development subsidiary and 10% stake in Sling TV. In exchange, EchoStar assumed control of Dish’s 80% stake in Hughes Retail Group.

“With this transaction we will vertically integrate all the elements that define our customer experience — one team will deliver the full Dish and Sling TV experience end to end,” Erik Carlson, president of Dish, said in a statement.

Analysts contend the tax-free asset swap, which is expected to close at the end of the first quarter (ended March 31), could pave the way for a merger and/or acquisition with a major third-party.

Dish founder and CEO Charlie Ergen has made no secret his desire to forge into wireless communications — underscored by $10 billion spent acquiring wireless spectrum. That spectrum makes the satellite TV operator attractive to an appropriate buyer. The company has reportedly been linked to Verizon Communications as well as T-Mobile before that.

Dish’s stock took a slight hit after reports surfaced Verizon could be looking at a merger with Charter Communications, which recently acquired Time Warner Cable, the No. 2 cable operator in the country.

Regardless, Amy Yong, analyst with Macquarie Group, said, in a note, the housecleaning “eliminates negative points for a potential deal.”

Marci Ryvicker, analyst with Wells Fargo, believes Dish and EchoStar are swapping assets “for a reason,” which she says could include the FCC’s ongoing "broadcast television spectrum incentive auction." That auction seeks, among other things, to free up TV airwave spectrum for the burgeoning wireless market.

In a separate note, Craig Moffett with MoffettNathanson, said the M&A rumors underscore “the bewildering number of alternative strategic paths being considered by not just Verizon, but by every company in the sector.”


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