Dish Network says it is re-combining with satellite hardware maker Echostar more than a decade after the two sides split up.
On Tuesday, Dish said the boards of both companies approved a plan that will see Echostar shareholders receive nearly 3 shares of Dish Network’s common stock. Charlie Ergen, the founder of Echostar and Dish Network, is the chairman of both companies.
“This is a strategically and financially compelling combination that is all about growth and building a long-term sustainable business,” Ergen said in a statement, who affirmed the merger would create “significant cost and revenue synergies.”
Dish currently has a market value of around $4 billion, while Echostar’s market value clocks in at about half that figure, according to the Wall Street Journal. Echostar was founded in the 1980s as a manufacturer and distributor of C-Band satellite television equipment; it launched Dish Network as a standalone, direct-to-consumer satellite television platform in the 1990s. The companies split in 2008.
The recombination was not unexpected: In July, the website Semafor reported Dish had hired advisors in recent months to explore whether a marriage between it and Echostar made financial sense.
The merger comes at a time when Dish is struggling to cope with the loss of pay television subscribers at its traditional satellite business, along with sluggish gains at its Sling TV and Dish Wireless brands.
For years, Dish acquired — and then sat on — a large amount of wireless spectrum licenses, with some financial advisors believing the company would eventually launch a mobile phone offering comparable to AT&T and Verizon. Several years ago, Dish acquired Sprint’s prepaid subsidiary Boost Mobile with the promise of developing and launching a new, independent wireless brand. The acquisition was intended to appease federal regulators who were scrutinizing Sprint’s merger with T-Mobile, which has since gone through.
Dish’s new 5G network has not panned out as expected: While the service, called Project Genesis, has technically met several growth deadlines imposed by the Federal Communications Commission (FCC), most wireless phones on the market aren’t compatible with Project Genesis. Dish itself offers just two phones — one made by Motorola, the other Samsung — that are fully compatible with its 5G network. Most subscribers wind up roaming on AT&T, which leases out part of its network to Dish under a mobile virtual network operator, or MVNO, arrangement.
As Dish looks to continue building out its 5G wireless network, the company thinks it might need an additional $2 billion to $3 billion to launch in more suburban and rural areas ahead of another key FCC deadline that is approaching within the next two years. Merging with Echostar won’t give Dish the kind of income it needs to accomplish this goal, and could actually be more of a distraction for both companies.
