Charlie Ergen, president and co-founder of Dish Network Corp.
Jonathan Alcorn | Bloomberg | Getty Images
Charlie Ergen is closing in on selling the pay-TV business he founded more than 40 years ago.
EchoStar is in advanced talks to sell satellite TV provider Dish Network to rival DirecTV, the closely held pay-TV operator owned by private equity firm TPG and AT&T, according to people familiar with the matter. While the sides hope to finalize a deal by Monday, no deal is assured and talks may still fall apart, said the people, who asked not to be identified because the discussions are private.
The combination of Dish and DirecTV has been rumored for years and almost happened in 2002 until now collapsed under regulatory pressure. This time, the deal is being driven by EchoStar’s desire to repay $1.98 billion in debt that matures in November, two of the people familiar with the process said. EchoStar had just $521 million in cash and cash equivalents and marketable securities as of June 30 and projected negative cash flow for the rest of 2024, according to public filings.
The prospect of EchoStar’s future bankruptcy and creditor approval of the deal make completing a deal complicated. Dish tried to refinance some of its debt earlier this week with bondholders, but negotiations broke down, according to Filed September 23.
The company said in public filings that it remains in discussions with other debtors.
A potential DirecTV-Dish transaction is being structured as all cash, with DirecTV paying EchoStar for its satellite TV business, its Sling digital business and related liabilities, people familiar with the matter said.. In total, the transaction could be worth more than $9 billion, according to one of the people.
A DirecTV representative declined to comment. A representative for Dish could not immediately be reached for comment.
“The bottom line is that we now see bankruptcy in the next four to six months as the most likely outcome [for EchoStar]MoffettNathanson’s Craig Moffett said in a note to clients in August. “They will need to raise new capital.”
EchoStar has a total enterprise value of approximately $31 billion and a market capitalization of approximately $7.6 billion. There is no wireless spectrum involved in the proposed deal, which Dish Network has spent the past decade building up as it tries to transform itself into a wireless company, the people said.
Satellite TV, once one of the largest distributors of television package, has been declining for years — often at faster rates than cable competitors — as consumers switch to subscription streaming services such as netflix, Disney+ and Amazon Prime Video. Dish ended its latest quarter with 6.1 million satellite subscribers and 2 million customers for Sling TV, Dish’s line-over-the-Internet package.
DirecTV has also felt the pain, losing millions of subscribers since AT&T bought the company in 2015 for $67 billion in debt. AT&T launched it in 2021 and sold part of the company to TPG. At the time, DirecTV had about 15.4 million subscribers. It has about 11 million today, CNBC previously reported.
The company has recently focused on growing its streaming business, centering its latest ad campaign around dispelling the belief that DirecTV is only available via satellite dish. MoffettNathanson estimates that DirecTV added more than 20,000 streaming customers earlier this year. Most of its customers still use satellite dishes.
More recently, DirecTV has been in a distribution dispute with Disney that saw networks, including ESPN, go dark for nearly two weeks for the satellite company’s customers. The two companies have reached an agreement that gives DirecTV the ability to offer leaner, genre-specific packages.
— CNBC’s Lillian Rizzo contributed to this report.
