August 19, 2022

DealBook: Playing It Close in Wireless, With an Eye for Satellite Deals

Charles Ergen, chairman of Dish Network and EchoStar, has been on a takeover spree this year, making more than $2 billion in acquisitions.Paul Sakuma/Associated PressCharles Ergen, chairman of Dish Network and EchoStar, has been on a takeover spree this year, making more than $2 billion in acquisitions.

If Charles Ergen has a master plan for his deal-making, the 58-year-old founder and chairman of Dish Network and EchoStar isn’t sharing the strategy publicly.

The billionaire has been on a takeover tear this year, making $2.3 billion in acquisitions. While the businesses operate in similar industries, it is not clear how they will fit in Mr. Ergen’s empire.

Through his loosely connected companies, he has bought DBSD North America, a bankrupt satellite operator; Blockbuster, a bankrupt movie rental chain; the assets of Move Networks, a once high-flying video service that has since sputtered; and Hughes Communications, a satellite Internet company.

He is not done, either. The hard-nosed executive, who is said to have once been thrown out of a Las Vegas casino for counting cards, is closing in on a deal for TerreStar, another bankrupt satellite operator.

With an offer of $1.38 billion, EchoStar has been named the stalking horse bidder, setting the floor for the purchase price. A rival will have to pay at least $1.44 billion to win TerreStar.

If Mr. Ergen prevails, he will score a coveted piece of broadband spectrum. Analysts say the combination of TerreStar and DBSD could be even more valuable — if that is even his plan.

“The only person who truly knows what Charlie is doing is Charlie,” James Ratcliffe, an analyst at Barclays Capital, said. “He is not going to tell us his plans, if he’s made the calculation that disclosing something will reduce his ability to execute on those plans.”

The recent acquisitions all focus on content delivery — whether by satellite or by retail stores — leaving Mr. Ergen several ways to deploy his new assets. Some industry analysts say the spectrum could be used to build out a nationwide wireless broadband network or to partner with a large communications company to support its data needs. Others predict that he will make a big play in mobile video.

As Mr. Ergen and his team piece together a communications conglomerate, the corporate line is that all options are on the table. EchoStar and Dish Network, once a single entity, now operate as sister companies. Dish Network is a largely consumer-facing satellite television provider. EchoStar makes set-top boxes and runs the satellites for the Dish Network service.

Joseph Clayton — who was named Dish Network’s chief executive in May after Mr. Ergen resigned from the position — says he is focused on a broad industry that includes video, data, broadband, Internet and voice telephony.

“We have all of this wireless spectrum, people say it’s for mobile video,” Mr. Clayton said. “It could be a combination of all of the above when we get to the end line.”

“I would say, it’s still a little nebulous,” he added. “But I’m certain we will be one of the leaders in wireless — across the board.”

Mr. Ergen has acknowledged the need to evolve. In a conference call earlier this year, he called the satellite video market a “mature industry.” While Dish Network and EchoStar continue to generate significant profits, their core businesses are facing increased competition from online video providers, like Netflix, and telecommunications companies.

“If you were in the phone business and wireless came along and you kept on putting in a twisted pair of lines, that was still a good business for another 10 years, 15 years,” Mr. Ergen said on the call. “But at some point that wasn’t a very good business.”

As Mr. Ergen reshapes his companies, the new assets should help ease the transition.

Blockbuster, which Dish Network bought for $320 million in April, is highly prized as a global brand with a broad base of customers, Mr. Clayton said. While the company is still hashing out its strategy, Mr. Clayton indicated there are significant cross-promotion opportunities. The network of stores — which seem outdated in the on-demand era of Netflix — could become a platform to reach new Dish Network customers and handle service issues.

“We’re still determining how many locations we’d like to keep, but as long as they’re profitable, we’ll keep them,” Mr. Clayton said. The unit may remain a part of Dish, or it could eventually be spun off as a separate company, he added.

Dish Network is also interested in buying new assets that will complement its spectrum holdings, or other areas of its portfolio. It could, for example, pursue a popular content provider, said Mr. Clayton, a former chief executive of Sirius Satellite Radio, which is currently owned by Sirius XM Radio.

“I would be interested in Sirius, Hulu, Pandora. There are a lot of things that are up for grabs right now,” he said. “I can assure you one thing, I will not be hiring Howard Stern.”

Mr. Ergen — who has a folksy demeanor but tends to avoid media interviews — seems to revel in the murkiness. In a conference call shortly after the Blockbuster deal, he compared his strategy to an episode of “Seinfeld.”

“There’s a lot of things that happen in the first about 28 minutes of that show where you don’t know exactly where that show was going. But it seemed to all come together in the last couple of minutes,” he said, describing the hit 1990s sitcom, often called a show about nothing.

“So it could be a strategy about nothing, if you’re skeptical,” Mr. Ergen said. “But I think that everything we do has a purpose.”

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