Dish-EchoStar merger closes

It’s a new year and a new ball game for Dish Network, which became a subsidiary of EchoStar over the weekend.

As expected, the merger of EchoStar and Dish closed on December 31, 2023, giving Dish some much-needed funding to stay afloat and continue to work on its wireless strategy.  

Prior to the merger, Charlie Ergen served as chairman of both companies, a role he continues. He owns about 91.3% pf the total voting power of EchoStar’s equity securities following the merger. Thus, little changed with regard to who’s in charge.

However, an SEC filing today notes that Dish is no longer a separate publicly traded company and the new management may operate Dish’s business differently from how Dish operated in the past, including in the pursuit of strategic objectives.

The companies announced in August that Hamid Akhavan, then-president and CEO of EchoStar, would serve as president and CEO of the combined company. John Swieringa, then-president and COO of Dish Wireless, is now COO and President of Technology at EchoStar. 

Analysts primarily have seen the merger as a way for Dish to access EchoStar’s $1.9 billion in cash and estimated $265 million in free cash to finance its 5G buildout, as Bloomberg reported. At last check, Ergen was calculating about $10 billion for the cost of deploying the greenfield 5G open RAN network.

Besides the cash, the transaction gives Ergen the ability to borrow more money. “That’s the reason why he put Humpty Dumpty together again,” said industry analyst Roger Entner, founder of Recon Analytics. “He has done this before. There are times when it’s opportune to have the two separate and there are times when it’s opportune to have the two together.”

Dish acquired Boost Mobile for $1.4 billion via the T-Mobile/Sprint transaction, with the idea being that it would become the fourth facilities-based carrier in the U.S., replacing Sprint. But Dish has a long way to go before it can compete head-on with the likes of AT&T, T-Mobile and Verizon, let alone win in that race. Dish is struggling in the consumer side of the business via Boost Mobile and Boost Infinite, its prepaid and postpaid brands, respectively.

Enterprise challenges

What about the enterprise sector? Ergen has talked about that as an important opportunity for Dish, especially now as Dish is entwined with EchoStar and they can combine technologies, similar to what’s they’re doing at the Naval Air Station on Whidbey Island in Washington state.

But there again, it’s an uphill battle, according to Entner. By way of example, T-Mobile was lagging for years before it merged with Sprint and created a nationwide 5G network, now boasting the “best” and “fastest” 5G, thanks in large part to the 2.5 GHz spectrum it acquired.

“T-Mobile only got a chance with business when they had a good nationwide network,” Entner said. Compared to the consumer sector, “businesses are more finicky with higher demands and pay less than individuals.”

Now, there’s a lot of upside in the enterprise sector because T-Mobile’s market share is only about 10%, so there's really nowhere to go but up, he said.

For Dish, winning share in the enterprise sector means disrupting the incumbents – AT&T for large enterprise, Verizon for medium and smaller enterprise and T-Mobile for “tiny and small” businesses, Entner said. To top it off, businesses are slower to make decisions than consumers – they can take up to a year, “a year that Dish doesn’t have,” he said.

Dish slowed its 5G network deployment for 2024 and is expected to pick it up again in the first half of 2025 to meet its final buildout milestone, which calls for covering 75% of each Partial Economic Area (PEA) in the U.S. by June 14, 2025. That’s a much harder milestone to meet compared to its previous buildout requirements.

The good news is there’s no financial penalty if they don’t meet the PEA deadline, Entner said. The question then becomes whether they find a financial source and spend a lot of money to meet that milestone or instead seek an extension.  

Dish + Amazon = ?

Dish and Amazon have a distribution partnership through which Boost Infinite is sold on and the companies have a deep operational relationship in which AWS runs the carrier’s 5G cloud core network, analysts at TD Cowen noted in a January 2 report listing potential surprises in 2024.

Now that Dish has made progress on its 5G Voice over New Radio (VoNR) coverage, essentially covering all NFL markets by mid-2024, a tighter tie-up between Dish and Amazon could be in the cards, though they note that FTC Chair Lina Khan could stand in the way over antitrust concerns. If a deal were to happen after the November election, it could see Amazon entering wireless through Dish with low pricing that’s highly disruptive to the industry, they said.

However, they noted that to qualify for their list of potential surprises in 2024, a “surprise” must constitute an event that is less than 50% likely, not well discussed or anticipated by the market and potentially material to stock prices. “We do not necessarily advocate any investment strategy into these ‘surprises,’ but rather hope that a more open debate of their possibility is of interest and potential utility to investors,” the Cowen analysts wrote.