EchoStar is in future talks to sell its satellite television subsidiary, Dish Network, to competitor pay-tv firm DirecTV, owned by private equity firm TPG and AT&T. People familiar with the talks said though the two parties intend sealing the deal by Monday, they are yet unsure if it will materialize.
It is a long-awaited merger that was earlier proposed in 2002 but failed to materialize because of issues in regulatory clearance. The new reason for EchoStar’s action is an imperative need to address $1.98 billion in debt that comes due in November. As of June 30, EchoStar had cash and marketable securities of only $521 million, and the company expects to report negative cash flows for the remaining portion of 2024.
The probability that EchoStar may go into bankruptcy complicates the deal, specifically in terms of creditor approvals. Over the week, Dish tried to refinance some of its debt with bondholders, but it failed to agree on a deal as reflected in the filing dated September 23. The company is still negotiating with other debtholders.
The deal, if closed, will be an all-cash deal in which DirecTV will acquire not only the satellite TV business of Dish but its other digital service Sling and liabilities associated with it. Estimations put the transaction value well above $9 billion.
Industry analysts also have raised concerns about EchoStar’s viability in purely financial terms. Craig Moffett of MoffettNathanson indicated in an August note to clients that bankruptcy within the next four to six months seems increasingly likely unless the company can secure new capital.
EchoStar has a market value of about $31 billion and a capitalization of around $7.6 billion. Crucially, there is no wireless spectrum in this deal, though Dish has spent billions of dollars in the last decade building wireless infrastructure.
The satellite TV market has been in free fall and often leads cable peers in that direction as more and more customers defect for streaming channels like Netflix and Amazon Prime Video. Dish ended the quarter with 6.1 million satellite subscribers and 2 million Sling TV customers. DirecTV also is not faring much better, having lost tens of millions of customers since AT&T bought it in 2015. Today it has around 11 million subscribers.
As both companies scramble to find ways to adjust to shifting consumer tastes, DirecTV has promoted its streaming abilities and had settled a distribution dispute with Disney that will enable it to carry crucial channels such as ESPN once more.
