The merger will see the two firms reunify for the first time since EchoStar was spun off from Dish 15 years ago
Earlier last month, Total Telecom reported that the two firms had hired advisors to iron out the details of the merger, which is now set to be completed by the end of the year.
Chairman and founder of both companies, Charlie Ergen, said the move will provide Dish Network with the financial freedom it needs to build a nationwide wireless network that is able to compete with the likes of AT&T, T-Mobile, and Verizon.
“This is a strategically and financially compelling combination that is all about growth and building a long-term sustainable business,” said Ergen.
In recent years, Dish has been rapidly evolving from a pure satellite television operator to a major player in the wireless market. Dish agreed to purchase Sprint’s pre-paid mobile brand Boost as part of the mega-merger between T-Mobile and Sprint back in 2020, in a bid to become the country’s fourth national mobile network operator. Since then, the company has won 5G spectrum at auction and has been busy rolling out infrastructure across the US.
Dish has said that it will invest up to $10 billion to deploy its 5G wireless network.
Now, this new merger will combine EchoStar’s satellite communications structure with Dish’s pay-TV business and 5G network.
Dish network is valued at around $4 billion, and Echostar at $2 billion. Dish is notably laden with debt, while EchoStar is not, hence the merger appears primarily motivated by the financial support it will lend the mobile operator in continuing to finance its rollout of 5G infrastructure.
Ergen currently owns 60% of EchoStar shares and over half of Dish’s. Under the terms of the new deal, EchoStar shareholders will receive 2.85 Class A shares from Dish per share of Echostar with the exchange ratio representing a 12.9% premium on EchoStar’s shares closing valuein early July, when reports of the merger first surfaced.
“Ergen has been trying to win back investor confidence in his wireless strategy. Dish shares have hit lows not seen in more than two decades this year as analysts question whether his project will pay off before billions of dollars of debt come due in the coming years,” the Wall Street Journal article states.
Dish shares have been trading at their lowest level since 1999 and are down 41%, while EchoStar shares are up 41%.
After the signing of the deal, Erik Carlson (CEO of Dish) is set to depart, leaving current EchoStar CEO Hamid Akhavan to take over as current CEO and president of the combined company.