EchoStar “ready for M&A options”

Charlie Ergen, founder of the Dish Network and EchoStar satellite operation, said the asset swaps made in January between the two businesses readied the pair for a wave of merger interest that’s expected in the TV and cellular Internet sectors.

Ergen, speaking to analysts following Dish Network’s quarterly and full-year results, said: “It made more sense for Dish to be in control of its own destiny, and [EchoStar sister company] Hughes can focus on where they want to be.”

He told analysts: “It was almost 10 years ago when we split the companies apart. We had a logic to why we’re doing it. We had a theory on where we thought the market was going to go. Some of those theories didn’t turn out to be exactly right. For example, we thought that the set-top box business, from an EchoStar perspective, we could go out and get – as a separate company, we could go out and get other people in the industry, cable industry and other parts of the world. And we just really weren’t that successful.”

“Now with OTT proliferation and video becoming more of an app, the set-top box business is not nearly – in terms of set-top box, we just don’t see as good a long-term future in that side of the business. And at the same time, DISH became very dependent on EchoStar for core services whether it’d be uplink services, backhaul for local channels, technology, and it made more – and then it made more sense for DISH to be in control of their own destiny for those assets.”

“I think there’s a secondary benefit. “There’s probably going to be M&A activity out there in the future, and may perhaps the administration is more attuned to that. And this probably aligns the assets in a better way to participate potentially in that as well.”

Ergen admitted that linear TV viewing was declining, and that OTT viewing was up: “I think those are just general trends that have been going on for two or three years. And I think the question will be just whether they really haven’t accelerated in a material way, but at some point perhaps they will, particularly as more people come into the OTT market.”

“On the linear side, I think you’ve got to make linear TV look more like an OTT product. I think there’s simple things if you talk to people who – I think there are simple things where people like – one of the reasons that people I talk to like Netflix is you can watch commercial-free, and you can binge view. And that’s kind of hard to do on linear TV today, but technically it would be relatively easy to duplicate some of that.”

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