EchoStar restructures its assets
February 1, 2017
By Chris Forrester
EchoStar (which is listed as SATS) has swapped certain assets with its pay-TV sister company, Dish Network (which trades as DISH). EchoStar takes care of the portfolio of satellites in orbit as well as the supply and management of its set-top box division. However, the key assets closely involve another Charlie Ergen-backed operation, Hughes Retail Group (HRG) which looks after the consumer satellite-delivered broadband business, the largest in North America.
The transaction also includes certain jointly-owned business including spectrum licences and some real estate properties.
A statement said: “DISH Network Corporation and EchoStar Corporation today announced they have executed an agreement that will transfer certain EchoStar assets and operations, including its EchoStar Technologies hardware and software development group, its national and regional uplink business, its managed fiber backhaul network serving all US DMAs and its OTT development group to DISH in exchange for DISH’s 80 per cent economic interest in Hughes Retail Group held in the form of a tracking stock.”
The fine print sees EchoStar exchange its equity in EchoStar Technologies business unit (ETC) for 80 per cent economic interest in Hughes Retail Group. HRG is 80 per cent owned by DISH and 20 per cent by EchoStar but operated 100 per cent by EchoStar.
ETC’s main clients include Dish Network itself, Bell TV (Canada) and Dish Mexico, and also provides technology for Sling TV.
The complete deal is structured in a tax-efficient manner and will “allow investors to better understand EchoStar’s equity story and valuation,” said a company statement. Once the transaction closes EchoStar will own 100 percent of the higher growth HRG business (worth about $97-106 million in EBITDA), and will have divested “the less strategic set-top box business” (worth about $85-94 million in EBITDA).
Part of the appeal is the upcoming launch of EchoStar-19, a very high-capacity multi-beam Ka-band satellite that EchoStar expects to increase its satellite-delivered broadband capacity by 180+ per cent.
EchoStar also holds onto some major slices of spectrum over the USA, Europe (in S-band) and key rights to the 45 deg West orbital slots over Brazil. It also owns a 49 percent stage in the Dish Mexico DTH service, and has a “strategic investment” in Greg Wyler’s OneWeb proposed satellite constellation.