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EchoStar to Divest Its DISH Business to DIRECTV, Stock Sinks 12%
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EchoStar Corporation (SATS - Free Report) recently inked a definitive agreement to sell its video distribution business, DISH DBS ("DISH"), including DISH TV and Sling TV, through a debt exchange transaction of roughly $9.75 billion of DBS notes to DIRECTV. The transaction will consolidate two of the most significant players in the Pay-TV industry, allowing the combined entity to invest more aggressively in its services. By combining DISH and DIRECTV’s video services, the deal will enable the new entity to compete more effectively in the rapidly evolving media landscape.
By merging their Pay-TV operations, DIRECTV and DISH DBS will be better positioned to negotiate content deals with programmers, offering consumers a broader selection of channels and streaming options. The transaction has been approved by the boards of directors of both EchoStar and DIRECTV and is estimated to settle in the fourth quarter of 2025. Various closing conditions, including regulatory approvals and the tendering of outstanding DBS notes into the Exchange Offer, must be met for the deal to move forward.
In addition to the sale of its Pay-TV assets, EchoStar has taken significant steps to address the financial health of DISH by securing new financing from TPG Angelo Gordon and co-investors. The $2.5 billion in investment will provide interim liquidity and enable DISH to refinance its debt maturity for November 2024, ensuring that the company can continue to operate smoothly while the transaction with DIRECTV is finalized.
Following the announcement of the deal, SATS’ shares tanked almost 12% and closed the session at $24.82. The merger decision did not bode well among its investors owing to a lack of any potential financial returns for them.
SATS Fosters Its 5G Wireless Ambitions Through the Merger
The transaction will allow EchoStar to enhance its focus on its nationwide 5G Open RAN network, operated under the Boost Mobile brand. The strategic move will enable it to compete with dominant wireless carriers by offering consumers a compelling alternative in the wireless market. Additionally, it allows SATS to leverage its satellite experience and assets to develop innovative direct-to-device solutions.
Boost Mobile subscribers can expect better coverage, faster speeds and improved customer experiences as EchoStar continues to build out its network infrastructure. To fuel these ambitious plans, SATS has secured a $5.1 billion capital investment from current stakeholders via the purchase of EchoStar secured notes maturing in 2029. This new financing will be used to develop and expand the Boost Mobile 5G network, accelerating EchoStar’s ability to deploy a nationwide facilities-based wireless service.
Financial Synergies to Elevate SATS’ Profile
The merger deal is likely to bolster both SATS and DIRECTV’s financial profiles, enabling future investment and positioning them for success in the evolving competitive landscape. The merger has the potential to generate cost synergies of at least $1 billion annually, with these savings expected to be realized by the third year following the deal's close (anticipated by late 2025).
EchoStar expects a reduction in its debt obligations at the time of deal closure in 2025, lowering its total consolidated debt by nearly $11.7 billion. Also, its consolidated refinancing needs through 2026 will be reduced by roughly $6.7 billion (which excludes financing leases and other notes payable). By releasing Intercompany Obligations between DISH Network and DISH DBS, EchoStar will be able to fully unencumber the 3.45-3.55 GHz spectrum, unlocking valuable strategic and operational flexibility. This spectrum band is crucial for the company’s 5G network, giving it a competitive edge as it continues to build its Open RAN infrastructure.
SATS’ Top-Line Contraction and High-Debt Burden are Woes
In the last reported quarter, SATS’ revenues fell 9% year over year to $3.96 billion, owing to net subscriber losses in Pay-TV, Retail Wireless and Broadband and satellite services. The top line also missed the consensus mark by 0.6%. Soft revenues generated from pay-TV, Retail Wireless and Broadband and satellite services businesses amid growth in the 5G Network Deployment further dampened its results.
As of June 30, 2024, the company had a debt (net of current portion) of $28.65 billion against only $520.5 million in cash and cash equivalents and marketable investment securities. By selling its Pay-TV assets to DIRECTV, EchoStar is focusing on investing in its wireless future while simultaneously addressing its financial challenges with new capital investments and debt restructuring.
SATS’ Zacks Rank & Stock Price Performance
At present, EchoStar has a Zacks Rank #5 (Strong Sell). Shares of the company have gained 54.5% against the sub-industry’s decline of 3% in the past year.
Ubiquiti company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its visibility for future demand and inventory management techniques.
Zillow Group delivered an earnings surprise of 37.41%, on average, in the trailing four quarters. The company is witnessing solid momentum in rental revenues, driven by growth in both multi and single-family listings, which is a positive factor.
Airgain has a long-term earnings growth expectation of 35%. Based in San Diego, CA, Airgain provides antenna products as integrated wireless solutions. These devices are designed to address vital connectivity requirements during product development and throughout the entire lifecycle of other industries, such as automotive and consumer, in addition to various sectors within an enterprise.
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EchoStar to Divest Its DISH Business to DIRECTV, Stock Sinks 12%
EchoStar Corporation (SATS - Free Report) recently inked a definitive agreement to sell its video distribution business, DISH DBS ("DISH"), including DISH TV and Sling TV, through a debt exchange transaction of roughly $9.75 billion of DBS notes to DIRECTV. The transaction will consolidate two of the most significant players in the Pay-TV industry, allowing the combined entity to invest more aggressively in its services. By combining DISH and DIRECTV’s video services, the deal will enable the new entity to compete more effectively in the rapidly evolving media landscape.
By merging their Pay-TV operations, DIRECTV and DISH DBS will be better positioned to negotiate content deals with programmers, offering consumers a broader selection of channels and streaming options. The transaction has been approved by the boards of directors of both EchoStar and DIRECTV and is estimated to settle in the fourth quarter of 2025. Various closing conditions, including regulatory approvals and the tendering of outstanding DBS notes into the Exchange Offer, must be met for the deal to move forward.
In addition to the sale of its Pay-TV assets, EchoStar has taken significant steps to address the financial health of DISH by securing new financing from TPG Angelo Gordon and co-investors. The $2.5 billion in investment will provide interim liquidity and enable DISH to refinance its debt maturity for November 2024, ensuring that the company can continue to operate smoothly while the transaction with DIRECTV is finalized.
Following the announcement of the deal, SATS’ shares tanked almost 12% and closed the session at $24.82. The merger decision did not bode well among its investors owing to a lack of any potential financial returns for them.
SATS Fosters Its 5G Wireless Ambitions Through the Merger
The transaction will allow EchoStar to enhance its focus on its nationwide 5G Open RAN network, operated under the Boost Mobile brand. The strategic move will enable it to compete with dominant wireless carriers by offering consumers a compelling alternative in the wireless market. Additionally, it allows SATS to leverage its satellite experience and assets to develop innovative direct-to-device solutions.
Boost Mobile subscribers can expect better coverage, faster speeds and improved customer experiences as EchoStar continues to build out its network infrastructure. To fuel these ambitious plans, SATS has secured a $5.1 billion capital investment from current stakeholders via the purchase of EchoStar secured notes maturing in 2029. This new financing will be used to develop and expand the Boost Mobile 5G network, accelerating EchoStar’s ability to deploy a nationwide facilities-based wireless service.
Financial Synergies to Elevate SATS’ Profile
The merger deal is likely to bolster both SATS and DIRECTV’s financial profiles, enabling future investment and positioning them for success in the evolving competitive landscape. The merger has the potential to generate cost synergies of at least $1 billion annually, with these savings expected to be realized by the third year following the deal's close (anticipated by late 2025).
EchoStar expects a reduction in its debt obligations at the time of deal closure in 2025, lowering its total consolidated debt by nearly $11.7 billion. Also, its consolidated refinancing needs through 2026 will be reduced by roughly $6.7 billion (which excludes financing leases and other notes payable). By releasing Intercompany Obligations between DISH Network and DISH DBS, EchoStar will be able to fully unencumber the 3.45-3.55 GHz spectrum, unlocking valuable strategic and operational flexibility. This spectrum band is crucial for the company’s 5G network, giving it a competitive edge as it continues to build its Open RAN infrastructure.
SATS’ Top-Line Contraction and High-Debt Burden are Woes
In the last reported quarter, SATS’ revenues fell 9% year over year to $3.96 billion, owing to net subscriber losses in Pay-TV, Retail Wireless and Broadband and satellite services. The top line also missed the consensus mark by 0.6%. Soft revenues generated from pay-TV, Retail Wireless and Broadband and satellite services businesses amid growth in the 5G Network Deployment further dampened its results.
As of June 30, 2024, the company had a debt (net of current portion) of $28.65 billion against only $520.5 million in cash and cash equivalents and marketable investment securities. By selling its Pay-TV assets to DIRECTV, EchoStar is focusing on investing in its wireless future while simultaneously addressing its financial challenges with new capital investments and debt restructuring.
SATS’ Zacks Rank & Stock Price Performance
At present, EchoStar has a Zacks Rank #5 (Strong Sell). Shares of the company have gained 54.5% against the sub-industry’s decline of 3% in the past year.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the broader technology space are Ubiquiti (UI - Free Report) , Zillow Group, Inc. (ZG - Free Report) and Airgain Inc. (AIR - Free Report) . UI sports a Zacks Rank #1 (Strong Buy), whereas ZG and AIRG carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ubiquiti company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its visibility for future demand and inventory management techniques.
Zillow Group delivered an earnings surprise of 37.41%, on average, in the trailing four quarters. The company is witnessing solid momentum in rental revenues, driven by growth in both multi and single-family listings, which is a positive factor.
Airgain has a long-term earnings growth expectation of 35%. Based in San Diego, CA, Airgain provides antenna products as integrated wireless solutions. These devices are designed to address vital connectivity requirements during product development and throughout the entire lifecycle of other industries, such as automotive and consumer, in addition to various sectors within an enterprise.