Faced with a choice between investing more in its new wireless business, which needs additional capital and time to catch on with consumers, or holding onto its legacy satellite and streaming television services, which generate a lot of cash but are shrinking, Englewood-based EchoStar Corp. has decided to go all in on wireless.
Long-time rival DirecTV on Monday said it will pay $1 and assume $9.7 billion in EchoStar debt to acquire Dish Network and its Sling streaming service. That amount represents under half the $21.3 billion in net debt EchoStar holds and will ease the pressures tied to a $2 billion payment that was coming due in mid-November.
While not a clean slate, the debt reduction, combined with funds the company has or plans to raise, will provide Boost Mobile significantly more time to win over consumers and establish itself as the nation’s fourth wireless provider.
“They have been saying we are an asset-rich but liquidity-poor company. We have many opportunities to grow and develop, but we didn’t have enough cash to develop them,” EchoStar CEO and president Hamid Akhavan said in an interview with ANH on Monday afternoon.
EchoStar has found a way to feed its wireless growth plans, where most of its assets — wireless spectrum — are concentrated and where it sees the most potential, while also providing the legacy satellite and streaming side of the business, which have seen steady losses in subscribers, a better chance to survive, he said.
For DirecTV, a longtime rival, the combination should provide it with the kind of negotiating power it needs to strike better deals with content providers. Cost savings from the deal are expected to come primarily in that area, not by large cuts to the headcount, which should limit layoffs in metro Denver, he said.
EchoStar employs about 7,000 people in metro Denver, half of its overall workforce of around 14,000. Of that total, 2,400 are dedicated to wireless services, which now has a much better chance of growing in the future.
The fate of the 4,600 local satellite and streaming television employees will be in the hands of DirecTV after the deal goes through late next year. But Akhavan said he doesn’t anticipate significant layoffs because of the combination.
Sling, the streaming service, is also something that DirecTV lacks and will likely be shielded from cuts. And working out better content deals should relieve some of the financial pressure on the satellite television side.
As the state’s largest technology employer, EchoStar’s survival and the future viability of Boost Mobile have major ramifications for the local economy. Akhavan said the company will remain fully rooted here.
“Our commitment to Denver is very strong,” he said.
This is a breaking story and will be updated.