The sale of dishes provides EchoStar with short-term funding to grow the business: CEO

EchoStar (SATS) announced that it will sell its video distribution business, including Dish and Sling, to DirecTV for a nominal price of $1 and more than $9.7 billion of the company's related debt. The deal would create the largest pay-TV provider in the United States. EchoStar President and CEO Hamid Akhavan joins Seana Smith and Madison Mills at Catalysts to discuss what's next for the company.

“There are different aspects for us to find the right time. Firstly, I think from a financial perspective there were some maturities coming up. You know, we've been saying lately that we have a very asset-rich but cash-poor company. And now we’re addressing this in a very important way,” Akhavan tells Yahoo Finance.

“It's the right time for our content distribution business to scale up, you know, the industry has changed. It's a very difficult industry. Now programmers are going direct to consumers (through streaming), and the erosion of satellite-based distribution has been very significant recently…And I think that was the right strategic positioning for that area of ​​our business.”

The CEO says the deal will make EchoStar more competitive against its rivals in the “extremely competitive” telecommunications industry. “There are only three players that own all of the telecommunications mobile communications in the United States,” meaning AT&T (T), T-Mobile (TMUS), and Verizon (VZ). The market “can afford to have a very solid challenger in the US.”

EchoStar shares fell in response to the acquisition announcement. Akhavan says he “estimates that it was a very complex transaction that in some respects represented the most sophisticated, complex and extensive restructuring, refinancing and exchange in the recent history of Wall Street.” So I think it's a while takes time for people to unwrap it.” He says the deal “finances us in the short to medium term so we can continue to develop the business.”

The takeover requires government approval, but the CEO is not worried that there will be any regulatory hurdles. “There are no obstacles for us as the merger of the two companies has resulted in the loss of (over) 60% of their customers since 2016,” due to improved access to broadband internet. He says: “The fluctuation in our business simply shows that the market has choices and regulators actually want a stronger content distributor that can push the programmers to offer smaller, more bite-sized and cheaper packages to consumers who demand this . So I think the decision will actually be very easy for them. That’s why that’s what we hope and expect.”

The story continues

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This post was written by Naomi Buchanan.