Ergen Is Still Odd Man Out in Billionaires’ Deal Club

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Dish Network Founder Charlie Ergen
Dish Network Corp. Founder Charlie Ergen. Photographer: Jonathan Alcorn/Bloomberg

Charlie Ergen is once again on the outside of consolidation as another telecommunications mogul strikes a deal.

The billionaire’s satellite-TV provider Dish Network Corp. is still flying solo after more than $700 billion in industry deals by rivals in the last three years. Wireless carriers and cable operators are rushing to get bigger and add more services to stay competitive.

In the latest example, Charter Communications Inc., the cable operator backed by John Malone, said Tuesday that it’s buying Time Warner Cable Inc. for more than $75 billion including debt. That’s after Patrick Drahi’s Altice SA announced on May 20 that it agreed to buy smaller provider Suddenlink Communications.

So where does that leave dealmaker Ergen and Dish? Already, Dish lost out on Sprint Corp. and Clearwire Corp. in 2013 after getting outbid. While it was in the mix for DirecTV, AT&T Inc. eventually prevailed last year.

“Their options are starting to look a little bit limited as a lot of companies are pairing up with each other and partnering up to gain scale,” Amy Yong of Macquarie Group Ltd., said in a phone interview. “This raises the level of urgency for Dish to want to do something pretty quickly.”

Ergen got a shot at approaching wireless carrier T-Mobile US Inc. last year when Sprint walked away from talks because of regulatory opposition. Dish, with a market value of $32 billion, is still the company’s most likely buyer, but T-Mobile has has gotten more expensive after surging more than 40 percent this year. It’s not obvious what Dish’s other big takeover options are.

Sell-Side

On the sell-side, Dish has something many big players in the industry covet: A boatload of valuable wireless spectrum, or airwaves for transmitting voice and data to mobile devices. That makes it a potential target. But AT&T, a possible suitor, is still tied up closing its purchase of DirecTV. And Verizon Communications Inc. just announced it’s buying AOL Inc.

Verizon isn’t hampered financially by the $4.4 billion AOL takeover, but the $202 billion wireless giant may not feel it needs Dish today, said Walter Piecyk, an analyst at BTIG. Still, with some cable and Internet outsiders also eyeing wireless expansion, Verizon probably doesn’t want to wait too long, he said.

Google Inc. or a cable company such as Charter, Altice or Comcast Corp. could step in to facilitate a combination of Dish’s spectrum, valued by some analysts at as much as $50 billion, and T-Mobile’s cell towers and wireless customers.

Dish “has effectively the last big chunk of spectrum that these operators or new operators will need,” Piecyk said in a phone interview. “If Dish is able to structure a transaction with T-Mobile and a cable operator or Google, that’s going to put Verizon in a very difficult spot.”

Other Options

If Ergen can’t find a partner willing to sell to or buy Dish, he could also explore a breakup, Yong of Macquarie said. This could entail separating out the satellite-TV business to help facilitate a sale of those operations and then creating a sale-leaseback structure with its spectrum. Or Ergen could think more seriously about building out his own wireless network and putting Dish’s spectrum to use that way, she said.

“I don’t think Ergen is just going to sit still and do nothing with it,” Piecyk of BTIG said.

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