Dish Network´s Bid for Sprint – Ergen Gets Personal

May 10, 2013 | By More

Dish Network made a $25.5 billion counter bid in March 2013 against SoftBank’s October agreement to pay $20.1 billion for 70 percent of Sprint, US´s 3rd largest mobile player. Both SoftBank and Dish have a lot at stake so analysts do not discard the possibility a bidding war, but given Dish´s record as a disruptor, it is plausible to expect that a combined Dish-Sprint company would be more transformative and with more profound ramifications for the converging telecom and entertainment business.

Dish Network connecting the dots

Dish Network chairman Charlie Ergen is known for three characteristics that often define self-made entrepreneurs: Risk-taking, independence and frugality. These personal characteristics may need to come together for the one-time professional poker player to succeed if his bet to merge Dish with Sprint goes through.

  • Charlie Ergen, Chairman Dish Network

    Charlie Ergen, Chairman Dish Network

    Risk-Taking: Ergen has openly admitted that Dish´s future largely depends on the acquisition of Sprint/Clearwire since growth prospects for Dish are limited without a transformative deal. But $25.5 billion is a big bet and some point at Dish´s highly-leveraged proposal compared to SoftBank’s. However, to prove his determination and show “skin in the game”, Ergen is willing to put his entire personal net worth of $10 billion on the table.

  • Independence: In the race for the multiservice network, DTH operators need to find means for quad-play independence or (ultimately) become part of someone else’s business. Independence is of particular urgency for Dish given that it has walked a horizontally integrated service path, unlike DirecTV which has emphasized a more vertical approach towards exclusive content and distribution. Dish could re-explore partnership deals with T-Mobile USA but Ergen said that if he loses his battle with SoftBank to buy Sprint/Clearwire he may need to put the entire satellite TV company up for sale.
  • Frugality: The bet for Sprint has largely been interpreted in the press as a move to transform Dish Network into the wireless data business.  While there will certainly be synergies between Sprint and Dish including cross-selling opportunities, cost savings and churn reduction (as a result of service bundling), it appears that the shift from linear video consumption towards a multiscreen non-linear environment is the main long-term driver for the deal. Managing transport resources frugally and smartly will be vital in the context of content fragmentation and the exponential growth of IP video traffic to all kinds of devices and environments. Efficiency will ultimately define winners and losers among last-mile access providers.

Another indication that Ergen believes in ultimately becoming an efficient transporter of multiscreen video content can be inferred from recent friction with content owners over the spiraling cost of programming, Dish´s push for a la carte offerings and programmers (understandable) resistance to Dish´s “hooper” ad-skipping technology. The traditional dual stream model for TV, consisting of subscription and advertising revenue will likely stay but gradually reshaped by demanding consumers that do not want to pay for content they do not watch. Dish intends to empower consumers further by making personalized content available anytime and in any environment (add value to content) while working towards developing a video-centric hybrid content delivery network (low cost transporter).

The morphing of Dish from a conventional satellite TV company into a horizontally-integrated transporter for multi-screen TV (in both fixed and wireless contexts) is to be watched closely as a potentially new service paradigm. Satellite TV pioneers like Dish have a track record of leading consumer-empowering disruptions such as consumer-grade digital TV, digital video recording (DVR) and place-shifting technology (SlingBox). Risk-taking, independence and frugality are thus the three personal characteristics of Dish´s chairman that could shape a potential merger with Sprint and the opportunity for a satellite player to drive a new paradigm in television distribution.

Also read:

Dish Network´s Bid for Sprint – Connecting the Dots

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Category: ANALYSIS

About the Author ()

Carlos Placido is an independent consultant with twenty years of progressive experience in the areas of telecom consulting, business development, engineering and R&D. With focus on emerging satellite markets and technology, he has conducted numerous strategic consulting projects as well as research and management activities, including global market research studies for Northern Sky Research (NSR), business development support for technology vendors and project management at Telefonica. Until 2004, Carlos led a development team at INTELSAT, where he was responsible for identifying and validating future satcom uses of emerging video and IP data technologies. Carlos is also contributor and administrator for Satcom Post, an online professional knowledge-sharing platform. He holds an engineering degree from the University of Buenos Aires and an MBA from the University of Maryland, Smith School of Business.

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