EchoStar nears deal to sell Dish to DirecTV as debt payment looms: sources

Charlie Ergen is close to selling the pay-TV business he founded more than 40 years ago.

EchoStar is in advanced talks to sell satellite television provider Dish Network to rival DirecTV, the closely controlled pay-TV operator owned by private equity firm TPG and AT&T, according to people familiar with the matter. While the sides hope to reach an agreement by Monday, no agreement is guaranteed and talks could still collapse, said the people, who did not want to be identified because the talks are confidential.

The Dish-DirecTV merger has been rumored for years, and it almost worked out in 2002 until it fell through under pressure from regulators. This time the deal is driven by EchoStar's desire to pay off $1.98 billion in debt that comes due in November, two people familiar with the process said. According to public filings, EchoStar had just $521 million in cash and cash equivalents and marketable investment securities as of June 30 and forecast negative cash flows for the remainder of 2024.

The prospect of EchoStar's future bankruptcy and creditors approving the deal make closing a deal difficult. Dish attempted to refinance some of its debt to bondholders earlier this week, but negotiations fell through, according to a Sept. 23 filing.

The company said in public filings that it continues to have discussions with other creditors.

A potential DirecTV-Dish transaction will be structured entirely in cash, with DirecTV paying EchoStar for the satellite television business, its Sling digital business and related liabilities, people familiar with the matter said. In total, the deal could be worth more than $9 billion, one of the people said.

A spokesman for DirecTV declined to comment. A spokesperson for Dish could not immediately be reached for comment.

“The bottom line is that we now view bankruptcy in the next four to six months as the most likely outcome (for EchoStar),” Craig Moffett of MoffettNathanson said in a note to clients in August. “They need to raise new capital.”

EchoStar has a total enterprise value of approximately $31 billion and a market capitalization of approximately $7.6 billion. The proposed deal does not involve wireless spectrum that Dish Network has amassed over the past decade to transform itself into a wireless company, the people said.

Satellite TV, once one of the largest providers of television packages, has been declining for years – often faster than the cable competition – as consumers switch to subscription streaming services, e.g Netflix, Disney+ And Amazon Prime Video. Dish ended its most recent quarter with 6.1 million satellite subscribers and 2 million customers for Sling TV, Dish's online suite of linear networks.

DirecTV has also felt the pain, losing millions of subscribers since AT&T bought the company with debt for $67 billion in 2015. AT&T spun it off in 2021 and sold part of the company to TPG. At that time, DirecTV had about 15.4 million subscribers. Today there are about 11 million, as CNBC previously reported.

The company has been focused on expanding its streaming business lately, focusing its recent advertising campaign on dispelling the notion that DirecTV is only available through a satellite dish. MoffettNathanson estimates that DirecTV added more than 20,000 streaming customers earlier this year. The majority of its customers still use satellite dishes.

Most recently, DirecTV was in a distribution dispute with Disney that resulted in channels like ESPN being blocked from the satellite TV company's customers for nearly two weeks. The two companies have reached an agreement that gives DirecTV the ability to offer thinner, genre-specific packages.

—CNBC's Lillian Rizzo contributed to this report.