DISH Inks Deal to Buy EchoStar's Satellite Services Business

Zacks Equity Research

DISH Network DISH recently announced that it has entered into an all-stock deal to buy the satellite services business from EchoStar Corporation SATS.

The deal, which is valued at $800 million, helped DISH get hold of a business that manages and provides broadcast satellite services.

Per the deal, DISH is entitled to certain operations and assets including Echostar’s Broadcast Satellite Service (BSS) business for about 22.9 million of its shares. Notably, the BSS business includes nine direct broadcast satellites (DBS), licensing for the 61.5-degree orbital slot, key staff accountable for satellite operations and a few real estate properties.

DISH Network Corporation Revenue (TTM)

DISH Network Corporation Revenue (TTM)

DISH Network Corporation revenue-ttm | DISH Network Corporation Quote

DISH noted that the deal is tax free and is expected to close by the second half of 2019, which is subject to certain conditions.

Notably, the current deal follows the 2017 deal per which DISH bought certain assets from EchoStar including “set-top box development, Sling TV technology, software development employees and U.S. satellite TV ground infrastructure” per The Business Journals. The deal was locked to deliver better experience to DISH TV and Sling TV customers.

Acquisition to Improve Efficiency

DISH’s decision to bring the satellite operations business in-house may help it deliver better customer experience, thereby giving it a chance to improve user retention rates.

This in turn may help the company to strengthen its subscriber base.  DISH continues to lose subscribersin its Pay-TV business, primarily due to stiff competition and cord-cutting. Notably, net Pay-TV subscribers declined approximately 259K in first-quarter 2019.

Moreover, management noted that the deal will help it achieve operational efficiencies and bolster both free cash flow and EBITDA. This is likely to aid operating income and bottom-line in the near term.

Focus on Quality Content May Aid DISH

DISH’s focus on providing quality content to its users is expected to benefit it in the long term. The resolution of the dispute with Univision Communications restored access to the latter’s channels for DISH and DishLATINO customers.

Additionally, the company strengthened its on-demand content library after adding “11 à la carte on-demand packages” taking the total new title additions to 7,000. The package additions are expected to broaden DISH’s existing portfolio with new video content, including original series.

Focus on providing quality content and the above deal are expected to aid DISH’s top line.

Zacks Rank & Stocks to Consider

DISH currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader consumer discretionary sector include IMAX Corporation IMAX and Comcast Corporation CMCSA. Both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for IMAX and Comcast is pegged at 17.5% and 12.5%, respectively.

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