Dish Network CEO Confident in Bid for Sprint
Dish Network Chairman Charlie Ergen said Dish is “prepared to win and prepared to lose” in its bid for Sprint Nextel. If Dish is unsuccessful with Sprint, “we have a lot of options,” including selling the spectrum, selling Dish or partnering with someone in the wireless business, he said Thursday during a Q1 conference call.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Ergen said he’s “comfortable” with Dish’s $25.5 billion bid for Sprint. It’s a little over $7 per share and Japan-based SoftBank’s bid is $6.38 per share, he said. “There’s a lot of sideshow stuff going on but we believe in our synergies.” If SoftBank has come up with more synergies, it has not increased its bid based on those synergies, he said: “If they believe in their synergies, they may top our bid.”
As a U.S. company, Dish has an advantage over SoftBank, Ergen said. The U.K.-based Vodafone failed in Japan “given that they were culturally different,” he said. There are a lot of obstacles when entering a foreign country, he said. But “that doesn’t mean they [SoftBank] can’t be successful.” Regardless of the options open to Dish, its spectrum will be used in the U.S., Ergen said. “It’s going to go somewhere. … It’s very difficult for SoftBank to outbid us,” he said: “We bring so much to the party that they don’t bring."
Ergen said he prefers to have the Sprint acquisition go through rather than a merger with DirecTV. Dish and Sprint will be transformed in the process, he said. A merger with DirecTV would bring tremendous synergies, “but it'll still be the same company and we would have to figure out how to transform the company,” he said. Dish hasn’t started the due diligence process yet, Ergen added: “What we've seen makes us more confident.” There’s a real value in Sprint and, “in a proper strategic fashion, that value creation can be achieved whether with Dish or SoftBank,” he said: “I'd play whatever role people need me in; if that’s washing dishes or getting pizza, I'll do it."
Dish launched its Hopper with Sling product in February and is satisfied with the results, said Robert Olson, chief financial officer. “Hopper is performing like we expected.” The service is $10 per month and the product “will be a significant contributor to our ARPU [average revenue per unit] over time,” he said. The Hopper is “far superior” to DirecTV’s Genie “in terms of features and customer experience,” said CEO Joseph Clayton. There’s been “a lot of smoke and mirrors” around Genie because it doesn’t have Primetime Anytime or the Hopper’s second-screen application, he said. In market ratings, the Hopper has always come out ahead of the Genie, Ergen said. However, the Genie’s marketing is quite good, he said: “We have a great product and the satisfaction scores are off the charts, but we've got to do a better job of helping people understand the product.”
Ergen said he expects attitudes toward technology like the Hopper will be viewed more favorably by broadcasters going forward. “Once consumers make the decision en masse, there’s nothing that broadcasters or us can do.” The Hopper makes it simpler to fast-forward through commercials, so it can be done with one push of a button instead of multiple steps, he said. Broadcasters understand the model is changing, he said, but “I don’t think they like how fast it’s changing.” They recognize the model is changing and “they're interested in the technology we're talking about,” he added.
Offering programming in smaller bundles is more consumer-friendly, Ergen said in response to a question about a plan from Sen. John McCain, R-Ariz., to introduce a la carte video legislation (CD May 9 p2) (see separate report in this issue). “We know that our customers pay for 200 channels and watch 15.” But there are five big groups “that probably have enough clout in Congress to … stop that kind of legislation today,” he said.
In Q1 2013, Dish reported $3.56 billion in revenue, compared to $3.58 billion in the same period last year, mainly due to reductions in its Blockbuster segment, Dish said in a press release. Subscriber-related revenue increased from $3.22 billion to $3.35 billion, it said. The company invested heavily in its brand, which is necessary to improve the sales mix going forward, said Clayton. Broadband satellite growth “moves us closer to delivering a complete entertainment package to customers,” he said. About 654,000 gross new pay-TV subscribers were added compared to 673,000 of such subs last year, Dish said. Net subs grew by 36,000 in Q1 2013, closing the quarter at more than 14 million, it said.