EchoStar May Split Up Assets, Will Buy Sling Media

EchoStar Communications is considering splitting up its businesses into two publicly traded companies.

The company is pursuing a plan to spin off its technology and infrastructure assets in a tax-free transaction, separating them from the pay TV Dish Network operations. Those assets include EchoStar’s set-top-box-manufacturing business, international operations, third-party fixed-satellite services and noncore satellites, uplink and spectrum licenses.

”We believe separation of our consumer-based and wholesale businesses could unlock additional value,” EchoStar chairman and CEO Charlie Ergen said in a statement, “Each company would be able to separately pursue the strategies that best suit its respective long-term interests. The spinoff transaction would also allow employee incentives to be tied to their respective company's performance and improve opportunities to effectively develop and finance expansion plans.”

Ergen would serve as chairman and CEO for both Dish Network and the spinoff.

EchoStar is also acquiring Sling Media, maker of the Slingbox, which allows users to access live TV from their PC or portable device, for $380 million in cash and EchoStar options. The transaction is expected to close in the fourth quarter.

Sanford C. Bernstein analyst Craig Moffett sees the acquisition as a positive step for Dish to set itself apart from its competitors such as DirecTV, which touts its high-definition expansion as a competitive advantage, and the MSOs with their broadband and triple play.

“An ‘anywhere’ value proposition for consumers has the potential to position EchoStar's service offering as genuinely differentiated,” Moffett said.

However, the analyst was cautious about Sling’s reliance on high-speed broadband that is largely provided by cable operators and telcos, noting that the digital-subscriber-line service that is commonly bundled with direct-broadcast satellite services today is inadequate to handle a “high-quality user experience with Sling.”