EchoStar Now Slings

EchoStar Communications’ bold purchase of Sling Media may help the satellite-TV company compete with—and possibly supply—other cable and satellite operators.

The nation’s third-largest pay-TV provider through its DISH Network, EchoStar agreed to buy three-year-old “digital lifestyle” company Sling Media for $380 million in cash and options in a deal that is expected to close in the fourth quarter.

EchoStar was an early investor in the privately held Sling in January 2006, along with Goldman Sachs and Liberty Media Corp. Sling Media is the maker of the Slingbox, which connects to a television set-top box or DVR and delivers television content to users’ PCs and handheld devices anywhere there is an Internet connection.

Sanford Bernstein analyst Craig Moffett said EchoStar’s purchase of Sling Media may give it an image boost in the marketplace. Fellow satellite television provider DirecTV markets itself as the high-definition (HD) champ, launching 21 new channels this week and targeting 100 by year-end. The MSOs tout their triple-play packages, but while EchoStar was an innovator in DVRs, they have increasingly become a commodity.

Once acquired, Sling would be combined with EchoStar’s other technology and infrastructure assets and spun off into a separately traded public company, apart from the DISH Network pay-TV operations. Those assets include the company’s set-top-box-manufacturing business, international operations, third-party fixed-satellite services and non-core satellites, uplink centers and spectrum licenses.

“It gives them a leg up on the competition with the integration of these features,” says Moffett, who adds that the spin-off of Sling would keep it independent so that it can freely market to the MSOs.

On Sept. 27, the company unveiled the latest addition to its lineup of Slingbox components, the Slingbox SOLO, which lets users “sling” both standard-definition and HD content. The box retails for less than $200; this puts it in the middle of Sling Media’s product mix, which ranges from a $129.99 basic box to a $229.99 model that can handle up to three SD and one HD device.

EchoStar CEO Charlie Ergen said in a statement that “each company would be able to separately pursue the strategies that best suit its respective long-term interests.”

Meanwhile, DISH shares jumped this week on news of a potential AT&T takeover. Thomas Eagan, an analyst with Oppenheimer & Co., wrote in a research piece, “It seems to us a matter of when, not if, AT&T acquires EchoStar,” estimating a price of $56 per share. Eagan adds that the Sling Media service might be worth an incremental addition of 100,000 subscribers per year to the DISH Network starting in 2008.