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Ergen: Comcast/TWC Approval Could Make DirecTV Merger More Palatable

Dish Network chairman Charlie Ergen said if the pending Comcast/Time Warner cable merger passes regulatory muster, it could make it easier for a combination of the two largest satellite TV players, Dish and DirecTV.

“If you take the No. 1 and No. 4 [pay TV] providers and put them together, it’s hard to see why you can’t put No.2 and No. 3 together,” Ergen said on a conference call with analysts to discuss fourth quarter results. But the Dish chairman expressed some doubt that the Comcast/TWC deal would receive approval.

“This puts pressure on everybody that in a way is a bit unprecedented,” Ergen said. “…Nothing I can see is positive about this. If you are a pay TV provider and your name is not Comcast or Time Warner Cable, I don’t see anything positive.”

Ergen wasn’t proposing a deal with DirecTV and he acknowledged that both companies have taken different strategic paths – Dish has concentrated on amassing wireless spectrum and creating a broadband business while DirecTV has focused on growing its video base and boosting shareholder returns. But despite their differences, Ergen said it wouldn’t prevent a deal.

 “We have taken slightly different strategic paths,” Ergen said. “It’s safe to assume that they could have gotten into the wireless space and chose not to; they might not have as much passion for that. We may not have as much passion for [share] buybacks. But that doesn’t make things impossible.  The magnitude of the [Comcast] transaction makes us look at everything in a different light at Dish.”

Dish and DirecTV tried the merger route in 2002 only to have it rejected by regulators who believed the deal would significantly limit competition. 

Aside from any potential deals, Dish had a mixed quarter, adding 8,000 net new customers in the period and increasing revenue and cash flow by 6.6% and 23%, respectively. Dish also announced a deal with former sister company EchoStar, where Dish will swap 5 satellites and $11 million to EchoStar for an 80% economic interest in its retail wireless broadband unit Hughes Networks Systems. Dish said it will lease back space on the satellites from EchoStar.