Following is the unofficial transcript of a CNBC exclusive interview with DISH Network Corp (NASDAQ:DISH) & EchoStar Corp (NASDAQ:SATS) Chairman Charlie Ergen and EchoStar CEO Hamid Akhavan on CNBC’s “Squawk on the Street” (M-F, 9AM-12PM ET) today, Tuesday, August 8.
Billionaire Charlie Ergen On Merging Dish And EchoStar To Expand Mobile And Satellite Telecom Empire
DAVID FABER: Joining me now in a CNBC exclusive is Charlie Ergen, he’s the chairman of Dish and EchoStar and Hamid Akhavan, he’s the CEO of EchoStar. Guys, good to have you both. Charlie, it’s been a long time. I’m sorry we’re not person, but I’m certainly happy to see you. 1
5 years ago, you know you said, let me just look here, when you spun off EchoStar, that it would enable the companies to pursue the strategies that best suits their respective long-term interests and allow employee incentives and the like to be tied to the company’s performance. Now you’re saying that it’s compelling because it’s all about growth and building long-term sustainable businesses. What changed so that you’re bringing these two back together?
CHARLIE ERGEN: Well, good morning, David. And a lots changed and the biggest thing is we can really build a new, we’re really bringing in a new athlete for telecom and there’s been a lot of, a lot of technology changes since we spun off Dish but there’s a lot of companies that do satellite well. And there’s a lot of companies that do terrestrial telecom well, but there’s really not a company that that combines connectivity in a way that you can use both terrestrial and satellite together.
And with the advent of lower satellites and lower cost launches, and the advent of 5G standards, you now can put all those kinds of things together. So we built this athlete that has a tremendous amount of resources whether it be worldwide spectrum, whether it be expertise in both telco and satellite, whether it be network management skills, that all comes together and so while those that didn’t exist 15 years ago obviously when we spun the companies off, but now it makes sense to put it back together.
FABER: Charlie, what I hear from many of your investors, of course, is the continued question of how much capital you’re going to need to be able to successfully build out your wireless business and many would view this deal potentially under that, under that perspective as simply giving you access to EchoStar’s balance sheet, one saying to me, it’s almost a disguised equity raise. How do you respond to those questions and or concerns?
ERGEN: Well, there’s no question that this deal, one of the benefits of this deal is that it certainly strengthens our our balance sheet. It certainly strengthens our runway for the next couple of years. But there’ll be more to do on that. We know we have a lot of capability and assets and we know that we’ve had to continue to invest in the future.
It’s always a mistake for companies to not invest in the future because eventually that catches up with you. And we’ve been investing for over a decade in where we think that connectivity is going. And I think that’s going to position us well for the future but certainly we’re in a stronger position today than we were yesterday.
FABER: Yeah, but I mean you spent almost 40 billion buying Spectrum and the question is do you have enough money, you know, you don’t seem to have access to the capital markets at least at a level you’d like to be able to borrow at, Charlie. Citi saying that you’re going to need between 8.5 and 9 billion by 2025. What are you going to do to raise the capital to build out this wireless business that you spent so much money acquiring the Spectrum for?
ERGEN: Well, first of all, I think maybe the, maybe the market doesn’t totally understand the capital that we need. That may be partly our fault, but we have a tremendous amount of assets in combination of the company allows us to grow parts of our business and maybe you can talk a little bit about EchoStar and some of the some of the things that they’re doing because they certainly are cashflow positive, the EBITDA positive.
So they bring a lot of the skill sets but when you put the companies together, there are there are some synergies and there are some business opportunities that we otherwise wouldn’t have.
FABER: Hamid, I will come to you, you’re going to be running a chat, a company that’s challenged at least in some of the core businesses, you know, satellite TV business, I mean they, you just reported lost 294,000 subscribers.
I think you’re below half of your previous size EBITDA burden from the wireless build out, revenues running at a rate of about 8.6% decline a year, your leverage ratio is 7.2. That’s for Dish I’m talking about so I don’t want to, I don’t know the combined company. What do you do here when you run this company? What’s number one on your list of things you got to accomplish?
HAMID AKHAVAN: So, you know, I mean here’s where we have technology meeting opportunity. I think we had a portfolio, unique portfolio of assets here that provide us with almost any form of connectivity. You know, we have anything from engineering and manufacturing and, you know, content delivery and you know, mobile wireless.
I think we’ve got to bring these two together in a synergistic way. There’s a lot of synergies that can be created as a result of combined operation, but more importantly, bringing products to market that are bundled properly. Now, there are 17 million households in the United States that do not have proper broadband connectivity. And you know, that’s a requirement to participate in digital economy.
And we have 18 million subscribers that are spread across three or four different lines of business in the, in the combined company. I think this opens a lot of doors for us to bring new products to market, to bundle the products in the market and satisfy the needs of the consumers. So I expect to take advantage of that unique differentiation, I think as Charlie referred to it as a new athlete in telecom and I think we’re going to put that to use.
FABER: Yeah, you talk about a lack of broadband. Sorry Hamid, I just want to follow up but I do wonder, you know, you’ve got a competitor now in Starlink from Elon Musk. I mean, he’s putting up so many satellites so often, not to mention, I think 45 billion in government subsidies for wired, rural buildouts. Is that a concern for you given the competitive threat that perhaps both of those things represent?
AKHAVAN: Listen, I’m always concerned about all competition. I mean, that’s my job. But I can say the market is much larger. And I think that, you know, ever since I’ve been in telecom, some 40 years ago, I have never heard that there’s been enough bandwidth and there’s been enough connectivity and today, after all of those years, with all the investments that have been made, the demand is far higher than the supply.
So I think the market is large enough if you look at how many subscribers, you know, Starlink has to date and how many we have and how much the market has been taken. We as a market leader with 60% market share of the market, we are still serving a couple of million customers, and there’s still 17 million households that don’t have connectivity.
So I see there’s room for us both and — just went up. I think that more than doubles our capacity to date. And that’s the largest commercial satellite for broadband connectivity ever put up there. So we’re looking forward to having that CapEx holiday in serving the consumers.
FABER: And, sorry yes, go ahead Charlie.
ERGEN: I just might add that because you kind of kind of look in the rearview mirror when you talk about some of the, some of the statistics you put out there but as Hamid said, we’ve been starved for bandwidth in our broadband business from satellite.
We’ve now more than doubled that capacity with a successful launch in — so we have built in we have already demand so you’re gonna see you’re gonna see those trends dramatically change, and then on the, on the Dish side, we’ve only been in a prepaid business on somebody else’s network.
That’s probably the least economic place you can be in in the wireless business and we just now really have met our critical mass of our 73% of population build out with the most modern network in the world with 5G open ran cloud native network. And we’ve we’re entering the postpaid business, which is, which is the sweet spot.
So those trends are all going to change. And I think if people look in the rearview mirror, they won’t really understand where we go as a company. It’s Hamid, it’s our job to maybe articulate a little bit better where we’re going and the opportunities that we have, but it’s not the dim picture that you painted.
FABER: Well, I don’t mean to paint a dim picture Charlie, it’s just that you know, you have enormous capital needs, you say perhaps they’re not as great as some would estimate. And it’s unclear to me where the money comes from. I mean, I guess it’s as simple as that. And you have, for example, a put call option deadline coming up this Friday on T-Mobile’s 800 MHz spectrum. It would cost you 3.6 billion. I would imagine you’re not going to exercise that option, for example.
ERGEN: Well, we won’t discuss that. But I mean, we are we have been in negotiations with with T-Mobile that we don’t know what their resolution is going to be. But there’s not a hard deadline this this week.
And, and obviously, there’s a lot of opportunity for us, but we’re not going to stretch our balance sheet to we’re we’re I think we’ve been prudent capital stewards, and we’re not going to do anything that would that would risk what we’re trying to do and, and you know, I might add that when we put the companies together, we, the outside people and financial advisors did a lot of stress test, and this company’s not going together if what you said was true.
FABER: Okay, understood, would you sell Spectrum to help you fund the build out?
ERGEN: I think there’s, look, we’re we certainly between the two companies have an awful lot of assets, right? One of the things that I think is interesting is EchoStar has S-band around the world. We have the same frequency in North America. You can’t do a worldwide LEO system without economically without making sure that you have a business around the world.
So there’s there’s tremendous synergy there just in the fact that you now have a ubiquitous spectrum around the world that just happens to be a spectrum that’s ideal for IoT and devices and sensors, but also for handsets, and you’ve seen a lot of you’ve seen reports of people saying that’s a 25 billion plus dollar business in the future.
Suddenly, you know, together we have some of those assets in place. And so I think you I think when you have when you have the kind of portfolio we have as a company, whether it be assets or technology or management, I think there’s a lot of opportunity for us and—
FABER: Charlie—
ERGEN: You’ll just have to stand, you’ll have to stand by and wait—
FABER: I will, I will but, you know, your shareholders are not happy having waited, you know, and watched the stock decline so much. I mean, I remember years ago, you talked to me about being a poker player, and you had a hand that you felt was a great hand because you had so many different options.
Do you still feel like you have really any options here? I mean, others would say you should have taken the opportunities to sell or to do other things that could have created shareholder value at 50, at 60, instead of at, where’s the stock right now, a lot lower.
ERGEN: Yeah, I mean, I think the skeptics are certainly that would be that, their position. I’m a bit more of a half full person because I’m on the inside. And the way I look at it look at is that we’ve been built, we’ve been building in investing for 15 years for connectivity, and we’re now in the position we’re finally in a position to reap those rewards with the things that we need to go build our business and build it and you’re gonna I think our investors are gonna see that.
I’m a big investor in our company. So certainly, I’m disappointed in our performance, but I also have the confidence to know that that’s short term, and that you’re going to see the culmination of the things that we’ve put together and you’re going to start seeing all of that pay dividends for us and our investors will be rewarded for that.
FABER: Alright well, I’ll be watching closely. I certainly hope that it is good news and that we can be together as well at some point and talk about it. But I certainly appreciate you both joining me today. Charlie Ergen, Hamid Akhavan, thank you both.
ERGEN: David, always a pleasure. Thanks.
AKHAVAN: Thanks.
