EchoStar’s Dish sale marks disappointing end to Ergen’s strategy

Dish’s “Seinfeld” strategy appears to have ended quite like the actual show — with its finale a generally-accepted disappointment.

In 2011, Dish cofounder Charlie Ergen first mentioned “Seinfeld” on an earnings call, responding to an analyst’s question about his company’s mixed bag of assets. Ergen noted a half-hour episode of the 1990s sitcom would usually start with multiple plot lines without a clear direction, “But it all seemed to come together in the last couple of minutes,” he said. “And so I think in terms of where we’re going strategically, you’ll have to just wait and see where it all comes together.”

On Monday, assuming regulatory approval, the conclusion was revealed.

EchoStar, Dish’s parent company, sold the pay-TV provider to DirecTV for a nominal price of $1 and $9.75 billion of associated debt on the business. EchoStar shares fell more than 11% Monday.

In recent years Dish tried and failed to transition to a nationwide wireless carrier, while seeing millions of pay-TV subscribers cancel for streaming services and operators that include high-speed broadband, such as Comcast and Charter.

Dish and DirecTV have lost a combined 63% of their video subscribers since 2016.

“Times have changed,” said EchoStar CEO Hamid Akhavan in a CNBC interview Monday. “The content-distribution industry has been on the decline, losing customers at a rapid pace.”

The company’s enterprise value has plummeted in turn.

When Dish and DirecTV discussed merging in 2014, DirecTV’s market capitalization was about $40 billion, and Dish’s market valuation was more than $28 billion.

DirecTV sold a year later to AT&T for $49 billion in equity value. Dish remained independent and lost almost all of its value as its business dwindled and satellite TV has become increasingly anachronistic.

EchoStar and Dish merged back together earlier this year after separating in 2008. EchoStar was motivated to move Dish and its debt off its balance as a $2 billion debt payment matures in November, CNBC reported last week.

When Ergen used to talk about Dish and its future trajectory, he’d sometimes hold out his hand and stretch out his fingers, using them as metaphors for different pathways forward. For years, he tried to marry Dish’s pay-TV business with a wireless service, buying up spectrum at auctions and petitioning regulators to allow its usage.

Dish ended up acquiring Boost Mobile as a divestiture from T-Mobile for $1.4 billion in 2019. Still, without a partner, it’s been difficult for Dish to find the capital to both run its pay-TV business and build out a nationwide network to compete with AT&T, Verizon and T-Mobile — especially as satellite TV cash slow diminishes each year with the loss of millions of subscribers.

“We couldn’t feed [the wireless] business properly,” Akhavan said Monday. “The focus of the company being in multiple directions was also a management distraction.”

The actual series finale of “Seinfeld” was widely panned compared to the show’s best episodes. It’s hard not to view this pathway for Dish as a similar disappointment.

WATCH: EchoStar CEO exclusive CNBC interview on Dish-DirecTV tie-up