Ergen: A Dish-DirecTV Combo ‘Makes A Lot Of Sense’

But Adds That Dish's Wireless Options Remain ‘Wide Open’
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Count Dish Network CEO and chairman Charlie Ergen among top industry execs who agree that the pay TV industry could use another dose of consolidation.

“There’s no question that putting Dish and DirecTV together makes a lot of sense,” Ergen said Tuesday on Dish’s second quarter earnings call with analysts and reporters. “We would certainly look at DirecTV, and putting Dish and DirecTV together.”

Such a combo, which the Federal Communications Commission shot down in 2002, “makes a lot of sense strategically.”

Earlier on the call, Ergen said the regulatory path for a deal with DirecTV could be easier now that the telcos are offering video services , the wireless industry undergoes its own wave of consolidation, and more video options become available to consumers over broadband.

"Clearly it's a different environment from a regulatory point of view," Ergen said, adding later: “The marketplace is probably fairly attractive for the consolidation of the video business.”

Further consolation  “might happen in cable first, and that might force the satellite guys to look at different things,” Ergen added, in a reference to Liberty Media chairman John Malone, who is reportedly trying to use Charter Communications as a vehicle to combine with either Time Warner Cable or Cox Communications.

Some analysts believe Dish could be well served by merging with DirecTV. “A combination with [DirecTV] would provide sufficient operating cost savings to fund both network construction and the necessary price cuts to re-invigorate satellite’s consumer value,” Craig Moffett, founder of Moffett Research, wrote in a note issued Tuesday.

Ergen said that Dish would be willing to part with its spectrum if it would help to align the strategies of Dish and DirecTV and smooth out the road toward a merger. “We’re not married to any particular strategy,” he said. “We’re not suicidal about it,” he said of Dish’s wireless strategy.

That said, Dish is not yet ready to give up on wireless, despite Dish's failed attempts at acquiring Sprint Nextel and Clearwire.  “We still think our options are wide open,” Ergen said.

He acknowledged that T-Mobile USA remains the U.S. wireless carrier left if Dish was to pursue a full-on merger.  

But Sprint remains a “potential partner for us as well,” Ergen said. “We know that asset and we think we fit well.”

Reporters and analysts also asked Dish execs to address the testy topic of retransmission, opening the door for Ergen to negotiate a bit in the media.

Ergen said Dish is “optimistic” that it will get a new deal done with Disney before the existing one expires next month. “But you never know until you sign the final agreement.”

The motivation, he said is to “get a fair price” while also securing more digital distribution rights. “There’s  a way to thread the needle there,” he said.

He said Dish is likewise bracing for the worst. “There could be a day when, strategically, companies can’t get together. We’re prepared to go either way.”

If a deal can’t get done, Dish will "part ways; simple as that.”

“I think we’re moving toward a favorable solution for both parties,” Dish president and CEO Joe Clayton said of the ongoing negotiations with Disney.

Ergen was also asked for an update on Dish’s pursuit of an “over-the-top” video subscription service akin to the kind of offering Intel Media and others are developing.

Dish, he said, is “technically prepared for OTT, if that’s something the programmers ultimately want to do,” but Ergen has not seen a “critical mass” of content providers that are willing to provide such rights.

“We got very little enthusiasm” from programmers, when Dish proposed the idea last year, Ergen said.