The Art of the $1 Deal: Billionaire Charlie Ergen’s Latest Gamble
Billionaire Charlie Ergen’s latest gamble came down to the wire.
Just weeks before billions of dollars were due to lenders, Ergen agreed to sell the Dish satellite-television and Sling TV services to rival DirecTV for $1. The deal, announced Monday, would also take about $10 billion in debt off his hands and help secure fresh financing, averting a potential bankruptcy for EchoStar, the parent company of Dish.
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“He’s always been under pressure, and he’s pulled a rabbit out of his hat time and time again to buy himself more time,” said Craig Moffett, an analyst at research firm MoffettNathanson.
The deal to combine Dish and DirecTV is a lifeline for the penny-pinching mogul whose habits are the stuff of telecom-industry legend. To save money, he long worked from a windowless office and made employees share hotel rooms. His hard-nosed negotiations with TV programmers led to frequent channel blackouts, but also kept Dish’s pay-TV prices down.
Now, Ergen, the 71-year-old chairman and controlling shareholder of EchoStar, will need to leverage his Washington, D.C., network to close a merger that antitrust officials have thwarted in the past. And he must persuade the company’s bondholders, some of whom have backed his ventures for years, to take a $1.6 billion haircut on what they are owed.
The Colorado mogul is known to play the odds. He tried his hand at blackjack card-counting until a casino asked him to leave. Later, he and partners poured their savings—$60,000—into selling satellite dishes from a Denver-area storefront, laying the foundation for what would become Dish, one of the country’s biggest pay-TV businesses.
“What he does at a card table is the same kind of thing he’d do at a negotiation table,” said Jimmy Schaeffler, the head of media consulting firm Carmel Group, who has known Ergen for decades. “He’s still a risk-taker. He’s still a gambler.”
Landing Jumbo Jets
On Monday, AT&T said it agreed to sell its 70% stake in DirecTV to private-equity firm TPG, which already owns the other 30%, for about $7.6 billion in payments.
Separately, DirecTV agreed to buy Dish from EchoStar and take on roughly $9.8 billion of its debt. But, TPG will only assume that debt if bondholders agree to write off about $1.6 billion of the Dish obligations. TPG’s credit unit Angelo Gordon and DirecTV also agreed to give EchoStar $2.5 billion in financing to satisfy debt maturing in November.
“In one shot, we reset the company on a new path,” said EchoStar Chief Executive Hamid Akhavan, who likened the negotiations to landing multiple jumbo jets on the same runway. “To land all of them on the same day, on the same timeline, was unprecedented.”
EchoStar’s survival will cost investors. S&P Global Ratings called the proposed debt-exchange “tantamount to a default.” And stockholders in Ergen’s companies have seen the market value of their holdings sink from almost $40 billion to less than $6 billion.
Ergen hit the road this week to persuade bondholders to accept the losses and to reassure investors about EchoStar’s prospects, according to people familiar with the matter. The pitch: Bondholders would enjoy more certainty with debt backed by an enlarged DirecTV. And by casting off its declining pay-TV business, EchoStar would be a simpler wireless business with valuable nationwide spectrum rights.
Ergen wasn’t available for an interview, his spokesman said.
He still maintains an active schedule and works past midnight at times, people familiar with his schedule say. He has climbed each of Colorado’s 14,000-foot peaks and maintains a company tradition of joining incoming interns and managers on a team-building ascent, venturing out with them as recently as July when the DirecTV merger talks were getting under way.
Not Flashy
Ergen grew up around Oak Ridge National Laboratory in Tennessee, where his father, William, worked as a nuclear physicist. His mother, Viola, worked for years as an accountant and met her husband through a hiking club.
After a failed stint as a financial analyst at Frito Lay, Ergen started his satellite business out of a converted mall in the Denver suburbs, far from the Hollywood studios and New York media owners he often battled. He launched its first satellite on a Chinese rocket with a high failure rate.
“I didn’t have a window for the first 25 years,” Ergen said in a 2019 interview at his newer, light-filled headquarters. “We’re not a flashy company.”
Dish offered affordable pay-TV packages to any home or business with space for a receiver. As it grew into the country’s third-largest pay-TV provider, the business pioneered digital video recorder and streaming-TV features that later became industry mainstays.
Employees no longer share hotel rooms on business trips, though they are encouraged to negotiate every service contract they sign, no matter how routine. A former business partner recalled Ergen intervening to swap carpeting for cheaper linoleum in a new satellite office. When the company shot a sizzle reel during the pandemic of its wireless-network crews at work, Ergen narrated the video himself.
On one earnings call, an analyst asked why the company let a sports-right deal lapse rather than pay the higher cost. “Look, I’m from Tennessee, but I’m just not that stupid, and we’re not going to do that,” Ergen replied.
The folksy shtick masks the record of an aggressive financial engineer. In 2008, he split the company he founded into two companies named EchoStar and Dish Network only to later recombine them.
Before the pay-TV business started its long-term decline, Ergen began investing in wireless spectrum licenses. By 2022, he had spent more than $30 billion on spectrum bets.
In 2019, Ergen saw a new opportunity, seizing on two telecom companies’ predicament: T-Mobile and Sprint had agreed to merge, but the Justice Department demanded concessions to keep the wireless market competitive. Dish agreed to buy customers and wireless licenses that the government forced T-Mobile and Sprint to divest.
“The regulators put Dish in a very strong position,” Ergen said in an interview at the time.
Beltway Barter
U.S. authorities could still derail Ergen’s exit from pay TV.
But Ergen has shown a knack for navigating Washington’s thicket of agencies under leaders from both parties. He was welcomed into the Trump White House while the government was reviewing T-Mobile’s bid for Sprint. And the Biden administration this year awarded the company a $50 million grant to run a network-equipment testing center.
If Ergen pulls off his pay-TV exit as planned at the end of 2025, he will be left with a war chest of wireless licenses and an upstart wireless service. Even if he wants to, he isn’t allowed to sell most of the spectrum to likely buyers—other cellphone companies—until 2026 at the earliest. EchoStar’s spectrum rights also include frequencies that companies like Amazon and SpaceX could use to eventually connect cellphones from space.
EchoStar’s wireless service, led by its Boost Mobile brand, offers high-speed cellphone service but only serves about 7 million subscribers, well behind rivals AT&T, Verizon and T-Mobile.
Many stars must align for Ergen’s wireless spectrum bet to cover his losses, let alone pay off for investors.
“It feels like one of those hunting for El Dorado sort of stories,” where the payoff is always down the road, said the telecom analyst Moffett, referencing the legendary expeditions to find a lost gold city. “The problem is it’s an incredibly risky strategy.”
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The Art of the $1 Deal: Billionaire Charlie Ergen’s Latest Gamble
