EchoStar to grow, then divide

EchoStar dish CEO Charlie Ergen presented plans Tuesday to keep the satellite TV provider growing as competition from DirecTV and cable operators intensifies.

There has been speculation he would sell out to a larger entity or merge with DirecTV, but Ergen said in a statement that he has agreed to buy tech firm Sling Media and plans to split EchoStar into two publicly traded companies: one for its Dish Network TV service, which has 13.6 million customers; the other for EchoStar's technology assets, including Sling. "Each company would be able to separately pursue the strategies that best suit its respective long-term interests," Ergen said.

His company has asked the IRS to rule on what taxes, if any, would be owed under this split. If EchoStar then pursues the spinoff, Ergen would hold the top job at both companies. Shares rose 6.8%, to $44.14, after the announcements.

The spinoff would spotlight EchoStar's technology holdings, which include private satellite services and building satellite receivers sold here and overseas.

With its strong manufacturing capability, EchoStar was able to offer digital video recorders to Dish customers long before the technology became commonplace.

The cash-and-options offer values Sling at $380 million.

Sling has sold more than 500,000 of the models of its Slingbox. The device enables people to use their computers or mobile devices to remotely watch via the Internet any TV channel they receive at home or show they've saved there on a digital video recorder.

"The global demand for set-top boxes is huge over the next few years," says Kaufman Bros. analyst Todd Mitchell. "There are very high barriers to entry, and (EchoStar's plan) creates a pure play in that market and a currency to make smaller technology acquisitions."

He says the technology spinoff could add as much as $3 a share to EchoStar's current value.

EchoStar already owns a small stake in privately held Sling Media, as do Goldman Sachs and Liberty Media — which is acquiring News Corp.'s controlling stake in DirecTV.

EchoStar doesn't plan to hoard Sling's technologies after the acquisition, which the companies say should close by the end of the year.

"We hope to work with Dish Network," says Sling Media CEO Blake Krikorian. "But we have the ability and OK to license our technology to other companies and partner with them, as well. We'll be a stand-alone company."

He said Sling currently works with DirecTV to offer Internet streams of its NFL Sunday Ticket.

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