Dish Network (NASDAQ: DISH) might be able to revive a once-defeated merger with DirecTV (NASDAQ: DTV) in today's regulatory environment--if the merger could be positioned as a response to a merged Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC). But, economically, it's not feasible, Charlie Ergen, co-founder and chairman said during wide-ranging comments with analysts after Dish announced first quarter earnings.
"I guess I would be cautiously optimistic you could get it through regulators (if you could ) show them that … as a result of the merger, competition would be enhanced and a stronger Dish-DirecTV in the wake of a Comcast-Time Warner-Charter Communications (NASDAQ: CHTR) consolidation, new entrants in the marketplace, OTT and concentration and broadband, is probably not a bad thing for consumers," Ergen said.
The problem is that Dish isn't in a financial position to advance such an idea. That would be better left for AT&T (NYSE: T), reportedly the top suitor for the top satellite company.
"Would Dish look at DirecTV? Of course we'd look at DirecTV if they're for sale. And there would be a lot of synergy and … that would make a lot of sense from our perspective because there'll be just a tony of synergy between the two companies," Ergen said.
On the other hand, he said, the economics don't favor such an idea.
"DirecTV would be too frothy for us for our board to look at those kinds of prices," he added. "We could never outbid an AT&T or a Verizon (NYSE: VZ) or anyone else for DirecTV."
The same might go for getting into the wireless business with both feet via a T-Mobile US (NYSE:TMUS) acquisition, although, again depending on the regulatory environment, a reverse with T-Mobile acquiring Dish is not completely out of the question, he said.
"We don't have the kind of money to go outbid Sprint (NYSE: S) for T-Mobile," Ergen said. "We can't compete in that space."
Sprint, he added, can and "they'd have a lot of synergy. Why wouldn't they go after T-Mobile?"
The regulatory environment could be a stumbling block, but "you could go broke bettering on Washington," Ergen said. "So if, in fact, Sprint didn't proceed or was denied, then T-Mobile would have a strategic interest in us."
If that regulatory environment, as is expected, looks the other way and allows the number one cable operator to acquire number two, it could create a tectonic shift in the entire telecommunications space, Ergen speculated.
The merger, while good for Comcast and Time Warner and their shareholders, isn't so good for everyone else.
The merger "has serious consequences to the future of telecommunications and content and everything else in the United States. That's a big merger. It would not be a merger that typically would sail through Washington … even though, obviously, they're very well connected."
The merger has too many bad side effects to glide through the approval process, he added.
"Everybody has to compete against them. So how do you then put together things that would be beneficial to American consumers and shareholders? AT&T and DirecTV might be one of those chain reactions, but there would be others and you can use your imagination on what would be for me to talk out of school," he said.
That could, if the dollars broke in the right direction, even include a new move to combine Dish and DirecTV.
"You'd have to spend some time with the regulators and make your case" as part of a changing environment that would include a merged Comcast-Time Warner Cable, Ergen said. "Strategically I think people would understand the fairness of that and you probably either would approve both of them or you would disapprove both of them., if they can go to 30 million subs and higher, somebody else ought to be able to go to 30 million subs, too."
A merged satellite company, at least from Dish's perspective, won't be the one to do it, though.
"We're small guys, we can't afford DirecTV," he concluded.
- see this transcript
Dish Network adds 40K video, 53K broadband subs, but net income drops
DirecTV boosts U.S. revenues to $6.09B, but net income declines
Dish's Ergen leaves door open for T-Mobile deal if a Sprint/T-Mobile effort fails
DirecTV reportedly enlists Goldman Sachs for talks with AT&T
Rumor mill: Dish Network's Ergen courts DirecTV's White