Dish’s Ergen Ready to Be T-Mobile’s Plan B as DirecTV Pricey

May 08, 2014 4:22 pm ET

(Updates with closing prices in ninth paragraph.)

May 8 (Bloomberg) -- Dish Network Corp. Chairman Charlie Ergen is vowing not to enter a bidding war for deals. Instead, he’s waiting to pounce on T-Mobile US Inc. if its merger with Sprint Corp. fails.

While a DirecTV merger is also tempting, the satellite-TV rival is too expensive to pursue, Ergen said today on a conference call to discuss first-quarter earnings. DirecTV shares have risen on speculation that AT&T Inc. is in talks to buy the company, just months after Ergen approached DirecTV about a combination.

“We don’t have the kind of money to go outbid Sprint for T-Mobile or outbid AT&T for DirecTV. So we have to be well positioned so no matter what happens it’s all good for us, and I think we’re there,” Ergen said. Regulators in Washington will “pick winners and losers,” he said.

For now, Ergen, a billionaire and one-time professional blackjack player, said he’s content to sit back and see how the consolidation plays out.

“I wasn’t a very good poker player but when a bunch of drunken fools were throwing money around occasionally I was able to pick up the pot at the end of the day,” Ergen said today. “My recommendation to our board would probably be let’s see what happens.”

The upcoming spectrum auction will help Dish determine its value, he said.

‘Strategic Interest’

If government regulators decide to block a deal between Sprint and T-Mobile even though it’s logical to create a bigger wireless competitor, “then T-Mobile would have strategic interest to us, yes,” Ergen said.

Sprint is expected to make a formal bid for T-Mobile in June or July, a person with knowledge of the matter said last week. The chief executive officer of Deutsche Telekom AG, which owns T-Mobile, said earlier today that he doubts a merger of T- Mobile and Sprint could win regulatory approval anytime soon.

T-Mobile shares have surged 79 percent in the past year as investors cheered its subscribers gains and speculation it could be an acquisition target. The stock fell less than 1 percent to $31.73 today.

If Ergen acquired T-Mobile instead, he would get access to a faster-growing market beyond Dish’s satellite-TV business, which has slowed now that most U.S. households already pay for TV subscriptions. That means wireless high-speed Internet is more important than ever, Ergen said today. Last year, Ergen offered to buy Sprint, only to be outbid by SoftBank Corp.

Plot Twist

Bloomberg News reported in March that Ergen contacted DirecTV to discuss a merger. He’s competing for DirecTV’s attention with AT&T, which is in talks to buy the company, people with knowledge of the situation said this week.

A merger between AT&T and DirecTV would make more sense strategically than financially and would leave Dish in a good position, Ergen said today. DirecTV is too expensive now to be worthwhile for Dish, though Dish would certainly look at DirecTV if it were up for sale, he said.

DirecTV shares fell 3.6 percent to $85.11 today, giving the company a market value of about $43 billion. The stock is still up 38 percent in the last year.

“The movie always has a twist,” Ergen said. “It never happens the way you think, and even the way I think things are going to happen isn’t the way it’s going to happen.”

While he ponders his next move, Ergen is working on the first online, cable-TV like product in the U.S., to be introduced by the end of the year, he said today. Englewood, Colorado-based Dish has enough deals with programming providers to offer the service, he said.

--With assistance from Alex Sherman in New York.