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Merger or Strategic Shift?

Merger or Strategic Shift? . Key Recommendations. Do Not Merge with. Establish a Joint Venture with. Explore Further Growth Opportunities. Key Recommendations  Industry Trends  Merger Issues  Sprint  Further Opportunities.

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Merger or Strategic Shift?

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  1. Merger or Strategic Shift?

  2. Key Recommendations Do Not Merge with Establish a Joint Venture with Explore Further Growth Opportunities Key Recommendations  Industry Trends  Merger Issues  Sprint  Further Opportunities

  3. Rather than offer a bid to merge with DirecTV LLC, Dish should form a joint venture with Sprint and move into the wireless broadband space Key Recommendations  Industry Trends  Merger Issues  Sprint  Further Opportunities

  4. Industry Trends The Rise of Fixed-Wireless Broadband Key Recommendations Industry Trends  Merger Issues  Sprint  Further Opportunities

  5. Industry Trends • Pay-TV is a mature market with flattening overall growth • Loss of 105,000 subs in 2013 • Programming cost growing steadily at ~9.6% • Changing consumer demand • Sat-TV subs gains in the Pay-TV market are on the verge of reversal • Telecom subs gains (~1.5mm) are head and shoulders above Cable (1.7mm loss) and Sat-TV (170k) • Dish and DTV gross add trends are both stalling, (+0.0% vs. + 0.8%) Key Recommendations Industry Trends  Merger Issues  Sprint  Further Opportunities

  6. Industry Trends • Efforts to expand beyond the market is the future • Bundled services reduce churn and increase per customer revenue • Rural underserved population (<6Mps) equals a 54mm household opportunity • Changing consumer demands in the Pay-TV market • Netflix subscribers and growth dwarf all competitors with 2.3mm new subs in Q4 2013 alone. • Different players are jumping into the Pay-TV market. Sat-TV is stalling in a stalling Pay-TV market. It’s time to move on. Key Recommendations Industry Trends  Merger Issues  Sprint  Further Opportunities

  7. Do Not Merge with Establish a Joint Venture with Explore Further Growth Opportunities Key Recommendations Industry Trends Merger Issues  Sprint  Further Opportunities

  8. The Case Against Merging Key Recommendations Industry Trends Merger Issues  Sprint  Further Opportunities

  9. Key Recommendations Do Not Merge with Establish a Joint Venture with Explore Further Growth Opportunities Key Recommendations Industry Trends  Merger Issues Sprint Further Opportunities

  10. Should establish a joint venture with A joint venture will causemarket penetration and expansion Shared resources will lead to savings of $1.6B in CapEx Pre-existing InfrastructureSupports a Strategic Partnership • No additional expenditure on infrastructure • Leveraging existing expertise1 • 54M Household Opportunity9 • LTE Broadcast Opportunity10 • Combined potential revenues of $24B • Market share gain of +6% • Dish’s wireless spectrum7 • Sprint LTE capacity8 • Pilot LTE/Broadcast program in TX3 Key Recommendations Industry Trends  Merger Issues Sprint Further Opportunities

  11. Pre-Existing Infrastructure Supports a Strategic Partnership • Expansive • national cellular tower network; • not enough spectrum, even with Clearwire acquisition; • Limited LTE Distribution Hybrid LTE/Broadband • 700MHz E Block LTE/Broadcast; • need LTE capability • PCS H Block  Fixed Wireless Broadband; need Cell Towers Source: SEC.gov Key Recommendations Industry Trends  Merger Issues Sprint Further Opportunities

  12. A Partnership will Serve Underserved Households 16%2 Underserved HHs Direct-to-home TV or Mobile Content 19% (+6pt) Share in Pay TV HHs!3 Simultaneous multicast: 2nd Screen capability 1 Conservative approach assuming competitive activity 2 Match Sprint current share (source: Ibisworld) 3 Vs 2013 current share within Pay TV (source: S&P) Key Recommendations Industry Trends  Merger Issues Sprint Further Opportunities

  13. Shared Resource will lead to $7.5bn Synergies • Year 1 assumption • $1.0bn/year, growing to $1.4 runrate by Year 4 Source: SEC.gov Key Recommendations Industry Trends  Merger Issues Sprint Further Opportunities

  14. Total NPV of $24 billion in 5 Years Key Recommendations Industry Trends  Merger Issues Sprint Further Opportunities

  15. Key Recommendations Do Not Merge with Establish a Joint Venture with Explore Further Growth Opportunities Key Recommendations Industry Trends  Merger Issues  Sprint  Further Opportunities

  16. Further Growth Opportunities • Human Capital Demands • Expand in-house expertise on wireless 4G capability. • Retraining existing technicians • Hiring hardware engineers • Hiring software and UX engineers • Leadership – executive communication liaison. • Expand Future Content • Current partnership with • AutoHop technology as leverage Becoming an ISP through fixed-wireless broadband • Test Future Strategic Partnerships • Building strategic partners in the set-top box wars Key Recommendations Industry Trends  Merger Issues  Sprint  Further Opportunities

  17. Do Not Merge with Establish a Joint Venture with Explore Further Growth Opportunities Questions Comments Clarifications

  18. References • Keil, T. & Laamanen, T. (2011, 12). When rivals merge, think before you follow suit. Harvard Business Review, 89(12), 25-27. Retrieved from http://web.a.ebscohost.com/ehost/detail?sid=9daf39a9-68d4-4327-8c50-b4abf851a19b@sessionmgr4005&vid=1&hid=4109&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ== • Lieberman, D. (2014, 03, 31). Dish network-DirectTV merger? don't bet on it, analysts warn. Retrieved, from http://www.deadline.com/2014/03/dont-bet-just-yet-on-a-dish-network-directv-merger-analysts-warn/ • Hannan, C. (2013, 01, 02) Dish Network, the Meanest Company in America. Businessweek.com, Retrieved from:http://www.businessweek.com/articles/2013-01-02/dish-network-the-meanest-company-in-america • Weber, R. A., Camerer, C. F. (2003). Cultural Conflict and Merger Failure. Management Science 49(4), 400-415. • Stahl, G. K., & Voigt, A. Do Cultural Differences Matter in Mergers and Acquisitions? A Tentative Model and Examination. Organization Science 19(1), 160-176. Retrieved from: http://www.jstor.org/stable/25146169 . • Christensen, C. M., Alton, R., Rising, C., Waldeck, A. (2011). The New M&A Playbook. Harvard Business Review, 89(3), 48-57.http://www.extremetech.com/electronics/177897-dish-secures-spectrum-for-150mbps-lte-to-rural-homes-in-the-us • http://www.rethink-wireless.com/2013/12/18/sprint-dish-trial-fixed-lte-service.htm • http://newsroom.sprint.com/news-releases/sprint-and-dish-to-trial-fixed-wireless-broadband-service.htm • http://www.sec.gov/Archives/edgar/data/101830/000110465913029234/a13-10109_2425.htm • Dish secures spectrum for 150Mbps LTE wireless broadband to rural homes in the US | ExtremeTech • http://blogs.hbr.org/2011/07/the-soft-things-that-make-merg/ • http://hbr.org/2009/10/mergers-that-stick/ar/1 • http://www.forbes.com/sites/dorothypomerantz/2014/03/31/why-a-directv-dish-network-merger-might-be-different-this-time-around/ • http://variety.com/2014/biz/news/dish-sets-stage-for-directv-merger-with-transfer-of-satellites-analyst-12011153383 • http://www.deadline.com/2014/03/dont-bet-just-yet-on-a-dish-network-directv-merger-analysts-warn/ Other References: • Mergent • S&P NetAdvantage Capital IQ • Bloomberg • ValueLine • WSJ – All Things D

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