Dish Network’s ongoing evolution to being a competitive 5G network operator received a jolt from above as its Chairman Charlie Ergen combined that business with Dish Network’s sister company Echostar to form a new entity focused on market differentiation through services like private wireless, satellite-to-device broadband communications and potentially fixed-wireless access (FWA) services.

The deal calls for Dish Network and Echostar to merge, with Dish Network shareholders controlling a 69% ownership stake in the new entity. That entity will also include Echostar’s Hughes Network Systems and count nearly 18 million total customers across Dish Network’s mobile telecommunications and satellite television services, and Echostar and Hughes enterprise/government connectivity verticals.

“They're all in a little bit different buckets in our companies and when we combine those all together with more modern technologies and databases, we have an ability to be more efficient at serving those customers and growing those customers,” Ergen said during a presentation on the deal.

Company management repeatedly cited 5G private network opportunities as a driver of that growth. This is based on the ability to combine Dish Network’s expanding 5G network with the satellite and enterprise/government capabilities of Echostar and Hughes.

“By integrating Dish spectrum with Echostar’s technological capabilities, we will have the ability to amplify 5G private networks,” Ergen said. “In other words, what we're able to do is combine satellite communication and terrestrial communications all within the 5G cloud-native platform.”

Ergen added that enterprise customers are asking for a combined connection platform that can serve broader use cases. “They may have SD-WAN and … they may have a satellite overlay,” Ergen said. “It's one of the things we're finding out that as we talk to customers on the satellite side, they're asking for terrestrial coverage.”

As an example, he cited an airline that is already using the company’s satellite technology today for in-flight entertainment or connectivity but needs a more robust connection solution at an airport.

“You can imagine an airline that says I want connectivity to my airplane, but my biggest problem is when I get around the major airports I have congestion because I got 300 planes that are circling and no satellite coverage can take care of that,” Ergen said. “Well, we can solve that problem terrestrially for the airlines so they can uniquely cover their customers while they're in the air but they also can cover their customers when they're on the ground and when they're circling.”

This coverage ability is boosted by Dish Network having specific satellite spectrum assets covering North America and Echostar having specific satellite spectrum assets covering the rest of the world. This could make for an easier path toward providing global private network services to enterprise and government customers.

“That to me is a much easier path than trying to do different frequencies in every country from satellites. We know enough about satellites to know that's a difficult project and it adds a lot of cost and interference that you have to then mitigate. It’s a much tougher problem,” Ergen said. “But when you have the same frequency around the world, it's much easier for your modem manufacturers, handset manufacturers and your operators who don't have to give their spectrum up.”

This opportunity has not been lost on the broader telecommunications industry, which has increased efforts toward connecting satellite and ground-based terrestrial services to support 5G networks.

Dish Network is also continuing to monitor the more mature fixed-wireless access (FWA) market, something that Ergen said could be supported by its satellite system. “We're a connectivity company,” Ergen noted. “We think fixed wireless is part of what we do, whether it be from satellite, whether it be from terrestrial.”

Dish Wireless COO John Swieringa said that the carrier is interested in the market, but is also focused on other priorities.

“We're keeping an eye on what the competition is doing,” Swieringa said. “It's about sequencing for us. … Obviously, we have a lot on our plate with getting the retail business rolling, but fixed wireless is on the development roadmap. But no firm to launch yet.”

Ergen upped the stakes by adding that the “network today is capable of doing fixed wireless similar to how some of our competition does it. It will be obviously for us an economic model. And as you said, if you got available bandwidth, you can make a case for that.”

Economic considerations are a big part of the merger.

Company executives stated the deal will provide a targeted $150 million per year in earnings before interest, taxes, depreciation and amortization (EBITDA) savings. “That will create a more robust capital structure and provide financial flexibility [and] position the company for growth and value creation,” Ergen said.

This savings will also be boosted by a near-term drop in capex by Dish Network, which recently hit a 5G converge milestone that allow it to take a deployment investment breather, and Echostar successfully completing its Jupiter 3 satellite launch that allows for reduced near-term capex investments.

That cost savings should also come in handy as Dish Network moves through its eventual network expansion plans.

The carrier to this point has been spending billions of dollars to build out its cloud-native 5G network to meet coverage deadlines from the Federal Communications Commission (FCC) tied to the $34 billion it has spent on wireless spectrum licenses. Ergen had previously noted that the carrier’s full build could run up to $10 billion, and late last year it was forced to dip into the finance markets at a time when interest rates spiked.

Ergen more recently noted that the carrier would begin to cut spending once it hit the 70% coverage requirement. That spending lull will be a self-admitted important time for Dish Network to prove it can be a competitive wireless carrier in the market.

“We have a narrow window of opportunity here … to perform and execute and address our capital structure,” Ergen said during Dish Network’s first-quarter earnings call. “We have to do a lot of things right. We have a small margin of error but it’s all doable.”

During the latest presentation, Ergen noted Dish Network was at about $6 billion spent on capex, with around $2 billion more allocated for the next two years to “reach the lowest level of continuing milestones with the FCC.” However, he added that the remaining $2 billion has been “in his mind” as a means to build out a more robust network.

“We have worked with the FCC to get our milestones,” Ergen said. “I would have preferred to be able to build our network a little differently without the kind of 70% milestone. We spent almost close to a billion dollars on IoT that we had to throw away based on FCC requirements. We probably would have built our network at a more regional basis, and it would have been a little more robust and it would have been in market sooner had we been able to do it on a regional basis versus a national population basis. But these are things that were negotiated with the FCC. There's the practical business world and there's the regulatory world and sometimes those aren't as practical as we would like as business people.”

The construct of those business people heading the new operation will be slightly changed.

Ergen will serve as executive chairman of the combined entity, with current Echostar CEO Hamid Akhaven maintaining that role over the new operations. Swieringa will become president of technology and COO of the new entity, while current Dish Network CEO Erik Carlson will eventually leave the organization.

Carlson’s departure will continue what has been ongoing executive exits from Dish Network. This includes the recent retiring of Dave Mayo, who was EVP of network development; the abrupt resignation of COO Narayan Iyengar prior to Swieringa taking on that position; and former EVP and CMO Stephen Bye leaving Dish Network earlier this year.

Shareholders from both companies have already approved the deal, which is expected to close by year-end.