Synergy: Sirius, Liberty Media and Dish Network Part 1

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Includes: DISH, FWONA, SIRI
by: King of All Trades

By Steve Garcia

With the recent addition of Dish network (NASDAQ:DISH) executive Carl Vogel to the Sirius XM (NASDAQ:SIRI) Board, many are asking what is the fit. Vogel was one of Dish networks executive officers from 1994 until 1997, and served as President from 1995 until 1997 when he was a key member of the executive team that created and launched DISH Network in 1996. Upon reviewing recent acquisitions by DISH and Charlie Ergen, I came across the following pending acquisition, which I think is a much bigger deal than some have realized.

DISH Network to Purchase DBSD, Developer of U.S. Hybrid Communications System

ENGLEWOOD,Colo., Feb. 1, 2011 /PRNewswire/ — DISH Network Corporation announced today that it has entered into an agreement to acquire 100 percent of the equity of the reorganized DBSD North America, Inc., a hybrid satellite and terrestrial communications company, for approximately $1 billion subject to certain adjustments, including interest accruing on DBSD North America’s existing debt.

DISH Network is also committing to provide a debtor-in-possession credit facility to DBSD North America in connection with filings under Chapter 11 of the U.S. Bankruptcy Code. The credit facility, which remains subject to approval by the Bankruptcy Court, will consist of a non-revolving, multiple draw term loan in the aggregate principal amount of $87.5 million. This transaction is to be completed upon satisfaction of certain conditions, including approval by the Federal Communications Commission and DBSD North America’s emergence from bankruptcy.

Last year ICO Global Communications and DBSD North America deployed mobile satellite services and satellite-based Internet connectivity for relief agencies for Haitian rebuilding efforts following the disastrous earthquake that occurred there.

Here is a copy of the press release:

RESTON, Va., Mar 08, 2010 (BUSINESS WIRE) — ICO Global Communications (Holdings) Limited and its subsidiary, DBSD North America, Inc., announced that they have deployed satellite-based communications terminals with Internet access for use by relief agencies in Haiti. The terminals, known as CFK-100s, operate in the 2GHz S-band, and can be used in both mobile and fixed environments. They were installed and activated on February 17 and are being provided as part of the relief efforts of the International Telecommunications Union (ITU). Service is being provided through the G1 satellite, which was launched in April 2008.

The equipment and airtime are being provided free of charge under the terms of a 2007 Memorandum of Understanding between ICO, the ITU and the Commonwealth Business Council (CBC), which called for assistance, technology and airtime in response to natural disasters. Laptop computers and peripheral equipment are being provided for the project through a financial grant from the Hong-Kong-based RYTHM Foundation, the Corporate Social Responsibility arm of the QI Group, a member organization of the CBC. In addition, technical services to support the initiative were donated by Space Systems/Loral, manufacturer of the G1 satellite; Intelsat, a leading provider of fixed satellite services worldwide; and Hughes Network Systems, a provider of two-way satellite communications technology for the G1 satellite.

What could this mean to Sirius XM? Well, let’s start with the fact that Sirius XM is increasingly making its internet service more of a value. What does that have to do with DISH you say? DBSD is considered valuable because of its access to broadband spectrum. With increased spectrum some experts believe EchoStar and Dish Network which also has some spectrum of its own already in the mix will put DBSD and Dish together and create huge a 4G or LTE networks to support data and voice communication.

A key area of testing for DBSD post G1 satellite launch in 2009 was for two-way services which support a variety of mobile satellite devices. DBSD worked with Qualcomm (NASDAQ:QCOM), to develop a satellite communication protocol called EGAL (Enhanced Geosatellite AirLink), which could be easily implemented in standard Qualcomm cellular chipsets. The initial test calls made over the G1 satellite utilized a cellular handset that was equipped with EGAL software. Subsequent work during the alpha trials included demonstrations of handsets and wireless devices that can operate in both terrestrial and satellite modes in urban and rural areas showcasing the potential of mobile satellite services to further enhance today’s traditional mobile offerings and providing a path to commercialization of next generation mobile satellite services.

Additionally, In order to demonstrate the capabilities of the G1 satellite and the use of an Ancillary Terrestrial Component, DBSD developed a demonstration product that integrated the ability to deliver two way interactive services with content broadcast services. DBSD expanded its partners to include NBC Universal, Discovery Networks, MTV Networks and Cartoon Network to demonstrate a live mobile television service that is capable of delivering 10 to 15 channels of live television broadcast content to vehicles and mobile devices. The product tested is referred to as Mobile Interactive Media, or MIM.

As a concept product, MIM combines live mobile television, assisted navigation and two-way communications capabilities into a bundled package which takes advantage of strong la carte demand for these services in the automotive market. MIM was named "Best of the Best" at the 2009 International Consumer Electronics Show. Features of MIM include:

  1. 10 – 15 channels of live television content from leading brands, offering a mix of news, entertainment and children’s programming.
  2. Assisted navigation.
  3. Communications capability for telematics and emergency messaging applications.

In short, Sirius XM is now aligned with Liberty Media (LCAPA) and Dish Network. The combination will prove to be a powerhouse of the new media market. There are synergies and leveraging capabilities with these three companies that bode extremely well for the future of new media and mobile infotainment. This does not even take into account Dish networks recent purchase of Blockbuster, but imagine the possibilities.

Disclosure: Long SIRI, No current holdings in LCAPA, DISH or Qualcomm.

Continue to Part 2 >>