Would Biden's Infrastructure-Broadband Plan Impact A DirecTV/Dish Merger?

The Biden Administration plan to spend $100 billion in building widespread broadband coverage in rural/underserved markets would help ease antitrust concerns over a possible satellite pay TV merger of DirecTV and Dish Network, says one analyst.

At the same time, it could hurt the future business of a combined pay TV company.

Craig Moffett, partner and senior research analyst of MoffettNathanson Research, writes: “Closing the rural broadband gap would also be, to put it mildly, a body blow to the satellite TV companies -- whether separately or together.”

New competition would be coming from broadband, non-satellite pay TV competitors -- including faster telco-fiber operations started up by AT&T and other communications providers.

Moffett adds: “Focusing on sticker rural customers has been the foundational element of Dish Network’s satellite TV strategy in recent years ... and it has worked. The same strategy has kept DirecTV already-horrific subscriber losses from being even worse.”



All this comes as cord-cutting has accelerated in the pay TV industry -- with steepening declines among the satellite TV providers.

Satellite pay TV providers -- DirecTV and Dish -- lost a combined 13.8% of their subscribers to 21.8 million in the fourth quarter of 2020 from 25.3 million (Q4 2019).

Total U.S. pay TV subscriber homes dropped 7.3% in the fourth quarter of 2020 -- in the fifth in a series of consecutive 7% quarterly declines.

A combined DirecTV/Dish Network represents about 29% of the U.S. linear pay TV industry. (DirecTV with 13 million subscribers and Dish with 8.8 million). Until 10 years ago, no pay operator, per the FCC rules, was allowed to have more then 30%.

Even with the merger, Moffett estimates (before synergies) there would be revenue declines: $31.5 billion in 2022; $29.6 billion (2023); $28.1 billion (2024); and $26.9 billion (2025).

But key business cash flow would rise -- especially coming from an initial projected $2.5 billion in cost savings from a merger.

Earnings before interest, taxes, depreciation and amortization would climb to a projected $6.7 billion (post-synergy) in 2023 from $5.1 billion (pre-synergy).

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