Is the timing finally right for a merger of AT&T’s DirecTV and Dish Network?
Multiple attempts to make a merger fly have failed since U.S. Department of Justice and Federal Communications Commission antitrust authorities blocked the first formal attempt in 2002.
But Dish Network Chairman Charlie Ergen has continued to declare a merger “inevitable” — and the two companies are now back in talks driven by TPG Capital, according to New York Post sources.
TPG, which acquired 30% of DirecTV from last year when AT&T spun off its DirecTV, AT&T TV and U-verse services into a standalone joint venture video company valued at $16.25 billion, wants to recoup its investment, the sources said. (DirecTV, Dish and TPG declined to comment to the Post.)
Given its remaining 70% stake in the reconfigured DirecTV company, AT&T also stands to benefit significantly from a financially attractive merger deal.
Only two years ago, the U.S. Department of Justice quietly told the companies that a merger would likely need to be put off until 5G service is more widely available in rural areas.
Some experts believe that the current antitrust regulatory climate is too tough to risk. But others, including some analysts, believe that changes in the competitive environment — as well as $65 billion within the new $1.7-billion Biden infrastructure package dedicated to building rural broadband — may now make the prospect more feasible.
Both companies have lost market clout in recent years, particularly as streaming has accelerated consumers’ shift away from both traditional satellite and cable pay-TV services.
DirecTV’s customer base has shrunk from 25 million in 2017 to about 15 million currently, and Dish Networks’ has dropped from more than 13 million to 8.4 million.
“Both are decaying, dying channels — you can’t argue there is an antitrust issue,” one source “close” to the deal discussions said. Which means that concerns about driving up satellite TV user rates may now be outweighed by a desire to keep at least one satellite TV option alive.
Combining Dish TV, DirecTV and their virtual multiplatform video programming distributors (vMVPDs), Sling TV and DirecTV Stream, would create an entity with more than 20 million subscribers.
A merger could also enable as much as $1 billion in cost savings, and might, some sources speculated, even help AT&T fund a 5G “alternative solution.”
AT&T and Verizon are finally rolling out 5G, but were pressured to delay its activation around 50 U.S. airports due to Federal Aviation Administration concerns that it could interfere with airplane instruments.
Dish been struggling to build its own 5G network, and is under pressure to meet FCC requirements or potentially lose its 5G spectrum, notes the Post.
A number of telecom analysts have long advocated a DirecTV/Dish merger, and some are now renewing their calls, citing propitious circumstances.
UBS’s John Hodulik has stressed that more consumers now have more options to access high-speed internet and television.
In a note offering 2022 predictions, Lightshed analyst Richard Greenfield noted that AT&T “structured its DirecTV deal with TPG such that it would benefit from the synergies in a combo with Dish,” adding that “AT&T would benefit from higher distributions that we believe it would use to fund a share repurchase program as early as next year.”
Lightshed also noted that DirecTV’s customer base and value could be further undermined if the company does not renew its NFL Sunday Ticket agreement. Perhaps most important, he said, the regulatory risks are “not high, given the state of the pay-TV market.”
“Frankly, if Ergen can’t get it announced this year, it might never happen,” he concluded.