DirecTV buys rival Dish
Creates the largest pay-TV provider in the country with an estimated 18 million subscribers
As anticipated amid rumors over the weekend, DirecTV has agreed to purchase rival satellite TV provider Dish DBS (direct broadcast satellite) from Echostar for $1 and the assumption of $9.75 billion in debt. The transaction, subject to government approval, will create the largest pay-TV conglomerate in the country, with an estimated 18 million subscribers.
Echostar will retain cellular carrier Boost Mobile, acquired after T-Mobile divested it after they purchased Sprint.
At the same time, AT&T agreed to sell the remaining 70 percent stake in DirecTV to private equity group TPG, which owned the other 30 percent for $7.6 billion to help finance the deal. After acquiring DirecTV in 2015 for $67 billion, AT&T sold 30 percent of DirecTV to TPG for $1.8 billion in 2021.
The debt holders of Dish DBS – the satellite part of Echostar, are agreeing to take a haircut on the debt – roughly $1.57 billion with Dish and DirecTV launching a discounted rate for the debt to help extend maturities.
The deal is subject to FCC approval and a review from the Justice Department, which hasn’t been too friendly to mega-mergers under the Biden Administration. But DirecTV and Dish have a strong case: each company lost tons of subscribers over the years as streaming alternatives have exploded over the last decade with the success of Netflix, Amazon, Hulu, and others; the rise of FAST platforms such as Pluto TV; and the emergence of virtual providers like YouTubeTV and Fubo. DirecTV and Dish offer their service virtually, along with DirecTV Stream and Sling.
A merger between the two has been discussed for the last few years. Dish and DirecTV announced one in 2002, but the Justice Department blocked it amid governmental scrutiny and political pressure at a time when the video landscape was completely different. In 2008, the merger between satellite radio companies Sirius and XM was approved by the FCC in a 3-2 party-line vote and the Justice Department.
Banished from Dish for being too expensive, it isn’t known if regional sports networks would return under DirecTV. If that’s the case, it would be a boon to the struggling platform, returning to nearly nine million homes.
“DirecTV was founded 30 years ago to give consumers greater choices than incumbent cable companies for video content, and the Company’s acquisition of Dish TV and Sling TV positions it to again provide more choices and better value in an industry currently dominated by large streaming platforms,” said David Trujillo and John Flynn, co-Partners at TPG. “Our ability to execute these transactions, alongside our proposed acquisition of AT&T’s 70 percent stake in DirecTV announced earlier today, exemplifies the unique capabilities of the TPG platform and our experienced sector-focused investment approach as we support DirecTV’s continued investment in innovating the next generation of video services that benefit consumers.”
“This agreement is in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners,” said Hamid Akhavan, President and Chief Executive Officer of EchoStar. “With an improved financial profile, we will be better positioned to continue enhancing and deploying our nationwide 5G Open RAN wireless network. This will provide U.S. wireless consumers with more choices and help to drive innovation at a faster pace. We expect DISH and EchoStar bondholders to benefit from two companies with stronger financial profiles and more sustainable capital structures.”
This merger would give DirecTV more leverage over broadcasters and Hollywood studios in carriage negotiations. Earlier this month, Disney pulled its channels from DirecTV in a dispute. Broadcasters such as Nexstar, Tegna, and CBS have also had disputes with at least one of these satellite providers in the last ten years. So far, there has been no response from content providers or consumer groups on the proposed merger.