DirecTV agreed to buy satellite rival Dish network Monday, ending decades of on-and-off talks in a deal that will create one of the country’s largest pay TV distributors with a combined 20 million subscribers.
Dish, owned by EchoStar, has been weighed down with billions of dollars of debt and faced the prospect of a looming bankruptcy.
As part of the two-step transaction, DirecTV will pay $1 to buy EchoStar’s TV business called Dish DBS that includes Dish and Sling TV, while agreeing to assume about $9.75 billion of Dish’s debt, the companies said.
Dish and DirecTV are launching an exchange offer at a discounted rate for the debt to help extend the maturities.
The deal comes at a time when the two services are hemorrhaging subscribers amid the rising popularity of streaming services like Netflix.
DirecTV CEO Bill Morrow told Reuters on Monday that the combined pay TV company would have the muscle to negotiate smaller programming packages tailored to consumers’ interests.
Morrow plans to offer a streamlined viewer experience that makes it easier for customers to manage their subscriptions all from one place.
“We believe that consumers don’t want to be the aggregators — or at least a majority of consumers in the marketplace would not prefer to have to go out and manage all these multiple accounts of those direct-to-consumer SVOD [subscription video-on-demand] services,” Morrow said.
For the deal to go through, Dish DBS debtholders will have to agree to take a haircut on the debt by about $1.57 billion. With the exchange offer, Dish is attempting to convince its bondholders to become holders in the merged entity.
The deal will provide a crucial lifeline to EchoStar, which was co-founded by telecommunications entrepreneur Charlie Ergen and is currently saddled with more than $20 billion in debt. EchoStar will receive $2.5 billion of financing from buyout firm TPG’s credit unit Angelo Gordon and DirecTV to help pay off Dish’s $2 billion bond that is due in November.
EchoStar said the deal will help cut its total consolidated debt by $11.7 billion and reduce its refinancing needs through 2026 by $6.7 billion.
It will keep other parts of its business, including over $30 billion in wireless spectrum investments, that would continue to operate as a stand-alone company.
“The merger was inevitable… These are both melting ice cubes with plenty of competition increasingly being delivered over the Internet in the vast majority of the US, and they will be better positioned to navigate that environment post a merger,” said Jeff Wlodarczak, analyst at Pivotal Research Group.
Shares of EchoStar were down 13% in morning trading. The drop, Wlodarczak said, could be related to the lack of equity in the deal and investors potentially selling on the news, following a near 70% jump so far this year.
AT&T stock was flat, trading at $21.90 a share.
The deal also provides a much-needed exit to AT&T, which is selling its 70% stake in DirecTV to TPG for $7.6 billion.
In 2021, AT&T had signed a joint-venture agreement with TPG, in which the private equity firm contributed about $1.8 billion in cash in exchange for a 30% stake in DirecTV, which was valued at about $16 billion at the time. AT&T had agreed not to sell its stake in DirecTV for a three-year period, which expired on July 31.
AT&T has been faced with declining distributions from the DirecTV business for several years. For the year ended Dec. 31, distributions from DirecTV came in at $2.04 billion, compared with $2.65 billion a year earlier.
DirecTV has about 11 million US subscribers, while Dish has roughly 8.1 million, according to the analyst firm MoffettNathanson.
By comparison media giant Comcast has roughly 13.2 million cable TV subscribers.
A merger between DirecTV and Dish is likely to test the appetite of regulators to allow for consolidation in the television industry, although the media landscape has been transformed dramatically since the two sides first attempted a merger in 2002 that was nixed by the Federal Communications Commission and the Department of Justice.
“We believe that the time is right in terms of the multitude of competition that exists out there that is not going to change with the combination of Dish and DirecTV,” Morrow said.
MoffettNathanson analyst Craig Moffett told The New York Times that he didn’t anticipate the government challenging the merger this time, given the weakened state of satellite TV.
“At the end of the day, you’re better off with one than none, Moffett said. “And neither one is going to survive very long on their own. And to be fair, even putting them together is not going to change the trajectory of the business.”
The deal is expected to close in the fourth quarter of 2025, subject to regulatory approvals.
With Post wires
