DirecTV And Dish To Merge, Creating Pay-TV Giant

DirecTV is acquiring satellite rival Dish Network, creating by far the largest pay-TV operator.

The two satellite companies, which have struggled in recent years due to cord-cutting and their inability to offer broadband services in the streaming era, have discussed coming together several times over the years.

DirecTV said the deal, which is structured as a debt exchange transaction, will save $1 billion in costs each year.

Dish merged last January with EchoStar, its corporate cousin in the wireless business.

Regulators will now review the transaction. In the past, they have scuttled attempts to bring together the two satellite firms, but today’s pay-TV landscape is far more fragmented, as millions of customers cut the cord each year. Even so, the resulting entity would control more than one-quarter of the U.S. pay-TV market, with nearly 20 million subscribers. Washington agencies have taken a hard line on a number of M&A deals in recent years, though the presidential administration is set to change in January, signaling a new regulatory era.

While the companies have declined from their heyday, each still carries weight in the pay-TV ecosystem, as evidenced by DirecTV’s recent standoff with Disney. The 13-day carriage impasse came at the start of the NFL season.

The deal is a dramatic rescue for EchoStar, which has more than $20 billion in debt and was headed toward potential bankruptcy. It will receive $2.5 billion of financing to help pay off Dish’s $2 billion bond coming due in November. EchoStar said the deal will help cut its total debt by $11.7 billion and lower its refinancing needs through 2026 by $6.7 billion.

“DirecTV operates in a highly competitive video distribution industry,” DirecTV CEO Bill Morrow said. “With greater scale, we expect a combined DirecTV and Dish will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers’ interests, and to be better positioned to realize operating efficiencies while creating value for customers through additional investment.”

EchoStar CEO Hamid Akhavan said the deal is “in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners.” As a result of it, he added, “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.”