DirecTV to Acquire EchoStar’s Dish TV Business

By Milana Vinn and Dawn Chmielewski

NEW YORK (Reuters) – DirecTV has agreed to purchase EchoStar’s satellite television business, which includes Dish TV, marking the culmination of years of negotiations aimed at forming one of the largest pay TV distributors in the U.S. with a combined subscriber base of 20 million.

This acquisition occurs amidst a decline in satellite TV market share as competitors like Netflix and Amazon Prime Video gain popularity due to shifting consumer preferences toward streaming services.

DirecTV CEO Bill Morrow stated that the newly combined company would be better equipped to offer customized programming packages and enhance the viewer experience, allowing subscribers to easily manage their shows across both traditional and streaming platforms. He emphasized that most consumers prefer not to handle multiple streaming subscriptions themselves.

In a two-step transaction, DirecTV will pay $1 for the Dish DBS business, which encompasses Dish and Sling TV, while assuming approximately $9.75 billion in Dish’s debt. An exchange offer will be created for Dish’s debt to extend its maturity. Dish’s debtholders must agree to a reduction of $1.57 billion in debt for the deal to proceed, and Dish aims to convince its bondholders to align with the merged company.

The transaction provides critical support to EchoStar, co-founded by Charlie Ergen, which is managing over $20 billion in debt. It is set to receive $2.5 billion in financing from TPG’s credit unit and DirecTV to pay off a $2 billion bond maturing soon. This plan aims to decrease EchoStar’s total debt by $11.7 billion and lessen refinancing needs through 2026.

Additionally, the deal offers AT&T a necessary exit strategy as it divests its 70% stake in DirecTV to TPG for $7.6 billion. AT&T has seen dwindling distributions, down from $2.65 billion the previous year to $2.04 billion.

The merger may pose challenges related to regulatory approval, as the last attempt was blocked in 2002. However, Morrow believes the current competitive landscape supports this consolidation.

Market Dynamics

DirecTV and Dish have had intermittent merger discussions over the years. The two companies hope that joining forces will improve their competitive stance against other pay-TV providers and bolster negotiations with programmers. For Dish, focusing on expanding its 5G wireless network post-merger could be a priority.

Morrow suggested the merger could yield annual cost synergies of at least $1 billion. The convergence is projected to establish the fourth-largest wireless competitor in the U.S., targeting a closure date in the fourth quarter of 2025, pending regulatory approval.

As subscriber counts dwindle, DirecTV’s base has recently dropped to over 11 million from more than 15 million, while Dish’s subscriber count is around 6.1 million with a recent loss of 104,000 subscribers. Leading investment banks assisted both companies during this strategic move.