DirecTV announces pending acquisition of Dish video business

Pay television provider DirecTV says it has finalized a plan to acquire the video products of its rival, Echostar, a merger that would marry DirecTV’s flagship satellite and streaming services with that of Dish Network and Sling TV.

The deal, announced early Monday morning, follows at least two weeks of rumors published by financial news outlets, which some executives at DirecTV attempted to downplay as speculative.

Under the proposed transaction, DirecTV will acquire Dish Network and Sling TV from Echostar for $1, plus the assumption of nearly $10 billion in debt from Dish.

In addition to the deal, but separate from it, AT&T will sell its 70 percent stake in DirecTV to TPG Capital for around $7.6 billion, giving the investment firm full control of DirecTV’s streaming and satellite TV businesses prior to the closure of the Dish and Sling TV deal.

Both acquisitions are subject to regulatory approval. Acquiring Dish Network would also require taking on the satellite broadcaster’s licenses to use radio spectrum set aside for satellite services, which would involve the scrutiny of the Federal Communications Commission (FCC), an agency that has not been friendly to video-based mergers over the last few years.

The deal would also require a review from the US Department of Justice on antitrust grounds. The legal agency blocked a proposed Dish Network-DirecTV merger two decades ago along those very concerns.

Things could be different this time around, with streaming services chipping away at satellite’s lead over the years. Assuming no subscriber losses between now and next year, a combined Dish Network-DirecTV would have around 20 million pay TV customers, making it the largest provider of premium consumer and business video services in the country. That would include around 3 million DirecTV via Internet, DirecTV Stream and Sling TV customers who watch pay TV over the Internet.

Less clear is whether Echostar will also include its portfolio of patents attributed to Sling TV and Dish Technologies, which the company has leverage in court over the past two years.

The tie-up would not include Echostar’s wireless licenses or associated consumer wireless service, and would allow the company to focus squarely on building up that part of the business, something that has been stimulated in recent years by a lack of cash.

“This agreement is in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners,” said Hamid Akhavan, President and Chief Executive Officer, 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 US 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.”

Echostar and DirecTV say it hopes the merger will close in the latter half of next year, subject to all regulatory approvals.

“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 DiercTV 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.”

DirecTV said the acquisition of Dish’s video services would afford it more leverage to seek favorable programming distribution deals, at a time when carriage disputes are becoming more common. The scale of having nearly 20 million pay TV customers should “incentivize programmers to allow DirecTV to deliver smaller packages at lower price points,” the company said.

It recently won a concession from the Walt Disney Company to sell consumers on smaller, lower-cost bundles of channels that are organized around genre, and needs to have additional programmers like Fox Corporation, Comcast’s NBC Universal and Paramount Global’s CBS on board with the same idea before those packages can come to market.

Like other pay TV companies, DirecTV also struck a deal with Disney to offer its customers access to Disney-owned streaming services like Disney Plus, ESPN Plus and Hulu.

On the Dish side, the companies say allowing DirecTV to acquire its smaller rival will “alleviate a material portion of EchoStar’s financial constraints” and “free up operational and financial resources that EchoStar can dedicate to its mission of deploying a nationwide facilities-based wireless service to compete with dominant incumbent wireless carriers.”