Shares of EchoStar, the parent company of Dish Network, jumped by 7% in early trading on reports suggesting renewed merger discussions with DirecTV. For years, these two satellite TV giants have eyed a potential alliance, although a formal proposal was rejected by the FCC back in 2002. With the landscape of television having shifted dramatically over the last two decades, both companies are grappling with the pressures of declining cable subscriptions.
A merger between EchoStar and DirecTV would create the largest pay-TV provider in America, consolidating their respective 19 million subscribers. Recently, EchoStar’s stock has faced challenges due to the company’s struggles in launching a wireless competitor to larger players like AT&T and Verizon. Presently, AT&T controls 70% of DirecTV, with private equity firm TPG holding the remainder.
Sources from Bloomberg and Reuters indicated that the two companies are in the preliminary stages of discussions. In a related development, DirecTV managed to secure a deal with Disney after enduring a 13-day service interruption that emphasized the difficulties the company faces as a dedicated video provider. Unlike broadband companies that also offer television, both DirecTV and Dish rely solely on video services.
Research from Citi highlights that despite past merger attempts, the notion of a combination still resonates with industrial logic. Such a deal could offer both companies a better chance to adapt to the ongoing decline in traditional TV subscriptions and enhance their ability to provide competitive streaming options.
Analyst Craig Moffett from MoffettNathanson believes that the current regulatory environment is more favorable for a merger compared to earlier times. However, he expresses skepticism regarding the potential synergies that could arise, particularly in programming agreements. He noted that the long-standing anticipation of a merger has likely led to protective measures being built into existing carriage agreements.
In summary, as discussions pick up steam, the potential merger between EchoStar and DirecTV could reshape the pay-TV landscape, offering both companies a lifeline in an industry that is rapidly evolving.