DirecTV strikes long-elusive deal to combine with Dish By Reuters

By Milana Vinn and Dawn Chmielewski

NEW YORK (Reuters) – DirecTV agreed on Monday to buy EchoStar’s satellite TV business, which includes Dish TV, capping decades of on-and-off talks to create one of the nation’s largest pay-TV distributors with 20 million of subscribers.

The deal comes at a time when satellite TV services DirecTV and Dish are hemorrhaging market share against competitors such as Netflix (NASDAQ: ) and Amazon (NASDAQ: ) Prime Video, which have benefited from changing consumer habits and the growing popularity of streaming video. .

DirecTV CEO Bill Morrow told Reuters the combined pay-TV company would have the power to negotiate smaller programming packages tailored to consumer interests.

It also plans to deliver an improved viewer experience that makes it easier for subscribers to find their favorite shows – whether on a traditional TV channel or via streaming – and manage their subscriptions from one place.

“We think consumers don’t want to be aggregators — or at least most consumers in the market would prefer not to have to go out and manage all these multiple accounts of those direct-to-consumer SVOD services,” Morrow said in an interview, using the industry term for streaming or subscription video-on-demand.

As part of the two-step deal, DirecTV will pay $1 to buy the pay-TV business called Dish DBS, which includes Dish and Sling TV, while agreeing to assume about $9.75 billion of Dish’s debt , the companies said in a statement. Dish and DirecTV are launching a low-rate trade-in offer for debt to help extend maturities.

For the deal to close, holders of Dish DBS debt will have to agree to reduce debt by about $1.57 billion. Through the exchange offer, Dish is trying to persuade its bondholders to become holders of the merged entity.

The deal will provide a crucial lifeline for EchoStar, which was co-founded by telecoms entrepreneur Charlie Ergen and currently has more than $20 billion in debt. EchoStar will receive $2.5 billion in financing from the credit unit of buyout firm TPG, Angelo Gordon and DirecTV to help pay off Dish’s $2 billion bond due in November.

EchoStar said the deal will help reduce total consolidated debt by $11.7 billion and reduce refinancing needs through 2026 by $6.7 billion.

The deal also provides a much-needed exit to AT&T (NYSE: ), which is selling its 70 percent stake in DirecTV to TPG for $7.6 billion. In 2021, AT&T 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 percent stake in DirecTV, which was valued at about $16 billion dollars at the time. AT&T agreed not to sell its stake in DirecTV for a three-year period that expired on July 31.

AT&T has been dealing with declining distributions from its DirecTV business for several years. For the year ended Dec. 31, distributions from DirecTV totaled $2.04 billion, compared with $2.65 billion a year earlier.

A merger between DirecTV and Dish will likely test regulators’ appetite for allowing consolidation in the television industry, although the media landscape has been dramatically transformed since the two sides first attempted a merger in 2002, which was rejected by the Federal Commission of Communications and the US Department of Justice.

“We think the timing is right in terms of the amount of competition that’s out there, which isn’t going to change with the combination of Dish and DirecTV,” Morrow said.

ON again, OFF again

DirecTV and Dish have had on-and-off talks over the years. Reuters reported in early September that DirecTV and Dish Networks had resumed merger talks.

The two pay-TV operators, facing a rapidly eroding subscriber base, are betting that a combination will help them compete better against pay-TV rivals such as Comcast’s (NASDAQ:) Xfinity . Charter Communications (NASDAQ:)’ Spectrum and YouTube TV and are improving their ability to negotiate with programmers.

For Englewood, Colo.-based Dish, the deal would allow the company to focus all of its investments on building its 5G wireless network. Last year, Ergen, who co-founded both Dish and EchoStar, struck a deal to merge the two companies.

DirecTV said it expects the Dish tie-up to have the potential to generate at least $1 billion in cost synergies each year.

Morrow said the Dish-DirectTV combination will give Ergen a boost in creating the nation’s fourth wireless competitor. The deal is expected to close in the fourth quarter of 2025, subject to regulatory approvals.

DirecTV, which had a subscriber base of more than 15 million when it agreed to the TPG deal in 2021, now has just over 11 million customers.

In its most recent quarterly report, EchoStar said net pay TV subscribers fell by 104,000. The total number of Dish TV subscribers was around 6.1 million.

Investment bank PJT Partners (NYSE: ) advised DirecTV on the deal, while Barclays advised TPG. JPMorgan advised Dish, while Bank of America, Evercore, LionTree and Morgan Stanley also advised DirecTV and TPG.