Feds tell AT&T merger between DirecTV, Dish will hinge upon 5G

The logos of Dish Network and AT&T’s DirecTV. (Images: Handout/Graphic: The Desk)

Federal regulators warned AT&T that another attempt to merge its DirecTV satellite service with rival Dish Network would not receive approval until the industry makes significant advances on the next-generation 5G wireless broadband standard.

Citing two unnamed sources, the New York Post reported on Wednesday that AT&T had been approached by officials within the U.S. Department of Justice who warned the communications giant that an attempt to merge DirecTV with Dish wouldn’t stand up to regulatory scrutiny until faster wireless broadband is available in more rural areas.

The Department of Justice raised those same concerns two years ago when Dish and DirecTV tried to merge then, their second such attempt in two decades, the Post said.

During their discussion with AT&T, federal regulators said they were relying on a vast survey of the country’s 5G wireless network that was conducted when the Department of Justice was scrutinizing a proposed merger between T-Mobile and once-rival Sprint. The merger was ultimately approved and the deal closed earlier this year, but not before T-Mobile agreed to divest Sprint’s prepaid wireless service Boost Mobile to Dish Network. Dish acquired Boost Mobile for $1.4 billion in July.

Executives at AT&T are currently exploring offers from several third parties for DirecTV. The business unit has bled cash since it was acquired by AT&T in 2015 as consumers continue to move away from expensive cable and satellite TV bundles for cheaper streaming options, a practice known as “cord-cutting.”

AT&T leveraged its DirecTV acquisition to build two new pay TV products: A streaming version of DirecTV called DirecTV Now (later renamed AT&T TV Now) and an IP-based pay TV platform called AT&T TV. Both have struggled to attract customers in part because of their programming plans that are significantly more expensive compared to rival streaming TV services like Sling TV, Hulu with Live TV and Philo.

Earlier this year, Dish Network chairman and co-founder Charles Ergen told investors he felt a merger between his company and DirecTV was “inevitable.” But last week, the Post reported Dish was not participating in AT&T’s auction for DirecTV.

The report published on Wednesday suggested Dish was exploring the possibility of participating in the auction only to decide against it after being told by federal regulators that any deal likely wouldn’t survive the approval process.