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Dish chairman: Merger with DirecTV “probably inevitable”

Dish Network’s chairman said it’s likely inevitable that his company and AT&T’s DirecTV would merge in the future, but warned there could be significant regulatory hurdles if both companies make such a proposition.

On an earnings conference call this week, Dish Network’s corporate chairman Charlie Ergen said one foundation for a merger between the two companies is growth in competing technologies that is eroding market share for traditional linear pay TV systems like direct-to-home satellite broadcasting.

For several years, Wall Street executives have encouraged Dish Network and AT&T to explore a merger of their satellite TV businesses — something that the companies tried before in what seems like another lifetime.

In October 2001, Dish Network — then owned by Echostar — and then-Hughes owned DirecTV inked a deal to combine businesses for $26 billion in cash and stock (around $39 billion today, adjusted for inflation). Analysts at the time said the proposal represented a “fantastic deal” for the pay TV industry, but warned of significant regulatory hurdles that stood in the way of a completed deal.

Echostar and Hughes called off the proposed merger more than a year later after the Department of Justice and Federal Communications Commission raised antitrust concerns. Both companies later spun off their satellite TV business; DirecTV was acquired by AT&T in 2015, while Dish focused on building out a standalone over-the-top streaming service called Sling TV.

That last part could make the case for a merger today: Ergen said growth in the pay TV space has been dominated in recent years by the emergence of online-only options, which consumers find attractive because of their low monthly price and availability on televisions, smartphones and tablets without too much extra hardware — something both cable and satellite have struggled to offer.

Over the last two decades, federal regulators have warmed to the idea that Internet-based competition is a strong argument for consolidation in traditional industries. In 2008, the DOJ approved a merger between satellite radio companies Sirius and XM after both cited rising competition from streaming music providers — namely, Pandora and Apple’s iTunes — as eroding the market share for their linear radio service. (The combined SiriusXM acquired Pandora last year.)

The DOJ also approved a contentious merger between mobile phone service providers T-Mobile and Sprint, on condition that each company sell certain assets to third parties. Dish stands to benefit from that sale by acquiring precious radio spectrum licenses that phone companies rely on. More than a dozen states sued to block the merger, but a federal judge ruled against them, green-lighting the inevitable combination of the two companies.

Ergen said the judge’s move in that case convinced him that another merger attempt between Dish and DirecTV would stand up to the same level of regulatory and judicial scrutiny.

Disclosure: The author of this story owns stock in Sprint Corporation.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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