Multiple times over the years, DirecTV and Dish Network have come close to merging. More recently, the chairman and former CEO of Dish, Charlie Ergen, has said multiple times that a combination of the two satellite broadcasters was “inevitable.”
However, the recent auctioning off of a stake in DirecTV by its owner, AT&T, didn’t end with a DirecTV/Dish combination. Instead, AT&T agreed to spin off Directv to a separate business entity called “New DIRECTV,” of which it would control 70 percent, with private equity firm TPG owning the rest. The deal is expected to close in the second half of 2021.
Why didn’t Dish Network merge with DirecTV? It was reported last year that antitrust regulators in the Justice Department had indicated that such a combination would face regulatory pushback, at least until 5G service improves in rural areas of the country.
Both satellite providers have been bleeding customers over the last few years, even beyond the numbers that have been falling away from cable.
With Dish Network concentrating on 5G service, and DirecTV about to be part of that separate entity, could the two combine after all? Especially now that the administration that signaled regulatory hesitancy is no longer in power?
One analyst looked at that question last week. The conclusion? It probably makes a merger less likely.
MoffettNathanson analyst Craig Moffett, as quoted by FierceVideo, recently wrote a note stating that the Biden Administration’s new broadband plan could help pave the way for alleviating the concerns of regulators.
“Focusing on stickier rural customers has been the foundational element of Dish Network’s satellite TV strategy in recent years…and it has worked. The same strategy has kept DirecTV’s already-horrific subscriber losses from being even worse,” Moffett wrote. “Given the option, for the first time, of choosing not just cable but also OTT alternatives, it’s a safe bet that many customers will simply leave.”
“It is also not clear who would be the sponsor. Dish Network would obviously be a candidate, but we suspect investors would recoil from the idea of doubling down on the satellite TV business at almost any price,” he continued. “Private equity buyers would perhaps be more likely, but without the ability to significantly lever the balance sheet, equity returns would be poor at anything other than a very low entry price.”
As part of its proposed infrastructure package, the Biden Administration has proposed $100 billion to, per Politico, “fix U.S. broadband connectivity woes.”
“While the President recognizes that individual subsidies to cover internet costs may be needed in the short term, he believes continually providing subsidies to cover the cost of overpriced internet service is not the right long-term solution for consumers or taxpayers,” a White House fact sheet says.
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.