The idea of DirecTV and Dish Network combining their pay TV businesses has been kicked around for years but one analyst feels like the time may finally be right in 2022.
Lightshed offered up a long list of TMT predictions for 2022 and, after taking year off in 2021 from trumpeting a satellite provider tie-up, returned to its thesis that a Dish Network and DirecTV combination is necessary given the persistence of cord cutting.
“We believe the regulatory risks today are not high given the state of the Pay TV market. Frankly, if [Dish Network Chairman Charlie] Ergen can’t get it announced this year, it might never happen,” wrote Lightshed analyst Rich Greenfield, who noted that the synergy opportunities of a satellite merger have declined over the years and DirecTV could be exposed to higher churn if it doesn’t renew its NFL Sunday Ticket deal.
“Despite the lost synergies, this will be welcome news to Dish and AT&T investors. AT&T structured its DirecTV deal with TPG such that it would benefit from the synergies in a combo with Dish. AT&T would benefit from higher distributions that we believe it would use to fund a share repurchase program as early as next year,” he wrote.
Putting together Dish Network and DirecTV along with their respective virtual MVPDs, Sling TV and DirecTV Stream, would create a pay TV operator with more than 20 million subscribers, the largest in the U.S.
AT&T last year spun off DirecTV, U-verse and AT&T TV, which were combined into the new DirecTV. However, AT&T retained a 70% stake in the business, so it has a strong financial interest in maximizing the value of DirecTV through a merger.
The FCC and U.S. Justice Department blocked the first attempt at a DirecTV-Dish merger about 20 years ago. But a lot has changed since then, said UBS analyst John Hodulik. High-speed internet has become more readily available and streaming services from both distributors and programmers have provided more optionality than ever when it comes to live and linear TV.
At the same time, Ergen has repeatedly stated that a DirecTV-Dish merger—whether it’s this year or in 10 years—is “inevitable.” He reiterated that stance last year, saying a merger is more of a “timing issue” than anything else.
Now, it appears that discussions may have picked back up around a possible merger with TPG Capital, the company that took control of DirecTV from AT&T, press the issue. According to the New York Post, the private equity firm is pushing a merger in hopes of cashing in on its investment in DirecTV, but Ergen may be holding up the deal by making demands for “significant voting shares and a say in key decisions.”
This article has been updated to include reference to a new report from the New York Post.