Satellite pay TV providers DirecTV and Dish are again, officially seeking a merger.
On Monday, satellite provider DirecTV announced plans to acquire the video businesses of EchoStar, including satellite Dish TV and virtual MVPD Sling TV, in an all-debt transaction (with a nominal consideration of $1) that would create the largest pay TV provider in the U.S.
In announcing the deal, DirecTV executives suggested that together with Dish, a combined company would have more scale and negotiating leverage with programmers. And they emphasized a combination of the two companies would enable it to better pursue a new vision for the struggling linear pay TV ecosystem, with the ability to offer skinnier, lower-cost and genre-based TV packages that consumers desire alongside SVOD options, delivered in a one-stop shop environment within a single user interface.
“DirecTV operates in a highly competitive video distribution industry,” said Bill Morrow, CEO of DirecTV, in a statement. “With greater scale, we expect a combined DirecTV and Dish will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers’ interests, and to be better positioned to realize operating efficiencies while creating value for customers through additional investment.”
For EchoStar, offloading Dish and related debt is meant to help it focus resources and be in a better financial position for its continued build out its 5G network and to be able to operate as a viable fourth nationwide facilities-based wireless competitor in the market. The latter was the aim of the government when Dish-Boost Mobile transactions were greenlit to help satisfy competition concerns and pave the way for approval of the 2020 T-Mobile and Sprint merger. At close, EchoStar is expected to have reduced its total consolidated debt by approximately $11.7 billion and reduced consolidated refinancing needs through 2026 by approximately $6.7 billion.
As for DirecTV and Dish, they expect to realize $1 billion annually in cost synergies by the third anniversary of closing, assuming a late 2025 deal close, across programming, customer support and technology.
Also announced Monday, private equity partner TPG (which holds a 30% stake in DirecTV) is acquiring the remaining 70% of DirecTV from AT&T. DirecTV since 2021 has operated as a joint venture between TPG and AT&T, including its DirecTV, DirecTV Stream and U-Verse video operations. The TPG-AT&T deal is expected to close in the second half of 2025 and is not contingent on the DirecTV-Dish deal closing. AT&T expects to receive approximately $7.6 billion in cash payments from DirecTV through 2029.
As part of the broader deal, TPG and other lenders including DirecTV are going to provide $2.5 billion in financing so that Dish is able to fully refinance its 2024 debt maturity, per Morrow.
Morrow and CFO Ray Carpenter will continue to lead DirecTV.
Adam Rhodes, senior research analyst for Reorg, told StreamTV Insider that the combination “will certainly help DirecTV from a programming cost perspective and although the benefit has diminished since the prior merger attempt, lower customer acquisition costs.”
“The company will also be able to further leverage its fixed corporate, general and administrative costs,” Rhodes added.
Increased negotiating leverage
Increased scale and more influence with programmers in negotiations when carriage renewals come up is another benefit the companies see of combining forces.
It’s where DirecTV recently laid out its aim for an evolving pay TV model during a now-resolved carriage dispute with Disney. In that renewal DirecTV, following a channel blackout, was able to secure agreements for smaller, genre-based channel packages, which Morrow on Monday call with analysts categorized as “a baby step” in the right direction and emphasized a need for collaboration with programmers that are pursuing their own DTC streaming efforts.
Rhodes told StreamTV Insider that the Disney dispute, while not driving the timing of the proposed tie-up, is emblematic of challenges facing the legacy pay TV bundle and “highlights the importance of greater scale today.”
The analyst also noted that the combination, creating the largest pay TV provider in the U.S. with about 18 million subscribers, “would certainly afford it with greater negotiating leverage with programmers for legacy linear and SVOD offerings.”
“Importantly, the combined company's satellite scale provides it with a negotiating leverage for its vMVPD offerings, promoting the company's transition to a hard bundle (both legacy linear and SVOD) competitor,” Rhodes commented.
Impacts to rural competition?
One of the questions regarding a DirecTV-Dish transaction is the impact to competition, particularly in rural areas that the two serve.
The government blocked a previous 2002 attempt of the companies’ merger, but several have pointed out that since then the video and broadband landscape has changed.
DirecTV leadership on Monday emphasized the wide array of video choices consumers now have with streaming options with dominant players like Netflix, Amazon Prime Video, Hulu and others.
“You can see where consumers have a whole lot of choice to be able to satisfy their video interests. We also believe that when you look at broadband deployment around the United States, it is advanced significantly over the last five to 10 years. This enables people to have choice beyond satellite TV, beyond cable TV, if they have an environment to be able to tap into these other services,” Morrow said.
In a call with analysts Monday, DirecTV shared slides showing competition from SVOD and over-the-top streaming services. Per the slide, as of 2024 DirecTV had about 10 million subscribers while Dish had about 8 million – together creating a pay TV base of about 18 million. That said, management also noted that DirecTV and Dish together have collectively lost about 63% of their satellite subscribers since 2016 due to cord-cutting and the rise of streaming services.
“This is all because of the wide-scale broadband deployment, with over-the-top services, as those DTC services are,” Morrow noted, adding that DirecTV is content-agnostic and combined can provide consumers with a different kind of choice than a standalone DTC SVOD service provider can offer.
And as DirecTV’s only business is video, he emphasized it’s a pure play video aggregator and distributor, so it’s focus is squarely on the video experience that consumers want, as it doesn’t have other products to sell. It’s aiming for the ability to aggregate smaller, genre-based linear packages combined with SVOD, AVOD or FAST channels, as well as other options, within one user interface that includes personalization and aggregated navigation and recommendations.
And more specifically as it relates to competition in rural areas, DirecTV emphasized that most consumers aren’t switching between DirecTV and Dish.
Morrow categorized it as “an incredibly competitive video distribution industry today,” where streaming players and the rollout of broadband has “generated enough competition to where we do not believe by consolidating the two satellite TV services that consumers will be left without.”
Morrow also cited internal research by the companies that found in rural areas consumers leaving both Dish and DirecTV are in large part switching over to SVOD and OTT services, rather than switching between the two traditional providers.
“When customers leave us, even in these most rural, remote parts of America, they’re moving over to these SVOD services, far more than they’re moving between us,” Morrow said.
In describing studies to see where DirecTV customers go when they leave, similarly undertaken by Dish with third-party analysis, he said “it’s such overwhelming, compelling data that shows the amount of customers that are going to SVOD type services is clearly the majority. It’s a small percentage that actually moves between Dish and DirecTV.”
And these results are for areas where sometimes FCC maps show there’s no broadband service, Morrow continued “but we have clear evidence that they [consumers] are moving to over-the-top type services…to support their video needs” which the companies intend to share with regulatory bodies as evidence of no loss of competition through the merger.
Reorg’s Rhodes also thinks changes in the landscape bode well for the deal from a regulatory perspective.
“Given growing streaming competition, proliferation of rural broadband and the overall pressure on the pay-TV bundle, it is much more likely that this combination survives regulatory scrutiny than the companies’ 2001 merger attempt,” he commented.
In a Monday research note to investors, New Street Research analyst Blair Levin said that while direct competition between DirecTV and Dish in rural areas would be an issue that there are several factors since 2020 that have transpired and are in favor of the deal. Those include wireless companies building out fixed wireless; the U.S. government spending more than $10 billion and committed to spend billions more to connect unserved locations with broadband; and more robust satellite broadband coverage of rural America, including through Starlink.
“The market conditions for video delivery in rural America are dramatically different than in 2002 and 2020,” wrote Levin. “While the rural market will be one of the key issues, and we will have to watch carefully the political reaction from rural political leaders, we think the situation has changed sufficiently to allow the deal to proceed without the government ultimately rejecting it.”
And although Rhodes believes broader pay TV headwinds will remain, the analyst told StreamTV Insider that “the combined company will be in a much better position to compete into the future.”
The transaction is subject to regulatory approvals and the success of an exchange offer for EchoStar’s debt notes to facilitate the transaction.
Article updated to correct spelling of DirecTV CEO Bill Morrow's last name on second reference. A previous version incorrectly spelled it Marrow.