The US satellite TV giant DirecTV announced on Monday that it will acquire EchoStar’s Dish DBS video distribution business, which includes Dish TV and Sling TV. The acquisition will take place in a debt exchange, where DirecTV will pay EchoStar $1 and assume the latter’s debt of about $9.75 billion.
Furthermore, this announcement also coincides with TPG announcing that it will acquire 70% of DirecTV ownership from AT&T. Hence, pending regulatory approval, this transaction will mark AT&T officially leaving the TV business. However, Bill Morrow, CEO of DirecTV mentioned that they will still have “an ongoing commercial relationship” with AT&T.
Notably, post-acquisition, DirecTV will have a total of about 20 million pay TV subscribers, millions ahead of their competition such as Charter and Comcast, each with just over 12 million subscribers. DirecTV also estimates that the acquisition has the potential to generate savings of about $1 billion in operating expenses every year.
Bill Morrow, CEO of DirecTV, said, “DirecTV operates in a highly competitive video distribution industry. 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 customer’s interests, and to be better positioned to realize operating efficiencies while creating value for customers through additional investment.”
Additionally, for EchoStar, this deal will provide them with a crucial lifeline as the company is currently bogged down with more than $20 billion in debt. This deal will provide EchoStar with $2.5 billion in financing as a buyout from TPG’s credit unit Angelo Gordon and DirecTV to help them pay off a $2 billion bond, due in November. Overall, EchoStar stated that this deal will help them cut their total debt $11.7 billion and also reduce $6.7 billion in refinancing needs through 2026.
According to an official statement by both companies, this combination “will benefit U.S. video consumers by creating a more robust competitive force in a video industry dominated by streaming services owned by large tech companies and programmers. The transaction will provide consumers with compelling video options while separately improving EchoStar’s financial profile as it continues to enhance and further deploy its nationwide 5G Open RAN wireless network. The merger between these two companies has been years in the making as they previously agreed to merge back in 2001, although that agreement was called off after an antitrust lawsuit by the Department of Justice. Over the past two decades, as tech companies such as YouTube and Hulu have entered this space, pay TV companies have been hit really hard. Hence, the two companies are optimistic that this merger should get through this time around as a response to the current competition in this industry. This sentiment also echoes in the official statement which states “Streaming services owned by large tech companies and programmers now have subscription numbers that far exceed those of pay TV distributors. Content that was historically the mainstay of traditional pay TV – news, sports, and entertainment – is now available exclusively or first-run on direct-to-consumer streaming services.”
EchoStar president and CEO Hamid Akhavan, said, “This agreement is in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners. With an improved financial profile, we will be better positioned to continue enhancing and deploying our nationwide 5G Open RAN wireless network. This will provide U.S. wireless consumers with more choices and help to drive innovation at a faster pace. We expect Dish and EchoStar bondholders to benefit from two companies with stronger financial profiles and more sustainable capital structures.”