DirecTV agrees to buy rival Dish for $1, assuming it has billions of dollars in debt

DirecTV announced Monday that it is buying rival Dish Network, ending decades of back-and-forth talks about combining its satellite services.

In the streaming era, companies have struggled to retain subscribers. As platforms like Netflix, Hulu and Amazon Prime Video gained popularity, luring millions of subscribers away from pay TV with lower prices and on-demand content, DirecTV and Dish found it increasingly difficult to justify rising subscription costs, worsening an already dramatic cut. .

The companies said that “the combination of DirecTV and Dish will benefit U.S. video consumers by creating a stronger competitive force in a video industry dominated by streaming services owned by large technology companies and developers.”

Under the deal, DirecTV will pay Dish owner EchoStar as little as $1 per Dish in exchange for assuming the multibillion-dollar debt.

This February 23, 2011 file photo shows Dish Network satellite dishes at an apartment complex in Palo Alto, California.

AP Photo/Paul Sakuma, file

Meanwhile, private equity firm TPG will acquire AT&T owns the remaining 70% of DirecTV. This move comes nine years after AT&T bought the company in 2015 to sell its 30% stake to TPG in 2021, a DirecTV spokesman told CNN.

The deal still depends on Dish bondholders agreeing to net debt of less than $1.56 billion, which a DirecTV spokesman said the company will seek to secure in the coming weeks. Bondholders can accept a lower interest rate, take a slightly higher interest rate today or wait, which could result in Dish going bankrupt. In a press release on Monday, Dish shared the trade-in offer.

Dish currently has a $2 billion maturity bond that matures on November 23. To secure financing through a shared revenue stream, TPG and DirecTV will provide Dish with a $10 billion loan that will enable the company to repay its debt on November 24.

The deal gives DirecTV and Dish greater scale, a DirecTV spokesman told CNN. From an investment perspective, the combined entity offers a more reliable source of revenue that can be invested in products and services, which benefits developers like Disney. It will also allow the new entity, the video company, to work better with developers to achieve smaller packages.

The newly combined DirecTV-Dish entity will continue to support the Dish brand for the foreseeable future, a DirecTV spokesman said. DirecTV has no current plans to make changes to the existing Dish or Sling TV brands, which means current Dish customers should not worry about being forced to switch to DirecTV.

If they combine them, the new service will have about 20 million subscribers, of which more than 11 million will be DirecTV. However, that number pales in comparison to DirecTV’s subscriber base of 20.3 million at its peak in 2015, when A.T.&T bought a majority stake in the company.

DirecTV was founded by Hughes Electronics in 1994. AT&T bought the company in 2015 and in 2021 sold part of it to private equity firm TPG.

Dish Network is a subsidiary of EchoStar Corporation (SATS), which also owns Sling TV and the rights to wireless spectrum used for cell phone communications. The stock jumped almost 3% in pre-market trading.

It’s a long time coming

Reports and rumors about the merger have been circulating for years. In 2014, Bloomberg reported that former Dish CEO Charlie Ergen had reached out to former DirecTV CEO Mike White.

However, the U.S. government previously blocked a proposed $19 billion merger in 2002 on competitive grounds. Echostar had to pay a $600 million breakup fee to Hughes, which was then owned by General Motors.

Monday’s deal offers DirecTV a way to cut rising costs and, at the same time, EchoStar a way to solve its debt problem. The deal also strengthens the duo’s position in the industry, allowing them to more easily compete with rivals in pay TV and streaming services.

Antitrust regulators’ wariness toward satellite TV mergers stems from a time when such companies were the only providers available to viewers in suburban and rural areas, which were typically less dense in population and not supported by cable networks due to high costs infrastructure.

However, as broadband companies increasingly provide a wide range of solutions to remote consumers, the competitive effects of such mergers have become less severe.