DirecTV has agreed to acquire EchoStar’s satellite TV business Dish TV, in a move that will create one of the largest pay-TV distributors in the U.S. with a combined 20 million subscribers.
DirecTV had around 11.3 million video subscribers in the United States. DishTV had 6.08 million pay TV subscribers. Both are facing significant challenges from video streaming players such as Netflix and Amazon Prime.
DirecTV will be led by Bill Morrow, DirecTV’s Chief Executive Officer, and Ray Carpenter, DirecTV’s Chief Financial Officer. The combined company will be headquartered in El Segundo, California. DirecTV did not indicate a possible job cut.
DirecTV will not be paying significant amount for acquiring EchoStar’s video distribution business, including Dish TV and Sling TV. The mega deal is structured in a way that DirecTV will be spending just $1 to buy Dish TV. But DirecTV will manage Dish DBS debt worth $9.75 billion.
The deal caps years of on-and-off negotiations between the two companies as they look to consolidate in a market increasingly dominated by streaming services like Netflix and Amazon Prime Video, Reuters news report said.
DirecTV estimates that the combination of DirecTV and Dish TV has the potential to generate cost synergies of at least $1 billion per annum.
EchoStar will reduce its debt by $11.7 billion and reduce its refinancing needs through 2026 by $6.7 billion.
Pay-TV market
The size of the global pay TV market is forecast to grow from $184.5 billion in 2023 to $213.5 billion by 2033.
The acquisition comes at a time when both DirecTV and Dish have been losing market share to streaming competitors.
While the merger is expected to help both DirecTV and Dish compete more effectively against pay-TV rivals like Comcast, Charter, and YouTube TV, it will also face regulatory scrutiny.
DirecTV CEO Bill Morrow said the merger will allow the combined company to offer more tailored programming packages and simplify the viewer experience by integrating traditional TV channels with streaming services. The goal, he said, is to help consumers manage their subscriptions more easily.
Lifeline to EchoStar
This merger offers a lifeline to EchoStar, co-founded by telecom entrepreneur Charlie Ergen, which is currently grappling with over $20 billion in debt. The deal is set to reduce EchoStar’s consolidated debt by $11.7 billion and ease refinancing pressures through 2026. To assist in paying off Dish’s $2 billion bond due in November, EchoStar will receive $2.5 billion in financing from TPG’s credit unit, Angelo Gordon, and DirecTV.
The merger provides an exit for AT&T, which is selling its 70 percent stake in DirecTV to TPG for $7.6 billion. AT&T had initially partnered with TPG in 2021 in a joint venture, and the expiration of a three-year agreement on July 31 cleared the way for the sale.
Regulatory challenges
The companies first attempted a merger in 2002, but it was blocked by the FCC and the Department of Justice. However, DirecTV’s Morrow believes that today’s competitive landscape may prompt regulators to view the merger differently.
The deal, which is expected to close by the fourth quarter of 2025, will allow Dish to focus on building its 5G wireless network while DirecTV looks to generate cost synergies of at least $1 billion annually. If successful, the merger will also boost Charlie Ergen’s efforts to create the fourth-largest wireless competitor in the U.S.
Baburajan Kizhakedath
