In a move to remain competitive with online streaming television services, DirecTV has announced plans to acquire EchoStar’s video distribution business, which includes longtime satellite television rivals Dish TV and Sling TV, through a debt-exchange transaction.
A similar deal to merge the two companies was blocked in 2002 after the U.S. Federal Trade Commission cited antitrust concerns.
“The video-distribution industry has undergone a massive transformation and is highly competitive, now dominated by streaming services owned by large tech companies and programmers,” DirecTV said in a statement on Sept. 30. “Streaming services owned by large tech companies and programmers now have subscription numbers that far exceed those of pay TV distributors.”
Services such as Google’s YouTube TV, Hulu Plus Live TV, Philo, and Fubo TV have gained traction in recent years by offering consumers exclusive or direct-to-consumer content that was once the “mainstay of traditional pay TV.”
EchoStar also owns Sling TV, another popular streaming television service, which DirecTV will acquire. DirecTV currently offers a streaming-only option in addition to its traditional satellite television service.
The companies note that DirecTV and Dish combined have lost 63 percent of their satellite customers since 2016, with traditional pay-TV penetration in U.S. households standing at less than 50 percent today.
The acquisition will bring together DirecTV’s and Dish’s content offerings, with an increased ability to offer smaller, more affordable content packages while improving their streaming services and improving EchoStar’s financial profile, the companies said in the statement.
DirecTV CEO Bill Morrow said that the deal will help the company better collaborate with content programmers to deliver more tailored and cost-effective content packages.
“DirecTV operates in a highly competitive video-distribution industry,” Morrow said. “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.”
The agreement is also expected to benefit EchoStar, which also owns Boost Mobile and HughesNet satellite internet, the companies said in the statement. With the debt burden reduced by approximately $11.7 billion, EchoStar will have more flexibility to expand its 5G wireless network and develop new satellite-based services.
“Today’s strategic actions will advance our ability to aggressively compete in the U.S. wireless market. Customers of legacy incumbents will be waking up and paying attention to our state-of-the-art network,” EchoStar CEO Hamid Akhavan said in a separate statement “With an improved financial profile and a unique approach, we expect to gain share, drive shareholder value, and provide more options for U.S. wireless consumers.”
DirecTV is expected to generate more than $1 billion annually in cost synergies by sharing infrastructure and reducing operating costs. The combined entity will continue to offer a diverse array of programming, including local news, sports, and entertainment, maintaining its position as a key player in traditional pay TV.
The transaction, which is expected to close by late 2025, is subject to regulatory approval and other closing conditions, including the successful exchange of Dish DBS notes.
Financial analysts estimate that the combined company will have a strong leverage profile, enhancing its ability to invest in future growth opportunities, they said in the statement.
AT&T is also selling its 70 percent stake in DirecTV to TPG Inc.—a key stakeholder in DirecTV—for $7.6 billion.
In 2021, AT&T signed a joint-venture agreement with TPG, in which the firm contributed around $1.8 billion in cash in exchange for a 30 percent stake in DirecTV, which was valued at about $16 billion at the time, according to Reuters. AT&T had agreed not to sell its stake in DirecTV for a three-year period, which expired on July 31, Reuters reported.
TPG representatives David Trujillo and John Flynn highlighted the significance of the acquisition, stating that it positions the company “to again provide more choices and better value in an industry currently dominated by large streaming platforms.”
Upon closing, DirecTV will maintain its headquarters for the combined company in El Segundo, California, and will continue to be led by its current leadership team. EchoStar is currently headquartered in Englewood, Colorado.
From The Epoch Times