Q. I read that DIRECTV and Dish are thinking of merging. Do you see that happening? — Victor, Albany, New York.
Victor, I think you are referring to an analysis just published by the research firm, Pivotal, in which its founder Jeff Wlodarczak says he thinks DIRECTV and Dish could come together in some form.
Noting that both satcasters are losing subscribers at an unprecedented rate, the analyst theorizes it would make sense for the two to merge to reduce expenses and, possibly, create a more formidable venture.
“One has to think AT&T (DIRECTV’s owner) is looking to somehow shore up its melting DIRECTV ice cube and a merger (or a sale) with Dish would go a long way to boosting the business,” he wrote.
DIRECTV, which once was arguably the most powerful company in video, is in rapid decline, having lost hundreds of thousands of subscribers in the last year. And AT&T, which purchased the satellite TV service for $67 billion in 2015, seems clueless on how to turn the satcaster around. Consequently, I agree with Wlodarczak that AT&T would entertain almost any scenario that would take DIRECTV off its hands without taking a bath in the process.
But that’s where this scenario likely hits a roadblock. Would Dish agree to pay AT&T enough money to allow AT&T’s executives to save face with their shareholders? Probably not. Dish doesn’t appear to have any better idea on how to run a satellite TV business these days so why would it double-down on the shaky category and overpay for DIRECTV?
And it would have to overpay. AT&T’s executive team, led by CEO Randall Stephenson, is under pressure to show its purchase of DIRECTV will eventually produce dividends. Anything less than a princely sum in the sale would be seen as a defeat, perhaps one that would cost Stephenson his job.
Likewise, I can’t imagine AT&T would buy Dish and expand its satellite TV business when it’s having such difficulty making DIRECTV work.
Of course, there could be a third option where the two services consolidate assets and attempt to operate without one company assuming control. But that would be very complicated to assemble, particularly with Dish Chairman Charlie Ergen involved. (Ergen is not the easiest person to work with.)
So while current market conditions would suggest a merger could be on the table now, I am dubious that it will actually happen.
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— Phillip Swann