News Analysis
The Wall Street Journal reported Friday that AT&T is “exploring” a deal for DIRECTV, five years after it purchased the satellite TV service for $49 billion.
But there is something about the WSJ article that does not make sense.
It’s not that AT&T would want to sell DIRECTV, which has lost about six million subscribers over the last five years. The telco has stated clearly that it no longer believes that satellite TV has a future.
No, it’s that the story says AT&T has been “in talks” with private-equity suitors about buying a slight majority of DIRECTV with AT&T possibly holding on to the rest. The “suitors” mentioned in the article include Apollo Global Management and Platinum Equity.
What does not make sense to me is the absence of Dish, the most logical “suitor” for DIRECTV. The company whose chairman, Charlie Ergen, recently said that a merger between Dish and DIRECTV is “inevitable.”
”AT&T executives have previously explored parting with DIRECTV assets, including a potential spinoff or combining assets with rival Dish Network Corp., but obstacles, including antitrust concerns, have gotten in the way,” the article says.
The story later states that “AT&T executives have highlighted hurdles that would deter such a deal (with Dish). Antitrust enforcers could block a deal to preserve competition in the market for live TV channels in rural areas where satellites are often the only option available.”
I agree that the anti-trust concerns are valid. After all, the FCC rejected a Dish-DIRECTV merger attempt in 2002 for that very reason.
However, the competitive environment is dramatically different than it was 18 years ago. The explosion of streaming from services such as Netflix and AT&T’s own HBO Max has given consumers a multitude of viewing options.
And in rural areas, there could be workarounds including a binding commitment from a Dish-DIRECTV entity to provide fair market prices there for a period of time.
Dish and DIRECTV could even argue that the merger/sale is necessary now to keep the satellite TV business afloat in the coming years. Both services are losing subscribers due to cord-cutting. If there isn’t a merger soon, one or both could go out of business in the next few years.
So I don’t buy that AT&T is afraid of bringing a Dish-DIRECTV merger to federal regulators. I suspect the fears expressed in the WSJ article are to create more leverage in negotiations with Dish. It’s either that, or a sale to a private equity firm would ultimately include swapping assets to Dish.
Why?
Dish is arguably the only company on the planet that would benefit from buying DIRECTV for a fair price. With cord-cutting expanding, and competition growing in the streaming category, it’s difficult to envision a private equity firm being successful running DIRECTV. The problems that now hamper AT&T would also hamper the equity firm, and even more so because AT&T has resources the equity firm does not.
While Dish is also losing customers to cord-cutting, the acquisition of DIRECTV would give it around 25 million pay subscribers. That would make Dish the nation’s largest cable or satellite service.
With 25 million subscribers, and no competition in the satellite TV category, Dish could stay profitable for years by generating more advertising, and pressuring programmers to offer lower carriage fees. Think of it. Few programmers would want their channels suddenly removed from a pay TV service that reaches 25 million homes.
Dish is also uniquely qualified to run a satellite TV company with Ergen’s extensive experience in the industry. If anyone can make DIRECTV work now, it’s Ergen.
Bottom line: I still think Dish and DIRECTV will come together, assuming AT&T ultimately sells. The merger of their resources may be tied to an equity firm in some way, but it has to happen.
One could even argue that it’s “inevitable.”
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— Phillip Swann
Please Lord Baby Jesus let it happen.
It’s difficult to envision a private equity firm
being successful running DIRECTV.
AT&T has NO interest in providing
ANY customers Good Service.
Why would a company move their Customer Service
Overseas with limited or No English ?
(My opinion, this is their biggest problem)
Keep jacking up the rates.
(after promising they would be in a
better position to negotiate better deals)
when they originally bought DIRECTV.
Not offering customer Up Graded equipment.
Not giving viewers Packages they want.
Saying: It no longer believes that satellite TV has a future.
that puts Rural Customers in a bind,
also gives Urban customers less choices.
Streaming has flaws. You need to subscribe to
multiple services to get all the channels you get with Satellite
which end up costing more and confusion to use as
each one is different. Plus Subscribe to High Speed Internet.
Not all offer DVR, a very popular feature.
Hope there is a deal made with someone who
cares about customers and Satellite service.
If run right, it is fantastic.
DIRECTV still has the best picture.
I am ambivalent about a Diah/DirecTV merger. Both are lousy companies. I see Dish improving their channel options but at DirecTV pricing! There is no way this will be a customer win in the long term. Case in point…when AT&T bought DirecTV and destroyed a fairly decent company. Charlie Ergen will just corner more of the market, dig his hills in with negotiations, and the customer will still be on the losing end. My next stop, once I am out from my 2 year contract…HULU hear I come!
As a former Dish Network Subscriber of 14 years I can honestly say that they would not help Improve Direct TV if they were to purchase the company. All Dish Network has done is drive away customers by raising the prices they charge and dropping the channels due to disputes with companies such as Sinclair Media, Comcast, and other channel providers.
If. Direct merge with or dish buys it on think it will be any
better. Both of them are really nor that great I’ve had or used
Most of all of them. And they
all a total rip off. My theory on
the whole thing, they all are going under. It’s a time and
season for everything and I
think this about to be over.
It’s. to much streaming and
other things up and coming.so
It’s probably on the way out.
I subscribed to DirecTV about a year before AT&T bought them, and I loved it. And I will tell you right now: the #1 reason I quit is because AT&T DESTROYED it. They took a fantastic affordable service and applied their asinine approaches to everything to it. Finally, the ‘surprise’ package modifications and increases to the bill enraged me so much that I said enough and quit (and spent 3 months getting the bill fixed because AT&T keeps DirecTV’s accounting system separate from theirs). If AT&T were to either let DirecTV “be free again,” or let it combine with Dish, I will IMMEDIATELY take a fresh look at going back. But not until then. And I beg to differ with those who say satellite’s on the way out, satellite won’t be “gone” from the landscape until the last of the Baby Boomers and Gen-Xers have passed away, and you’re looking at a good 20-40 years before that happens.
I get tired of channels being taken away and prices continuously increasing. Most of the time if it rain or the wind slightly increase the channels goes off. That is so Crazy!
If you think things will improve under Dish Network ownership think again. Dish drops channels for long periods of time. Just ask anyone who cares about HBO or NFL Network.