Q. I read your story about AT&T trying to sell DIRECTV, but I can’t understand why Dish isn’t bidding for it. It seems to me that Dish has been interested in merging with DIRECTV before and so they would now, too. What’s your analysis on what will happen here? Will AT&T sell it to another TV company like Comcast? — Wayne, Fairfax, Virginia.
Wayne, the New York Post reported this week that AT&T is taking bids for DIRECTV, its struggling satellite TV service. That’s not surprising considering that DIRECTV has lost roughly six million subscribers since AT&T purchased it in 2015, and that AT&T wants to focus exclusively on streaming-based products such as HBO Max and AT&T TV. But what is surprising is that the Post writes that Dish did not make an offer in the first round of bids.
“Rival satellite-TV provider Dish Network — whose billionaire boss Charlie Ergen once said a merger of Dish and DirecTV is “inevitable” — isn’t participating in the auction, according to sources. That’s after a failed bid last year by Stephenson to merge the two that ran into antitrust concerns,” the newspaper wrote.
Dish Chairman Charlie Ergen has wanted to merge with DIRECTV, or buy it outright, for decades. In fact, the two satcasters agreed to merge about two decades ago, but the deal was nixed by federal regulators in 2002 on grounds that it would reduce consumer choice.
So why isn’t Dish interested in buying DIRECTV now when its price would be devalued, and the feds would be more receptive due to the current explosion of consumer video choices thanks to streaming?
I think Dish is interested, but Ergen (and likely AT&T) has concluded that negotiating a deal directly with AT&T would be troublesome. One, the feds could still reject a straight DIRECTV-Dish deal; there are millions of rural residents without Internet access (so no streaming) who would be hurt if they only had one satellite choice.
And two, Ergen and AT&T’s executive team are likely to be unsuitable negotiation partners. The Dish Chairman is arguably the industry’s toughest (and prickliest) negotiator, one who’s known to blow up a deal over a seemingly minor slight. AT&T probably does not even want to entertain the notion of dancing with Charlie when time is not on its side.
The likely scenario here is that an equity firm, such as Apollo Global Management, will buy DIRECTV with the intention of flipping it to another company with Dish being the likely flipee, if you will. Apollo is a finance company; it has no experience running a national pay TV service. When it has purchased a TV-related company in the past, it turns over the management responsibilities to a company that does have the experience. (For instance, Apollo last year purchased a few dozen local TV stations owned by Cox Media, but is allowing Cox Media to serve as the management team.)
Apollo could sell DIRECTV to Dish, or give it an investment stake that would enable Ergen’s team to run both companies. While it’s possible that they could keep both satellite TV services intact, and therefore avoid federal regulatory scrutiny, I suspect that would not appeal to Ergen. He knows that eliminating a major satellite rival would give him more leverage with programmers during carriage disputes as well as allow Dish to streamline operations.
Bottom line: Don’t count Dish out. Ergen, a former professional blackjack player, knows he still has a card to play.
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— Phillip Swann