DirecTV and Dish are merging, creating a pay-TV giant

DirecTV is taking over satellite competitor Dish Network, creating by far the largest US pay television operator.

The two satellite companies, which have struggled in recent years due to cord-cutting and their inherent inability to offer broadband service, have discussed working together several times over the years.

DirecTV said the deal, structured as a debt swap with Dish parent EchoStar, will result in $1 billion in annual cost savings. The combined company will have more than 19 million subscribers, representing about a quarter of the total U.S. market.

Along with the acquisition news, the companies announced that private equity firm TPG is acquiring the 70% of DirecTV it does not currently own, paying $7.6 billion in multiple installments through 2029. In 2021, AT&T spun off DirecTV into a privately held company. with TPG as a 30 percent shareholder. The six-year period that AT&T owned DirecTV caused tens of billions of dollars in losses to shareholders and overlapped with its ill-fated 2018 acquisition of Time Warner for $85 billion. In 2022, the Time Warner portfolio, operating as WarnerMedia, merged with Discovery in a $43 billion merger, creating Warner Bros. Discovery.

Dish merged with EchoStar, its cousin in the wireless business, last January. Across Dish's satellite base and internet-based Sling TV platform, EchoStar has just over 8 million video customers. According to recent estimates from researchers and Wall Street analysts, DirecTV has 11 million, including satellite, traditional cable and the DirecTV Stream Internet service.

Regulators will now review the proposed deal, which the companies expect to close in the fourth quarter of 2025. In the past, attempts to merge the two satellite companies have been thwarted at various stages due to regulatory concerns, but today's pay-TV landscape is no longer as good, is much more fragmented, and the access point for video is no longer limited to a physical cable instructed. Still, the resulting company would control a large portion of the market and significantly outperform current market leader Charter Communications, which has 12.7 million residential video customers.

Washington regulators have been skeptical of a number of M&A deals in recent years, despite a change in presidential administration in January that will usher in a new era of regulation. Although the DirecTV-Dish merger would create a pay-TV giant, it would allow EchoStar to continue its plans to offer a wireless competitor to AT&T, Verizon and T-Mobile, which would increase competition in the industry.

While satellite companies may be in decline compared to their heyday, each company remains a top distributor, with DirecTV's clout highlighted in its recent dispute with Disney. The standoff in early September lasted 13 days, even leading up to the start of the NFL season. In the end, the companies said they reached a compromise that would allow DirecTV to offer smaller, cheaper packages of TV services, something they say customers are increasingly looking for as the overall cost of TV and streaming continues to rise. Combined with a blackout between Charter's Spectrum and Disney in 2023, the situation put the traditional pay package under the microscope.

The acquisition represents a dramatic financial rescue for EchoStar, which is more than $20 billion in debt and headed toward possible bankruptcy. The company will receive $2.5 billion in financing to help repay Dish's $2 billion bond due in November. EchoStar said the deal will help reduce its total debt by $11.7 billion and reduce its refinancing needs by $6.7 billion by 2026. The transaction requires DirecTV to pay one dollar, with the primary cost being the assumption of debt.

“DirecTV operates in a highly competitive video distribution industry,” said Bill Morrow, CEO of DirecTV. “We expect that with increased scale, DirecTV and Dish will be better able to work with programmers to achieve our vision for the future of television, which is to aggregate, curate and distribute content targeted to the Customers’ interests and to become better positioned to achieve operational efficiencies while creating additional value for customers through additional investments.”

EchoStar CEO Hamid Akhavan said the deal was “in the best interests of EchoStar’s customers, shareholders, bondholders, employees and partners.” As a result, he added, “we expect that bondholders of Dish and EchoStar will benefit from two companies with stronger financial profiles and more sustainable capital structures.”

Shares of EchoStar and AT&T each rose a fraction in premarket trading.