The two companies first attempted to merge back in 2002 U.S. satellite-TV providers DirecTV and Dish are in the spotlight on Monday following a media report saying AT&T (T) and its joint-venture partner TPG (TPG) are in early-stage talks to merge their DirecTV satellite TV service with EchoStar (SATS) owned Dish. Commenting on a potential deal, RBC said it would view it as positive for both AT&T and EchoStar, with cost synergy opportunities accretive to AT&T cashflow, while for EchoStar the transaction could bring a cash injection. Voicing a similar opinion, Citi said a satellite video merger would be a potentially positive catalyst for EchoStar and a potential incremental positive for AT&T.
MERGER TALKS: AT&T and its JV partner TPG are in early-stage talks to merge their DirecTV satellite TV service with EchoStar owned Dish, Reuters' Anirban Sen wrote on Friday, citing a person familiar with the matter. The two companies first attempted to merge back in 2002 when the U.S. Justice Department blocked the tie-up. The combined entity would create the largest pay-TV service provider in the U.S. at about 16M subscribers, if the talks are successful, the author notes. The potential deal would likely attract antitrust scrutiny again although it might be able to clear regulatory hurdles this time as the industry has expanded substantially since then and DirecTV and Dish now compete against the likes of Comcast (CMCSA), Charter (CHTR), Amazon Prime (AMZN), YouTube TV (GOOGL), and Netflix (NFLX), the publication adds.
POSITIVE FOR ECHOSTAR, AT&T: Commenting on Reuters article on Friday, RBC Capital said it views a potential merger of Dish and DirecTV as positive for both AT&T and EchoStar. Cost synergy opportunities could be accretive to AT&T cashflow, while for EchoStar the transaction could bring a cash injection, required to advance its 5G deployment before the June 2025 FCC deadline, and therefore also be incrementally helpful for tower leasing at towerCos such as American Tower (AMT), Crown Castle (CCI), and SBA Communications (SBAC), RBC adds.
Also discussing a potential deal, Citi told investors that it believes AT&T will look to maximize value from its DirecTV ownership following the press reports. The firm's initial reaction "is that there is still a high degree of industrial logic" to merge DirecTV and Dish as they "try to navigate the secular erosion of linear video subscriptions and improve scale to offer a streaming alternative." Also, there may be an alternative scenario for Dish to use spectrum as currency to acquire AT&T's stake in the DirecTV business that could create an accretive financial scenario for EchoStar equity holders, the analyst tells investors in a research note. Citi views a potential satellite video merger as a potentially positive catalyst for Neutral-rated EchoStar and a potential incremental positive for Buy-rated AT&T.
PRICE ACTION: In morning trading, shares of AT&T have gained over 2% to $22.12, while TPG's stock has advanced about 1% to $56.98. Also higher, EchoStar's shares have jumped almost 6% to $25.67.
