DirecTV, the US cable TV carrier, has agreed a deal to acquire EchoStar’s video distribution business, which includes satellite television operator Dish TV and the Sling TV streaming platform.
The agreement has finally come to fruition after decades of on-and-off discussions between the two parties to create one of the nation's largest pay TV distributors with a combined 20 million subscribers.
The transaction comes at a time where streaming services such as Netflix and Amazon Prime Video are dominating the market and benefiting from consumers ‘cutting the cord’ and moving away from traditional pay-TV services.
DirecTV claims the combination with Dish will “benefit US video consumers by creating a more robust competitive force in a video industry dominated by streaming services owned by large tech companies and programmers.”
Through the transaction, the parties have vowed to offer consumers smaller packages at lower price points and bring together multiple content sources in one place.
DirecTV has acknowledged that streaming services now have subscription numbers that far exceed those of pay-TV distributors and revealed that when combined with Dish, the companies have collectively lost 63% of their satellite customers since 2016.
It also added that traditional pay TV penetration in US households is now less than 50%.
The DirecTV and Dish merger will be competing with the planned Venu Sports streaming joint venture between the Fox Corp, Warner Bros. Discovery (WBD), and Disney media giants that is set to launch before the end of the year.
However, the launch could be held up as FuboTV, the upstart US sports-focused internet TV service, recently scored a major legal win over Venu Sports after winning a preliminary injunction against the OTT streamer.
Bill Morrow, DirecTV chief executive, said: “DirecTV operates in a highly competitive video distribution industry.
“With greater scale, we expect a combined DirecTV and Dish will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers’ interests, and to be better positioned to realize operating efficiencies while creating value for customers through additional investment.”
In terms of sports content, DirecTV recently resolved its contract dispute with Disney, providing its customers access to the major ESPN network following a blackout of almost two weeks.
As part of the two-step transaction, DirecTV will pay $1 to buy the pay TV business called Dish DBS that includes Dish and Sling TV, while agreeing to assume about $9.75 billion of Dish's debt.
At close, EchoStar will have reduced its total consolidated debt by approximately $11.7 billion and reduced its consolidated refinancing needs through 2026 by approximately $6.7 billion.
For the deal to go through, Dish DBS debtholders will have to agree to take a haircut on the debt by about $1.57 billion. With the exchange offer, Dish is attempting to convince its bondholders to become holders in the merged entity.
DirecTV estimates that the combination of DirecTV and Dish has the potential to generate cost synergies of at least $1 billion per annum. These synergies are expected to be achieved by the third anniversary of closing in late 2025.
The transaction, which the boards of directors of both companies have unanimously approved, is expected to close in the fourth quarter of 2025, subject to the receipt of regulatory approvals.
The deal will provide an exit to AT&T, the prominent US telecoms giant, which is selling its 70% stake in DirecTV to private equity firm TPG Capital for $7.6 billion.
AT&T agreed to sell a 30% stake in DirecTV to TPG in 2021 for about $1.8 billion which valued DirecTV at about $16 billion at the time. AT&T had agreed not to sell its stake in DirecTV for a three-year period, which expired on July 31.
The deal will also provide a crucial lifeline to EchoStar, which was co-founded by telecommunications entrepreneur Charlie Ergen and is currently saddled with more than $20 billion in debt.
EchoStar will receive $2.5 billion of financing from TPG's credit unit Angelo Gordon and DirecTV to help pay off Dish's $2 billion bond that is due in November.
DirecTV will continue to be led by Morrow and chief financial officer Ray Carpenter. The combined company will be headquartered in El Segundo, California.
