DirecTV and Dish have agreed to combine in a deal that will create the biggest pay-TV provider in the US with about 18 million subscribers.

Under the terms of the transaction, DirecTV will acquire Dish TV and Sling TV from EchoStar Corp. for a nominal consideration of $1 plus the assumption of about $9.75 billion of debt, according to a statement on Monday that confirmed previous Bloomberg News reporting.

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The deal is contingent upon Dish’s bondholders agreeing to take a haircut on the principal amount of the company’s debt of at least $1.568 billion, the statement shows.

DirecTV is owned by AT&T Inc. and joint-venture partner TPG Inc. In connection with Monday’s deal, TPG will acquire the 70% stake in DirecTV that it doesn’t already hold from AT&T in a $7.6 billion in cash transaction.

EchoStar shares closed down 11% to $24.82 on Monday. AT&T shares were little changed at $22.

On and off

DirecTV and Dish have flirted with merging on and off for two decades. While U.S. regulators sued in 2002 to block a previous attempt to combine, the TV landscape has changed dramatically since then.

Twenty years ago, satellite providers brought TV to rural areas where cable wasn’t available. Today, many of those areas have access to broadband Internet and aren’t as reliant on satellite TV. 

At the same time, the rise of popular streaming services from the likes of Netflix Inc. and Amazon.com Inc.’s Prime Video has eaten into the pay-TV industry’s revenues as tens of millions of consumers have canceled their services. 

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The shift has hit satellite TV providers harder than cable companies, which have found success offering internet service to consumers. Together Dish and DirecTV have lost 63% of their satellite customers since 2016, the companies said in the statement. Nearly 30% of that loss of their user base, or 6 million subscribers, has been since the start of 2022, according to data compiled by Bloomberg Intelligence analyst Geetha Ranganathan.

Amazon and Netflix offer so much competition for subscribers, a Dish-DirecTV merger shouldn’t be a regulatory problem, DirecTV CEO Bill Morrow said on a call with investors.

DirecTV and Dish are primarily competing against each other in areas that lack robust broadband coverage and where switching to streaming services is not easy, Morrow said. He said he hopes regulators “come to the same conclusion as us: There’s not going to be a loss of competition by bringing two satellite TV companies together.” 

The merger is expected to help the companies survive by giving a combined entity more leverage in negotiations with programmers, Morrow said.

“We want to use our influence to tell the programmers: we are the only pure-play, video-focused entity that’s content agnostic so let us serve a consumer interest that you cannot,” Morrow said in an interview.  

The deal is expected to close in the fourth quarter of 2025, subject to regulatory approvals, according to the companies.

Cost synergies

Both DirecTV and Dish now offer online TV bundles that replicate the traditional cable or satellite package. DirecTV had an estimated 11.3 million subscribers at the end of 2023. Dish, controlled by billionaire Charlie Ergen, finished the second quarter with 6.1 million satellite customers and 2 million subscribers to its Sling TV online service, officials said on an August conference call.

If the transaction goes through, revenue for EchoStar will primarily come from its mobile network and satellite connectivity businesses, CEO Hamid Akhavan said on a conference call, making it a more attractive growth story for investors. The transaction raised $5.5 billion of capital that EchoStar can invest in its Boost Mobile business to build and enhance its nationwide 5G network. 

The deal will create $6 billion in additional liquidity for EchoStar and reduce its refinancing needs for the next two to three years, Malayeri said. This transaction “unencumbers our assets and allows us to independently move forward on the growth side of the business,” he said.

The combination of DirecTV and Dish has the potential to generate annual cost synergies of at least $1 billion. The merged company will be called DirecTV but continue to market the Dish TV and Sling TV brands. It will be led by Morrow. 

TPG Angelo Gordon and some of its co-investors, as well as DirecTV, have agreed to provide $2.5 billion of financing to EchoStar to fully refinance Dish debt maturing in November 2024, according to Monday’s statement. 

PJT Partners Inc. is acting as lead financial adviser to DirecTV, and Barclays Plc is lead financial adviser to TPG. JPMorgan Chase & Co. is acting as lead financial adviser to Dish, while Bank of America Corp., Evercore Inc., LionTree Advisors and Morgan Stanley are also providing financial advice to DirecTV and TPG.

—Bloomberg News