DirecTV strikes deal to acquire Dish Network

DirecTV said on Monday that it had reached an agreement to acquire Dish Network, a deal that would create a satellite TV giant with millions of customers and potentially provide a financial lifeline for Dish, which is struggling with billions of dollars in debt.

The deal is a life raft for Dish, a fading purveyor of traditional television whose fortunes have waned along with the pay-TV industry. The company has roughly $2 billion in debt coming due in November, and about $500 million in available cash, putting the company at risk for bankruptcy. In August, Dish told investors it would need additional capital, "which may not be available on favorable terms" to fund its obligations.

The deal, which is subject to regulatory approval, is a multi-step transaction that involves the private equity giant TPG acquiring a majority stake in DirecTV from AT&T for $7.6 billion. DirecTV plans to buy Dish for just $1, but will also take on Dish's debt.

EchoStar, the parent company of Dish, will keep other parts of its business, including over $30 billion in wireless spectrum investments. It would continue to operate as a stand-alone company.

The deal would create one of the largest pay-TV providers in the United States. Dish has roughly 8.1 million subscribers, according to the analyst firm MoffettNathanson, and DirecTV has about 11 million U.S. subscribers. Comcast, a cable heavyweight, has roughly 13.2 million video subscribers.

Bill Morrow, the chief executive of DirecTV, said in a statement that the two companies would be "better able to work with programmers to realize our vision for the future of TV."

An acquisition by DirecTV would represent a coda of sorts for Dish Network's chair, Charlie Ergen, a former professional blackjack player who has long sought to unite the two satellite TV companies. Ergen, 71, struck a deal to merge DirecTV with Dish in 2002, but that deal was blocked by the Federal Communications Commission and the Justice Department on the grounds that combining the two biggest satellite TV players would harm competitors.

It remains to be seen whether the government would oppose a similar deal two decades later. Dish and DirecTV are no longer the entertainment juggernauts they were in the early 2000s, before the proliferation of streaming gave consumers a wide array of alternatives to traditional television. Increased broadband internet access and wireless services in rural areas -- traditionally satellite TV's bailiwick -- have also supplanted Dish and DirecTV for many customers.

But regulators may still have objections. The Justice Department was concerned about a potential combination of DirecTV and Dish as recently as 2020, when a similar deal was under consideration, The New York Times reported. A major stumbling block was the paucity of 5G wireless service in rural areas, depriving customers of a viable alternative to Dish and DirecTV.

Craig Moffett, an analyst for MoffettNathanson, said he didn't expect the government to challenge the merger this time, given the moribund state of satellite TV.

"At the end of the day, you're better off with one than none," Moffett said. "And neither one is going to survive very long on their own. And to be fair, even putting them together is not going to change the trajectory of the business."