Speculation that Dish Network and US DTH rival DirecTV held merger talks in the wake of consolidation in the country’s cable sector sent their shares soaring yesterday.
Dish chairman Charlie Ergen contacted DirecTV CEO Mike White in response to…
Speculation that Dish Network and US DTH rival DirecTV held merger talks in the wake of consolidation in the country’s cable sector sent their shares soaring yesterday.
Dish chairman Charlie Ergen contacted DirecTV CEO Mike White in response to Comcast announcing its US$45bn acquisition of Time Warner Cable in mid-February, reported Bloomberg citing sources.
However, the report added that White was reluctant to pursue an official process over concerns that regulators could block the deal on competition grounds.
A transaction between the two satellite broadcasters has been a favourite of the rumour mill since their attempt to merge in 2002 was shot down by regulators.
Dish and DirecTV declined to comment, although Ergen has openly touted the benefits of consolidation in the past, while White has been seen as more wary about the regulatory scrutiny.
The latest speculation about a possible marriage between the two prompted several analysts to weigh in on the possible deal.
Wells Fargo’s Marci Ryvicker said rural competition issues that plagued the last potential merger still cloud the deal, although they could possibly be alleviated with enough concessions and a reduction in broadband prices.
Ryvicker added that she would not be surprised if the Bloomberg report was leaked from inside of Dish to get the due diligence discussion on the regulatory hurdles in overdrive.
Meanwhile, Raymond James analyst Chris Quilty highlighted how a deal would have materially positive benefits for Dish’s sister company Echostar, the US satellite operator.
He said the benefits include Echostar not being barred from selling its set top boxes to DirecTV, as well as significant synergies in the acquisition, launch and operation of the combined satellite fleet.
Earlier this year, the operator agreed a “swap” arrangement with its sister group that saw it take ownership of five Dish satellites in return for an 80% equity interest in its Hughes Retail Group, a residential retail satellite broadband business.
That deal makes Dish the only major US DTH operator not to operate its own fleet of satellites, and Quilty said a combination with DirecTV would boost Echostar’s position to compete in the FSS market.
Dish’s shares closed up 6.27% to US$62.09 on 26 March following the report, compared with a US$58.42 close the day before. DirecTV shot up 5.6% to US$77.34 compared with US$73.17.
Dish and DirecTV shares later fell to US$61.22 and US$74.67, respectively, on 27 March.
