SURPRISING DEAL: DIRECTV TAKES ON NEARLY $10 BILLION IN DEBT TO ACQUIRE DISH TV – WHAT’S AHEAD?

EchoStar announced on Monday that it will sell its Dish TV provider and digital business Sling to its rival DirecTV in a deal aimed at merging two of the largest pay-TV providers. Following the news, EchoStar’s shares fell more than 11%.

According to the press release, DirecTV agreed to pay a nominal fee of $1 for Dish, but more importantly, it will assume about $9.75 billion in debt from Dish. The deal is contingent upon approval from some of Dish’s bondholders and is expected to close in the fourth quarter of 2025. Once merged, DirecTV and Dish will serve approximately 20 million customers, according to Reuters.

In an interview on CNBC’s “Squawk on the Street,” Hamid Akhavan, CEO of EchoStar, said, “This was the right time to bring the companies together to create an entity capable of negotiating better deals with content producers and offering smaller, more bite-sized packages that consumers are asking for.”

Akhavan also emphasized that the content distribution industry is in significant decline, and companies like Dish and DirecTV have fallen behind other platforms with more advanced technologies and wider reach. He noted that EchoStar was unable to fully support both its video distribution and core wireless internet businesses, and this merger will allow the company to focus all of its resources on its core services.

Also on Monday, AT&T announced that it would sell its entire 70% stake in DirecTV to the investment firm TPG for $7.9 billion. Previously, in 2021, AT&T sold 30% of its stake in DirecTV to TPG, which valued the company at $16.2 billion at the time. AT&T originally bought DirecTV in 2014 for $48.5 billion.

Rumors of a merger between Dish and DirecTV have circulated for decades. In 2002, the two companies came close to a deal in which EchoStar would have acquired DirecTV from Hughes Electronics of General Motors, but the deal was blocked by the U.S. Federal Communications Commission. At that time, EchoStar outbid Rupert Murdoch and News Corporation in a bidding war for DirecTV.

Since then, the satellite TV industry has faced major blows as consumers shifted to streaming services. With about $2 billion in debt looming and only $521 million in cash and equivalents as of June 30, according to public filings, EchoStar was increasingly facing the prospect of bankruptcy. The company recently attempted to refinance some of its debt but failed to reach an agreement with bondholders, according to a filing on September 23.

Akhavan stated that EchoStar has secured enough capital for a bright future, but the company will not be making many big moves soon as it is still digesting recent changes. He emphasized that the company would prioritize customer acquisition over expanding services. “We are as competitive as anyone in terms of our offerings, whether in price, coverage, or quality,” he asserted.