DISH Network once again finds itself in the right place at the right time. Just a few weeks after the company announced its deal to purchase wireless assets and spectrum from Sprint and T-Mobile, the satellite company now finds itself in a position to scoop up DirecTV.
DirecTV’s parent company AT&T has found itself under mounting pressure from investors to ditch the satellite service and focus on more profitable aspects of the business. Elliot Management specifically now owns a $3.2 billion stake in AT&T has made it clear that they want the company to unload DirecTV.
To be fair, it’s not like DirecTV is doing well. AT&T was recently sued in federal court for allegedly padding their DirecTV subscriber numbers. It turns out that DirecTV has been bleeding subscribers for years now. Last year alone the service lost 2.5 million subscribers.
All of these issues have recently been compounded by the recent political environment in the United States. President Trump has been overtly critical of AT&T subsidiary CNN, even going so far as to call on his supporters to boycott the company. According to Fox Business, advisors to the President have gone so far as to point out that DirecTV is the most vulnerable part of AT&T’s portfolio should they want to target the boycott.
Given the investor’s call to do something with DirecTV, many experts expect AT&T to reach a deal with fellow satellite-service provider DISH Network. DISH is a notable smaller company with roughly 12 million satellite subscribers, though they are looking to pivot into wireless offerings over the next few years. Knowing that, partnering with a big company like DirecTV could be a boon to the company’s satellite offerings.
The reality is that the infrastructure required to offer satellite broadcasting services is vast and expensive. If DirecTV and DISH work together they can share those infrastructure costs, which will allow them to better compete with rival companies who might not be burdened by legacy infrastructure costs.
Boost Mobile founder Peter adderton spoke with Fox Business about the possibility of the two companies merging their satellite offerings. “There has to be an appetite between the two companies to merge,” said Adderton. “The biggest concern I would think for Dish and Direct TV is its tremendous infrastructure costs both companies have, clearly there’re new competitors in the video space: YouTube, Disney, Amazon and others that don’t have these legacy infrastructure costs.”
While analysts see the value of a merger between DirecTV and DISH, it’s unclear how executives at either company feel about. It’s no secret that DISH is shifting its focus towards becoming one of the major wireless carriers in the country. However, just because their focus is in that direction does not mean that they plan to abandon their satellite roots. A DirecTV merger could take a lot of the pressure off of their satellite services to generate more revenue.
Predictably, neither DISH nor AT&T spokespeople have offered any comments. For now, all we can do is speculate and wait.
Sources:
https://www.foxbusiness.com/features/dish-seen-as-best-option-for-att-to-unload-directv
