(Bloomberg) -- AT&T Inc. and joint-venture partner TPG Inc. are in talks to combine their DirecTV service with Dish, according to people familiar with the matter, a deal that could create the largest pay-TV provider in the US.
The discussions between DirecTV and Dish parent EchoStar Corp. are in the early stages, said the people, who asked not to be identified because the information is private. An agreement hasn’t been reached and talks could still end without one, they said.
“Rumors about a potential transaction involving DirecTV and Dish are nothing new, but we don’t comment on rumors and speculation,” a spokesperson for DirecTV said in an emailed statement.
A spokesperson for AT&T also said the company didn’t comment on rumors or speculation. Representatives for TPG and EchoStar declined to comment.
A merger of the two largest satellite-TV providers would create a single company with about 20 million subscribers at a challenging time for the pay-TV industry. It would also cap years of speculation about consolidation in the satellite-TV business. EchoStar just closed its acquisition of Dish in December.
While past discussions of a DirecTV-Dish combination have run up against antitrust concerns, the shift from pay TV to streaming has changed the competitive landscape.
Shares of EchoStar gained as much as 1.9% after the close of regular trading Friday, after rising 8.9% earlier in the day to give the company a market value of $6.59 billion.
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.
In August 2021, to get the TV business off its books, AT&T moved DirecTV into a joint venture with private equity investor TPG in a deal that valued the company at about $16 billion. AT&T held 70% while TPG received 30%. Due to subscriber losses, AT&T took a $15.5 billion impairment charge in 2020 to account for the lower value of the operation.
Since Sept. 1, DirecTV had been battling Walt Disney Co., the owner of ESPN and ABC, among other networks, in a carriage dispute that they settled on Saturday. While the companies were trying to resolve that dispute, DirecTV customers weren’t able to watch this week’s Monday Night Football match between the San Francisco 49ers and the New York Jets or Sept. 10’s US presidential debate.
Dish has been seeking to transition from pay-TV to wireless services but has racked up significant debt to buy spectrum while the legacy business loses subscribers. It has a $2 billion bond due Nov. 15.
A combination of DirecTV and Dish would likely attract antitrust scrutiny, as an earlier plan did when the US Justice Department sued in 2002 to block a merger. An agreement now, though, might clear hurdles because the industry has changed substantially since that time, when DirecTV was owned by General Motors Co.
The pay-TV industry, including cable and satellite, had 104 million US subscribers in 2015, according to data compiled by Bloomberg Intelligence. That has shrunk to less than 70 million this year as services including Netflix and Amazon Prime video have scooped up viewers. Netflix, an on-demand streaming service with about 84 million subscribers in the US and Canada, has plans starting as low as $7 a month. Multichannel services like Dish and DirecTV cost more.
Since 2002, DirecTV and Dish have periodically flirted with a combination. In 2014, Ergen contacted DirecTV’s chief executive officer to discuss a merger, Bloomberg News reported. Bloomberg News reported in 2019 that the two companies were open to a merger and believed a deal could pass muster with regulators.
As consumer viewing habits changed, both AT&T and Dish have focused intensively on their internet connectivity businesses. AT&T has prioritized its fiber-optic and wireless network expansion, while Dish is transitioning to wireless services.
--With assistance from Christopher Palmeri.
(Updates with settlement of carriage dispute in 10th paragraph.)
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