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COMMUNICATIONS: Reports Of Imminent Merger Between AT&T’s DirectTV And Dish

COMMUNICATIONS
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  • Overnight reports that DirecTV and Dish are in advanced merger talks, potentially forming the largest US pay-TV provider with ~20mn subscribers. WSJ article implies a deal could come as soon as Monday.
  • DirecTV (11mn subscribers) is expected to control the combined entity, with AT&T and TPG remaining investors; Dish (8mn subscribers) is part of EchoStar Corp.
  • DirecTV was sold by AT&T in 2021 at an EV of USD 16.25bn, whereby AT&T retained a 70% interest. DirecTV contributes around USD 3-4bn of AT&T’s FCF (USD 17-18bn FY24 guidance) though this has been dropping by around a fifth annually.
  • The merger could face fewer regulatory issues due to weakness in the pay-TV market with subscribers have declined from over 100mn in 2015 to less than 70mn.
  • Credit impact tough to assess given the lack of detail. Presumably, DISH bonds move to the combined entity though this is deconsolidated from AT&T. Synergies would likely be strong, and AT&T could see a boost in FCF contribution from a larger entity should it retain interest as expected.
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  • Overnight reports that DirecTV and Dish are in advanced merger talks, potentially forming the largest US pay-TV provider with ~20mn subscribers. WSJ article implies a deal could come as soon as Monday.
  • DirecTV (11mn subscribers) is expected to control the combined entity, with AT&T and TPG remaining investors; Dish (8mn subscribers) is part of EchoStar Corp.
  • DirecTV was sold by AT&T in 2021 at an EV of USD 16.25bn, whereby AT&T retained a 70% interest. DirecTV contributes around USD 3-4bn of AT&T’s FCF (USD 17-18bn FY24 guidance) though this has been dropping by around a fifth annually.
  • The merger could face fewer regulatory issues due to weakness in the pay-TV market with subscribers have declined from over 100mn in 2015 to less than 70mn.
  • Credit impact tough to assess given the lack of detail. Presumably, DISH bonds move to the combined entity though this is deconsolidated from AT&T. Synergies would likely be strong, and AT&T could see a boost in FCF contribution from a larger entity should it retain interest as expected.