A DirecTV-Dish merger would face high hurdles

If Dish and DirecTV were to attempt to merge, one likely result would be even greater scrutiny of Comcast and Time Warner Cable.
(Elise Amendola / AP Photo)

Once again there is speculation that satellite broadcasters Dish and DirecTV are in merger talks, this time courtesy of a story in Bloomberg.

These stories have been popping up about every six months. Typically, the stocks of both companies get a nice boost and then a few weeks go by and nothing happens. Then six months later another story breaks and the process repeats itself.

A combination of Dish and DirecTV would create a pay-TV powerhouse with about 35 million subscribers. That size could result in big savings on programming costs and perhaps make satellite more appealing than cable for frugal customers.

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Since both DirecTV Chief Executive Mike White and Dish Chief Executive Charlie Ergen have at times acknowledged that a combination of the two pay-TV distributors makes sense, many media observers think it is not a matter of if but when the two companies marry.

Because the proposed merger of cable operators Comcast and Time Warner Cable is expected to get through the regulatory process intact, many think Dish and DirecTV could also get a green light.

But DirecTV and Dish tried to merge once before, in 2002, and the government said no because it would remove a competitor from the market. That is not the case with Time Warner Cable and Comcast.

To be sure, satellite radio services Sirius and XM did manage to merge after a lengthy approval process. In that case, though, the two companies successfully made the case that there was not enough room for both and that only a merger could guarantee a vibrant business. Dish and DirecTV are already established and profitable.


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“Unfortunately, the odds of successfully completing a merger must be deemed relatively low,” wrote media analyst Craig Moffett.

If Dish and DirecTV were to attempt to merge, one likely result would be even greater scrutiny of Comcast and Time Warner Cable. DirecTV’s White recently expressed concern about the power of a Comcast-Time Warner Cable combination and could in theory argue that Dish and DirecTV need to merge in order to stay competitive.

Even if regulators again said no to Dish and DirecTV, an attempt to merge might be worth trying if only to see if it could lead to tougher restrictions on Comcast-Time Warner Cable or (long shot) even the derailing of that deal.


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Follow Joe Flint on Twitter @JBFlint.

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