Speculation once began swirling about a possible DISH Network-DIRECTV merger last week, this time due to a report in the Wall Street Journal.
According to the Journal, DISH Network CEO Charlie Ergen stated that he is interested in restarting merger talks with competitorDIRECTV. Coincidentally, or maybe not, DISH Network’s stock had been hammered the day before due to a lackluster earnings report. The stock bounced back after the report, and is now hovering around the $30 mark, nearly the same price as before the report.
DIRECTV for its part, has basically laughed at the proposition. DIRECTV CEO Chase Carey was candid in comments recently, “In terms of the merger with EchoStar, we really have nothing new to say, I don’t know whether The Journal needed to fill a page or what, but I have nothing. There’s really nothing.”
Better than most corporate double speak, and fairly close to a straight up denial. Liberty Media chairman John Malone, the parent of DIRECTV also shrugged off speculation, blaming the regulatory environment. Malone said the deal would certainly be “synergistic” if it were doable, but doesn’t feel much has changed since the last time DISH Network and DIRECTV tried to merge in 2002. Synergistic being the corporate code word for saving lots of money by laying off thousands of employees by combining the companies. That deal fell through when both the FCC and the Justice Department ruled the deal anti-competitive.
While some have speculated that a possible satellite TVmerger may be possible now due to the recent marriage of XM Radio and Sirius, its more of an apples and oranges comparison.
Satellite radio is a niche market, with less than 10% penetration as far as subscribers in the United States. Pay television has a much higher penetration rate, between 75 and 85 percent of all households have some sort of cable, satellite or telco TV service. For most in rural America, satellite TV is the only choice. Any combination of DIRECTV and DISH Network would create a monopoly across a huge segment of the population. This would subject the combined company to a huge amount of governmental regulation, as least in the rural areas they serve.
So while DISH Network may be begging for a buyout or merger, they would be better off looking to AT&T in hopes of striking any sort of deal, as nothing will be happening soon with DIRECTV.