DISH, DirecTV mum on merger report

Jeff Richgels  —  8/23/2008 5:40 pm

With satellite radio companies XM and Sirius finally gaining approval to merge, it shouldn't be surprising that some are speculating about a merger of satellite TV providers DirecTV and DISH Network.

On Tuesday, the Wall Street Journal reported that DISH CEO Charlie Ergen again is considering pursuing a merger with larger rival DirecTV. The Journal, which cited "people familiar with the matter," said no formal proposals have been made.

Back in 2001, Ergen tried to acquire DirecTV's then-owner, Hughes Electronics Corp. But regulatory opposition from the Justice Department, the Federal Communications Commission and several states caused Ergen to abandon the deal.

On Monday, DISH reported that in the second quarter it lost 25,000 subscribers, the first quarterly subscriber losses ever reported by a major U.S. satellite TV provider.

DirecTV, which is faring better in gaining subscribers, is expected to report a net gain of 130,000 subscribers during the second quarter when it announces results Thursday.

The Journal said that Ergen is looking to pursue the merger in the face of a difficult economic environment and keen competition that has halted the firm's customer growth. That competition includes both cable and phone companies like AT&T and Verizon that are ramping up their TV offerings.

Ergen envisions that a single satellite provider would have the scale and financial resources to market something neither has been able to muster individually: a potent broadband offering, the Journal reported.

Multichannel.com reported Wednesday that spokesmen for both DISH and DirecTV declined to comment on the Journal story. They had declined to comment to the Journal for the story.

The Journal reported that Ergen thinks the environment may be more receptive for a DISH-DirecTV deal -- primarily because federal regulators just signed off on the Sirius-XM merger. In that case, the companies argued that their merger should be allowed because they compete not just with each other, but a wide range of entertainment offerings. Similarly, DISH and DirecTV today could argue that they face competition from across the cable and telecom industries in addition to each other.

The Journal said that any merger discussions "are likely to be long and complicated, while still facing significant antitrust hurdles."

Ergen's other strategic option -- selling DISH -- has been much talked about for some time, but the Journal said it's much less likely now due to DISH's struggles.

High-profile telecom analyst Craig Moffett, of Sanford C. Bernstein & Co., said DISH is "on the brink" of decline and "it is not obvious (that DISH is) an attractive candidate for anyone," the Journal reported.

Jeff Richgels  —  8/23/2008 5:40 pm