DIRECTV to Acquire EchoStar’s Video Distribution Business

Will Provide U.S. Consumers with More Flexibility and Better Value in the Highly Competitive Video Industry Currently Dominated by Large Tech Companies and Programmers

Enhancing Value for U.S. Consumers

DIRECTV and EchoStar announced that they have entered into a definitive agreement under which DIRECTV will acquire EchoStar’s video distribution business DISH DBS, including DISH TV and Sling TV, through a debt exchange transaction. The combination of DIRECTV and DISH will benefit U.S. video consumers by creating a more robust competitive force in a video industry dominated by streaming services owned by large tech companies and programmers. The transaction will provide consumers with compelling video options while separately improving EchoStar’s financial profile as it continues to enhance and further deploy its nationwide 5G Open RAN wireless network.

Strengthening Market Position

“DIRECTV operates in a highly competitive video distribution industry,” said Bill Morrow, Chief Executive Officer, DIRECTV. “With greater scale, we expect a combined DIRECTV and DISH will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers’ interests, and to be better positioned to realize operating efficiencies while creating value for customers through additional investment.”

Commitment to Customers and Innovation

“This agreement is in the best interests of EchoStar’s customers, shareholders, bondholders, employees, and partners,” said Hamid Akhavan, President and Chief Executive Officer, EchoStar. “With an improved financial profile, we will be better positioned to continue enhancing and deploying our nationwide 5G Open RAN wireless network. This will provide U.S. wireless consumers with more choices and help to drive innovation at a faster pace.

We expect DISH and EchoStar bondholders to benefit from two companies with stronger financial profiles and more sustainable capital structures.”

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“DIRECTV was founded 30 years ago to give consumers greater choices than incumbent cable companies for video content, and the Company’s acquisition of DISH TV and Sling TV positions it to again provide more choices and better value in an industry currently dominated by large streaming platforms,” said David Trujillo and John Flynn, Partners at TPG. “Our ability to execute these transactions, alongside our proposed acquisition of AT&T’s 70% stake in DIRECTV announced earlier today, exemplifies the unique capabilities of the TPG platform and our experienced sector-focused investment approach as we support DIRECTV’s continued investment in innovating the next generation of video services that benefit consumers.”

Transaction Benefits

A combination of DIRECTV and DISH will help the new company provide consumers with more choices and better value. The combined video company is expected to:

• Have increased scale to incentivize programmers to allow DIRECTV to deliver smaller packages at lower price points.
• Be better positioned to bring together multiple content sources in one easily accessible place.
• Have an enhanced ability to make the investments required to improve its streaming services.
• Improve the viability of the satellite platform by realizing efficiencies of some shared fixed infrastructure and operating expenses.
• Continue to provide the broadest array of programming and diverse voices available on pay TV, including local news.

The transaction will also benefit U.S. wireless consumers by allowing EchoStar to focus on enhancing and further deploying its 5G Open RAN cloud-native wireless network. This transaction will:

• Alleviate a material portion of EchoStar’s financial constraints.
  
  
• Free up operational and financial resources that EchoStar can dedicate to its mission of deploying a nationwide facilities-based wireless service to compete with dominant incumbent wireless carriers. 
  
  
• Benefit consumers by enabling EchoStar (through its Boost Mobile brand) to strengthen its position as the fourth facilities-based carrier in the U.S.
  
  
• Enable EchoStar to further leverage its satellite assets and experience, including developing innovative direct-to-device (D2D) solutions.

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Navigating a Competitive Landscape

The video distribution industry has undergone a massive transformation and is highly competitive, now dominated by streaming services owned by large tech companies and programmers.

• Streaming services owned by large tech companies and programmers now have subscription numbers that far exceed those of pay TV distributors.
• Content that was historically the mainstay of traditional pay TV – news, sports, and entertainment – is now available exclusively or first-run on direct-to-consumer streaming services.
• The vast majority of consumers who leave satellite video are “cutting the cord” for streaming services – wherever they live.
  • Combined, DIRECTV and DISH have collectively lost 63% of their satellite customers since 2016.
    
    
  • Traditional pay TV penetration in U.S. households is now less than 50%.

Financial Strength and Synergies

The transaction is expected to strengthen the financial profiles of DIRECTV and EchoStar, creating opportunities for additional investment.

• Upon transaction close, DIRECTV expects to have a leverage position just over 2.0x, and plans to reduce to under 2.0x within 12 months, consistent with its stated 1.5x – 2.0x financial policy on a pro forma basis. As a result, DIRECTV will have one of the best leverage profiles in the pay TV industry.
• DIRECTV estimates that the combination of DIRECTV and DISH has the potential to generate cost synergies of at least $1 billion per annum. These synergies are expected to be achieved by the third anniversary of closing, assuming the closing is in late 2025.¹
  
• The transaction will provide EchoStar with greater financial flexibility by improving its access to capital and reducing overall refinancing needs.
• At close, EchoStar will have reduced its total consolidated debt (excluding financing leases and other notes payable) by approximately $11.7 billion and reduced its consolidated refinancing needs through 2026 by approximately $6.7 billion (excluding financing leases and other notes payable).
• The transaction, in conjunction with the exchange offer announced today (the “Exchange Offer”), will also result in the termination of all Intercompany Obligations between DISH Network and DISH DBS and creates the ability for EchoStar to fully unencumber the 3.45-3.55 GHz spectrum, unlocking incremental strategic and operating flexibility.

Conclusion

This strategic acquisition positions DIRECTV to regain its competitive edge in the video market while enabling EchoStar to focus on enhancing its wireless offerings.

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Source – PR Newswire

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