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Dish Chairman Ups Merger Talks With DirecTV

26 Mar, 2014 By: Erik Gruenwedel

In perhaps the most anticipated merger in the multichannel video program distribution industry, Dish Network founder and chairman Charlie Ergen reportedly has approached DirecTV CEO Mike White about consolidating the two satellite operators.

Combining the companies would result in a domestic subscriber base of 34 million, topping Comcast/Time Warner Cable and Netflix, respectively. DirecTV also has another 11 million subscribers in Latin America, among other markets. In addition to 14 million subs and AutoHop ad-skipping technology, Dish brings significant ownership of wireless spectrum to the table.

Both Ergen and White (less so) have expressed support of a merger in fiscal calls, with a move largely dependent upon antitrust issues. With Comcast pulling the trigger on a $45 billion acquisition of Time Warner Cable, Dish’s Ergen feels the time is right, according to Bloomberg, which cited sources familiar with the situation.

The talks are being conducted at a senior level with no official process yet under way, the sources said.

Indeed, should DirecTV emerge the dominant driver in a union, Ergen (and key Dish executives) undoubtedly would reap significant payouts as senior shareholders. Comcast, in fiscal disclosures, revealed that four TWC executives, including new CEO Rob Marcus, would receive a combined $135 million in severance payments. Marcus, who assumed the CEO position Jan. 1, alone is slated to receive $80 million.

Wells Fargo analyst Marci Ryvicker said merging Dish and DirecTV makes sense with cost synergies in the $30 billion to $40 billion range resulting from lower churn, combined marketing/advertising, fewer satellites, lower programming costs, fewer sales people, and lower corporate overhead, among other factors.

"We don’t think it strange in the least that the Dish-DirecTV story is emerging right now, especially in light of the consolidation noise in cable,” Ryvicker wrote in a note. “In fact, we would go so far as to deem a discussion between the two [satellite] players as a fiduciary duty to their respective shareholders. We’re not saying a merger ‘has’ to get done by any means, but we do think exploratory conversations make a tremendous amount of sense post Comcast-Time Warner Cable.

“If anything, we think today’s headlines might spark those with potential interest in Dish to move more quickly than they otherwise would have.”


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