DirecTV acquires Dish Network. Photo: Brighter TV Future

DirecTV is acquiring EchoStar‘s video distribution business, including Dish TV and Sling TV. EchoStar said this move refocuses the company’s portfolio on wireless and satellite connectivity markets. 

The deal brings together the two main satellite TV providers in North America, DirecTV and Dish TV, which both face declining subscriber numbers. According to an investor presentation, DirecTV and Dish have collectively lost 63% of their satellite subscribers since 2016, as traditional pay TV penetration has fallen to less than 50% of U.S. households. 

DirectTV is acquiring the rival business for the nominal fee of $1 and assuming responsibility for the net debt of the Dish business. 

In addition, AT&T is selling its stake in DirecTV to investment manager TPG Angelo Gordon, which is previously owned 30% of the company. TPG and other lenders including DirecTV will provide $2.5 billion of financing to fully refinance Dish’s 2024 debt maturity. 

DirecTV said this deal will incentivize programmers to allow DirecTV to deliver smaller packages at lower price points.

“Video distribution has undergone a massive transformation, creating a highly competitive ecosystem, which is dominated by streaming services, owned by large tech companies and programmers. [This combination] will give the merged entity the scale that’s needed to better negotiate with programmers so we can get the content that the customers want,” DirecTV CEO Bill Morrow said. 

EchoStar Refocuses on Satellite and Mobile 

This sale will drastically change EchoStar’s financial profile, as 67% of its current revenue is from pay TV. Post-sale, EchoStar’s revenue will be dominated by retail wireless, which will make up 67% of the business. Broadband and satellite services from Hughes Network Systems will make up 31% of the business. 

EchoStar is also receiving $5.1 billion in financing backed on its spectrum assets to invest in Boost Mobile’s nationwide 5G O-RAN network. The sale and financing funds near-term debt maturity and reduces EchoStar’s need for refinancing. 

EchoStar is working to deploy a nationwide facilities-based wireless service to compete with the incumbent wireless carriers. The company also plans to further leverage its satellite assets, including developing direct-to-device (D2D) solutions. 

“We have refocused our portfolio on the growth of our wireless and satellite connectivity markets,” Echostar CEO Hamid Akhavan told investors on Monday. “Our stock until now had been a mixed combination of growth, which is our mobile business and our satellite business, and then significantly cash-generating, declining business, pay TV business. Now, by the fact that we are breaking the two, the remaining business of EchoStar becomes a growth profile and more attractive to growth investors.”

EchoStar shares [SATS] fell 10% on Monday.