MW A Dish-DirecTV deal may not improve satellite TV's fate much, but bonds still rally
By Ciara Linnane and Emily Bary
Dish junk bonds and EchoStar's stock see gains, with Dish and DirecTV again said to be in talks about combining
High-yield bonds issued by EchoStar Corp.'s Dish Network cable-TV business were among the biggest gainers in the U.S. junk-bond market on Monday, after a report that Dish may be merged with DirecTV.
The report by Reuters said that AT&T $(T)$ and its joint-venture partner TPG $(TPG)$ are in early stage talks on a deal, citing a person familiar with the matter.
The parties attempted to merge in 2002 but were blocked by the U.S. Justice Department on competition grounds. The combined entity would be the biggest pay-TV service provider in the U.S. if talks succeed, so a fresh deal might draw regulatory scrutiny again, although the landscape is different this time around as more people cut the cord.
"It's hard to imagine that regulators would block a deal," MoffettNathanson analyst Craig Moffett wrote on Monday.
This isn't the first time that the market has contemplated a merger since the two companies tried combining more than two decades ago. For instance, investors speculated on a possible deal back in 2021, according to Moffett.
"Almost nothing has changed since then ... save for the size of the companies (nearly 40% fewer satellite video subscribers) and the rate of decline (substantially faster)," he wrote Monday.
In his view, a merger "clearly should" happen. But he also cautioned that investors shouldn't get too excited about the benefits of one.
See also: Verizon plans big fiber bet with $20 billion Frontier deal. Does it make sense?
"Consolidation during a period of secular decline is always to be expected," he wrote. "But it would be a mistake to overestimate its importance. Adding a year or so to the expected life of satellite TV isn't going to change the narrative for programmers, distributors, or even for satellite TV."
Nonetheless, EchoStar shares $(SATS)$ are up 10% on Monday and rallying alongside the Dish high-yield bonds.
An AT&T representative said the company doesn't comment on rumors or speculation. Representatives from Dish, TPG and DirecTV didn't immediately respond to a request for comment.
The Dish bonds are rated Caa3 by Moody's Ratings and CCC-minus by S&P Global Ratings. The 7.35% notes that mature in July of 2028 were showing the biggest price gain over the last two weeks at 17.37 points, as the following chart from data-solutions provider BondCliQ Media Services shows.
There was pretty even selling and buying of the bonds through the morning.
Dish has more than $21 billion of bonds outstanding, according to FactSet data. The bulk of that matures in 2026.
-Ciara Linnane -Emily Bary
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September 16, 2024 16:06 ET (20:06 GMT)
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