March 3, 2020
Dish Network’s Charlie Ergen may think it’s “inevitable” about a satellite TV merger with AT&T’s DirecTV, but AT&T COO John Stankey is keeping his cards close to the vest.
Speaking March 3 at the Morgan Stanley Technology, Media & Telecom Conference in San Francisco, Stankey appeared open to industry consolidation while underscoring the strength of satellite TV’s rural customers.
Characterizing any merger as “a little problematic” due to regulatory issues, Stankey reiterated that the $48.5 billion acquisition of El Segundo, Calif.-based DirecTV in 2015 was always about securing video customers for future distribution technology, i.e. over-the-top video and high=speed Internet.
“We will continue to offer satellite and DirecTV where it has a rightful place in the market, places where cable broadband is not prevalent, oftentimes, more rural or less dense suburban areas,” Stankey said. “We’ll continue to offer it for customers on a stand-alone basis, who find its superior content offering to be something that they wish to have.”
AT&T’s WarnerMedia Entertainment is about to launch subscription service HBO Max in May, while just-released AT&T TV (formerly DirecTV Now) bowed March 2.
“We’re really pleased with what we saw [with AT&T TV] … that we would be able to replicate how customers were receiving the product in the other markets that we would enter where we own facilities and are able to pair video with broadband,” Stankey said.
Regardless, at the time of the 2015 acquisition, AT&T U-verse and DirecTV had a combined 26 million customers in the United States and more than 19 million customers in Latin America, including Mexico and the Caribbean.
Flash-forward to the end of 2019 and AT&T had 19.5 million domestic pay-TV subscribers, with another 13.3 million in Latin America. That’s a decline of 25% and 30%, respectively.
Wall Street analyst Craig Moffett contends regulatory issues shouldn’t be a problem for DirecTV and Dish as they were in 2002 when the Justice Department sued to block a deal, saying the merger would stifle competition and hurt consumers.
“Satellite TV was growing by leaps and bounds at the time. Now it is in free fall. That alone may be enough to settle the debate; sure, two would be better than one, but both are credible bankruptcy risks on their own. Heck, they’d be a credible bankruptcy risk even together,” Moffett wrote in Sept. 30, 2019 note.
He contends a merger argument could best be presented to regulators as an act of preserving pay-TV for rural Americans without access to high-speed Internet.
“[That] would be a reasonably persuasive one,” Moffet wrote.