In a move that directly reflects Comcast's (Nasdaq: CMCSA) $45 billion acquisition bid for Time Warner Cable (NYSE: TWC), Dish Network (Nasdaq: DISH) Chairman Charlie Ergen has reportedly reached out to DirecTV (Nasdaq: DTV) CEO Mike White about merging the two satellite services.
Ergen (left) and White.
According to a Bloomberg story, Ergen felt the Comcast-TWC deal opened the door for talks to bring together DirecTV's 20 million subscribers with Dish's 14 million. A similar super-satellite-service deal was tried 10 years ago but regulators put the kibosh on it, leaving an ongoing sour taste in the mouths of all parties and, according to sources, providing a reason why White would be shy about renewing talks.
The deal also could be a way for Ergen to encourage other parties such as Verizon (NYSE: VZ) and AT&T (NYSE: T) to climb into bed with Dish, suggested BTIG LLC analysts Walt Piecyk, who told Bloomberg that, thanks to "rapidly changing industry dynamics everyone should be talking to everyone, and if you're not you might be left behind."
Piecyk said that it is unlikely that the overture to DirecTV is an orphan, a point that "should serve as a reminder to AT&T and Verizon that a strategic asset has other options that could make Dish un-buyable in the future."
The fact that the previous effort to merge the two satellite providers was shot down suggests that the timing might not be right with the current administration in Washington. On the other hand, sources told Bloomberg, online video and its position in the competitive space could add another factor that might favor a deal.
Both Ergen and White have danced around the subject before--generally at the prodding of analysts digging more deeply into the companies' future merger and acquisition plans.
"The last time Dish tried to acquire DirecTV was 10 years ago and the government rejected it. Since then, in half of America, you've got a very robust telco competitor now. That's a change," White said at the Deutsche Bank Media, Internet & Telecom Conference in Palm Beach, Fla.
Ergen has been even more blunt about the prospects of a new deal.
"I would be relatively optimistic you could put a deal together if there was a desire with DirecTV that makes sense for the government to approve," Ergen said in an interview with Bloomberg in October 2012. "You've got a whole different dynamic than 10 years ago."
Whether that different dynamic approves the Comcast-Time Warner Cable marriage, let alone a super-satellite-service, is something that will play out this year.
The Fly on the Wall stock market and investment site said that Barclays, among others, believes a deal would be "difficult to do given high regulatory hurdles, operational execution issues increasing at Dish, and a substantial part of Dish's equity is due to spectrum and DTV has said it does not see as much value in the spectrum opportunity."
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