Feeds

Dish and DirecTV deal: Damned if they merge, damned if they don't

Comcast Time Warner Cable deal has investors salivating

The Essential Guide to IT Transformation

Analysis Almost like a delayed reaction, the news that Dish Network had been actively courting DirecTV once again in the US has driven up both companies’ share prices, triggered by the Comcast Time Warner Cable deal.

The share price movements should have happened the day the Comcast TWC deal was mooted, but were only came about after concrete news of Dish’s chairman courting DirecTV.

So we had a frantic email exchange with our old finance analyst friend Gerard Hallaren at Janco Partners about the possibility of a deal. It has been mooted for many years, and goes right the way back to Dish being thwarted in its attempt to buy DirecTV at the time when control of it went to the then News Corp.

Since then it has been wrestled from News Corp’s Rupert Murdoch by John Malone, and added to his Liberty Media empire, with some clever financial shenanigans which amounted to a threat to buy enough shares in News Corp to destabilise the Murdoch family control.

Dish’s Chairman Charlie Ergen resented that 2002 intervention by the Justice Department and the subsequent strength that brought to DirecTV. It flourished under Murdoch who has DTH empires around the world from Australia and China through Europe, and he very much understands how to get the best out of that business. Malone has continued where he left off, with prodigious gains in Latin America.

So now Dish would be the junior partner in any such deal, rather than the outright owner it would have been in 2002.

Dish brings to that equation the spectrum hoard that it has built up which may one day, perhaps with Sprint as a partner, provide the return path to turn the business into a quad or triple play – selling wireless broadband and voice.

Looking ahead we can see the Justice Department okaying a deal between Dish and Sprint, no problem, but we’re not so sure of it okaying a deal between a freshly merged Dish and DirecTV with Sprint.

Then Hallaren made the observation that perhaps this deal was designed to throw a harsh light on the Comcast TWC deal and show the Justice Department the kind of world it is creating if it allows a Comcast TWC merger. How can it allow a merger that leads to 35 million cable homes, a deal that impacts multiple markets – TV, voice and broadband – and then not allow a similar 35 million home merger in pure DTH? It couldn’t.

And given the precedent of the Dish DirecTV merger not being allowed 12 years ago, the Justice Department would not want that deal to re-emerge.

So if the Justice Department plans to say no to the DTH merger of equals, it may feel it cannot start things off by allowing the cable deal. And if that deal falls apart, strangely that puts Time Warner Cable back in the frame for a merger with Charter, who of course is being led now by shareholder John Malone. Which brings us full circle to where we came in.

It is in both Ergen's and Malone’s interests to kill this deal. It is in both their interests to merge now, but only if the deal cannot be killed, so it is best to agree terms and have a higher share price for a while, in order to find out which way the Justice Department leans. Hallaren points out that, historically, in a second-term presidency antitrust cases are avoided, which might point to both deals being allowed. All of which would create carnage in content purchasing, broadband concentration and media reach.

Copyright © 2014, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.