DirecTV, Dish Expected to Face Merger Questions on Earnings Call

DirecTV CEO Mike White
DirecTV CEO Mike White
 Gustavo Caballero/Getty Images

With satellite TV operators DirecTV and Dish Network set to report fourth-quarter financials Thursday and Friday, respectively, Wall Street is looking for the latest management commentary on consolidation in the pay TV industry, a hot topic since Comcast unveiled a $45 billion deal to acquire Time Warner Cable a week ago.

A merger deal between DirecTV and Dish Network failed more than a decade ago, but the idea still comes up regularly, and Wall Street observers expect the top executives to be asked about the possibility on conference calls this week.

Wells Fargo analyst Marci Ryvicker, for example, predicted that the Comcast-TWC transaction would spur other deals. "We view an approved Comcast-TWC transaction as an incremental positive for Dish-DirecTV," she wrote. She noted, though, that a key variable would be Dish chairman Charlie Ergen's "time frame and focus, i.e., we still think priority number one is wireless" for him.

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Macquarie Securities analyst Amy Yong told The Hollywood Reporter that the Comcast-TWC deal would allow the satellite TV giants to argue that they should be allowed to merge if they want because they are facing a stronger competitor.

But some on Wall Street are less bullish that regulators would be open to a Dish-DirecTV combination.

"Regarding a DirecTV-Dish merger, the market might expect that approval of the TWC-Comcast merger could pave the way," said Tom Eagan, analyst at Northland Securities. "We don't. Not only do DirecTV/Dish compete against each other (unlike TWC/Comcast), but there are few video options in their rural markets."

He concluded: "Not enough has changed since 2002 when the FCC rejected their merger attempt."

UBS analyst John Hodulik echoed that sentiment.

The size and market power of the bigger Comcast "would likely create more questions regarding the possibility of a DirecTV-Dish deal, but we would note that a cable deal would not lessen the number of competitors in a market," he pointed out.

Last year, DirecTV chairman and CEO Mike White said several times that his company, which reports earnings Thursday, would see financial and consumer benefits in a combination with Dish, but signaled that Washington regulators may not be ready to seriously consider it again.

Given what he said on CNBC in November, though, he could be ready to try: "Remember, it wasn't approved 10 years ago by a Republican administration. Now the world has changed dramatically. And I would argue that if you look at content costs...the world has changed quite a bit, and that consolidation in the industry would be pro-consumer."

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

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