EchoStar Corporation’s SATS subsidiary DISH TV is reportedly considering a merger with AT&T Inc. and private equity firm TPG Inc.’s joint venture – DirecTV – according to a Bloomberg report. 

Citing sources familiar with the matter, the report further added that no agreement has been reached, and the discussions are still at a nascent stage and could end without any conclusive outcome. Following the speculations of a potential merger, shares of SATS jumped 8.9% yesterday and closed the session at $26.44.  

A potential merger between DirecTV and Dish could significantly transform the pay-TV market and satellite services in an increasingly streaming-dominated world. 

The pay-TV landscape has been witnessing severe disruption owing to the proliferation of streaming services such as Netflix and Amazon Prime Video. By joining forces, DirecTV and Dish could potentially stabilize their subscriber bases and find new ways to compete in an era where on-demand services are continuously gaining traction. Bloomberg reported that combining the two satellite businesses would result in a larger subscriber base, estimated at 20 million, giving the new entity potential market strength.

The Merger to Face Intense Regulatory Scrutiny

A merger of this magnitude is likely to attract significant scrutiny from U.S. regulators, particularly regarding antitrust concerns, per Bloomberg. The U.S. Department of Justice previously blocked a merger between the two companies in 2002 due to antitrust concerns, with expectations of generating a satellite TV monopoly and disrupting competition. Back then, DirecTV was owned by General Motors.  

The report highlighted that owing to the sweeping changes witnessed in the industry, the deal could pass regulatory scrutiny this time. 

SATS’ Potential Subscriber Losses Affect Top Line

Net subscriber losses in Pay-TV, Retail Wireless and Broadband and satellite services are weighing on the top-line performance. In the last reported quarter, SATS revenues fell 9% year over year to $3.96 billion. The top line also missed the consensus mark by 0.6%. Soft revenue generated from pay-TV, Retail Wireless and Broadband and satellite services businesses amid growth in the 5G Network Deployment further dampened its results.

SATS’ Zacks Rank & Stock Price Performance

At present, SATS has a Zacks Rank #5 (Strong Sell). Shares have gained 44.2% against the  sub-industry’s decline of 13.8% in the past year.

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Stocks to Consider

Some better-ranked stocks from the broader technology space are Arista Networks, Inc. ANET, Harmonic Inc. HLIT and Ubiquiti Inc. UI. HLIT presently sports a Zacks Rank #1 (Strong Buy), whereas ANET and UI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Arista Networks supplies products to a prestigious set of customers, including Fortune 500 global companies in markets like cloud titans, enterprises, financials and specialty cloud service providers. It delivered a trailing four-quarter average earnings surprise of 15.02%. In the last reported quarter, Arista delivered an earnings surprise of 8.25%.

Harmonic enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally. HLIT delivered a trailing four-quarter average earnings surprise of 32.5%.

Ubiquiti company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved its visibility for future demand and inventory management techniques.

 

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