EchoStar Chairman Charlie Ergen has long held that a merger of Dish and DirecTV was "inevitable." But it was usually Ergen who was expected to be doing the acquiring.

The tables turned a bit as DirecTV agreed to acquire EchoStar's struggling video distribution unit, including the Dish TV satellite business and the Sling TV streaming business, via a stock transaction. Per terms of the agreement, DirecTV will assume $9.9 billion of Dish's net debt and pay just $1 for Dish TV and Sling TV. They expect to close the deal in Q4 2025.

EchoStar said the proposed sale of its video business, combined with a new raise of capital, will enable the company to deal with a near-term debt wall and focus on its 5G network strategy.

Additionally, TPG plans to acquire AT&T's 70% stake in DirecTV and assume full ownership of the company. AT&T and TPG teamed to spin out DirecTV in 2021. TPG and AT&T expect to close that deal in the second half of 2025, adding that completion of that transaction is not contingent on DirecTV's acquisition of Dish.

Update: AT&T is set to receive $7.6 billion in cash payments from TPG through 2029, New Street Research analyst Jonathan Chaplin pointed out in this research note.

If these deals go through, TPG will have about 18.07 million video subs. EchoStar ended Q2 2024 with 8.07 million video subs, including 6.07 million satellite TV customers and 2 million Sling TV customers. Privately held DirecTV has about 10 million subs via its DirecTV satellite and streaming business and base of U-verse (IPTV) customers, according to the Los Angeles Times.

DirecTV and EchoStar/Dish estimate that they have collectively lost 63% of their satellite TV customers since 2016 thanks to pay-TV cord-cutting and a broader shift to streaming services.

DirecTV and EchoStar reasoned that the combined company would enjoy greater scale, believing that DirecTV would be able to negotiate better programming deals, resulting in smaller, less expensive packages. DirecTV also believes that adding Dish's video business would help it aggregate content from multiple sources and put it all in one "easily accessible place."

"We think this is the right deal for consumers," DirecTV CEO Bill Morrow told the Los Angeles Times. "We think [satellite TV] has a greater life and a greater value than most people realize."

DirecTV believes the combination has the potential to generate cost synergies of at least $1 billion per annum, achievable by the third anniversary of closing (assuming the close occurs in late 2025).

Regulators killed a proposed merger of Dish and DirecTV in 2002. This newly proposed deal will also face some regulatory scrutiny, though industry experts expect it to go through given the current state of video competition.

"It's hard to imagine that regulators would block a deal," MoffettNathanson analyst Craig Moffett explained in an emailed note issued earlier this month amid speculation that DirecTV and EchoStar were again in merger talks. "It's hard to argue that a merger shouldn't happen; it clearly should … Consolidation during a period of secular decline is always to be expected."

"Much has changed since 2002, with every data point improving the odds of government approval," New Street Research policy analyst Blair Levin explained in a research note at the time. He believes regulators would likely deem that the market is "significantly more competitive" and that a proposed combo of DirecTV and Dish would be "unlikely to cause an anti-competitive effect."

Fixing EchoStar's debt

Heading into this deal, EchoStar had about $2 billion of debt maturing on November 14 and warned it didn't have the cash on hand to fund Q4 operations or the coming debt maturity if it couldn't find a remedy.

At the close of the proposed transaction with DirecTV, EchoStar believes it will have reduced its total consolidated debt (excluding financing leases and other notes payable) by about $11.7 billion, and reduced its consolidated refinancing needs through 2026 by roughly $6.7 billion.

In tandem with the DirecTV transaction, EchoStar announced Monday that it had raised $5.1 billion of capital from existing stakeholders for investment in its national Open RAN 5G network and other general corporate purposes. That will help to fund EchoStar's near-term debt wall and "significantly reduced refinancing needs in the next 24-36 months," the company said.

"With an improved financial profile and a unique approach, we expect to gain share, drive shareholder value, and provide more options for US wireless consumers," Hamid Akhavan, EchoStar's president and CEO, said in a statement.