AT&T Should sell DIRECTV to DISH

NashGuy

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Mar 24, 2009
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I think that AT&T's acquisition of DTV will increasingly be viewed as a strategic mistake as the traditional cable TV bundle -- especially delivered over DBS satellite -- continues to rapidly decline. So I think this idea of AT&T spinning off DTV will become a common refrain on Wall Street in the next couple of years. But AT&T's current leadership is loathe to admit that they never should have purchased DTV.

I do think there's a pretty decent chance that, maybe a couple years from now, AT&T tries to somehow divest from their satellite TV business. In the meantime, I think they'll try to migrate a lot of their TV customer base over to their forthcoming streaming TV service (AT&T TV, or whatever they brand it). That'll be especially true of those satellite customers who live in homes where AT&T Fiber/Internet is available, because they'll hope to achieve a long-term IP-based double play (broadband + TV) among that population.

The tricky question, though, is who might want to buy DTV satellite or how it might be merged with DISH. Hard to see any third party wanting to invest in the sinking ship of DBS TV. So AT&T would probably need DISH to either buy it outright or maybe form some kind of joint-venture subsidiary that DISH and AT&T co-owned (and that distanced the satellite TV business from AT&T's stock price).
 

lparsons21

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I personally am not buying into the demise of sat tv. I will admit I think it will get to the point of only being able to support a single company though. But how to get to one company is the question. A merger/buyout of one over the other seems problematic because the only similarity between the two is they use satellites, otherwise all the consumer end equipment is quite different.

I also am not buying into the pie in the sky of how much 5G and the launching of a bazillion satellites for internet service is going to happen anytime real soon.

Just call me a curmudgeon or Luddite if it makes you feel better! :)



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slice1900

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I've never seen an acquisition made for $10 billion or more that wasn't a mistake in hindsight. Can anyone think of one?

I cringe every time I read someone saying that Apple should buy Netflix or Tesla or whatever. As an investor I'm glad that Apple stays far away from stupid ideas like that and only does small targeted acquisitions.
 
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Juan

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I personally am not buying into the demise of sat tv. I will admit I think it will get to the point of only being able to support a single company though. But how to get to one company is the question. A merger/buyout of one over the other seems problematic because the only similarity between the two is they use satellites, otherwise all the consumer end equipment is quite different.

I also am not buying into the pie in the sky of how much 5G and the launching of a bazillion satellites for internet service is going to happen anytime real soon.

Just call me a curmudgeon or Luddite if it makes you feel better! :)



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navychop

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I think I prefer curmite to luddgeon.

Dish does not today use Ka for home delivery. Other than those, maybe Dish would be ahead to just buy sats and slots as DTV dwindles and there are no buyers for L,S&B.

I am conflicted over Apple or some such buying Tesla. On the one hand, the cash would ensure Tesla remains at the forefront and well ahead of all competitors. Some old line auto manufacturers disappear and Tesla becomes profitable with a large market share. Plenty of future there.

OTOH, what does Apple et al know about automobiles? But they know technology!


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NashGuy

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Mar 24, 2009
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Nashville, TN USA
I personally am not buying into the demise of sat tv. I will admit I think it will get to the point of only being able to support a single company though. But how to get to one company is the question. A merger/buyout of one over the other seems problematic because the only similarity between the two is they use satellites, otherwise all the consumer end equipment is quite different.

I also am not buying into the pie in the sky of how much 5G and the launching of a bazillion satellites for internet service is going to happen anytime real soon.

Just call me a curmudgeon or Luddite if it makes you feel better! :)
Ha, not calling you a luddite. However, you say you don't buy into the demise of satellite TV but then basically admit that, yes, it's in long-term decline (at least mild decline) which will necessitate that the industry consolidates from two major national players to one.

To be honest, I think there's quite a bit of uncertainty over how steep/fast the decline of DBS TV will be. And I would agree with you that, at least in the next several years, it's not going away. But I think we could both agree that it's definitely not a growth industry.

When I get into these debates/discussions with longtime satellite TV fans, it seems like they often defend DBS as a TV distribution technology. And I admit that there's nothing wrong with DBS technology, per se. Sure, it suffers from a little rain fade but it has an ability to reach people nationwide, something that other forms of TV cannot do. (And it can deliver lots of HD channels with great picture quality too!) The problem with DBS is mainly due to the changing nature of the TV business. The business of cobbling together packages of other companies' cable channels and then reselling them at a low margin to subscribers is fading as consumers increasingly turn to direct-to-consumer streaming services. That shift doesn't hurt cable TV operators because they're also broadband operators. (In fact, it may actually HELP cable operators because their broadband profit margins are way higher than their TV profit margins.) But it hurts DISH and DirecTV because, well, they can't deliver broadband through their dishes.

I do believe that DBS TV will continue to have a captive audience of consumers who have no other choice for pay TV. But that group of consumers will only ever shrink. How quickly, I don't know. But any logical interpretation of the facts and trends in front of us tells us that DBS TV is a business in long-term decline.

That, I believe, is what makes DirecTV ill-suited to ownership by AT&T, at least from the perspective of Wall Street. The rest of AT&T is at least plausibly positioned for continued future growth. But everyone knows that's NOT the case for DirecTV. Which is why it might make sense for it to trade as a separate stock, perhaps a stock that is a joint DirecTV/DISH operator.
 

goaliebob99

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Im not buying what barons is trying to sell! At this point DIRECTV’s infrastructure is so integrated into AT&T’s infrastructure that the amount of work needed to re separate that would be enormous and expensive. I don’t see this happening at all!


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slice1900

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Consider the original source of this - an analyst from UBS. They're an investment bank, who make money off fees in large mergers and acquisitions. It is the job of their analysts to come up with scenarios like this hoping to drum up business.

It doesn't make sense in any way to combine Directv and Dish, there are no synergies to extract at this point because satellite TV won't be around long enough for Dish to convert their customers over to Directv's system (they'd want to do that even if they were the buyer, because Directv has more than twice as many satellite customers so it would be really stupid the other way around)

This stopped making sense about 10 years ago, and every year that goes by it becomes stupider to contemplate.
 

NashGuy

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Mar 24, 2009
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Nashville, TN USA
Im not buying what barons is trying to sell! At this point DIRECTV’s infrastructure is so integrated into AT&T’s infrastructure that the amount of work needed to re separate that would be enormous and expensive. I don’t see this happening at all!
Consider the original source of this - an analyst from UBS. They're an investment bank, who make money off fees in large mergers and acquisitions. It is the job of their analysts to come up with scenarios like this hoping to drum up business.

It doesn't make sense in any way to combine Directv and Dish, there are no synergies to extract at this point because satellite TV won't be around long enough for Dish to convert their customers over to Directv's system (they'd want to do that even if they were the buyer, because Directv has more than twice as many satellite customers so it would be really stupid the other way around)

This stopped making sense about 10 years ago, and every year that goes by it becomes stupider to contemplate.
As many do on these forums, you're focusing on the technology. The case for a merger between DTV and DISH has nothing really to do with how compatible or not their systems are. Has everything to do with removing your only direct competitor (leaving millions of consumers with no other choice for pay TV -- except Orby, LOL) and with scaling up your (otherwise dwindling) subscriber base to better position you when it's time to renegotiate those carriage contracts. Sirius and XM didn't merge because they were perfect technology matches. They merged because they were direct competitors and the market just wasn't big enough for both of them. Rather than trying to see which would bleed out first, they just asked Uncle Sam if they couldn't team up.

There are a few other efficiencies to be had in a DTV+DISH hookup, I guess: unified billing, unified team of installers and customer support, maybe standardizing on one set of STBs (e.g. everyone gets some variant of the Hopper, although boxes used with DTV dishes may have to have slightly different internals than ones used with DISH dishes). But those are minor considerations. It's mainly about achieving far greater price control and higher profit margins.

I don't think the government should allow it right now, frankly, because it would be a pretty anti-consumer move. And we're not yet at a point where either business looks close to non-viable. But things might look different in a few years and, honestly, I'm not sure how much confidence I have in the DOJ and FCC to put consumers' best interests above stockholders'.
 

CSM

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Aug 28, 2015
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As many do on these forums, you're focusing on the technology. The case for a merger between DTV and DISH has nothing really to do with how compatible or not their systems are. Has everything to do with removing your only direct competitor (leaving millions of consumers with no other choice for pay TV -- except Orby, LOL) and with scaling up your (otherwise dwindling) subscriber base to better position you when it's time to renegotiate those carriage contracts. Sirius and XM didn't merge because they were perfect technology matches. They merged because they were direct competitors and the market just wasn't big enough for both of them. Rather than trying to see which would bleed out first, they just asked Uncle Sam if they couldn't team up.

There are a few other efficiencies to be had in a DTV+DISH hookup, I guess: unified billing, unified team of installers and customer support, maybe standardizing on one set of STBs (e.g. everyone gets some variant of the Hopper, although boxes used with DTV dishes may have to have slightly different internals than ones used with DISH dishes). But those are minor considerations. It's mainly about achieving far greater price control and higher profit margins.

I don't think the government should allow it right now, frankly, because it would be a pretty anti-consumer move. And we're not yet at a point where either business looks close to non-viable. But things might look different in a few years and, honestly, I'm not sure how much confidence I have in the DOJ and FCC to put consumers' best interests above stockholders'.
That latest article I posted thought the government would allow it because of all the streaming services.
 

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