Streaming and satellite: DirecTV pays $1 for Dish and Sling TV

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US groups are making a new attempt at a big wedding in the pay-TV business: DirecTV is to take over the operations of Dish and Sling TV from competitor Echostar. The purchase price is a symbolic dollar, plus the assumption of billions in debt. However, this will only work if a debt cut is successful first. At the same time, AT&T wants to sell its majority stake in DirecTV; and Echostar plans to issue new shares and bonds to raise billions for its 5G network.

Echostar shares lost almost an eighth of their market value on Monday after the plans were announced. AT&T shares also fell initially, but even managed to post a small gain at the close of trading. The transaction is complex (see below for details) and is not expected to be completed until the fourth quarter of 2025. There are also many chapters to the story, which would go beyond the scope of a news ticker. In short, DirecTV emerged from a General Motors (GM) subsidiary called Hughes Electronics and operates satellite TV and TV streaming.

Echostar goes back to a small distributor of hardware for satellite TV reception founded by Charles Ergen in 1980. From 1995, it became an operator of its own fleet of geostationary satellites for pay TV under the brand name Dish. Echostar also develops set-top boxes and offers Internet access via its satellites.

The history

In 2001, Echostar reached an agreement with Hughes Electronics to buy the company (including DirecTV). However, the US trade regulator FCC prevented the takeover due to competition concerns. This not only cost Echostar 600 million US dollars in compensation to Hughes Electronics, but also triggered two turbulent decades for both Echostar and DirecTV.

Echostar separated Dish from the group and took it public in 2008, only to buy it back in 2023. In between, Echostar acquired other satellite operators: Hughes Communications (inventor of the very small aperture terminals (VSAT) and also part of GM for some time), Terrestar Networks and DBSD. In 2020, when T-Mobile USA and Sprint merged, the network operators had to relinquish the Boost Mobile brand and its customers for competitive reasons. Echostar stepped in; since then, the company has been operating as a virtual mobile network operator (MVNO) and is now building a nationwide 5G mobile network based on Open RAN.

DirecTV has also been active as a satellite TV provider since the mid-1990s. After the failed sale to Echostar, News Corp took control. In 2015, AT&T bought DirecTV at a value of 48.5 billion dollars. Six years later, DirecTV became independent again, but remained 70 percent owned by AT&T. Investor TPG (formerly Texas Pacific Group) bought 30 percent.

AT&T sells DirecTV

Now AT&T and TPG have agreed that TPG will also take over the remaining 70 percent. This should bring AT&T a purchase price of 2 billion dollars next year. In addition, there will be distributions of 5.1 billion dollars by 2025 and another half a billion dollars in 2029, making a total of 7.6 billion dollars.

This is meagre in view of the original purchase price and shows that pay TV is in a deep crisis. Streaming providers have stolen the thunder from traditional satellite and cable packages with significantly lower prices and often no advertising. The tide is now turning: streaming providers are repeatedly cutting prices and selling advertising at the same time.

Echostar gets rid of the millstone

The crisis has not passed Echostar by either. The business unit with Dish (satellite TV) and Sling TV (streaming) has accumulated high debts, and interest rates are no longer unusually low. Bankruptcy can no longer be ruled out. The existing creditors are therefore expected to agree to a debt cut of at least 1.568 billion dollars, which 85% are said to have already done.

To refinance a bond maturing in November, TPG and its future subsidiary DirecTV are granting a loan of 2.5 billion dollars. In addition, they will take over further bonds with a total nominal value of 9.75 billion dollars. However, the creditors must accept that the term will be extended by several years and the nominal values will be reduced by up to 40 percent in exchange for a higher interest rate. If you want to know exactly, please consult the published table.

In total, Echostar can get rid of 11.7 billion dollars of debt and avoid 6.7 billion dollars of refinancing burden until 2026. In addition, Dish will relinquish all spectrum usage rights to Echostar. These measures put Echostar in a position to raise fresh money for the construction of its 5G network.

Echostar can take on new debt

Existing Echostar financiers, including company founder Ergen, subscribe to a new 5.1 billion dollar bond maturing in 2030, 100 million dollars of which is from Ergen. The now unencumbered frequency rights serve as collateral. In addition, 400 million dollars come from the sale of new shares to Ergen. There is also a low-interest and a non-interest-bearing Dish convertible bond that will not be redeemed by DirecTV. Echostar can extend their terms by four and five years respectively until 2030.

What is still missing for the big money round is that shareholder lawsuits are likely to fail, sufficient creditors agree and, above all, the US competition authorities do not put any obstacles in the way this time. The chances are better than in 2002, as the situation in satellite TV has changed significantly. The market is shrinking.

The parties involved are promising more attractive offers for end customers in the form of smaller program packages as a preventive measure. DirecTV therefore expects to be able to negotiate better conditions with Dish and Sling TV as a larger company when acquiring broadcasting rights for TV content. However, this did not necessarily mean that it would have to pass on such advantages to end customers.

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