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How a Merger Could Benefit Both AT&T and Dish Network

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The merger of AT&T’s and Dish’s satellite units

AT&T (T) and Dish Network (DISH) are reportedly looking to explore options to combine their satellite-TV businesses amid intense competition from online streaming rivals and a continued decline in pay-TV subscribers. According to a Bloomberg report, the merger between AT&T’s DIRECTV and Dish Network would be beneficial for both companies.

DIRECTV and Dish Network have lost almost 2.75 million subscribers in 2018.

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Likely benefits of the merger

AT&T’s spin-off of its DIRECTV satellite TV business and its alliance with Dish Network could help it reduce its debt burden and focus on its upcoming streaming service. Notably, AT&T’s WarnerMedia is launching its online streaming product in late 2019 at a price of ~$16–$17 per month.

According to UBS analyst John Hodulik, AT&T might keep a minority stake in the merged satellite TV business and could retain some of its cash flow, as reported by Bloomberg. Hodulik also believes that AT&T’s divestment of DIRECTV could boost its stock, as it’s facing substantial subscriber losses. In the first quarter, AT&T lost 544,000 US pay-TV customers, ending up with 22.4 million pay-TV customers. Hodulik expects the company to see 2.8 million pay-TV subscriber losses in 2019.

Dish Network has also been struggling to retain its pay-TV subscriber base for the past four years due to cord cutting. The acquisition of AT&T’s DIRECTV unit could make Dish Network the largest US pay-TV service provider with ~29 million subscribers. The deal would also allow the cable company to lower its programming costs.

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