The big merger news of Thursday is the Comcast Corp. (NASDAQ: CMCSA) acquisition of Time Warner Cable Inc. (NYSE: TWC). What is interesting is that this will create buzz out there again about the old pesky discussions that satellite providers may finally merge as well. Rumors have floated of the possibility of a merger between DirecTV (NASDAQ: DTV) and DISH Network Corp. (NASDAQ: DISH) on and off for some time.
The question is whether a combined satellite TV monopoly is really a monopoly in a climate of cable and cord-cutters. Standard & Poor’s discussed this back in October with a formal report. S&P said:
After more than a decade of speculation, rumors of a merger between major U.S. satellite TV providers DIRECTV and DISH Network Corp. have once again intensified with the companies’ recent open discussions of the possibility. The Federal Communications Commission (FCC) and Department of Justice (DOJ) blocked the companies’ attempt to merge in 2002 because of anti-trust concerns, many of which still exist.
S&P’s report pointed out in October that the U.S. paid-TV market strains to add video subscribers, programming costs continue to rise and DISH struggles to define its wireless strategy. These are very different than when the idea was around back in 2002. S&P even said that it had received many inquiries from investors regarding how the credit ratings would be affected by a potential combination of the two.
Again, is this a monopoly under the new competition for your eyeballs coming from so many different angles? Telecom providers offer fiber and cable TV competition. There is a full lineup of free and subscriber services online. And there is still the good old cable TV company.
So, how many competitors do there really need to be in the pay-TV market? This is a question that must be asked. Perhaps the public will want to know just how profitable companies have to be allowed to get as well.
We ask again, is it a coincidence that the primary directv-dish URL is already owned by DirecTV?
It remains up for debate whether a combined DirecTV-DISH will be considered enough of a monopoly that a merger would be blocked by the Justice Department or the FCC. Still, this could be encouraged if the NewCo provider were willing to adopt an a la carte menu that some members in Congress would like to see from the cable companies.
DirecTV (NASDAQ: DTV) is worth some $37.3 billion and Dish Network Corp. (NASDAQ: DISH) is worth $26.3 billion in market cap. It is time to start putting numbers together again on whether a satellite merger would be worth pursuing.
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