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AT&T may sell DirecTV stake

Illustration of a quarter as a satellite dish.

Illustration: Aïda Amer/Axios

Reports that AT&T is considering selling its 70% stake in DirecTV will likely reignite talks of a potential merger with satellite rival Dish Network.

Why it matters: With both companies hemorrhaging subscribers at an alarming rate, a combination may be the best path for survival.

Driving the news: Bloomberg reported Wednesday that AT&T could either sell, find a new investor or do a dividend recapitalization.

  • AT&T co-owns DirecTV with TPG as a part of a joint venture formed in 2021, which valued DirecTV at $16 billion at the time.
  • As part of the agreement, AT&T has an option to sell its stake after July 31, 2024, and can hold sale talks before that date.

The big picture: Dish chairman Charlie Ergen has long believed that a merger between the two was "inevitable."

  • The two were reportedly in talks earlier this year, but those talks stalled.
  • Both companies are struggling with their pay-TV businesses in terminal decline. Dish has been labeled a distressed security in equity and bond markets due to its heavy debt load as it builds out its 5G wireless business.
  • Dish's stock is down more than 66% year-over-year.
  • DirecTV lost 400,000 subscribers during the most recent quarter, while Dish shed 197,000. Since AT&T formed the JV with TPG, DirecTV has lost nearly 3 million subscribers.
  • A combination between DirecTV and Dish would immediately make it the top pay-TV provider — including Dish's Sling TV service, the combined company would have more than 21 million subs.

Be smart: A merger between the two was blocked by regulators back in 2002 over fears it would reduce choice for consumers.

  • Ergen doesn't think that would be the case this time, telling analysts last year: "In terms of a legal objection to a merger, that's been diminished by time and obviously [by] the degradation of the linear TV business."
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