UBS: AT&T Should Spin DirecTV To DISH

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In the U.S., one-time competitors XM Satellite Radio and Sirius Satellite Radio eventually merged to create a singular source of commercial-free subscription-based audio programming choices ranging from Howard Stern to vintage Howard Jones songs on First Wave.


Now, one analyst is suggesting the nation’s two direct broadcast satellite companies follow their lead.

The call for AT&T to spin-off DirecTV — a move that would allow it to merge with DISH Network — came from UBS Telecom and Cable Analyst John Hodulik. 

In a note, Hodulik believes such a transaction would be a “strong catalyst” for lagging AT&T shares.

His suggestion alone pushed AT&T to a fresh year-to-date high of $32.31 in early trading Friday on Wall Street.

Trading as “T” on the NYSE, AT&T is a fairly stable stock with little fluctuation. This also means there’s little growth for the issue, which has been between $28 and $34 over the last 12 months.

In a five-year trend, a high of $43.29 was seen in July 2016; it was a post-Great Recession high for T. The stock’s five-year low, however, came in December.

For Hodulik, DirecTV is the “weakest piece in the AT&T puzzle,” noting that some 2.8 million subscriber losses are expected in 2019.

There’s only one logical buyer.

DISH, Hodulik says, has “substantial energies” due to the similarities between the services, and it would provide benefits from operational and satellite consolidation.

A potential tie-up of DISH and DirecTV could monetize DISH’s 700 MHz spectrum holdings, too, he notes, while cash flow from the DBS side of the combined business could allow Dish to focus on wireless services.

AT&T purchased DirecTV for $49 million in 2015, merging it into its existing U-Verse platform.

Would a merger of DirecTV and DISH pass muster with federal regulators? Yes, he believes, thanks to the proliferation of online video competitors.

And, a T Mobile US/Sprint merger approval would only solidify a DirecTV/DISH merger — now the second most-rumored deal of 2019, behind the expected reunification of Viacom and CBS Corp.

As of 10:20am Eastern on Friday, DISH shares were off 10 cents to $36.08.

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