DISH Network Chair: Merger with DirecTV Likely to Happen

DISH Network Chairman Charlie Ergen says his company is likely to merge with rival DirecTV.
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DISH Network (DISH) - Get Report Chairman and Co-Founder Charlie Ergen said on Wednesday that his company was likely to merge with rival DirecTV "because the growth in TV is not coming from linear."

Ergen made his comments during a conference call to discuss quarterly earnings.

The Englewood, Colo., company reported net income of $389 million, or 69 cents a share, up from $337 million, or 64 cents, in the year-earlier quarter. Analysts had expected profit of 59 cents a share.

Revenue totaled $3.24 billion, down 2.1% from $3.31 billion a year earlier but still ahead of Wall Street's estimate of $3.15 billion.

Net pay-TV subscribers dropped 194,000 in the quarter to about 12 million, an improvement over the year-earlier net decrease of 334,000. Average revenue per user rose to $87.02 from $85.55.

For the year, DISH reported 2019 total revenue of $12.81 billion, compared with $13.62 billion in 2018.

Dish shares have wavered in trading on Wednesday. At last check they were off 0.3% to $41.18.

This is a challenging time for satellite TV. According to the Nielsen Total Audience Report, consumers in over-the-top-capable homes, where content is delivered via an internet connection, were spending nearly 19% of their TV time streaming content during the fourth quarter. That was up from 10% in an early 2018 report.

Last September, Ergen speculated about a merger on stage at the Goldman Sachs Communacopia, saying that "there is certainly synergy and economics in that.” Dish held negotiations to combine with DirecTV in 2014, only to lose out to AT&T (T) - Get Report.

On Wednesday, Ergen acknowledged potential regulatory challenges to a merger, but said it would make sense “because you can’t swim upstream."

Dish also has a major cellular project. A court recently cleared T-Mobile  (TMUS) - Get Report and Sprint  (S) - Get Report to combine. When those two companies sought regulatory clearance for their merger, they agreed to enable Dish to become a new fourth nationwide cellular carrier behind AT&T  (T) - Get Report Verizon  (VZ) - Get Report and the combined T-Mobile-Sprint.