How to Bet on A Dish and DirecTV Merger

NEW YORK (TheStreet) - The merger of satellite TV giants Dish Network (DISH) and DirecTV (DTV) would likely face more regulatory risks than Comcast's (CMCSA) recent $45 billion effort to buy Time Warner Cable (TWC). Still, there's a chance that Dish and DirecTV could decide the benefits of a marriage would outweigh the risk of going at it alone.

Bloomberg reported on Wednesday that Dish chairman Charlie Ergen recently approached DirecTV CEO Michael White about a possible merger. That interest comes over a decade after the Department of Justice blocked a $26 billion tie-up of the two satellite TV giants.

A possible new-found belief by Ergen that a merger is feasible makes sense in the context of a window of opportunity created in the shadow of Comcast and Time Warner Cable's merger efforts, and a web of consolidation that has run through the wireless business in the past 24 months.

It also indicates a quickly shifting environment for cable and satellite operators as consumers adopt new methods of viewing TV, sports and movie content. It was only a few years ago that Ergen said at a University of Colorado Law School presentation Dish's failed efforts to merge with DirecTV in the early 2000's could have destroyed the company.

Now, as Bloomberg reported, he appears to be testing the waters of a merger.

Ergen controls a significant chunk of Dish Network shares and has been lauded by investors for his savvy management of the company's purse strings. The Dish chairman was also early to spot a shift in communications habits in the U.S., buying up billions of dollars of wireless spectrum across the United States. Ergen stepped down from Dish's management ranks, in part, to help the company build up its wireless assets 

That experience now appears key to any possible merger effort between Dish and DirecTV. As analysts note, the synergies between Dish and DirecTV are immense, running as high as $30 billion in some models. A merger with DirecTV would also allow Ergen to finally deploy the billions he's spent on wireless spectrum, building out a nationwide wireless offering to bundle with satellite TV, a direct challenge to Verizon (VZ), AT&T (T) and Sprint (S).

Dish, after all, emerged as a wild-card in SoftBank's efforts to buy Sprint, and presented a $25 billion takeover plan for Sprint that would have created a lightly leveraged competitor to cable and wireless giants.

Immense synergy between Dish and DirecTV's current satellite TV offerings, and the emergence of a new nationwide broadband offering might present the perfect formula for a hard-fought victory.

"I have nothing to add other than it makes great sense!," Leon Cooperman, head of hedge fund Omega Advisors and a long-time Dish Networks shareholder said in an e-mail to TheStreet. Cooperman has been a strong supporter of Ergen, referring to the Dish chairman as a "genius" in previous interviews and a model steward of shareholder value.

Still, it wouldn't be surprising if Ergen and Dish step back from the ledge of a merger with DirecTV and pursue a different alternative, given the regulatory hurdles to a prospective deal. History has shown that, Ergen, a noted poker player, is ready to test many alternatives for Dish and has the confidence to move extremely quickly.

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