One day after DirecTV and Dish Network announced their long-anticipated merger, a significant credit rating agency expressed concerns about the rationale behind the deal. On Tuesday, S&P Global placed DirecTV on negative credit watch, highlighting the challenges posed by the rapidly declining linear TV industry.
The agency noted that while cost efficiencies were expected from the merger, they might not be sufficient to offset the projected declines. “Credit metrics will deteriorate with higher debt,” S&P stated, referencing the roughly $10 billion in debt that DirecTV will assume from Dish DBS, which is estimated at about 3.5 times EBITDA.
The merger, revealed on September 30, involves DirecTV’s owner, AT&T, selling its remaining 70 percent stake to private equity firm TPG.
This will lead to a merger with Dish Network, owned by Echostar, for a nominal price of $1 plus the assumption of debt, with the deal expected to close in the fourth quarter of 2025. Although the companies project about $1 billion in annual cost efficiencies, S&P warned that with traditional linear TV subscriptions declining from a peak of 88 percent in 2010 to nearly 50 percent today, DirecTV experienced a 15 percent year-over-year subscriber decline in Q2 2024.
Additionally, the credit agency raised concerns about potential customer churn during the transition to new plans, suggesting that the expected synergies from the merger might carry greater execution risks than anticipated.
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