A DBS Merger? Don't Count on It

CASPER

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A DBS Merger? Don't Count on It

Now that XM and Sirius have what they need from regulators to merge operations, speculation surfaced about the next potential big deal in satellite circles: A combination of DBS giants.

While the talk was irresistible for some, folks on Wall Street said don't count on a DIRECTV/DISH transaction.

"We believe it would be a mistake to assume that the XM/Sirius merger makes a DIRECTV/DISH merger any more feasible in Washington. The regulatory issues in the two mergers are entirely different," said Craig Moffett of Bernstein Research.

Both DIRECTV and DISH attempted to combine operations in 2002, but were thwarted in their attempts by regulators who argued that a merger would lead to a single dominant video provider in rural areas.

"Nothing in six years has changed," Moffett said. " The telcos' video offerings have arguably added to competition in metro areas, but the telcos have not built video facilities in rural America, nor do they plan to."

Analysts at Stifel Nicolaus agreed with the sentiment. "We think the market for multichannel video services has not changed in rural America - a key problem for the earlier merger effort - and there are a number of differences between the multichannel video market and the mobile audio market," they said.

"We therefore believe that the chances of a DBS merger being approved are not much better today than they were in 2002."
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