Citi sees potential satellite merger as positive catalyst for EchoStar

Citi believes AT&T (T) will look to maximize value from its DirecTV ownership after press reports indicated that DirecTV, which is 70% owned by AT&T, and Dish are in discussions to merge their satellite video businesses. The firm’s initial reaction “is that there is still a high degree of industrial logic” to merge DirecTV and Dish as they “try to navigate the secular erosion of linear video subscriptions and improve scale to offer a streaming alternative.” Also, there may be an alternative scenario for Dish to use spectrum as currency to acquire AT&T’s stake in the DirecTV business that could create an accretive financial scenario for EchoStar (SATS) equity holders, the analyst tells investors in a research note. Citi views a potential satellite video merger as a potentially positive catalyst for Neutral-rated EchoStar and a potential incremental positive for Buy-rated AT&T.