Now that the duopoly in satellite radio is about to get regulatory approval for a merger, Wall Street is pondering whether the satellite-TV duopoly of Dish Network and DirecTV might someday combine, too.
Sanford C. Bernstein senior analyst Craig Moffett thinks the XM Satellite Radio-Sirius Satellite Radio merger -- which is expected to get approval with significant conditions attached -- is not a precedent for satellite TV, despite a buzz on Wall Street to the contrary.
“We believe it would be a mistake to assume that the XMSR/SIRI merger makes a DTV/DISH merger any more feasible in Washington,” Moffett wrote in a note to investors, naming the companies by their stock-ticker symbols. “The regulatory issues … are entirely different.”
Moffett said the criteria used in considering XM-Sirius was a broad definition of the audio-services market, which not only embraced terrestrial radio, but also portable music devices such as iPods. In such a big pie, satellite radio is a relatively small piece and, thus, regulators deem the merger as not anticompetitive.
In 2002, both the Department of Justice and Federal Communications Commission opposed a proposed DirecTV-Dish merger based on the conclusion that satellite TV is a monopoly in rural America, where fixed-wire cable service is not widely available. That narrow definition of the marketplace made DirecTV and Dish big fish in a small fishbowl.
“Nothing in six years has changed,” Moffett wrote. “The telcos’ video offerings [Verizon Communications’ FiOS TV and AT&T’s U-verse TV] have arguably added to competition in metro areas, but the telcos have not built video facilities in rural America, nor do they plan to. In rural America, a merger would still be two-to-one. Two-to-one mergers are unlawful under U.S. antitrust law.”
Moffett added that XM’s and Sirius’ concessions to cap satellite-radio prices are common in merger applications, and satellite TV making price concessions would not be sufficient to gain approvals.
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