Will DISH Network Corp. (DISH) Be Swallowed Whole by DIRECTV (DTV)?

Good, bad, indifferent?
Some of the benefits to the proposed company, and hopefully its stock, would be the typical increased operating efficiencies and scale. Marketing spend could be reduced and cutthroat pricing may be alleviated, though the company would still need to stay competitive with cable and streaming options.

But the real benefits of this merger are long-term implications. DISH Network Corp. (NASDAQ:DISH) Chairman Charlie Ergen mentioned that the power in this business currently lies with content providers over distributors. This leaves the satellite and cable companies in a difficult position — a mature market with commodity like properties facing fierce competition from the infinite ability of the Internet. Even DIRECTV (NASDAQ:DTV), a company I have been a long time fan of, doesn’t have the exposure it needs to this disruptive force to remain competitive over the long term.

The immediate winners of the merger would be DISH shareholders, who would probably see a sharp premium to the current stock price. Macquarie analysts think DIRECTV would pay as much as $50  per share for DISH Network Corp. (NASDAQ:DISH), compared with today’s price of less than $35. DIRECTV (NASDAQ:DTV) shareholders may have to wait much longer for their own benefits.

While this proposed merger may be the best for the businesses involved, I would prefer to own cash-flow-winning DIRECTV today and for a few more years, without DISH.

The article Will DISH Be Swallowed Whole by DIRECTV? originally appeared on Fool.com and is written by Michael Lewis.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com and Netflix.

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