Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

DIRECTV (DTV), DISH Network Corp (DISH): Should You Buy These Massive Merger Rumors?

The boutique firm Moffett Research upgraded shares of DIRECTV (NASDAQ:DTV) and DISH Network Corp (NASDAQ:DISH)s to “buy” on Thursday. The firm’s “buy” rating was not fundamental in nature, but rather based on the possibility of a merger. With that said, will this “merger” ever occur?


A Deal in the Making?

Moffett Research makes a compelling case for investing in the two largest satellite companies. Analyst Craig Moffet says that even after “pruning bad branches” from the two companies, the combined synergies from the deal would be “staggering.”

Moffett believes a DIRECTV (NASDAQ:DTV)/DISH Network Corp (NASDAQ:DISH) merger could represent $30-$40 billion in net present value, and is now possible thanks to Dish’s failed attempt to acquire Sprint and its decision to withdraw its bid from Clearwire.

For the last two years, whispers of a DIRECTV (NASDAQ:DTV)/DISH Network Corp (NASDAQ:DISH) merger have been consistent, as many believe the combined technologies could greatly impact its competitive advantage. The reason being technology, patents, and licensing agreements that these two companies have combined.

Currently, both companies pay for content, but a combination of the two companies would save a great deal on the content that both companies pay for the same channels, often creating bidding wars. DIRECTV (NASDAQ:DTV) is known for its cutting edge DVR technology and sports packages.

While DISH Network Corp (NASDAQ:DISH) has Blockbuster DVD rentals, a massive portfolio of streaming options, and has its spectrum approved for mobile, these small differences can create one great company combined, which would ultimately save on costs and increase margins (as noted by Moffett Research).

Using History as a Guide

Moffett has been ranked the #1 analyst in the U.S. Cable & Satellite sector for the last seven years, according to Institutional Investor Magazine. Therefore, he does have great knowledge of the space and we cannot discount his belief. With that said, I don’t see this merger happening, and for one reason: the FCC!

The Federal Communications Commission (FCC) must first approve any proposed deal, as their job is to determine the economic impact of such deals and its competitive effect on the market. Thus, to explain why this merger will not work, we can simply look back to the proposed acquisition of T-Mobile by AT&T Inc. (NYSE:T)

AT&T Inc. (NYSE:T) had attempted to purchase T-Mobile for $39 billion; a deal that would’ve created significant separation between it and Verizon as the number #1 and #2 U.S. carrier. The acquisition would have combined the #2 (AT&T Inc. (NYSE:T)) and #4 (T-Mobile) U.S. carriers.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.