NEW YORK, Sept 30 (Reuters) - DirecTV on Monday agreed

to buy EchoStar's ( SATS ) satellite television business that

includes Dish TV, capping decades of on-and-off talks to create

one of the nation's largest pay TV distributors with a combined

20 million subscribers.

The transaction comes at a time when satellite TV services

DirecTV and Dish are hemorrhaging market share to competitors

like Netflix ( NFLX ) and Amazon's ( AMZN ) Prime Video, which have

benefited from changing consumer habits and the rising

popularity of streamed video.

DirecTV CEO Bill Morrow told Reuters the combined pay TV

company would have the clout to negotiate smaller programming

packages tailored to consumers' interests.

It also plans to offer an improved viewer experience that

makes it easier for subscribers to find their favorite shows -

whether on a traditional TV channel or via streaming - and

manage their subscriptions from one place.

"We believe that consumers don't want to be the aggregators

- or at least a majority of consumers in the marketplace would

not prefer to have to go out and manage all these multiple

accounts of those direct-to-consumer SVOD services," Morrow said

in an interview, using the industry term for streaming, or

subscription video-on-demand.

As part of the two-step transaction, DirecTV will pay $1 to

buy the pay TV business called Dish DBS that includes Dish and

Sling TV, while agreeing to assume about $9.75 billion of Dish's

debt, the companies said in a statement. Dish and DirecTV are

launching an exchange offer at a discounted rate for the debt to

help extend the maturities.

For the deal to go through, Dish DBS debtholders will have

to agree to take a haircut on the debt by about $1.57 billion.

With the exchange offer, Dish is attempting to convince its

bondholders to become holders in the merged entity.

The deal will provide a crucial lifeline to EchoStar ( SATS ), which

was co-founded by telecommunications entrepreneur Charlie Ergen

and is currently saddled with more than $20 billion in debt.

EchoStar ( SATS ) will receive $2.5 billion of financing from buyout firm

TPG's credit unit Angelo Gordon and DirecTV to help pay off

Dish's $2 billion bond that is due in November.

EchoStar ( SATS ) said the deal will help cut its total consolidated

debt by $11.7 billion and reduce its refinancing needs through

2026 by $6.7 billion.

The deal also provides a much-needed exit to AT&T ( T ), which is

selling its 70% stake in DirecTV to TPG for $7.6 billion. In

2021, AT&T ( T ) had signed a joint-venture agreement with TPG, in

which the private equity firm contributed about $1.8 billion in

cash in exchange for a 30% stake in DirecTV, which was valued at

about $16 billion at the time. AT&T ( T ) had agreed not to sell its

stake in DirecTV for a three-year period, which expired on July

31.

AT&T ( T ) has been faced with declining distributions from the

DirecTV business for several years. For the year ended Dec. 31,

distributions from DirecTV came in at $2.04 billion, compared

with $2.65 billion a year earlier.

A merger between DirecTV and Dish is likely to test the

appetite of regulators to allow for consolidation in the

television industry, although the media landscape has been

transformed dramatically since the two sides first attempted a

merger in 2002 that was nixed by the Federal Communications

Commission and the U.S. Department of Justice.

"We believe that the time is right in terms of the multitude

of competition that exists out there that is not going to change

with the combination of Dish and DirecTV," Morrow said.

ON AGAIN, OFF AGAIN

DirecTV and Dish have held on-and-off talks over the years.

Reuters reported earlier in September that DirecTV and Dish

Networks had resumed merger talks.

The two pay-TV operators, which are faced with a

rapidly-eroding subscriber base, are betting that a combination

will help them compete better against pay-TV rivals such as

Comcast's ( CMCSA ) Xfinity, Charter Communications' ( CHTR )

Spectrum brand, and YouTube TV and enhance their ability to

negotiate with programmers.

For Englewood, Colorado-based Dish, the deal would allow the

company to focus all of their investments on building out their

5G wireless network. Last year, Ergen, who co-founded both Dish

and EchoStar ( SATS ), struck a deal to merge the two companies.

DirecTV said it expects that the tie-up with Dish has the

potential to generate cost synergies of at least $1 billion

every year.

Morrow said the Dish-DirecTV combination would also give

Ergen a boost in creating the country's fourth largest wireless

competitor. The deal is expected to close in the fourth quarter

of 2025, subject to regulatory approvals.

DirecTV, which had a subscriber base exceeding 15 million

when it agreed to the deal with TPG in 2021, now has a little

than more than 11 million customers.

In its most recent quarterly report, EchoStar ( SATS ) said its net

pay-TV subscribers declined by 104,000. The total number of Dish

TV subscribers stood at about 6.1 million.

Investment bank PJT Partners advised DirecTV on the deal,

while Barclays advised TPG. JPMorgan advised Dish, while Bank of

America, Evercore, LionTree and Morgan Stanley also advised

DirecTV and TPG.