WHEN: Today, Tuesday, October 1, 2024
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of a CNBC interview with DIRECTV CEO Bill Morrow on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Tuesday, October 1. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2024/10/01/directv-ceo-on-dish-and-sling-tv-acquisition-from-echostar.html.
All references must be sourced to CNBC.
DAVID FABER: Joining me now to talk more about the other side of the deal and the state of the pay TV business is DIRECTV ‘s CEO, Bill Morrow. Bill, good to have you this morning. You know, I guess going to the heart of why you’re doing the deal, both companies’ subscriber roles have been declining at a fairly rapid rate, not unlike that of linear cable as well. Does putting them together help you stem those defections or is it simply a way to save money in the face of continued reductions in your subscriber roles?
BILL MORROW: Well, thanks, David. Actually, it’s a combination of a multiple of things. First and foremost, with all the competition that’s out there today, with the direct-to-consumer apps available across the United States, they can’t do what we actually have been trained to do over the last 25 years. And that is aggregate a whole slew of content where we are content agnostic, where we can actually provide a service that is independent of other businesses within our portfolio. And we believe that while there is good competition, it’s limited on addressing many of the consumer pain points that are out there. And we believe by putting these two companies together, it’ll give us, one, the influence that we need to kind of change the programmers and these carriage agreements, and two, to be able to invest in products and services that are aggregated in a way that the consumers are telling us that they need.
FABER: Right, which is something I guess you recently did with Disney after a somewhat brief outage there. Is that the kind of model you want to pursue with the other potential programmers?
MORROW: It is, but Disney only scratches the surface. If you think about it, David, we all want to be able to pick the kind of content that we want to watch, the genres, if you will, and we don’t want to pay for the other stuff. The days of old of having 250 channels that you have to pay for whether you watch or not are gone. And the carriage agreements that we have with the programmers need to evolve to support that. The technology that we’ve developed, the user interface that we’ve created, allows consumers to be able to pick the genre services or packs that they want, allows them to integrate a couple of the sPOD apps that they’re interested in, and we wrap a wonderful user interface to allow navigation to be easier, to allow search and recommendations to be easier. And equally as important, it’s one bill where we keep their costs down, and it’s exactly what the consumers are telling us that they want.
FABER: Right. You know, it’s funny. I mean, you’re giving reasons here in some ways why this would be pro-competitive, I guess. I didn’t miss that. But that said, I look back when the Department of Justice opposed these two companies coming together 23 years ago. Your subscriber roles were almost identical. It would have created a combination with, I think it’s roughly 18 million or so subscribers. That’s kind of where you’d be close to right now. Why is it so different now when it comes to the antitrust view of this deal?
MORROW: 23 years is a long time in our world, David, as you know. So the competition with the over-the-top services wasn’t there. The broadband rollout across the United States wasn’t there then. That has all changed. We’ve looked at data where we had a third party that said, when customers leave DIRECTV, where do they go? This third party also pulled the DISH data to see when they leave that company platform, where do they go? And even in the most remote areas of the United States, they aren’t going to each of us. They’re actually going to over-the-top services. So this is what we hope to be able to share with the FCC and the Department of Justice, that everybody’s going to benefit from this. That competition won’t be reduced because of those over-the-top services. And again, back to the influence that we need to be able to provide a different service that the direct-to-consumer applications cannot.
FABER: Right, as long as they have a good broadband connection, which gets me to Starlink. How big a competitor is that satellite-based service going to be for you? Is it already in rural areas, given it gives people the opportunity to have a broadband connection, which, to your point, allows them to decide how they want to deal with their video consumption?
MORROW: Well, and that’s what we want to be able to use Starlink in these remote areas to provide our over-the-top service. And by combining DISH and DIRECTV to have the influence to also change the way programming is, to where it’s smaller, thinner, more selective about what the consumers want. Again, you couple that with a couple of the direct-to-consumer apps, and it’s going to make the consumers happy. So we see a partnership with companies like Starlink.
FABER: I see. But, I mean, Bill, do you not make money then from selling people the DISH and that whole part of the business? I mean, are you really solely focused on sort of putting together the group of channels and being able to sell that as a service itself?
MORROW: Well, there’s a lot of customers out there today that enjoy their satellite service, whether it’s DIRECTV or DISH. But most of the growth, most of the people that are signing up for what we offer because they can’t get it with the direct-to-consumer apps, are people that want our over-the-top product, which we have. We have a DIRECTV over the internet, and that’s actually what we want to build on. By changing the programming agreements, those carriage agreements, like what we started with Disney, it’s going to give them the best of both worlds, and it will still be over the top for the new growth that we see here going into the future. What we just need to do is bring these two companies together. It’ll give us the efficiencies. It’ll give the ability to invest. And most importantly, it’ll give us the ability to influence the programmers to where we see this as complementary. David, and this is really an important point. This is not an either/or. In talking with many of the CEOs of the programmers out there, we see this as complementary. They want to be able to have a certain reach with their direct-to-consumer offering, and then what the consumer won’t go with is where we step in. And in a complementary way, we think we’re going to give consumers what we want. We think we’re going to be able to help the industry be healthier from a financial point of view, and we think that the programmers are going to go back to this partnership concept that actually helped them to get started in the beginning.
FABER: Right, and I’m looking here on your website at all of the different packages that are available, and obviously I would assume that will only continue. Going to cost you a lot of money, though. I mean, you’re taking on a good amount of debt here. You’re also buying out AT&T. Are you really going to have the additional capital needed that you just referenced to actually invest in this business, given how much you’re consuming to do these other things?
MORROW: Well, we have two things in our favor, David. First of all, we’ve kept our leverage ratio really low within DIRECTV. And the second thing is, through TPG, now that is 100 percent owner, and will be 100 percent owner of DIRECTV, they have the financing arm, Angelo Gordon. And so that’s where a lot of the money is going to be raised to be able to make sure that we have the deal construct with EchoStar to get the DBS business. And then even when we combine this, even with the loan that we’ll take to be able to help TPG buy AT&T, with the loan that we’re going to contribute to, to make this M&A deal successful, our leverage ratios will still be one of the best in the pay TV industry. And after 12 to 24 months, we’re going to be back down into a range that’s very close to the leverage ratio that we have today. So we have a very aggressive payoff plan to be able to give the bondholders, the new holders out there, the security that they need.
FABER: All right. And we’re going to be doing an interview when you’re going public at some point in the future then, I guess? Is that the potential exit?
MORROW: There’s all sorts of possibilities now, David. We just, right now, are focused on getting through these next steps.
FABER: All right, Bill, appreciate you taking the time. Thank you.
MORROW: Thank you.
For more information contact:
Jennifer Dauble
CNBC
t: 201.735.4721
m: 201.615.2787
Stephanie Hirlemann
CNBC
m: 201.397.2838
