A combination of these two companies makes sense to investors on paper and has been a possibility for more than two decades, stemming back to when a merger was first proposed and rejected by regulators in 2002.

The telecom giant AT&T and its joint venture partner TPG own DirecTV and could benefit from adding more subscribers to its platform to increase its negotiating power with program providers such as Disney.

Likewise, DISH is bleeding subscribers at a time when it needs cash to invest in its transition to a wireless network operator that can compete with the likes of AT&T, Verizon, and T-Mobile.

Talks are said to be in the early stages and may end without an agreement being reached, according to reports. But a potential deal would likely be welcomed by DISH investors if it came to fruition and gained regulatory approval, both of which remain big question marks.

DISH’s $1bn SUNs due 2028 saw the most gains rising by 11 points on Monday to a price of around 70. Likewise, its $1.5bn SUNs due 2029 rose by 9 points to a price of around 61.

These notes have traded at deeply distressed levels in the 40s and 50s for most of the year following EchoStar’sacquisition of DISH and the transfer of assets to a new subsidiary. Furthermore, creditor groups are forming to hold discussions with the company over how best to tackle upcoming November maturities.

Those notes in question — DISH’s $2bn 5.875% SUNs coming due this November — even rallied by around a point to above 98 cents on the dollar.

DISH’s three fastest rallying bonds following reports of a merger with DirecTV (via 9fin)

On the other hand, DirecTV bonds are trading down.

DirecTV has long been the higher-rated operator with Ba3/BB-/BB+ corporate family ratings compared with DISH’s Caa2/CC ratings. And DirecTV bondholders are less enthusiastic about taking on DISH’s problems.

DirecTV’s most recent bonds issued earlier this year — $750m 8.875% SSNs due 2030 — were indicated lower by about 1.5 points to a price below 99. Other notes were being quoted about half a point lower.

Long and winding road

This is just the latest chapter in a story that is already two decades in the making.

Investors said that while a merger would certainly be a positive for DISH bondholders, there are still huge doubts that it would pass regulatory scrutiny.

“This has literally been an on-again-off-again story my entire career,” one portfolio manager said. “It’s hard to imagine it wouldn’t be good for bonds but feels like it would be very difficult in the current regulatory environment.”

In terms of satellite TV operators, this merger would pretty clearly consolidate the market into just one major player, which is typically a red flag for anti-trust regulators. The companies could evoke the “failing firm” defense, but sources following the companies said this would be a high hurdle to clear.

However, the companies could also argue that the monopoly risks are lower in the TV industry when there are perhaps more options than ever to consume media.

Cable providers such as Comcast and Charter could be considered competitors, or streaming options such as YouTube TV and Hulu are more accessible than ever with home 5G connections and satellite internet connections through Starlink.

However, those alternatives to satellite TV may not be sufficient for a demographic in the US without access to reliable high-speed internet.

Sources have previously noted that the fate of the merger may also be determined by who is in the White House following this November’s election.

Because of this, sources said the bonds could see more volatility as both companies navigate the markets, the regulatory environment, and the political arena.

EchoStar/DISH and DirecTV did not respond to requests for comment.

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