Stocks are a bit lower on Thursday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the broader S&P 500 (SNPINDEX:^GSPC) both down about 0.5% at 11:10 a.m. EDT. Market observers appear to be taking their cues from the German government bond market this morning; the eurozone's benchmark 10-year Bund has been on a wild ride after European Central Bank President Mario Draghi commented that investors "should get used to periods of higher volatility."
In company-specific news, The Wall Street Journal reported early this morning that pay-television provider DISH Network (NASDAQ:DISH) is in discussions to merge with wireless provider T-Mobile (NASDAQ:TMUS).
A bit of context for this news: May set a new high for monthly mergers and acquisitions activity, according to data provider Dealogic, exceeding the previous record set in May 2007 at the height of the credit-fueled leveraged buyout boom. Private equity firms aren't leading the charge in this cycle -- instead, the largest deals are "strategic" transactions (i.e., involving two companies tying up). On Monday, I noted that an "anxiety boom" was reshaping entire industries, specifically citing pharmaceuticals and semiconductors. The media and communications industries are also transforming, but this is being driven not from the top, but by a powerful change in customer habits.
While the strategic imperative for jumbo deals is too often weak or nonexistent, here it is very clear -- at least for DISH Network. The pay-television industry, in its present incarnation, is dying. Consumers are tiring of paying exorbitant monthly rates for bundled packages of channels, many of which they don't want. Meanwhile, new video streaming entrants, including Netflix, Amazon.com, and Hulu, have proved a different model exists, forcing the cable and satellite television providers to adapt or decline. (Personally, I gave up my cable subscription years ago and rely on the services mentioned above instead.)
The nation's second-largest wireless carrier, AT&T (NYSE:T), will soon complete its $49 billion acquisition of DISH competitor DIRECTV (NYSE:DTV.DL). Will a DISH/T-Mobile deal get done? As the Journal noted:
One significant uncertainty is [DISH CEO Charlie] Ergen, who has held talks with companies across the wireless and satellite industries in recent years without completing a major deal. Dish bid openly -- and unsuccessfully -- for wireless carriers Sprint Corp.and Clearwire Corp. two years ago and has earned a reputation as a deal maker who is tough to get to closing.
Nevertheless, as time -- and the number of potential targets -- runs down, pressure will increase on Ergen to secure a partner in order to implement a wireless strategy (DISH Network lost 79,000 customers last year). Although neither T-Mobile nor DISH has confirmed that talks are ongoing, the market appears to like the notion of this tie-up, with the stocks up 5% and 6%, respectively, at 11:10 a.m. EDT.