Video services

DirecTV Could Win Big at AT&T

Analysts are already speculating that DirecTV Group Inc. (NYSE: DTV) could be the "big winner" after Dish Network LLC (Nasdaq: DISH) revealed in an 8-K filing Tuesday that AT&T Inc. (NYSE: T) will terminate its partnership with Charlie Ergen's direct broadcast satellite (DBS) service at the end of 2008. (See 8-K: AT&T Scraps Dish Deal.)

DirecTV "is now increasingly likely to supplant Dish as AT&T's DBS partner," Sanford C. Bernstein & Co. Inc. analyst Craig Moffett predicted in a note issued Tuesday afternoon. "AT&T has indicated that the termination is 'procedural' in nature. A six-month notice of termination was required under the contract in order to reopen renegotiations between Dish and AT&T, and presumably, DirecTV and AT&T as well."

With negotiation leverage clearly in hand, AT&T isn't closing the door on satellite TV. "We continue to discuss options with DISH," AT&T said in a statement.

AT&T is also pushing ahead aggressively with its own IPTV video service, U-verse. AT&T added 148,000 U-verse subs in the first quarter, giving it a total of 379,000. The telco anticipates signing up more than 1 million U-verse customers by the end of 2008. U-verse presently passes about 9 million homes, and AT&T expects to push that past 30 million by the end of 2010.

AT&T's decision to scuttle the Dish deal pours cold water on earlier speculation that it might strike a merger with Dish, but the telco's decision to scrap the current deal isn't a big surprise. Last month, Dish, in a different 8-K filing, disclosed that AT&T was requiring the DBS company to pay back a $500 million note, rather than convert the debt to equity. (See AT&T Breaking DISHes.)

But the possible long-term loss of an AT&T partnership "strikes a heavy blow to Dish Network, which is already suffering from a steep decline in net additions," Moffett added. Dish added 35,000 net new customers in the first quarter of 2008, off a staggering 89 percent from the prior year period. Dish ended the first quarter with 13.8 million subs.

AT&T has offered a Dish bundle since 2003. Moffett estimates that the deal contributes as much as 15 percent of the satco's gross additions, but news of a forthcoming end to the telco partnership comes as Dish's net-to-gross add ratio is well below the 15 percent mark. "As such, the loss of AT&T would very likely put Dish Network into negative subscriber growth territory in 2009," the analyst surmised.

Once the AT&T deal is done, Dish will be left with one major telco bundling partner: Embarq Corp. (NYSE: EQ). Dish also has a deal with CenturyLink Inc. (NYSE: CTL). (See CenturyTel, EchoStar Re-up.)

Dish shares were down 87 cents (2.99%) to $28.24 each in early trading Wednesday.

— Jeff Baumgartner, Site Editor, Cable Digital News

Jeff Baumgartner 12/5/2012 | 3:31:24 PM
re: DirecTV Could Win Big at AT&T This might not have much bearing on the longer-relatonship between AT&T and Dish Network, but the two agreed to extend their deal for another month -- through January 31, 2009.

According to the Dish 8-K filed Tuesday (Sept. 23):

On September 22, 2008, DISH Network L.L.C. ("DISH Network") and AT&T Inc. ("AT&T") agreed to a one month extension of the Commercial Agreement (the "Commercial Agreement"), dated as of July 20, 2003, as amended, between AT&T and DISH Network. The Commercial Agreement governs the commercial relationship between AT&T and DISH Network pursuant to which AT&T markets DISH Network programming services. As a result of the extension, the Commercial Agreement will terminate on January 31, 2009.

Jeff Baumgartner 12/5/2012 | 3:30:58 PM
re: DirecTV Could Win Big at AT&T And we have a long-term winner...AT&T


Jeff Baumgartner 12/5/2012 | 3:30:57 PM
re: DirecTV Could Win Big at AT&T make that long-term winner DirecTV....which, as expected, sealed a new co-marketing deal with AT&T
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