DirecTV's Gain Could Result in Dish Losses
With AT&T out of the picture starting in February 2009, Dish is not only at risk of losing a heap of subscribers, but it likely will have to meet the challenges of an ultra-competitive video market all by its lonesome, according to Sanford C. Bernstein & Co. Inc. analyst Craig Moffett.
To get you up to speed: After market close on Friday (Sept. 26), AT&T, as expected, reached a deal to co-market and resell DirecTV services throughout its footprint after Jan. 31, 2009 -- right after AT&T's present agreement with Dish comes to an end. (See DirecTV Wins AT&T Deal and DirecTV Could Win Big at AT&T.)
AT&T has offered a Dish bundle since 2003. AT&T, which had at one time resold DirecTV in the old BellSouth territories, will use the new bundle DirecTV in all areas yet-unreached by AT&T's U-verse platform.
To put the situation in bottom line perspective, AT&T's "distribution flip flop" could send hundreds of thousands of subscribers who otherwise would have gone with Dish as part of an AT&T bundle to DirecTV, Moffett said in a research note issued Monday morning.
Now the analyst expects DirecTV to add 800,000 subs next year, up from an earlier forecast of about half that. Moffett, who suggests Dish has attributed roughly 15 percent of its gross additions to the AT&T distribution channel, also expects Dish to lose about 400,000 subs for all of 2009. In August, Dish reported a dubious first for a U.S. satellite TV operator -- that it had lost 25,000 subs in the second quarter, trimming its total to 13.79 million. (See Dish Thrown for a Loss .)
Once the AT&T arrangement ends, Embarq Corp. (NYSE: EQ) will be Dish's largest telco bundling partner. CenturyLink Inc. (NYSE: CTL) also resells Dish services. Verizon Communications Inc. (NYSE: VZ) and Qwest Communications International Inc. (NYSE: Q) are still in DirecTV's camp.
True to form, Dish downplayed the new deal between AT&T and DirecTV. "We have enjoyed a good partnership with AT&T over the past several years. We look forward to a healthy competition with their U-verse product and DirecTV," Dish said in a statement issued Friday. It did not provide any revised guidance in the wake of Friday's news.
No marriage in the making?
Moffett also suggested that the end of Dish's deal with AT&T will also spell the end to rumors that the two companies will merge. Last week, Liberty Media Corp. (NYSE: LMC) Chairman John Malone likewise threw more cold water on the possibility that DirecTV and Dish could come together and create a satellite TV behemoth with 30.8 million subscribers combined. (See AT&T Breaking DISHes.)
"Dish Network faces going it alone," noted Moffett, who lowered his price target on Dish to $23, and boosted it for DirecTV to $36 per share.
Shares in DirecTV were up 29 cents (1.09%) to $28.84 per share in early trading Monday. Dish stock was down $1.88 (7.66%) to $22.67 per share.
— Jeff Baumgartner, Site Editor, Cable Digital News