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DirecTV's Gain Could Result in Dish Losses

If things go as one analyst sees them, U.S. cable operators should enjoy seeing Dish Network LLC (Nasdaq: DISH) twist in the wind a bit after AT&T Inc. (NYSE: T) opted to go with DirecTV Group Inc. (NYSE: DTV) as its exclusive, long-term satellite TV partner.

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

opticalwatcher 12/5/2012 | 3:30:49 PM
re: DirecTV's Gain Could Result in Dish Losses " AT&T... will use the new bundle DirecTV in all areas yet-unreached by AT&T's U-verse platform. "

To me this says it all. I don't know what DirecTV or Dish stand to gain with a deal with AT&T. As they expand their U-verse platform, they'll convert their customers from satellite. For either company it is a short term customer-losing deal with their biggest competitor.

I've never been able to find these AT&T bundles on their website anyway. Both companies do a much better job with direct-sales.
whyiswhy 12/5/2012 | 3:30:48 PM
re: DirecTV's Gain Could Result in Dish Losses NOT! It's anti-competitive. Bad for consumer. FCC should stop it.

Not holding breath for anything like that in this administration.
DCITDave 12/5/2012 | 3:30:48 PM
re: DirecTV's Gain Could Result in Dish Losses If I were DISH, I might be somewhat relieved that now I don't have to hold back from bashing the telcos and their inferior TV channel chocies, HD options, and customer service. Does anyone else think this could be a positive?
paolo.franzoi 12/5/2012 | 3:30:47 PM
re: DirecTV's Gain Could Result in Dish Losses 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.

http://www.att.com/gen/general...

This is the offering with DISH today. It is called Homezone and is available everywhere in the fSBC footprint (not sure about fBLS).

I actually think it is a better offer than U-verse but that is just me.

seven
Jeff Baumgartner 12/5/2012 | 3:30:47 PM
re: DirecTV's Gain Could Result in Dish Losses But Sirius and XM passed regulatory muster, albeit with some "open" device concessions. If Dish and DirecTV did come together someday, somehow, I think they'd find themselves on the hook for an tru2way/OpenCable-like, separable security provision that would require them to open up the set-top/receiver environment. I'm sure DirecTV would just love that. The cable industry has found it to be such a pleasure in terms of both technology and politics. JB
Jeff Baumgartner 12/5/2012 | 3:30:46 PM
re: DirecTV's Gain Could Result in Dish Losses
That's true. A combination of Dish and DirecTV would create an integration nightmare...from OSS and billing to the satellites and the receivers. Not to mention the type of customer each service tends to attract. But if dealing with ATT is a headache unto itself, perhaps it should be viewed as Neutral to Dish...but investors aren't seeing it that way yet. Dish shares are down 14% at last check.
gbmorrison 12/5/2012 | 3:30:46 PM
re: DirecTV's Gain Could Result in Dish Losses I suppose it could be but DISH still has a lot of challenges, the 'good' customers who autopay on time and never jump ship are in those telco bundle households.... With the weak consumer especially within DISH's customer profile (ESL, urban renters, rural areas) they have to be facing some write offs not seen in their numbers yet. They also can't market around the infuriating weather- and line of sight interruption-related outages. Still the loss of AT&T is not a negative, I bet dealing with them ate up any gain they could have seen, it's just not a positive in my view.
paolo.franzoi 12/5/2012 | 3:30:46 PM
re: DirecTV's Gain Could Result in Dish Losses 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.

http://www.att.com/gen/general...

This is the offering with DISH today. It is called Homezone and is available everywhere in the fSBC footprint (not sure about fBLS).

I actually think it is a better offer than U-verse but that is just me.

seven
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