Wall Street sell-side analysts seemed to be unsurprised by AT&T’s decision to pick DirecTV as its video marketing partner for its version of the ‘triple play’ package, in regions where it hasn’t built out its U-verse digital service.
The final decision had seemed obvious to analysts after DISH said earlier this month that AT&T would extend its five-year relationship by just one month to Jan 31.
But what does it mean for the independent DISH and its maverick founder/CEO Charlie Ergen (pictured), with the No. 2 U.S. satellite TV provider already struggling with customer losses in a tough economy?
Here’s what a few analysts say:
Craig Moffett, Sanford Bernstein.
The announcement is a clear negative for Dish Network, and a major win for DirecTV. As a result, we now expect Dish Network to post a sizable (400,000) subscriber loss for full year 2009. We had previously expected approximately flat net growth. For DirecTV, we now expect a gain of 800Kwhere previously we had expected approximately half that.
Ingrid Chung, Goldman Sachs:
While the loss of the AT&T contract should have a positive impact on 2009 free cash flow for DISH (due to subscriber acquisition costs), DISH will be somewhat strapped to do any investing in its own business for the next several months. DISH has $1 billion in debt maturities coming due Oct 1 and has no revolver in place. While DISH can pay down this debt (and $500 million for the AT&T convert) through cash and investments – $1.8 billion at 6/30/08 – DISH will have limited capital to invest in its mobile video initiative or build out its direct sales channel.