DirecTv buying assets of Pegasus.

[Richard King]

http://biz.yahoo.com/bw/040802/25355_1.html

Aug. 2, 2004--The DIRECTV Group, Inc. (NYSE: DTV - News) today announced an agreement with Pegasus Satellite Television, Inc., and related entities (Pegasus) for DIRECTV to purchase the primary direct broadcast satellite assets of Pegasus, including rights to all DIRECTV subscribers activated through Pegasus....

[gor88]

...and there was massive cheering throughout the land!!!! :hurah: :joy: :righton: :D

[Mark Holtz]

"We are now your DBS Provider. Would you like a DirecTiVo?"

[jdspencer]

The question I have to ask. Will DirecTV need to raise rates to cover this? I can't believe that increasing their subscriber base with Pegasus customers will pay for this acquisition.

[Richard King]

Since they have been paying Pegasus a percentage of income from each customer in their territories each month and they will no longer have to pay this, they already have a built in price increase.

[MarkA]

No, I doubt Pegasus customers are financially worth this much to DirecTV, but eliminating Pegasus will make DirecTV much more popular in former Pegasus territory, and it will make them look better as it's more of a national price thing. It helps their image more than it directly helps their bottom line.

[cnsf]

What does this really mean? Are they picking up satellites? More bandwidth? Or are they just buying a customer base?

[MarkA]

They are buying customers and the ability to market in former Pegasus areas without harassment.

[beasst37799]

:hurah: Basicly it means that pegasucks is no more .Also means those people in pegasus territory are not directtv customers and able to partake in any customer offers for hardware, programming, discounts. :hurah:

[Mike123abc]

Ouch this is nearly a billion dollars($938m) to make Pegasus go away! This is more than the DIRECTV/Echostar breakup fee (600m).

[dswallow]

$938,000,000 / 1.5 million customers = $625 / customer

I don't know if the programming costs paid by NRTC/Pegasus to DirecTV for each customer have ever been disclosed, but presumably it amounts to some difference from "retail" rates. It's only a matter of time before that $625 / customer is recouped. And in the meantime, DirecTV can market nationwide without the annoyance of a class of potential customers not being eligible for advertised promotions.

[danacc]

$938,000,000 / 1.5 million customers = $625 / customer

I don't know if the programming costs paid by NRTC/Pegasus to DirecTV for each customer have ever been disclosed, but presumably it amounts to some difference from "retail" rates. It's only a matter of time before that $625 / customer is recouped. And in the meantime, DirecTV can market nationwide without the annoyance of a class of potential customers not being eligible for advertised promotions.


When the NRTC and DirecTV terminated their distribution agreement, DirecTV offered to pay Pegaus $675/subscriber if they agreed by June 30 to transfer them in an orderly fashion. Pegasus actively let the deal expire. (The total amount based on the March 31 subscriber base was $750 Million.) DirecTV also agreed to pay other NRTC members $875-$1050 per subscriber if they wanted to sell their contracts rights to DirecTV by June 30. See http://biz.yahoo.com/e/040602/dtv8-k.html for details.

I am personally doing the happy dance - can't wait to be a DirecTV customer directly! I had good experiences with other NRTC service providers, but Pegasus is a different story.

[dswallow]

Actually I've since seen more info about Pegasus subscriber numbers... according to their web site, Pegasus claims "over 1.1 million" so let's say...

$938,000,000 / 1.15 million customers = $815.65 / customer

Still, just a matter of time before the deal pays for itself.

[Chris Blount]

Here is what SkyReport had this morning:

After two months of legal wrangling in Maine federal courts, and after nearly five years of overall litigation between the sides, Pegasus and DirecTV agreed to end their skirmish Monday in a deal that will allow the satellite TV service to obtain Pegasus' subscribers in rural areas.

DirecTV said it will pay $875 million in cash, subject to certain adjustments, for Pegasus' DBS assets, including subscribers acquired through Pegasus' National Rural Telecommunications Cooperative affiliates. The payment reflects the dismissal of all claims between the parties, including a $63 million judgment entered in May in favor of DirecTV against Pegasus, the satellite TV company said.

Taking into account the judgment, the aggregate price is about $938 million.

Chase Carey, president and CEO of DirecTV, said, "This agreement gives DirecTV a true ability to reach every home in America. DirecTV will have unencumbered access to an additional 10 million households and will be able to offer consumers in those rural markets the full benefits of DirecTV programming, pricing and service."

Carey said the number of DirecTV subscribers in rural areas has declined during the past few years, "and this will enable us to reverse that trend and grow our subscriber base in these areas going forward." He added, "This transaction also has significant financial benefits including significant increased short-term cash flow and long-term value from both increased subscribers and cash flow."

Pegasus CEO Marshall Pagon said the deal with DirecTV will allow for a quick resolution of Pegasus Satellite Television's case in Maine bankruptcy court. "Most importantly, these agreements assure that Pegasus Satellite Television's over 1 million subscribers throughout the U.S. will continue to receive uninterrupted delivery of DirecTV programming and that the sale to DirecTV will be managed smoothly and without disruption of their satellite service," Pagon added.

Pagon also thanked employees and management for their hard work. "In little over 10 years, and in defiance of widespread skepticism that satellite television could ever successfully compete with cable, they built a sound and successful business serving over 1 million rural subscribers in 41 states," he said.

The NRTC said it was happy DirecTV and Pegasus came to a deal. This was the last step in finalizing the agreement between NRTC and DirecTV that will terminate their joint DBS sales effort - which was first announced June 1 - and ends all litigation among the parties, the cooperative said.

Said NRTC President and CEO Bob Phillips. "Every one of our DBS members has chosen to quantify the great value in the businesses they've built over the last decade by accepting this deal, and the vast majority of them have also decided to continue on as retailers and services of DirecTV to our subscribers."

The June 1 agreement ends the original NRTC/DirecTV contract, and compensates NRTC DBS members for ending their exclusive territorial rights for selling the satellite TV service, while allowing them to continue to sell DirecTV through different options. Pegasus faced an Aug. 31 deadline for termination of the original NRTC/DirecTV DBS sales deal.

In addition to the DirecTV deal, Pegasus and a committee of unsecured creditors working on Pegasus Satellite's bankruptcy reached an agreement on the sale of TV stations owned by Pegasus Satellite to Pegasus Communications, subject to higher and better offers. The sale of the satellite TV assets and settlement with DirecTV as well as the sale of the TV stations are subject to bankruptcy court approval and applicable antitrust filings and approvals.

http://www.skyreport.com (Used with permission)

[Skip Towne]

Woo Hoo!!

[BabaLouie]

For all of you who are so all-fired happy about this, you can be pretty sure that Directv will soon be raising your rates. . .

[gor88]

not necessarily. Remember that DirecTV will make additional money off these subscribers, since they own them now. Over the course of a year, they will make a considerable amount back. Also, they will gain subscribers in some former Pegasus areas that have no service or want to switch from E*.

Overall, I don't think they will need to raise rates. The cost for acquiring additional customers will pay off in a couple of years. I'll also bet that they have been planning this acquisition and probably accounted for it in the last increase.

They can't go up too much, because Dish Network prices are comparable. A rise in rates makes Dish a more sensible choice and Rupert and the gang know it.

[SnowFade]

Also, I think most of the people who are all-fired happy have been paying the "licensing fee" that Pegasus inflicted on them...even in the event that D* raises rates, those people won't realize much (if any) increase. And as a former resident of Pegasus Purgatory, I'd be happy to pay an extra dollar a month just for the satisfaction of seeing them gone.

[THX]

What is going to happen to all of Pegasus' satellites?

I'm wondering if the upcoming HD announcement from Directv is in direct relation to the extra bandwidth that Directv will have because of the acquisition of their satellites as well.

[Mark Holtz]

Nothing with happen to Pegasus satellites because there are no Pegasus satellites. It was DirecTV service provided exclusively with a royalty fee in certain "remote" areas of the country.