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Wall Street Eyes DirecTV's 2003


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#1 OFFLINE   Steve Mehs

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Posted 17 January 2003 - 04:37 AM

Those on Wall Street had different opinions on Hughes' fourth quarter and year-end results released earlier in the week.

Armand Musey, satellite analyst with Salomon Smith Barney, said Hughes completed 2002 "with some of the wind knocked out of DirecTV’s sails, but managed to deliver on most of its financial targets."

Hughes' DirecTV unit ended 2002 with growth (975,000 net additions) that was lower than management was forecasting earlier in the year (1 million to 1.2 million net adds), "which we believe reflects its failure to see the significance of allowing (EchoStar's) DISH to break into its formerly exclusive distribution channels," Musey said.

The most striking item to come out of Hughes’ conference call Wednesday was its outlook for 700,000 to 800,00 net additions for DirecTV in 2003, Musey said. "We acknowledge DirecTV has been hit hard by DISH Network’s entry into its distribution channels," he said. "However, we still believe DirecTV will capture a larger share" in 2003 and 2004, he said.

Another analyst, William Kidd of Lehman Brothers, said DirecTV's forecasted 2003 ARPU (average revenue per subscriber) growth appeared anemic at 1 percent. SAC (subscriber acquisition cost) is projected to rise 8 percent to 9 percent. And subscriber growth - at the gross level - also is expected to be flat to down year-over-year, he said.

"In some respects we are sympathetic to the company's plight," Kidd said. "We do not fault them for the increase in SAC, as it's terribly important that DBS operators remain competitive with cable, and increasingly that DirecTV remain competitive with EchoStar."

In order to achieve that competitiveness, money must be spent, Kidd said. That has been the trend in the business for several years, but 2003 may be unique in that it could the first time DirecTV's gross additions could be down despite of an increase in SAC.

"It's counterintuitive and altogether disconcerting that DirecTV finds itself in a position of having to hang more bait on the lure in the pond of prospective subscribers, but expects to catch less than it did," Kidd said.

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#2 OFFLINE   Ronmort

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Posted 17 January 2003 - 05:41 AM

What was exclusive to Directv? The only channels I can think of are the PPV channels which carry the NHL Center Ice and NBA League Pass? Am I missing something?

#3 OFFLINE   raj2001

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Posted 17 January 2003 - 09:28 AM

Originally posted by Ronmort
What was exclusive to Directv? The only channels I can think of are the PPV channels which carry the NHL Center Ice and NBA League Pass? Am I missing something?


No, they meant distribution channels, not programming - i.e. Radioshack, Wal-Mart.

#4 OFFLINE   Jacob S

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Posted 17 January 2003 - 11:09 AM

But Dish Network will also experience more churn because of their choice in where to sell the systems but still gain more subs. Piracy will also increase as a result just as it did with DirecTv when they went to these outlets.

#5 OFFLINE   Karl Foster

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Posted 17 January 2003 - 01:00 PM

Originally posted by Ronmort
What was exclusive to Directv? The only channels I can think of are the PPV channels which carry the NHL Center Ice and NBA League Pass? Am I missing something?


I know they meant distribution channels, but the big exclusives on Directv are NFL Sunday Ticket and MLB Extra Innings. Most other programming is duplicated by both services.
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