Sorry I haven't been posting, but my opinion hasn't changed nor the ultimate value (or sell level) of $10. That was a great analysis of the potential of the Primestar conversion to high power. On a cash flow basis, Primestar and the C-band business are huge. Primestar still has not taken delivery of Tempo 1 from Loral. Can you say refund! As many here know, there have been some fireworks lately and launch slots are hard to come buy. Tempo 2 could be sold and suddenly you make a lot of debt disappear. Nobody is going to get excited about the big dish business on its own, but without the debt load and with focus, it is worth more than the 3 to 4 range.
A deal will happen. That is the bottom line. Charlie is on the wittness list for McCain's DBS local signal hearings next week. Crybaby Charlie will plead the case that could benefit all DBS players. Primestar, USSB and DTV don't agree with Charlie's local delivery strategy. Why put so much expensive and vulnerable hardware in space to deliver free channels, especially when those signals go to high definition?
This has been Political from the start. The legal basis for denying this merger is laughable. This is about pressure, comprimise, positioning and competitive advantage. Both DTV and Echo have benefited in 1998 because the consumer walks into a store and has two choices for DBS instead of three. The third would have boasted a strong brand name, an agressive pricing stucture and the #1 JD Power customer satisfaction ranking (remember the #2 reason people leave cable for DBS, #1 more channels and PPV, #2 hate cable service).
Charlie has used the DOJ to gain critical mass without a third competitor in cables most vulnerable year (no commercial digital roll out and congressional tounge lashing on pricing).
Primestar has a short term benefit that the others do not. If the multiple space events (solar storms, Leonids meteors, etc) have a damaging effect on the satellite infrastructure, the bulk of the Primestar subs will still be on the GE bird. Primestar could easily move their service to several other birds in the area without ahving to reposition each home dish. DTV is most vulnerable to a failure along with USSB. The effect could be negative for Charlie, but he has a lot of capacity in the sky. His problem, if in-orbit failures increase, coupled with the increasingly high risk of launch failure, Echostars in-orbit insurance costs could skyrocket over the next 12 to 18 months. With their vast satellite infrastructure, their cash flow would be very vulnerable to these increases.
Primestar for the pop to $10, then I say get out of the way of this industry, top to bottom. Iridium is a great short here. The satellite industry problems have just begun. They will be great buys sometime in 2000. |
