With all due respect, is anybody really surprised that the merger didn't go as planned? For right or wrong, the government has had a hard on for John Malone since about 1991, and this is just another demonstration of it.
Rupert Murdoch has proven that he is not infallible earlier. If he is playing hardball now, it is only because he got so far behind the 8-ball when he squared off with Charlie Ergen - first when he bought the 110 deg slot (which could have been Primestar's but was taken from them buy the gov't; that should have been an indication to Primestar of things to come) and then when he tried to merge with DISH. That's why we are in 4Q98 and News has the most expensive DBS slot in history and no way of offering service before 2000.
On October 6, I predicted that a deal could be reached that would lift the price of TSATA from 1 to 3. It could still happen. My personal opinion (I am not a broker) would be not to sell, since any news would be upside, and the collapse of the deal by no means indicates that they will discontinue service (at least not in the forseeable future). News Corp may still make a deal, with some requirement that will sufficiently abase Ted Turner to please Murdoch. Remember, Ted was ultimately outvoted when it came to inviting Rupert in the first place.
In the meantime, I would say the best play on the US DBS market would be to buy DISH, especially the bonds. DISH is a pure DBS play, unlike GMH, where DIRECTV is just something that pulls down the earnings of a larger company. I recommend the bonds because I believe Charlie Ergen is more interested in growing the company than operating at a profit, although DISH could be profitable before long if it wanted to. It is just that debt is king, and the new debt he takes on (he will generate lots of it) will be subordinate to the existing serior secured notes.
Ironically, Ergen may well be a dark horse suitor for Primestar. It would certainly pass muster with the government as a use of DBS to directly attack cable. He's probably sitting back and saying "let's see: $250 per box times 2 million subs, we do the upgrades in 18 months and I'll be bigger than DIRECTV..."
I don't mean to upset anybody with these comments - this is just my personal view of the industry. My advice is to FASTEN YOUR SAFETY BELTS, because you're going for a ride...
Regards,
NOEL |
