Bo: Here's what the market has to say about Primestar:
ING Barings: Hughes Acquisition Of PrimeStar Unlikely
Despite persistent rumors of a Hughes Electronics' takeover of
PrimeStar, some analysts remain unconvinced.
Noting the mid-power service's "excessive churn rate and high
debt load," ING Barings analyst Rob Kaimowitz suggests that,
"if there (is) any deal at all, we believe that there would
have to be some formula that is based on the number of
subscribers that ultimately do convert to DirecTV."
He went on to say:
*Although it's believed that EchoStar has also bid for
Primestar, Kaimowitz said he believes that it is likely
a ploy by Chairman Charlie Ergen to bid up the price.
*An ING analysis indicates that TSAT's Tempo satellites are
worth at most perhaps $250 million each (the in-orbit bird
at 119 has significant damage on its solar arrays, so ING
said this may be generous), and each subscriber is worth
"NO MORE" than $750 a piece. "As we have written many times
in the past, we think an acquisition of PrimeStar, without
significant concessions from existing bond holders and share
holders, is unlikely," he said.
*PrimeStar's debt, churn and cost of conversion to high
power makes an all out acquisition, at current levels,
prohibitively expensive. According to ING, with total
subscribers numbering 2.3 million, and debt at $1.7 billion,
debt per-sub would be $739. The estimated conversion cost
for each sub was estimated at around $500. When adding in
debt plus sub conversion figures, total per-sub costs are
at around $1,239.
"However, we would not believe a PrimeStar subscriber is
worth anything near $1,239 because of the company's 33
percent-plus churn rate," Kaimowitz said. "Excluding
acquisition costs, our models indicate a value closer
to $700-750." |
