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TSATA |
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Direct TV and Echostar have seen their stock prices fly this year as digital broadcast systems (DBS) providers are seeing a surge in demand. TSATA has not participated in this run. Unlike Direct TV or Echostar who provide high power service (18 inch dish), TSATA uses a bigger dish (29 inches) for their medium power service. Even so, they have over 3 million subscribers and have the JD Power #1 ranking.
TCI Satellite has been rolled into PRIMESTAR. They own 37% of the new entity along with Time Warner (30%) and the rest going to Cox, Comcast, GE etc. The key is to merge with AskyB, the News Corp./MCI venture that holds the DBS high power orbital slot at 110 degrees(paid US government over 600 million in auction)which covers the entire United States. The deal will also bring two new state of the art Satellites to Primestar. They will then have the ability to compete directly against Echostar and Direct TV in a matter of 1 to 3 months in the small dish, high power DBS market.
The problem is the US Department of Justice and the FCC. They are holding up the approval because they have anti-competition fears. Primestar is owned by cable companies and DBS is the competition to cable. Many in Congress had been banking on DBS to create competition to cable and bring down rates. That has not happened. Economics and other factors have made DBS players mostly going after those not served or served well by cable. The smart money is betting that the FCC and DOJ put their blessing on this deal. Although there will be many concessions and guidlines, it seems almost impossible for them not to. Wall Street is standing by, waiting to upgrade the stock to a buy from a hold as soon as they get the approval. Stock has traded between 6 and 8 so far this year. Approval will equal 10 to 12. Stock could climb to 15 by year end and still lag valuations of Echostar (much smaller). Decision should be out before the end of June. Good luck.
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