A report from Standard & Poors Market Intelligence (S&P) by Sarah Barry-James suggests that the potential for some sort of ‘merger’ between AT&T’s DirecTV and Charlie Ergen’s Dish Network poses risks.
Ergen is on the record as saying that a combination of the two DTH pay-TV giants is “inevitable.” However, S&P reminds readers that Constantine Cannon, a legal firm which specializes in antitrust litigation, stated that much has changed in the video market since 2002 when federal regulators said “no” to a previous merger scheme between DirecTV and Dish.
Constantine Cannon suggests that regulators would still likely rule a merger out. The lawyers say that there are millions of Americans who remain unserved by cable and for whom satellite video is their only payTV option. Under Section 7 of the Clayton Act, any merger that is likely to substantially lessen competition “in any section of the country” is anti-competitive and can thus be blocked.
The S&P article admits that finding a precise number of homes unserved by cable is difficult but depends on the various sources, which suggest that some 90 percent of US homes now have high-speed internet available — that leaves a market of 10 percent without cable service.
There’s another key element in any decision to permit a monopoly to be created, and it assumes the two players seeking to merge are near “death’s door” and in a state of near bankruptcy. While DirecTV is not in the rosiest of health, it is far from bankrupt — same with Ergen.
However, there are some precedents, not the least of which is the merger between Sirius and XM Radio back in 2008. That merger was a 17 month roller coaster for the pair with no guarantee that the authorities would allow the merger. Perhaps that’s the sort of timetable AT&T (and Ergen) might now be seeking…
Earlier this week, Giles Thorne, a media and telecoms analyst at investment bank Jefferies, gave Eutelsat a set of rosy expectations and a target share price of 18 euros. A similar examination of prospects for satellite operator SES does not deliver the same optimistic forecasts…
Indeed, the bank’s summary is pretty miserable, and despite a ‘Buy’ rating, cautions investors that SES stock is “going to remain depressed until visibility is given into how SES keeps it leverage below 3.3x over the next two years.” But then Thorne appears even more critical, saying, “and management credibly ends the downgrade cycle.”
The background to the bank’s downbeat report is that it expects SES Full Year 2020 to fall by a worrying 9.1 percent (to 1.88 billion euros) and a tumbling Video divisional revenue fall of 7.8 percent when compared with the company’s previous model.
The bank confirms its new financial Model expects the FCC’s C-band payment receipts will come in as guided: the first tranche of $0.98 billion to be received in Q1/22 and the second tranche of $2.99 billion to be received in Q1/24.
Jefferies issues a new target ‘base case’ share price of just 14 euros. Over the past 52 week,s SES’s share price has fluctuated widely between 18.12 and a ‘low’ of 4.87 euros. Shares were trading up on September 3 at 6.20 euros (up 3.85 percent on their September 2nd position).
Jefferies upside price target is much higher at 20 euros and assumes a strong take-up of capacity especially in emerging markets. The upside target also anticipates an earlier “expected normalization” of US government demand, while enterprise usage declines moderate quicker than expected – which all satellite operators hope for.
But there’s also black reading for its downside scenario, where the price target is a miserable 5 euros per share. This worst-case position talks of Video revenues going into structural decline. Jefferies is also anxious about the risk of the US dollar depreciating against the euro, as well as the FCC delaying the important C-band spectrum windfall payments.
News stories authored by journalist Chris Forrester,
who posts for the Advanced Television infosite and is also a
Senior Contributor for Satnews Publishers.
