Analyst: AT&T Plan To Stop Selling DirecTV Service “Puzzling”
Moffet Questions Telco’ Decision To Reconsider Reseller Relationship After 2008
By Linda Moss -- Multichannel News, 12/12/2007 2:54:00 AM
A Wall Street analyst Wednesday called AT&T’s decision to stop reselling DirecTV service in the first quarter – with plans to later re-evaluate that deal and one with EchoStar Communications – “puzzling” and “peculiar.”
Sanford C. Bernstein analyst Craig Moffett issued his report a day after AT&T announced its decision regarding DirecTV during an analysts’ meeting.
“In a puzzling announcement yesterday, AT&T indicated that it would stop selling DirecTV service in its BellSouth region in the first quarter,” Moffett said. “But AT&T left the door open to revisit the decision at the end of 2008.”|
AT&T group president of telecom operations John Stankey was the official who said the telco would stop reselling DirecTV service early next year, and that it was “evaluating” its deal with EchoStar with the expectation of making a decision about which satellite operator to continue partnering with by the end of next year.
AT&T inherited its DirecTV deal when it purchased BellSouth last year, and the phone company’s agreement to offer EchoStar’s Dish Network subscriptions extends through the end of 2008.
“The suggestion that AT&T may reconsider their decision at the end of 2008 is a peculiar one, given the requirements of re-training sales personnel on the new platform, integrating billing systems in the BellSouth territory, and beginning the process of branding and marketing the new EchoStar-based bundle for the next nine months,” Moffett said.
“Reversing course [again] in less than a year would carry significant costs for AT&T and must be deemed unlikely,” the analyst wrote in his report. “In any case, as noted previously, by then the relevant portion of the footprint [not covered by U-Verse] will be far smaller, and the decision will be significantly less critical.”
Moffett said that AT&T’s decision is a blow to DirecTV, the nation’s largest satellite provider.
“As we observed in June, the loss of AT&T as a distribution partner poses a significant threat to DirecTV's subscriber growth in 2008,” he wrote. “At the time we published our report, AT&T accounted for an estimated 15.2% of DirecTV's gross additions, and fully 58% of net subscriber growth at the time.”
But Moffett said that there may be “a silver lining” for DirecTV.
“It may be in the expansion of AT&T's U-Verse footprint to 30 million homes passed by the end of 2010, as announced yesterday, AT&T's evident commitment to U-Verse makes clearer than ever the fact that, in most of AT&T's footprint, the company won't be distributing satellite for long anyway,” Moffett wrote. “Reliance on AT&T as adistributor - at a time when AT&T is rapidly changing stripes and becoming acompetitor instead - is therefore problematic, at best.”
DirecTV downplayed the development, issuing the following statement: "We believe AT&T’s decision will have minimal impact on our business in that we have a number of initiatives in place to provide incentives to energize dealers in the region and we will step up our direct sales efforts."
But the satellite leader also didn't want to close the door on reconnecting with AT&T.
"In the meantime, we believe we still have an opportunity to be partners with AT&T after its agreement with Dish Network expires, given the strength of our brand, our high-quality customer base, and the fact that we’ve added more customers in the smaller Bell South territories than Dish Network has added in the much larger AT&T territories," the company said.
Recent published reports have said AT&T was considering buying either EchoStar or DirecTV, though some analysts have expressed doubt about such a deal.
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