New York -- Wall Street's public support of the
direct-broadcast satellite industry at the semiannual SkyFORUM conference here last week
appeared to resonate with investors, who drove DBS-stock prices higher.
EchoStar Communications Corp. -- a favorite among the eight
analysts on a Wall Street panel at SkyFORUM last Tuesday -- has seen its stock price set
new highs almost daily for the past two weeks, soaring past $100 per share by midday last
That's more than five times what the stock sold for
last fall. And at least one analyst believes that it could double again within the next
EchoStar chairman and CEO Charlie Ergen insisted at the
conference that he's not looking to sell the company. But he said he believes that
the nationwide video service will be of increasing interest to telephone companies and
other telecommunications ventures.
"We're the right management team to run the
company now, while we're on a growth cycle," he added.
Analysts credited operating performance, rather than buyout
rumors, for EchoStar's recent rise. Subscriber growth has been exceptional for both
EchoStar and DirecTV Inc. in recent months.
DirecTV added 120,000 customers last month, marking its
best March to date and up 60 percent over March 1998.
The promise of local-to-local legislation and new
interactive technologies should also help EchoStar and DirecTV parent Hughes Electronics
Corp., analysts said.
But consolidation forces probably helped to lift Pegasus
Communications Corp., a DirecTV reseller, to a 52-week high of $40.50 per share during the
week, up 45 percent from $28 March 31.
"The momentum of DBS stocks in general has to do with
consolidation," said Vijay Jayant, managing director at Bear Stearns & Co.
Analysts think that DirecTV and EchoStar will end up dividing the DBS market, taking out
DirecTV is expected to close on its deals to purchase U.S.
Satellite Broadcasting and the assets of PrimeStar Inc. within the next few months. And
EchoStar shareholders are likely to vote at their annual meeting next week to approve the
company's deal to buy News Corp.'s DBS assets.
Both the PrimeStar and News Corp. deals still require
Federal Communications Commission approval.
DirecTV president Eddy Hartenstein said April 30 was the
end date for the PrimeStar transaction, and he expects PrimeStar to settle with its
bondholders in time to meet that date.
Hartenstein added that DirecTV would not pony up additional
funding to help PrimeStar sweeten the pot for the bondholders.
Sources said PrimeStar's owners have proposed paying
bondholders roughly 80 cents on the dollar to buy back their bonds, up from 67 cents in
earlier tender offers.
Ergen said last Tuesday that EchoStar had not yet sold back
its bonds to PrimeStar, but he expects a bondholder decision to materialize soon. "We
have our motives for buying PrimeStar bonds," he added.
Some DBS analysts speculated that Ergen will try to force
DirecTV into swapping transponders at 119 degrees west longitude, where EchoStar operates
its core Dish Network service, for spectrum at 110 degrees, which is closer to
DirecTV's current service at 101 degrees.
Both Hartenstein and Ergen denied that the companies are
currently in talks over such a swap, but they would not rule out future talks.
"We'd probably prefer to get regulatory approvals" for the license transfer
at 119 and 110 first, Hartenstein said.
Wall Street analysts who supported DBS also expressed
optimism last week about the cable industry. "Investing in both cable and DBS can
make sense," said Tom Eagan, vice president of equity research at PaineWebber Inc.
Lou Kerner, an analyst and vice president at Goldman Sachs
& Co., said that in order to compete with cable in the future, DBS must partner with
telephone companies to offer bundled packages of voice, video and data.
DirecTV is already partnering with several regional Bell
operating companies to co-market phone and video service. Hartenstein said the company is
also in discussions with its telco partners about offering packages that include
high-speed Internet access through DSL (digital subscriber line).
If AT&T Corp. is successful in bundling phone, Internet
and video, "that bundling concept will force the rest of the world to compete,
because it will be popular with consumers," Ergen said. Customers don't care
whether all of the services are offered over the same plant, he added.
In the short term, EchoStar will offer Internet service via
push technologies such as Microsoft Corp.'s WebTV Networks. In the longer term, the
company is likely to use two-way Ka-band satellite or wireless cable technology, Ergen