DirecTV Faces Potential Satellite Delay

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Technical problems experienced with a similar satellite may force DirecTV Inc. to delay the launch of its "DirecTV 7S" bird -- a move that could give rival direct-broadcast satellite service provider EchoStar Communications Corp. a competitive leg up in launching local-to-local service in several key markets.

In a research report, Lehman Bros. Inc. cable and satellite analyst Vijay Jayant said problems have developed recently with the solar array of a satellite launched Jan. 10 (Telstar14/Estrella do Sul-1) and manufactured by Loral Space and Communications Ltd., the maker of DirecTV 7S.

According to Jayant’s report, a faulty solar array reduces the satellite’s power and its useful life.

DirecTV spokesman Robert Mercer said the DBS giant expects to meet its launch deadline.

"At this point, we are still scheduled for launch in the mid- to late first quarter," Mercer said. "The launch schedule and the date for [DirecTV 7S] will be confirmed once the cause of the anomaly is understood."

Mercer added that it is standard practice to take extra care in making sure that problems that develop on one type of satellite don’t affect similar satellites. "We’ll see what happens from what they learn from the anomaly," he said.

But Jayant said that because it takes between four and six weeks to ship a satellite to the launch site and to prepare it for launch, unless Loral clears up the anomaly in the next two weeks, DirecTV would not be able to launch the bird by its first-quarter deadline.

The 7S satellite -- scheduled to occupy the 119 degrees west longitude orbital spot -- is crucial for DirecTV in that it would expand its local-to-local service by 60 markets (40 new and 20 existing) covering an additional 14.1 million households, Jayant wrote.

It would also allow DirecTV to move the satellite currently in the 119-degree orbital slot to 72.5 degrees west longitude (pending Federal Communications Commission approval), opening up another 18 markets for local-to-local service.

The threat to subscriber growth lies in the fact that EchoStar has recently begun local-to-local service in eight of those proposed DirecTV markets, representing about 2 million homes.

"The longer the delay by DirecTV 7S, the more entrenched EchoStar could become in these markets," Jayant wrote.

He added that while the delay could impact short-term subscriber growth, it should have no effect on DirecTV’s long-term plans.

Shares of DirecTV parent Hughes Electronics Corp. appeared to be unaffected -- the stock was up 16 cents each to $16.90 per share in 4 p.m. trading Monday.

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