Weak Housing Market Slows DBS-Subscriber Growth

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The weak housing market is slowing down growth for video subscribers, which could impact the results and forecasts that DirecTV and EchoStar Communications report next week, a Wall Street analyst said Friday.

Sanford C. Bernstein analyst Craig Moffett offered his analysis of the impact of the U.S. housing situation on growth of the nation’s two largest direct-broadcast satellite providers.

“The weak housing market puts satellite-subscriber forecasts at risk,” Moffett wrote in a report. “According to U.S. government statistics, there were 24% fewer new homes added to the housing supply in this year than last, and -- after accounting for cable net losses and [Verizon Communications'] net gain -- there were about 35% fewer subscribers, in aggregate, available to DirecTV and EchoStar.”

The consensus projections are that next week, DBS' net additions will be 19% year-to-year. EchoStar reports its second-quarter earnings next Wednesday, while DirecTV does its next Thursday.

“After netting the basic-subscriber losses at cable with FiOS’ net additions, we arrived at a pool of just 27,000 subscribers available for DBS to ‘poach’ from cable this quarter,” Moffett wrote. “Any growth beyond this comes from expansion of the housing supply, and conversion from the over-the-air broadcast TV. Notwithstanding solid subscriber growth for DBS from the telcos, eking out net subscriber growth won’t be easy, in our view.”

He said the consensus estimates are that DirecTV will add 130,000 subscribers and EchoStar 250,000, or 380,000 total in the quarter

“With just 27,000 subscribers lost by cable [after accounting for Verizon], that leaves 350,000 expected net additions unaccounted for,” Moffett wrote.

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