Nabi Forecasts DBS Gains for 2004


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Supporting Founder
Sep 8, 2003
Las Vegas, Nevada
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In research released Friday, Marc Nabi of Merrill Lynch offered new subscriber guidance for satellite TV powerhouses DirecTV and EchoStar's DISH Network, saying the business still has an opportunity to take customers away from the wired business.

"We do not disagree that the cable industry will always have an advantage over the satellite and telecom industries because of its ability to provide an integrated bundled offer to consumers - video, high speed data and voice," Nabi said. "However, we do think that a reinvigorated Hughes management team and EchoStar's proactive entrepreneurial management can show positive operating momentum during the next several months."

Nabi forecasted that DirecTV could add about 950,000 subscribers in 2004, growing its subscriber base 9 percent year-over-year to 11.6 million. He also forecasted that DISH Network could add 1 million net subscriber additions in 2004.

The analyst said he expects the satellite TV penetration rate as a percent of total households to approach 27 percent at maturity, compared to about 20 percent today.

In one of his notes, Nabi resumed coverage of Hughes with a "buy" rating and established a $20 price objective.
From 20% to 27% is not much more of an allowance to penetration, thats allows for 3.5% for each company. I would have thought that the addition of locals would have helped the penetration get higher than this. Once the penetration reaches maturity Dish and Direct will have to worry about losing more subs than they gain, or having to gain enough subs to make up for those that churn and please their existing subs that they have now.

They will have to diversify by offering broadband and other services as well as offer more advantages such as better pricing and DVR's to more of its subs.
They (Dish at this time Direct as soon as D-7s goes up) are running out markets to launch. Dish is approaching 85% coverage of the population (top 100 market, Dish skipped a few of the top 100, they will probably fill them in one day). They are probably heading to 95%+ when they pick off the top 150 markets.

Think about it, when 85% of the population calls Dish right now they can answer yes we have your locals now or within a few weeks. By the end of next year they will probably be 95%, by mid 2005 when Dish's next spot beam goes up they will hit 100%.

It will become an all out battle with cable. HDTV, internet, VOD is how Cable is fighting back. Price and HDTV is really the only weapons that DBS has now. They might be able to do a VOD service with the new DVR boxes (they reserve some of the hard disk space download a bunch of PPV automatically and allow you to purchase will full DVR functionality).

The other advantage of cable is that they have the ability to show out of market TV stations. For example Dish just launched Sherman-Ada market. Ardmore, OK in the middle of the market has the local NBC and CBS, but they also have the ABC from Dallas, CBS, NBC, FOX and PBS from OKC. That is 5 out of market stations that Dish can only compete with 2 if you happen to be in a white area for FoX and ABC.
Dish Network should be allowed to broadcast any local stations that the cable company does in the same area that you live. This should be a law. Charlie should fight this. It is unfair for cable to be allowed to do this and satellite not be allowed to.

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