by VIK NAYYAR

 Corporate Headquarter:

2230 East Imperial Highway,

El Segundo, California, US

 

 

 

 

 

 

 

 

 

 

 

 

DirecTV provides television and audio services to 39 million subscribers through satellite transmissions. “Services include the equivalent of many local television stations, broadcast television networks, subscription television services, satellite radio services, and private video services. Subscribers have access to hundreds of channels. DirecTV competitors are cable television service and other satellite-based services”[5].

DirecTV’s history began in 1953 when Howard Hughes created Hughes Aircraft, which was sold to General Motors in 1985. GM merged it with Delco Electronics to form the Hughes Electronics Corporation. This corporation consisted of four smaller companies: Hughes Network Systems, Hughes Aircraft Company, Delco Electronics Company, and Hughes Space and Communications Company. Around the same time, Stanley E. Hubbard, who wanted to develop direct broadcast satellite service, started a company called United States Satellite Broadcasting (USSB). “USSB was awarded five frequencies by the FCC, at the coveted 101 degrees west satellite location. At the same time, Hughes Communications, Inc. was awarded 27 frequencies at the same 101-degree location” (TECH-FAQ)[6].  Over the next ten years, technological advances made it possible to build high-power satellites and the digital compression standards needed to send multiple digital television channels through a single satellite frequency. In 1990, Hughes Communications proposed a joint venture with both NBC and Cablevision, aimed at launching “Sky Power,” the first high-power digital television service. After both joint venture attempts failed, Hughes created DirecTV and arranged an agreement with USSB to build and launch the first high-power direct-broadcast satellite system. Partnered with Thomson Consumer Electronics, Hughes/DirecTV developed a digital satellite system capable of receiving 175 channels on a small 18-inch dish. Hughes was awarded the contract to build and launch the new satellites. USSB and DirecTV agreed the satellites would carry their two separate programming services and both companies launched their programming services in 1994. In 1998, DirecTV bought USSB for $1.3 billion and combined the two satellite services.In 1999, DirecTV bought PrimeStar, another competitor in the satellite television industry, for $1.8 billion. This dramatically increased DirecTV’s share of the U. S. satellite television market [7].

Headquarters:

Today, DirecTV, headquartered in El Segundo, California [7.1] has 27,000 employees. It is the second largest pay-TV provider in the United States. The largest is Comcast. In addition to 20 million US subscribers, “DIRECTV Latin America has 19 million customers through its subsidiaries and affiliated companies in Brazil, Mexico, Argentina, Venezuela, Colombia, and other Latin American countries” [8]. Consumers subscribe to various packages of DirecTV programming for a monthly fee and also have the option of ordering pay-per-view, video on demand events and movies. DirecTV’s broadcast center is located in Castle Rock, Colorado [8.1]. All DirecTV programming goes to Castle Rock, where it is digitized, compressed, encrypted, converted to a high frequency signal and amplified. It is then sent to uplink antennas aimed at one of several satellites in geostationary orbit, where transponders beam the signal back to earth over a wide area [9].

DEALS:

In May, 2014, AT&T [9.1] announced that it would purchase DirecTV.  The deal, approved by boards of both companies, is valued at $48.5 billion. Including assumed debt, the total purchase price is about $67.1 billion. The purpose of the deal is to increase AT&T’s market share in the pay-TV sector. AT&T’s current U-Verse has 5.7 million users in the U. S., while DirecTV has 20 million. The deal will also give AT&T access to Latin American markets, where DirecTV has 18 million subscribers. DirecTV would be able to offer its customers broadband internet service. AT&T’s CEO Randall Stephenson said “his company would move quickly after the transaction is closed to offer new products that bundle paid-TV content, broadband Internet and wireless service. These bundles will give customers a better alternative to cable TV by allowing them to get DirecTV’s 285 channels on mobile devices. Bundle packaging is what made competitor   Comcast [9.2] successful” [12].  The deal, initially expected to take about twelve months to complete, has been stalled by the Federal Communications Commission.

Legal Issues:

Comcast’s $45 billion bid for Time Warner Cable, announced in February, 2014, is one of the reasons for the FCC stall.  Federal regulators currently have both deals on hold due to concern over competition. Comcast and Time Warner Cable say they do not compete in the same markets as AT&T and DirecTV, but critics of the deal say that if Time Warner Cable and Comcast combine, “they will have too much power in the television industry. They would have vastly more power over negotiations with programmers, for instance. Consumer advocates fear the firms would be less inclined to improve customer service and make prices affordable” [13].  Although it is common for the FCC to stop the clock on merger reviews, two issues may be contributing to the current stall:  an FTC lawsuit against DirecTV, and AT&T’s past cooperation with the NSA. In March, 2015 the Federal Trade Commission filed a lawsuit charging DirecTV with deceptively advertising a discounted 12-month programming package that failed to disclose a required a two-year contract, a price increase up to $45 more per month in the second year, and early cancellation fees of up to $480 [14]. According to the FTC, DirecTV misled consumers and the FTC is seeking a monetary judgment that could be used to reimburse customers.  Also in March, 2015, the Minority Cellular Partners Coalition, 90 former business partners of AT&T, warned the FCC that AT&T had a poor record on privacy and the deal with DirecTV should be carefully scrutinized. The group accused AT&T of voluntarily handing over data to the National Security Agency after the September 11 terror attacks, thereby breaking the law and AT&T’s own company policy. “By so doing, AT&T knowingly committed egregious and continuing violations of the law”[15]. The coalition called for stronger privacy oversight if the merger is approved by the FCC and the Justice Department. According to Public Knowledge, a consumer advocacy group, privacy issues will worsen if the merger goes through and gives AT&T control of even more customer data. Nevertheless, Paul Gallant, a managing director at investment firm Guggenheim Partners and former legal adviser to the FCC, said privacy issues are unlikely to hold the merger back. According to Gallant, the main focus of regulators is how mergers affect competition and the AT&T – NSA issue will not hold the merger back [16].  Neither AT&T nor DirecTV is concerned about the FCC’s current suspension of their deal. DirecTV expects the review process to resume quickly and AT&T says it still expects to close the deal in 2015[17].

Financial Statistics:

DirecTV stock trades on the NASDAQ under the symbol “DTV.”  At this time, most Wall Street analysts are recommending a “Hold” on the stock.
DirecTV’s 2014 fourth quarter results were a bit higher than expected, so the hesitation to recommend “Buy” stems mainly from the pending outcome of the merger with ATT. According to DirecTV CEO Mike White, “Fourth quarter results, although marked by challenging macroeconomic conditions in Latin America and a conscious decision to reinvest in our U.S. business, capped off another strong year of operations for DirecTV” [19].  The company added 149,000 subscribers in the U.S. in the fourth quarter of 2014. Some of them came from Dish Network after Dish lost CNN and CBS for a short period of time. Other factors were improved retention practices and a new ad campaign in the fourth quarter.

For up-to-date stock information click here[20]

 

Sources:

1. DirecTV’s Logo: http://logos.wikia.com/wiki/DirecTV

2. Michael White Photo: http://www.directvpresscenter.com/executives/?p=2156

3. Pat Doyle Photo: http://investor.directv.com/corporate-governance/elected-officers/default.aspx

4. Joe Bosch Photo: http://investor.directv.com/corporate-governance/elected-officers/default.aspx

5. DirecTV “About Us”: http://www.directv.com/DTVAPP/content/about_us

6. TECH-FAQ: http://www.tech-faq.com/directv.html

7. TECH-FAQ: http://www.tech-faq.com/directv.html

7.1 Headquarters Location: https://www.google.com/maps/place/2230+E+Imperial+Hwy,+El+Segundo,+CA+90245/@33.9303243,-118.3860541,17z/data=!3m1!4b1!4m2!3m1!1s0x80c2b6c9fb6c7585:0xb02e52ec6e23b78e

8. Mannes’ Quote: https://books.google.com/books?id=OOUDAAAAMBAJ&pg=PA57&lpg=PA57&dq=compressed+Direct+Tv+signals+go+to+a+satellite&source=bl&ots=eoYXlxls2B&sig=sWV-b2L7-tTyc0M8bW87-xKbj-g&hl=en&sa=X&ei=coQsVd2IMse-ggSQtYTADw&ved=0CE0Q6AEwBA#v=onepage&q=compressed%20Direct%20Tv%20signals%20go%20to%20a%20satellite&f=false

8.1. Castle Rock: https://www.google.com/maps/place/Castle+Rock,+CO/@39.373538,-104.8409584,12z/data=!3m1!4b1!4m2!3m1!1s0x876c9705cf3ab447:0x61dc7a141b5c399a

9. Mannes’ Quote: https://books.google.com/books?id=OOUDAAAAMBAJ&pg=PA57&lpg=PA57&dq=compressed+Direct+Tv+signals+go+to+a+satellite&source=bl&ots=eoYXlxls2B&sig=sWV-b2L7-tTyc0M8bW87-xKbj-g&hl=en&sa=X&ei=coQsVd2IMse-ggSQtYTADw&ved=0CE0Q6AEwBA#v=onepage&q=compressed%20Direct%20Tv%20signals%20go%20to%20a%20satellite&f=false

9.1. AT&T Corporate Website: http://www.att.com

9.2. Comcast Corporate Website: http://www.comcast.com/cable-internet-packages.html?CMP=KNC-IQ_ID_64303809-VQ2-g-VQ3–VQ6-81855834448-VQ16-c-pkw-comcast-pmt-e&iq_id=64303809

10. Howard Hughes Photo: http://blog.solidsignal.com/content.php/2445-Who-is-Howard-Hughes-and-what-did-he-have-to-do-with-DIRECTV

11. DirecTV Headquarters: http://www.mymcmedia.org/in-praise-of-directv/

12. How The Proposed AT&T-DirecTV Merger Will Affect Consumers: http://www.ibtimes.com/how-proposed-att-directv-merger-will-affect-consumers-1586590

13. AT&T, DirecTV announce $49 billion merger: http://www.washingtonpost.com/business/technology/atandt-directv-announce-48-billion-merger/2014/05/18/62ffc980-dec1-11e3Kang, Cecelia.810f764fe508b82d_story.html

14. FTC Charges DIRECTV with Deceptively Advertising the Cost of Its Satellite Television Service: https://www.ftc.gov/news-events/press-releases/2015/03/ftc-charges-directv-deceptively-advertising-cost-its-satellite

15. AT&T’s Cozy History With the NSA Unlikely to Derail Proposed Merger: http://www.usnews.com/news/articles/2015/03/06/at-ts-cozy-nsa-history-unlikely-to-affect-directv-merger

16. AT&T’s Cozy History With the NSA Unlikely to Derail Proposed Merger: http://www.usnews.com/news/articles/2015/03/06/at-ts-cozy-nsa-history-unlikely-to-affect-directv-merger

17. AT&T, DirecTV announce $49 billion merger: http://www.washingtonpost.com/business/technology/atandt-directv-announce-48-billion-merger/2014/05/18/62ffc980-dec1-11e3Kang, Cecelia.810f764fe508b82d_story.html

18. DirecTV Stock: https://www.google.com/#q=directv+stock

19. Global Market Insight. Wall Street:  http://wallstreetpit.com/106981-directv-dtv-tops-4q-forecasts/

20. Yahoo Finance: DirecTV Stock: http://finance.yahoo.com/q?s=DTV