DISH

The big news coming from the direct-to-home sector that sent Wall Street analysts buzzing was the announced restructuring of the deal between Echostar Communications Corp. and SBC Communications.

SBC currently resells Echostar’s Dish Network direct-to-home satellite television service, but the arrangement has not been producing stellar subscriber numbers for Echostar. In the second quarter 2005, the partnership resulted in just 10,000 net subscriber additions for Echostar. When the restructured agreement begins in October, the companies will operate the service along a more traditional sales agency approach that provides motivation to drive subscriber growth. Echostar incurs all the acquisition costs for the new SBC- Dish subscribers and pays a sales commission and monthly residual payments to SBC.

Douglas Shapiro, analyst with Banc of America Securities, called the deal “mixed” for Echostar, in a Sept. 21 equity research report. On one hand, Shapiro said the new terms should “free up SBC to market more aggressively.” However, since Echostar is paying subscriber acquisition cost and likely will own the subscribers, SBC “may be less aggressive acquiring subscribers in the roughly 60 percent of its footprint in which it intends to deploy” Internet protocol TV (IPTV) because without ownership, it will not be easy for SBC to move those customers to its IPTV service.

Vijay Jayant, analyst with Lehman Brothers, was more bullish about the new arrangement, dubbing it a “win-win that could materially accelerate subscriber growth via the SBC channel. We believe that the revision of the SBC relationship, which Dish management has stated wasn’t working for either SBC or Dish, removes a significant overhang on the stock,” he said in a Sept. 21 equity research report.

Now that SBC has the financial incentives, the company could generate an 8 percent increase in Dish’s gross add run rate, Jayant said. He also downplayed SBC’s future IPTV plans. “Even with SBC’s plans to roll out terrestrial video services, we believe the company will need a video partner for a large portion of its footprint for years to come” to complete the so-called “triple-play” offering of voice, video and broadband data services.

The new arrangement was not enough to halt a downward slide Echostar’s stock had been on during the days leading up to the Sept. 22 publication deadline of this issue of Satellite News. The stock closed at $32.11 per share Sept. 13, the highest closing price (adjusted for dividends and splits) since Aug. 1. The stock closed down each of the following trading days, bottoming out Sept. 21 when it closed at $29.20, before recovering a cent Sept. 22.

The downward movement should not be too alarming because the stock floated in the $29 to $32 range between Aug. 1 and Sept. 22. However, if this new relationship is able to generate better subscriber gains for Echostar, it could help to push the price upward, providing that the increased subscriber acquisition costs that come from this arrangement do not have a negative impact on Echostar’s financials.

ORBM.PK

As reported last week, Orbimage Holdings LLC‘s stock spiked Sept. 15 to $14 when media outlets began reporting its acquisition of Space Imaging. However, it did not hold the one-day gain, dropping to $12.50 Sept. 16. The stock dipped over the next few days before regaining those losses and closing at $12.50 Sept. 22. We expect this stock to remain at this level until this acquisition clears any regulatory issues (which observers tend to believe it will with little or no resistance). Once it becomes clear how the inclusion of Space Imaging affects the Orbcomm balance sheet, the stock should react accordingly.

PA & NSE

Both New Skies Satellite Holdings Ltd. and Panamsat Holdings Corp. declared dividends. On Sept. 20 New Skies’ board of directors declared a quarterly cash dividend of $0.463125 per share for the third quarter of 2005, payable on or about Oct. 15 to shareholders of record on Sept. 30.

On Sept. 19, Panamsat’s board of directors declared a quarterly cash dividend of $0.3875 per share for the third quarter of 2005 in the amount, payable on or about Oct. 14 to shareholders of record on Sept. 30. Panamsat said the quarterly rate is equivalent to a rate of $1.55 per share on an annual basis.

Neither stock moved significantly on the announcement, but as the stocks gets closer to their respective record dates, the prices should jump incrementally to the cover the value of the dividend.