DirecTV, EchoStar Bundle Up
"What they're realizing is that by bundling services, the cable companies have some pricing flexibility," says one analyst. "If you take a single service provider and then bundle others with it, that decreases churn by 50%."
That analyst estimates that EchoStar and DirecTV would each be on the hook for an initial $1 billion to create the wireless network. That person also sees the companies hooking up with Intel (INTC) to use its WiMax technology.
Trying to create such a network would involve installing or leasing terrestrial base stations across the country in the form of transmitter towers so that DirecTV can offer wireless broadband. An earlier initial request for quotes went out in late 2005, followed by a more formal request for proposals, sources close to the deal said.
Asked how many tower companies had the infrastructure to achieve full nationwide coverage, the analyst said, "not many."Some of the leading tower companies mentioned by sources as being in the mix include Crown Castle (CCI) and SBA Communications (SBAC) and American Tower (AMT). A deal could add up to billions of dollars over several years, including the cost of transmitters that would be installed on towers and rental costs. Of note, tower rental companies are fixed-cost businesses and adding a huge rental contract on an existing network would boost profits. "We're talking about thousands of towers and most fall in the range of $5,000 per tower, per month," says a source. As new content distribution models such as wireless and IPTV emerge, sources speculate this could be a two-pronged strategy -- enabling wireless broadband for DirecTV subscribers and also giving News Corp. an in-house broadband network. That network could be used as the gateway to distribute its content, and also more control of its overall destiny.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV