Wall Street Eyes Verizon/DirecTV Deal

[Gregg Lengling]

As expected, Verizon and DirecTV have partnered, allowing the regional phone company to sell the satellite TV offering in a bundle of services.

Wall Street reacted to the news, suggesting the deal may be a long-term good thing for DirecTV and parent Hughes Electronics, and may create trouble for the cable competition.

John Hill of SoundView Technology Group said the deal is a "slight positive" for DirecTV and parent Hughes, "though we expect that much of the news was already anticipated by the market."

Cable could see an impact from the collaboration. The Verizon/DirecTV news is a slight negative for Cox, which is the major cable provider in Rhode Island, Hill said. Comcast, Time Warner and Cablevision could be impacted by the rollout of additional markets during the year, the analyst added.

Marc Nabi of Merrill Lynch pointed out similar deals between DBS and phone companies were attempted in the past. "Our enthusiasm for joint marketing ventures is tempered since DirecTV tried to accomplish similar bundles with the RBOCs back in 1998, which were outright failures," he said.

"What is expected to be different this time is that customer care and billing will be more integrated, and the competitive landscape suggests the RBOCs are allocating more resources to make it work," Nabi added.

The Verizon/DirecTV packages will be rolled out in Rhode Island on Tuesday and then in New England and the mid-Atlantic states in the coming months, with additional markets to follow.

By mid-year, when the companies interconnect billing systems, all bundled services will appear on the Verizon bill, including DirecTV service. DirecTV will perform installation and provide follow-up customer care for subscribers acquired through Verizon, the companies said.