DirecTV to be sold?

Chris Forrester

US DTH broadcasting giant DirecTV could end up being sold by John Malone's Liberty Media, and the potential buyers could include Verizon or AT&T says an influential financial report on the business.

New York-based Pali Research, in its debut report on the pay-TV operator, has given DirecTV a price target of an impressive $32, well ahead of its current $22-a-share pricing. Senior analyst and MD at Pali, Richard Greenfield, suggests that DirecTV is likely to be buying in its own stock starting in 2010 helped by it throwing off a massive $3bn in free cash flow. Indeed, Greenfield suggests one scenario whereby DirecTV could even take itself private within a 5-year timeframe.

But Pali also reminds investors that John Malone is himself primarily an investor, and not an operator of companies. Pali says it is "increasingly hard to imagine DirecTV remaining a stand-alone company..." The logical potential buyers, Greenfield says, are AT&T and Verizon. They have deep pockets and if the price - Pali suggests $35 a share - was right, then Malone could be a seller.

The logical view is that Verizon's FIOS system, or AT&T's Uverse system would then make an excellent play in the cities and suburbs, while satellite DTV handles the rural and countryside areas. But all this could be far too "logical", especially when Dr Malone is involved!