SBC Communications' multibillion-dollar bid to acquire DirecTV is a bad idea, say several analysts who have studied such an alliance.
The analysts, quoted by the Associated Press, say the proposed deal wouldn't solve the problems with the basic telephony business that have caused SBC's revenue to drop nearly 20 percent in the past two years.
“Making a serious foray into this (satellite) industry at this stage, when there are so many other problems that SBC and its peers are grappling with, seems a bit premature,” said Qaisar Hasan from Utendahl Capital Partners in New York. “It would be a huge management distraction.”
F. Drake Johnstone, an analyst with Davenport & Co. in Richmond, Va., told the AP, “They ought to get their own house in order before they consider a major acquisition.”
Others said purchasing DirecTV, the nation's second largest pay-television company, would dilute SBC's earnings and would not create synergies with the company's existing phone-oriented businesses.
SBC has yet to address news reports that it might attempt to purchase DirecTV, while Hughes Electronics, a subsidiary of General Motors, has stated that it is considering a variety of options regarding its ownership of the direct-to-home satellite service. Many reports predict a potential bidding war is developing between SBC and DirecTV’s longtime suitor, News Corp.
Last week, as an interim measure, DirecTV unveiled a debt-refinancing plan of nearly $3 billion. The company said it would sell up to $1.4 billion of 10-year senior notes and arrange $1.55 billion in new senior secured credit facilities. The credit facilities will have terms of five to seven years.
The proceeds will be used to pay bank debt and fund continuing operations until a deal is made.
For more information visit www.sbc.com.