AT&T to Stop Selling DirecTV in 2008

Weird. In the satellite television sector one big pending piece of news has been what AT&T (T) was going to do about the fact that it has been reselling service from both Echostar (DISH)
and DirecTV (DTV). The company has been selling DISH service in the old SBC territory, and DTV service in areas that had been served by BellSouth. The Street has been expecting the company to do the logical thing once current agreements expire and simply provide service from one satellite television company. Tuesday, with little fanfare, AT&T disclosed that it is going to stop selling DirecTV service in the 2008 first quarter.

According to Reuters, though, AT&T said it is still evaluating its long-term relationship with both EchoStar and DirecTV with a view to making a decision in late 2008.

So they decided. Or maybe they didn’t. Craig Moffett, an analyst with Bernstein Research, says the announcement is “puzzling,” since the company seemed to both reach a decision and promise to reconsider it all in the same breath. Moffett notes that AT&T choosing DISH over DTV was widely expected; he also notes that as of the middle of 2007 AT&T accounted for 15.2% of DirecTV’s gross subscriber additions.

The irony, he says, is that given AT&T’s promise to take its U-verse fiber-based TV service up to 30 million homes passes by 2010, it seems evident that “the company won’t be distributing satellite for long anyway.” As Moffett notes, relying on AT&T as a distributor at a time when it also is ramping up as a competitor is “problematic, at best.”

In any case, Moffett says that, despite AT&T’s confusing comments, it seems unlikely that the company will change course again, since it would carry significant costs in terms re-training sales personnel, integrating billing systems and re-branding and marketing the service.

Meanwhile, the market Wednesday is bidding up both satellite stocks: DirecTV is up 75 cents, or 3.2%, to $24.29, while DISH is up 21 cents, at $39.04.