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DIRECTV (DTV - Analyst Report), the largest satellite TV operator in the U.S. has decided to enhance its video offerings with next-generation 4K ultraHD video services. DIRECTV is trying hard to become the first pay-TV operator to offer a nationwide 4K ultraHD technology in the U.S.

4K ultraHD technology offers contents with horizontal resolution on the order of 4,000 pixels. The use of horizontal resolution technology is a qualitative shift from the older HDTV technology which offers vertical resolution. The technology will significantly enhance video and sound quality.

DIRECTV is trying to establish itself as a premier pay-TV operator targeting high-quality subscribers. Management is emphasizing on broadband, video-on-demand and pay-per-view businesses for long-term growth. With higher-quality subscriber base, DIRECTV has implemented programming package price increases, and higher HD and DVR equipment service and lease fees, driving higher average revenue per user, which resulted in margin expansion. In the third quarter of 2013, the company added a net 139,000 subscribers in the U.S.

We expect the 4K ultraHD market to become more competitive in the near future. Comcast Corp. (CMCSA - Analyst Report), the largest pay-TV operator in the U.S. is doing research and development for 4K resolution. The company has already demonstrated 4K ultraHD programming for its NBC Universal division. Online video streaming company Netflix Inc. (NFLX - Analyst Report) is giving trial runs for the 4K ultraHD video services.

DIRECTV has also planned to launch two more satellites in 2014 and 2015, which we believe will further improve service quality. Rounds of rumor in the industry circle suggest a possible merger between the largest two satellite TV operators, namely, DIRECTV and DISH Network Corp. (DISH - Analyst Report). DISH has accumulated a significant size of wireless spectrums.   

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