DIRECTV – the largest satellite TV operator in the U.S. has planned to move out from Global Village Telecom’s (GVT) buyout proposal of nearly €6 billion ($7.76 billion). Hence, withdrawing from the offer will allow KKR & Co. LP to bid solely for the company.
In an effort to increase their presence in emerging Brazilian markets, cable Multi Service Operators (MSO) like Liberty Global Inc. (LBTYA - Analyst Report) and telecom giant America Movil (AMX - Analyst Report) were all eyeing for Vivendi SA’s subsidiary unit GVT – a Brazilian telecom carrier.
GVT operates in 136 cities in Brazil and offers fixed telephone, broadband and Voice over Internet Protocol (VoIp) service to both business and normal customers. The company started its new pay-TV service in Jan 2012, indicating strong growth potential with 18.8% penetration rate within its broadband subscriber group. Moreover, during 2012 the company added 406,000 customers with an 11.4% Brazilian pay-TV market share.
We believe, DIRECTV’s plan to participate for bidding GVT assets will not only help them to gain market traction but will also facilitate DIRECTV to counter stiff competition, which exists in the Brazilian pay-TV markets. Moreover, the company is one of the leading satellite TV service providers in the country, so acquiring GVT’s broadband business assets may further boost the company’s online channel viewing options.
At the end of fiscal 2012, DIRECTV had $1,902 million in cash and cash equivalents and $17,170 million of outstanding debt on its balance sheet. A further acquisition of $7.76 billion of GVT assets will increase the company’s leverage.
Currently, DIRECTV carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Meanwhile, one can look at Comcast Corporation (CMCSA - Analyst Report), which carries a Zacks Rank #2 (Buy).