About Author: Andrew Montero

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Posts by Andrew Montero

11

Sirius XM, Liberty Media and DISH….Synergies Anyone? Part 1

By
Andrew Montero
– May 2, 2011
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With the recent addition of Dish network(NASDAQ:DISH) executive Carl Vogel to the Sirius XM (NASDAQ:SIRI) Board, many are asking what is the fit. Vogel was one of Dish networks executive officers from 1994 until 1997, and served as President from 1995 until 1997 when he was a key member of the executive team that created and launched DISH Network in 1996. Upon reviewing recent acquisitions by DISH and Charlie Ergen, I came across the following pending acquisition, which I think is a much bigger deal than some have realized.

DISH Network to Purchase DBSD, Developer of U.S. Hybrid Communications System

ENGLEWOOD,
Colo., Feb. 1, 2011 /PRNewswire/ — DISH Network Corporation (Nasdaq: DISH)
announced today that it has entered into an agreement to acquire 100 percent of the equity of the reorganized DBSD North America, Inc., a hybrid satellite and terrestrial communications company, for approximately $1 billion subject to
certain adjustments, including interest accruing on DBSD North America’s existing debt.

DISH Network is also committing to provide a debtor-in-possession credit facility to DBSD North America in connection with filings under Chapter 11 of the U.S. Bankruptcy Code. The credit facility, which remains subject to approval by the Bankruptcy Court, will consist of a non-revolving, multiple draw term loan in the aggregate principal amount of $87.5 million. This transaction is to be completed upon satisfaction of certain conditions, including approval by the Federal Communications Commission and DBSD North America’s emergence from bankruptcy.

Last year ICO Global Communications and DBSD North America deployed Mobile Satellite Services and Satellite-Based Internet Connectivity for Relief Agencies for Haitian Rebuilding Efforts following the disastrous earthquake that occurred there.

Here is a copy of the press release:

RESTON, Va., Mar 08, 2010 (BUSINESS WIRE) — ICO Global Communications (Holdings) Limited (ICO) (NASDAQ:ICOG) and its subsidiary, DBSD North America, Inc., announced that they have deployed satellite-based communications terminals with Internet access for use by relief agencies in Haiti. The terminals, known as CFK-100s, operate in the 2GHz S-band, and can be used in both mobile and fixed environments. They were installed and activated on February 17 and are being provided as part of the relief efforts of the International Telecommunications Union (ITU). Service is being provided through the G1 satellite, which was launched in April 2008.

The equipment and airtime are being provided free of charge under the terms of a 2007 Memorandum of Understanding between ICO, the ITU and the Commonwealth Business Council (CBC), which called for assistance, technology and airtime in response to natural disasters. Laptop computers and peripheral equipment are being provided for the project through a financial grant from the Hong-Kong-based RYTHM Foundation, the Corporate Social Responsibility arm of the QI Group, a member organization of the CBC. In addition, technical services to support the initiative were donated by Space Systems/Loral, manufacturer of the G1 satellite; Intelsat, a leading provider of fixed satellite services worldwide; and Hughes Network Systems, a provider of two-way satellite communications technology for the G1 satellite.

What could this mean to Sirius XM? Well, let’s start with the fact that Sirius XM is increasingly making its internet service more of a value. What does that have to do with DISH you say? DBSD is considered valuable because of its access to broadband spectrum. With increased spectrum some experts believe EchoStar and Dish Network which also has some spectrum of its own already in the mix will put DBSD and Dish together and create huge a 4G or LTE networks to support data and voice communication.

A key area of testing for DBSD post G1 satellite launch in 2009 was for two-way services which support a variety of mobile satellite devices. DBSD worked with Qualcomm (NASDAQ:QCOM), to develop a satellite communication protocol called EGAL (Enhanced Geosatellite AirLink), which could be easily implemented in standard Qualcomm cellular chipsets. The initial test calls made over the G1 satellite utilized a cellular handset that was equipped with EGAL software. Subsequent work during the alpha trials included demonstrations of handsets and wireless devices that can operate in both terrestrial and satellite modes in urban and rural areas showcasing the potential of mobile satellite services to further enhance today’s traditional mobile offerings and providing a path to commercialization of next generation mobile satellite services.

Additionally, In order to demonstrate the capabilities of the G1 satellite and the use of an Ancillary Terrestrial Component (ATC), DBSD developed a demonstration product that integrated the ability to deliver two way interactive services with content broadcast services. DBSD expanded its partners to include NBC Universal, Discovery Networks, MTV Networks and Cartoon Network to demonstrate a live mobile television service that is capable of delivering 10 to 15 channels of live television broadcast content to vehicles and mobile devices. The product tested is referred to as Mobile Interactive Media, or MIM.

As a concept product, MIM combines live mobile television, assisted navigation and two-way communications capabilities into a bundled package which takes advantage of strong la carte demand for these services in the automotive market. MIM was named “Best of the Best” at the 2009 International Consumer Electronics Show. Features of MIM include:

1) 10 – 15 channels of live television content from leading brands, offering a mix of news, entertainment and children’s programming

2) Assisted navigation

3) Communications capability for telematics and emergency messaging applications

In short, Sirius XM is now aligned with Liberty Media (NASDAQ:LINTA) and Dish Network. The combination will prove to be a powerhouse of the New Media market. There are synergies and leveraging capabilities with these three companies that bode extremely well for the future of new media and mobile infotainment. This does not even take into account Dish networks recent purchase of Blockbuster, but imagine the possibilities.

Disclosure: Long SIRI, No current holdings in LCAPA, DISH or Qualcomm

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4

DISH Network Prepares to Battle Netflix

By
Andrew Montero
– April 26, 2011
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Last week, DISH Network (NASDAQ:DISH) released a PR which I find quite exciting. Here is the press release in its entirety:

DISH Network’s DISHOnline.com delivers HBO® and Cinemax® titles not available on Netflix’s online service

ENGLEWOOD, Colo., April 21, 2011 /PRNewswire/ — DISH Network L.L.C. today announced that DISHOnline.com now gives customers instant, unlimited access to HBO and Cinemax titles not offered by Netflix’s online service. In connection with Home Box Office, Inc.’s new online video destinations, HBO GO® and MAX GO®, DISH Network customers who subscribe to HBO or Cinemax premium channels can now instantly watch nearly all of the respective current HBO or Cinemax programming inventory – most of which is available in high definition – at DISHOnline.com. Customers have access to more than 1,800 titles including Hollywood hits such as Avatar, The Hangover and Up in the Air, original content like award-winning series Boardwalk Empire® and True Blood®, as well as independent films, cult favorites and more.

“DISH Network is thrilled to be working with HBO to bring this broad collection of top-billed content to our customers for instant access at DISHOnline.com,” said Dave Shull, senior vice president of Programming for DISH Network. “DISH Network customers with an HBO or Cinemax subscription can also get new series titles after their premiere – plus bonus content including interviews, recaps and behind-the-scenes extras – none of which are available through Netflix’s online service.”

DISH Network customers who subscribe to the HBO or Cinemax TV packages can enjoy the respective online content any time and from any U.S. location with a broadband connection by simply logging on to DISHOnline.com, HBOGO.com or MAXGO.com.

DISH Network’s DISHOnline.com is the only online video portal that gives customers the ability to integrate live and recorded TV with more than 150,000 popular movies, TV shows, clips and trailers into one easy-to-use-interface. For more information or to create an account, visit www.DISHOnline.com

This PR in and of itself is very good, but couple it with the recent winning bid for Blockbuster Video by DISH and I would say a certain other online movie service is in for a major battle; are you paying attention Netflix (NSADAQ: NFLX) ?  Perhaps due to waiting for final approval from the bankruptcy court and satisfaction of certain conditions related to the bankruptcy, DISH network has been relatively quiet about the winning auction bid for Blockbuster. In the April 21 filing with U.S. Bankruptcy Court in New York, lawyers for DISH said they needed more time to determine which of the 1,700 Blockbuster stores would remain in operation.

DISH has until May 5 to close the deal, which was previously extended to April 25. Blockbuster has agreed to waive a $500,000 daily fee that was to have been previously assessed to the sale when extended beyond the closing date. DISH has agreed to assume costs associated with continued store based operations, including employee costs and vacations. U.S. Bankruptcy Judge Burton Lifland is due to rule this week on granting Dish 90 additional days (to July 21) to assume or reject current store leases. In court filings, Dish listed about 575 stores it intends to keep operating.

However, this media powerhouse would appear to be a very formidable foe for NFLX and seems poised to beat NFLX at its own game and with considerably more available media and choices for the consumer. The video entertainment customer base will likely now have some exploring to do and choices to make once Charlie Ergen has that final approval of the sale in his hands. Make no mistake, Mr. Ergen is going to make sure that his Blockbuster purchase wields a significant profit and helps continue to accumulate significant market share for his media empire.  The combination of DISH and Blockbuster seems a very formidable opponent for Netflix or any other video or cable entity to try and fend off. Investors should pay attention to DISH news and filings in the coming weeks. The quarterly conference call for DISH is scheduled for May 2nd at noon. The dial in number is (800) 616-6729. Additional information can be found here;

http://dish.client.shareholder.com/releases.cfm

Disclosure:  No position in DISH, BLOAQ or NFLX currently

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5

Sirius XM (NASDAQ:SIRI) Quietly Mounting Improving Internet Radio Campaign

By
Andrew Montero
– April 21, 2011
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As Sirius XM reached a new post economic collapse high over the course of Thursday April 21st trading activity, closing at $ 1.93 a share, I was searching for a reason for the recent upward momentum. Upon doing so I was surprised to find that ZUNE marketplace, the counter from Microsoft(NASDAQ:MSFT) to Apple’s (NASDAQ: AAPL) App store, has an application which was released on April 1st and updated on April 14th, that allows Windows 7 phone users who subscribe to premium Sirius XM internet to listen to their Sirius XM internet service thru their Windows 7 phone. The application has terrific graphics that are very similar to the XMp3 display graphics.  The application has over 100 Sirius XM stations available to listen to on your phone. It also allows you to tag your favorite stations and create a short list just like the online player. There is a trial version of the application and then a full version which costs .99 cents.

After listening to the trial version, I immediately purchased the full version because it sounded that good. I can now listen to my XM satellite radio service in my car, on my XMP3, on my laptop or desktop and on my Windows 7 phone, which I always have on me as most people do. The sound was exceptionally better than I had expected compared to the sound quality I had with my previous Blackberry phone and the Blackberry app for Sirius XM.  It seems quite obvious that Sirius XM is mounting a big push and adding both value and ease of operation with their internet version of the service and applications like this to make your Sirius or XM internet radio easily portable without the need for proprietary equipment, though the internet service does not have as many channels as the satellite service, it still provides over 100 channels of diverse music, talk, comedy, entertainment and sports related content. This Windows 7 application is more than worth the .99 cents it costs and I suggest folks check it out.

Disclosure: Long Siri and no position in AAPL or MSFT

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3

Citigroup Attempts Improvements in Face of Mortgage Crisis

By
Andrew Montero
– April 18, 2011
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Last month, Citigroup announced plans for a 10 for 1 reverse stock split, which will move the share price somewhere near $40 by reducing the number of outstanding shares from the current 29 billion to a much more reasonable number of 2.9 billion. Citigroup share price is down 92% from its 2006 high of $55.70 which was achieved with close to 5 billion shares outstanding. The reverse split will take effect May 6, Citigroup CEO Vikram Pandit believes that the reverse split, together with with the reinstatement of a penny per share dividend as an initial step are important first moves as the company anticipates returning capital to shareholders starting next year. Citigroup has paid back the $45 billion it received from the government in 2008; it cannot pay quarterly dividends of more than 1 cent a share until 2012 as a condition of the rescue. Citigroups dividends to shareholders had been as high as .49 cents prior to the 2008 economic meltdown, and in 2008 the dividend was .16 cents before the collapse. The last dividend the company paid was .01 cent in February of 2009.

Citigroup (NYSE:C) has been in the midst of righting itself since its collapse. TARP money and government favors permitted it to survive. However, CEO Vikram Pandit has steadily marched the company back from the dead over the course of the past 2 years. While not all of his decisions have been well received the results so far have been better than anticipated.  The company has focused much of its energy in the past two years on cutting off parts of its businesses that don’t fit with its main banking operation.

Unfortunately there are also recent reports that Citigroup continues to struggle with its mortgage business; the bank is still selling mortgages that violate quality standards, according to an internal Freddie Mac (OTCBB:FMCC) review obtained by Bloomberg in January.  Fifteen percent of the loans Citigroup sold to the government owned mortgage finance company in the second half of 2009 and the first half of 2010 had such flaws as missing appraisals, insurance documents or income miscalculations, according to a review of 375 mortgages. The target for defects should be about 5 percent, said Tim Rood, a former executive with Freddie’s sister agency Fannie Mae, and now managing director at Washington-based advisory firm Collingwood Group LLC.  Citigroup faces $100 million in payouts on the loans if customers demand refunds for mortgages that stop paying, according to Paul J. Miller of FBR Capital Markets in Arlington, Virginia. Miller based his estimate on the numbers in the Freddie Mac memo.

Also of note, Citigroup Inc. will raise as much as $273 million selling a stake in insurer Primerica Inc (NYSE:PRI). Citigroup is offering 12 million shares at $22.75 each.  Underwriters have the option of purchasing an additional 1.8 million Primerica shares from Citigroup. The bank will still hold 20.7 to 23.1 percent of Primerica after the sale.  Citigroup was the largest shareholder as of December 2010 with a 40 percent stake, according to data compiled by Bloomberg. Primerica was part of Citi Holdings, the portfolio of businesses Pandit said he would sell, wind down or restructure in order to get back to a more core business model. Primerica, based in Duluth, Georgia, sells term life insurance and mutual funds. It sold 21.36 million shares at $15 each as part of its initial public offering in March 2010. Primerica has declined 3.4 percent this year overall.

Disclosure: No position in C or PRI

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5

Sirius XM (NASDAQ:SIRI): Never Mind The Mainstream

By
Andrew Montero
– April 15, 2011
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Over a year ago Sirius XM board member and Liberty CEO Greg Maffei was quoted as saying “Our Sirius investment has performed very well” and “We consider Sirius XM to be the anchor of our LCAPA stock portfolio.”  Since that time much has changed with regard to Sirius XM.  It has become an even stronger company by better managing its debt and growing its subscriber base. It is also interesting to note that none other than Jim Cramer did a piece back in late 2009 in which he discussed Sirius XM in the following way.  “If you like Sirius, do not play the common stock. The bonds are the best bet. Not that long ago, in the summer, Barclays put out a terrific piece about the 3.25% Sirius converts due 2011. These converts, which currently sell at 88, could be a great play on any turn, because they will get paid off at a nice gain. Barclays likes it because there is no other Sirius debt due ahead of it, and if it gets in trouble, Liberty Media, the new investor that injected capital, will make that debt good, because bankruptcy wrecks the principal asset that SIRI brings to the table: its gigantic operating loss. I am also drawn to the 9.625% notes that mature in 2013, a piece of paper that has zoomed in value since the decent quarter Sirius posted, and which trades more actively than all other bonds….

Now I am no fan of Jim Cramer, but I have to give credit where credit is due.  Even though he was wrong on the correct play, owning the stock from the same time frame would have netted you more total income, from a pure bond perspective he looked like Nostradamus on those two bond calls.  Both series of debt were addressed by the company with the most recent being the 3.25% convertibles, which are subject to an offer at a premium for early redemption this month.  What also has been happening lately is an incredibly blatant attempt to create falsely negative sentiment with regard to Sirius XM.  Let me start to address this negative smear campaign with the debt issue.  Debt is being reduced as we speak and will be in the next quarters filing, but I assure you that total long term debt, excluding related party is actually about 125 million less than showing, 2.57 billion this quarter already with the 3.25% redemption once it is complete vs. 2.695 billion reported in the 10K for fiscal 2010.  Add to the situation just released news in the proxy which shows a reverse split is off the table, and the poison pill is going to be left to expire as well.

Next, there is the ever popular story of cheaper internet radio services that are going to spell doom for Sirius XM.  Services like Pandora or Slacker are all cheaper than Sirius XM, yes that is true on one hand, but when you add the cost of streaming data charges, even if you have the rare unlimited data charge, the cost goes up on those services to the point where I would suggest you are getting less and paying more. Also, although I personally enjoy the variety of content on Sirius XM, I am sure there are plenty of folks out there who are happy just listening to their personal radio playlists and are willing to tolerate commercials.  There is always something for everyone to like or dislike. As the saying goes, one man’s trash is another man’s treasure.  Recent events have also taught us that Sirius XM does indeed intend to add value to the internet based service for all subscribers, and to differentiate it in some ways from the satellite platform. Adding the recent Limited engagements 2 channel to the internet version of the service shows intent to do just that.

Of course the biggest reasons to own SIRIUS XM common shares are the improving metrics and business model. The undeniable synergies created when the two companies merged, the free cash flow and EBITDA growth, as well as subscriber growth and additional revenue streams, which all bode well for the company’s dynamic turnaround and the future improvements in operations and infrastructure costs.

This smear campaign is about getting you and me, the common stock holders of SIRIUS XM to sell our shares on fear of bad news and get out leaving any future gains and cheap entry in the rear view mirror so that miscreants who write these negative articles and trade on fear have easier pickings as well as hedge funds, institutions, and wealthy investors that have missed the boat to this point. The choice belongs to you the retail investor. The SEC filings and recent events are all available for review right up to the Q4 2010 filing. All company filings can be viewed here (http://investor.siriusxm.com/reports.cfm). I would suggest that anyone who has an interest, take the time to review and read those filings. Specifically read the filings since the merger in 2008.  Once you do, you will most likely be glad to have read this article. The improvements are real tangible improvements, not hearsay from some bloggers on the internet. It also makes me wonder why people who dislike the service spend so much time harping the negative angle. Surely many folks out there can put two and two together.  I write these articles to help people get to the truth buried at the bottom of the pile of garbage that is disseminated in the mainstream media and on some blogs. Best of luck to all and do your own due diligence.

Disclosure: Long Siri

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