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Multiband Corp (MBND), DIRECTV (DTV): Is This Telecom Services Contractor Worth More Than You Think?

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Telecom services contractor Multiband Corp (NASDAQ:MBND) agreed to sell out to privately-held Goodman Networks in May 2013 for roughly $70 million, or $3.25 per share in cash. Goodman, an engineering services company, seems to have been attracted to Multiband Corp (NASDAQ:MBND)’s growing engineering services unit that constructs public telecom and energy infrastructure assets on a project basis. However, Multiband Corp (NASDAQ:MBND) is also the #2 field services provider for DIRECTV (NASDAQ:DTV), one of only four contracted home services providers for the top satellite television company, and provides similar services for various cable and internet companies. With an acquisition price of roughly 1.5 times book value, should investors take the cash?


Multiband Corp (NASDAQ:MBND) derives the vast majority of its sales from its field services installation work for DIRECTV (NASDAQ:DTV) and other operators, accounting for 87% of its total sales. While satellite work orders were down 9% in its latest fiscal year, the company offset the decline with new business from cable companies looking to outsource the labor-intensive installation process. Multiband Corp (NASDAQ:MBND) also benefited from its position as one of the largest master system operators for DIRECTV (NASDAQ:DTV), which allows it to directly bill customers and receive fees for managing upgrade and customer service processes.

In its latest fiscal year, Multiband Corp (NASDAQ:MBND) generated relatively weak financial results, with a 1.8% increase in revenues and a steep decline in operating income. While the company did a good job of replacing lower home installation work with higher multi-unit management contracts, the cost of acquiring new business negatively impacted profitability. However, with roughly 159,000 direct multi-unit subscribers and a growing base of managed subscribers for third party operators, Multiband is creating critical mass in the multi-unit market, an area that has approximately 26 million households and is a focal point for DIRECTV (NASDAQ:DTV).

Of course, Multiband is riding the coattails of DIRECTV (NASDAQ:DTV), which dominates the domestic satellite television market along with smaller competitor DISH Network Corp (NASDAQ:DISH).Despite rising competition from cable, wireline, and online networks, the two companies have maintained steady market share, with a current combined 34 million subscribers out of the estimated 100 million households with pay-television services. In addition, both companies have been strengthening bonds with customers by adding services, like exclusive original content and digital video recording capabilities.

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