AT&T is in the process of preparing to go public with a formal offer for
EchoStar, something that could happen before the end of the year, according to a
story in Barrons over the weekend.
The report cites the recent drop in EchoStar stock, which had lost 24 percent in
a little less than a month dropping sharply after the company missed its
quarterly financial targets as a motivation for AT&T to consider the move,
which has been rumored on and off for months.
May Move Quickly
AT&T is motivated to move quickly to ensure it can get any deal reviewed by
regulators during the current administration rather than taking a chance the
regulatory environment could change after President Bush leaves the White House
in January of 2009, the newspaper said.
EchoStar shares were up nearly 20 percent in midday trading despite an overall
down market, rising US$7.63 per share to $47.46. AT&T shares were down more than
4 percent, meanwhile, to $37.85.
AT&T declined to comment on the reports EchoStar did not respond to a request
for comment from the ECommerce Times.
AT&Ts motivations are clear to discern: Controlling Dish TV would enable it to
offer its customers a full bundle of services: phone, Internet , wireless and
video services. AT&T is building out its own video service, known as "Uverse,"
but that is expected to take years to reach market saturation.
A deal for EchoStar could be worth as much as $30 billion, with Barrons saying
discussions have taken place about AT&T offering $65 per share, though EchoStar
may try to get a higher final price.
EchoStar fueled speculation it would be put up for sale when it recently
announced it would split itself into two units, one controlling the satellite
services and the other holding the companys technology assets.
There is a 65 percent chance of an AT&TEchoStar merger over the next year,
Citigroup analyst Jason Bazinet said in a research note published Friday.
EchoStars Dish TV service trails only DirecTV among satellite television
providers, with 13.7 million subscribers at the end of the second quarter.
Another Base of Customers
AT&T, meanwhile, has seen rival Verizon (NYSE: VZ) gain much more traction much
faster with its FiOS fiberoptics Internet and video service, recently reporting
that it had passed the 1 million customer level while aggressively seeking to
add to the number of markets where it is licensed to deliver video, noted
independent telecom analyst Jeff Kagan.
Having a strong video offering is critical for phone companies as they compete
headtohead with cable companies to deliver full bundles of services, Kagan
told the ECommerce Times.
"They continue to roll out Uverse, but its clearly taken longer to gain
traction than even they thought it would," Kagan said. Earlier this month, AT&T
said it had 126,000 Uverse subscribers, and lowered its targets for the
nationwide rollout of the service.
Owning EchoStar may be a way to offer video to locations where its video network
is not yet built out and would give it another base of customers to sell
additional services to as well.
The idea of linking with satellite TV carriers is not new for phone companies.
In 2003, AT&T predecessor SBC Communications, later merged with AT&T, attempted
to buy DirecTV.
More recently, AT&T has benefited from its past acquisitions and its partnership
with Apple (Nasdaq: AAPL) on the iPhone, which have helped it record
doubledigit profit and revenue growth in recent quarters.
AT&T is eager to supplement that wirelessdriven growth with success in other
parts of its business, however, said Yankee Group analyst John Jackson.
"AT&T and Verizon have been benefiting the most from the consolidation in the
wireless space," Jackson told the ECommerce Times. "But they still face plenty
of competition for home customers from cable companies and from one another."