AT&T Corp., which is seeking to become a one-stop shop for communications and entertainment, may be eyeing Doug las County-based EchoStar Communications Corp. as an acquisition target, according to speculation by industry analysts.
“Competition is a huge, ever- darkening cloud for Echo Star, and they don’t have any silver bullets right now,” said Jimmy Schaeffler, senior multichannel-TV analyst for the Carmel Group. “What used to be a playing field that favored satellite for almost 10 years is starting to favor the wired and wireless services.”
EchoStar, with 11.7 million subscribers the nation’s second- largest satellite-TV service, faces mounting competition from cable and telecommunications companies that can offer combinations of video, Internet and landline- and wireless-phone services.
AT&T, formerly known as SBC Communications Corp. of San Antonio (which purchased AT&T Corp.), is among the most aggressive companies seeking to offer that bundle of services to consumers.
Shares of EchoStar have climbed more than 15 percent since the stock hit a three- month low of $24.52 in November. The company employs about 5,000 people in Colorado.
Both AT&T and EchoStar declined Tuesday to comment on the rumors, which resurfaced last week in a CNNMoney.com article and were amplified Tuesday in an article by Phillip Swann, president and publisher of TVPredictions.com.
“The satcaster (EchoStar) needs deeper pockets to compete with the News Corp.- owned DirecTV and the cable-TV industry,” Swann wrote.
EchoStar and the former SBC have had a marketing partnership for several years in which SBC resold Dish Network service with its phone and Internet service in the 13 states in which SBC operates. SBC also invested $500 million in EchoStar in 2003.
With a market capitalization of $81.1 billion, AT&T could seemingly afford to buy Echo Star, which has a market cap of $12.65 billion. SBC acquired AT&T last year for $16 billion and rebranded itself with the AT&T name.
Charlie Ergen, EchoStar’s co-founder, chairman and chief executive, would control any deal to sell the company through his majority ownership of voting stock.
“He (Ergen) has to be convinced that the combination (with AT&T) would grow faster than EchoStar would alone,” said Janco Partners analyst Matthew Harrigan. “He would be AT&T’s largest shareholder; it’s not the end of the line for him.”
Last year, AT&T announced plans to build its own cable-TV system, but success has been limited, Harrigan said, adding that AT&T has enough cash to make a deal that’s “slightly accretive over a period of time.”
Both EchoStar and AT&T plan to unveil new products at the 2006 International Consumer Electronics Show in Las Vegas, which begins this week. AT&T is scheduled to announce the launch of Homezone, a set-top box and service that integrates Dish Network satellite programming with AT&T’s high-speed Internet service offering video-on-demand content.
Staff writer Kimberly S. Johnson can be reached at 303-820-1088 or kjohnson@denverpost.com.
