In search of a video arm to complete its triple-play bundle of services, telecommunications giant AT&T has reportedly offered roughly $25 billion for Douglas County-based Echo Star Communications.
reported Thursday that AT&T, long rumored to have interest in the nation’s No. 2 satellite- TV operator, recently made an offer of $55 per share but that EchoStar is holding out for $65 per share, a 41 percent premium over its share price.
The report cited “people familiar with the companies” and came two days after EchoStar announced it may separate its consumer Dish Network business from the wholesale operation.
Oppenheimer & Co. analyst Thomas Eagan on Thursday upgraded EchoStar from “neutral” to “buy,” stating the spinoff is “a step towards a sale of Dish to AT&T.”
“Given the success of the cable triple play and the lack of success of AT&T’s U-Verse rollout, it seems to us a matter of when, not if, AT&T acquires EchoStar,” Eagan wrote in a research note.
U-Verse is AT&T’s attempt at offering its own video service through a fiber-optic network. Its rollout has been plagued with technology glitches.
EchoStar stock closed Thursday at $45.98, up nearly six percent after heavy trading of nearly five times the average volume.
EchoStar spokesman Parker McConachie and AT&T spokeswoman Vanessa Smith declined to comment on Thursday’s report. Smith said the San Antonio-based company doesn’t view its video initiative as a disappointment.
Some industry observers were skeptical that a merger is imminent.
“We’ve been down this road before about EchoStar being a potential takeover candidate,” said Michael Hopkins, a senior editor with Lakewood-based trade publisher Bridge Media Group. “And given what’s happened with the talk in the past, it’s too early to tell if these rumors are actually going to end up being something that’s true.”
EchoStar is considered a takeover target because the company can’t offer its own high- speed Internet and phone services to compete against triple- play offerings from cable-TV operators. The company, which employs about 21,000, resells WildBlue Communications Internet service.
“When it comes down to it, without high-speed data or ability to do some sort of phone service, they find themselves in sort of a niche position that seems to be going out of fashion,” said Ian Olgeirson, a senior analyst with SNL Kagan.
AT&T resells EchoStar’s Dish Network, which has 13.6 million subscribers, in much of its service territory as part of its bundle. Acquiring EchoStar would give AT&T higher returns on the video service and the power to control branding and pricing.
“Certainly both companies have some holes in their offerings, and there’s definitely some complementary aspects to the two companies,” Olgeirson said.
But Olgeirson said AT&T may have a hard time wringing out operating efficiencies because the companies offer services through different platforms – EchoStar through satellites and AT&T through copper and fiber-optic lines.
“I don’t think it makes that much sense unless they can get it really cheap,” said Kit Spring, an analyst with Stifel Nicolaus. “(EchoStar chairman Charlie) Ergen doesn’t seem to want to sell it cheap.”
Selling Dish would leave Ergen with a wholesale operation that includes a set-top box manufacturing business and Sling Media, a well-regarded tech startup the company is acquiring for $380 million.
Sling makes the Slingbox, which grabs live or recorded video from a television, digital video recorder or cable set-top box and allows users to watch that content on a computer or laptop via a high-speed Internet connection.
An AT&T/EchoStar merger may be an acknowledgment that AT&T’s U-Verse project is a failure, which could have implications for Qwest. The Denver-based company has said it is closely watching AT&T’s video effort.
Qwest resells DirecTV, the No. 1 satellite-TV operator, in much of its 14-state local phone-service territory.
“We’re evaluating opportunities in the video space,” said Qwest spokesman Bob Toevs. “But we’ve made no announcement with regard to strategy at this point.”
Qwest chief executive Ed Mueller has said he is happy with the partnership with Direc TV.
Staff writer Andy Vuong can be reached at 303-954-1209 or avuong@denverpost.com.
$45.98
EchoStar Communications’ closing per-share stock price Thursday, up 6 percent in heavy trading
$55
AT&T’s offer per share for EchoStar and its Dish Network service in a rumored takeover attempt
$65
Price per share reportedly sought by EchoStar
