Another day, another rumor that Douglas County-based Echo Star faces an imminent buyout.
“Every time someone burps in the media, EchoStar is about to be sold,” said Bob Scherman, editor and publisher of Satellite Business News, who has covered EchoStar and its maverick founder, Charlie Ergen, for 25 years.
“It’s getting to the point of absurdity,” he said.
The latest belch has AT&T buying the Englewood-based satellite-TV company for $55 a share. The Street
, citing people familiar with these merger talks, wrote that Echo Star, which serves 13.6 million customers through its Dish Network, is holding out for $65 a share.
So AT&T is willing to pay a $5 billion premium over EchoStar’s stock- market value, but Ergen wants a $10 billion premium? I guess they’re only $5 billion apart – surely, a deal is going down any day.
Perhaps EchoStar added carbonation to this belch Tuesday when it announced plans to split itself into two publicly traded companies. One would be a consumer TV service, the other a wholesale satellite-transmission service.
It’s just the kind of thing Wall Street wants to hear. Something else that issues stock.
“We see the uncoupling of the … divisions into two stocks as a step towards a sale,” wrote Tom Eagan, an Oppenheimer & Co. analyst.
Eagan upped his recommendation on EchoStar from “neutral” to “buy” Thursday, guessing that AT&T would likely pay about $56 a share – or about $25 billion – for the company.
That’s a lot of money for a communications platform that cannot even offer its customers decent Internet service.
Perhaps AT&T should reconsider one of the T’s in its name and buy a telegraph system.
Neither company would confirm or deny these reports. Why would they ruin the run?
EchoStar’s stock rose nearly 6 percent on the news Thursday. It was up more than 7 percent at one point, but I think investors started getting wise as the day wore on.
What’s old is new
The AT&T-EchoStar merger speculation is not new. These companies are likely engaged in some level of discussions all the time, generating all kinds of speculation.
EchoStar is talking to other companies, too. Last year, I debunked another dubious report that Echo Star’s chief competitor, DirecTV, was going to buy it out any day now. DirecTV is the nation’s largest satellite-TV provider, and EchoStar is the second-largest.
This was a 4-year-old tale that somehow flowed like fresh wine at an investors conference. Analysts and reporters get their employers to pay a lot of money for these conferences, so they had better come back with at least some news.
The DirecTV speculation grabbed headlines across the country and boosted EchoStar’s stock to a 17- month high before people realized it just wasn’t true.
Of course, I suppose an EchoStar/DirecTV is still theoretically possible, if AT&T doesn’t buy Echo Star first. Like the old saw goes: A broken watch is right twice a day.
EchoStar is one of the last remaining companies in its industry controlled by a single person. It’s also a company that needs to find a new strategy since satellite can’t provide Internet service as cable TV can.
And whenever a company like AT&T hits a speed bump on the information superhighway, people start to talk about ways to regain the momentum.
AT&T’s move to provide phone service, Internet access and video, dubbed “Project Lightspeed,” has been disappointing. So now there are a bunch of guys on Wall Street saying, “I know, maybe you should buy that satellite company run by that maverick Ergen guy in Colorado. Ergen doesn’t know what he’s doing with that thing anyway.”
It’s getting to be a really old story.
“People automatically assume that if you want a distribution company, you’ve got to buy EchoStar,” said Scherman. “The problem is, EchoStar is not for sale.”
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond to him at , 303-954-1967 or alewis@denverpost.com.
