Shares of EchoStar Communications Corp. rose more than 4 percent Tuesday on new reports about a possible acquisition of the satellite-television provider by telco giant AT&T.
Douglas County-based EchoStar closed up $2.04, or 4.2 percent, at $51.08 after a report by business website said AT&T had hired Goldman Sachs to negotiate a deal to acquire EchoStar.
In addition, Citigroup analyst Jason Bazinet published a research note stating there’s a 65 percent chance AT&T will buy EchoStar in the next year. He said the price could be as much as $65 a share, or $29.1 billion.
Neither EchoStar nor AT&T would comment on the reports by TheStreet and Citigroup.
AT&T has launched its own video service, U-verse, and in September reported that it had more than 100,000 U-verse customers. But questions have been raised about whether that service is viable.
AT&T also bundles and resells EchoStar’s Dish Network service to customers.
EchoStar is the second-largest satellite-TV provider in the nation, with 13.6 subscribers to its Dish Network. The company added 480,000 subscribers during the first six months of 2007.
Wall Street analysts have speculated for years that EchoStar would merge with another pay-TV provider or AT&T.
EchoStar said last month it is planning to split the company in two, spinning out its technology division into a new publicly traded company. The move spurred further speculation about a buyout.
Oppenheimer & Co. analyst Thomas Eagan at that time published a research note regarding EchoStar’s plan, saying it was “a step towards a sale of Dish to AT&T.” He upgraded EchoStar from “neutral” to “buy.”
EchoStar’s stock has risen 15 percent since the split announcement Sept. 25 and subsequent stream of possible buyout reports.
If AT&T is truly courting EchoStar, it could mean that the company has given up on its U-verse pay-TV service, which many analysts contend isn’t as successful as expected.
“I think AT&T has a problem with U-verse or it doesn’t work,” said Todd Mitchell, analyst for Kauffman Bros.
He said AT&T must decide internally if it’s going to deploy fiber-optic line closer to homes, similar to Verizon’s FiOS TV service, or go with EchoStar. Placing fiber closer to residents is more expensive than upgrading DSL- type lines to handle video signals, a method AT&T is using.
Whether AT&T would pay an amount EchoStar chairman Charlie Ergen would agree to remains questionable, Mitchell said.
“(AT&T) could probably make a case for buying EchoStar, at what Ergen wants to sell it for, based on the cost to deploy fiber,” he said.
The Wall Street Journal, reacting to ‘s report, reported Tuesday that the TheStreet’s story about AT&T hiring Goldman Sachs “looked dubious.”
“After speaking to a number of bankers who follow the industry, we don’t expect AT&T will be pulling the trigger on a purchase of the … company anytime soon,” the Journal wrote on its website.
Shares of AT&T closed down 37 cents at $41.82.
Kimberly S. Johnson: 303-954-1088 or kjohnson@denverpost.com
