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AT&T remains silent on Echostar bid

23 ноября 2007

As one might expect, AT&T, the world’s largest telecoms group, is skilled in the art of communications. But on the persistent rumours that the company might bid for Echostar, the company has remained tight-lipped.

AT&T remains silent on Echostar bidWall Street rumours about a potential takeover of the second-biggest US satellite operator have swirled around both companies for several years. However, they peaked this week after reports in Barron's and the financial website TheStreet.com said that AT&T was preparing a takeover bid worth as much as $26bn (£12bn) and that both companies have been in talks.

The reports sent Echostar's share price, depressed by recent disappointing quarterly results, soaring. The stock closed up 27 per cent at $47.49 on Monday, but slipped a little on Tuesday when no bid materialised.

Echostar was founded by Charles Ergen, who retains control of the satellite company. In spite of recent indications that Echostar's subscriber growth may be slowing, there is no sign that Mr Ergen wants to lose control or leave the business.

Monday's share price gain however, reflects the belief among some investors that a deal is not just plausible, but likely.

The speculation surrounding AT&T and Echostar comes amid a realignment of the industry in the US.

Echostar and DirecTV, the largest US satellite operator, have succeeded in taking millions of customers from cable operators such as Comcast and Time Warner Cable in the past decade by offering high-quality multi-channel video and good customer services.

Meanwhile, AT&T and Verizon Communications, the second largest US carrier, are both scrambling to roll out their own television and video services, targeting customers who pay $100 or more a month for their multi-channel TV offerings, internet access and landline phone services.

Cable companies have reported in recent weeks that they are starting to feel the pinch, particularly from Verizon, which had signed 717,000 subscribers to its advanced fibre optic-based video service by the end of September.

Shares in Comcast and Time Warner Cable have been hard hit, partly because of investor fears of a price war as competition heats up.

Proponents of an AT&T-Echostar deal argue that Echostar's Dish Network - with 13.7m satellite-TV subscribers - would bolster AT&T's U-verse IPTV (Internet Protocol TV) offering, which has just 126,000 customers. Others are not so sure.

"A takeout of EchoStar by AT&T is possible, but not certain," said Todd Mitchell, of Kaufman Bros, in a note on Tuesday. Craig Moffett, an analyst at Sanford Bernstein, is also doubtful. "There is nothing AT&T can do by bolting a satellite provider on to the phone network to give it a cost advantage against cable," he said.

AT&T already resells both Echostar's Dish and Direct­TV services to its customers and is likely to continue to do so in areas where the fibre optic-based U-verse service is not viable.

As a result of AT&T's acquisition of BellSouth late last year, the contracts between AT&T and the satellite companies became due for renegotiation, further fuelling the takeover speculation. As far as talk about a possible takeover, however, AT&T, like Echostar, declines to comment.

Источник: Financial Times

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