AT&T wooing EchoStar

CEO Ergen wants $65 a share, says report on Web site

Jeff Smith, Rocky Mountain News

Published September 28, 2007 at midnight

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EchoStar shares shot up nearly 6 percent Thursday in the wake of a report that AT&T is offering to acquire the Douglas County-based satellite-TV company for $55 a share.

EchoStar Chief Executive Officer Charlie Ergen is holding out for $65 a share, according to TheStreet.com, which used unidentified sources in its report.

Speculation about an AT&T- EchoStar deal has circulated frequently during the past couple of years. But many have wondered if Ergen, only 54 years old, would be willing to part with a company he has built from scratch since 1980.

Jimmy Schaeffler, senior research analyst at the Carmel Group in California, said he was very skeptical of the latest report.

"It's going to be a very challenging, protracted negotiation, if it's actually on the table," Schaeffler said. "Does Charlie want to sell? He's still traveling all over the world. He's still extremely engaged in the company. I think he loves what he does - most of the time. This would be like sending your child off forever. The better rumor is that Charlie buys AT&T."

On the other hand, Schaeffler said, Ergen would be viewed as a brilliant businessman if he could get AT&T to dole out between $55 and $65 a share.

EchoStar shares rose by $2.51, to $45.98, in active trading Thursday, but shares of San Antonio-based AT&T were flat at $42.83.

EchoStar became Colorado's most valuable company with a market cap of $20.6 billion, exceeding Newmont Mining's $20.3 billion.

At $45.98, the Ergen family's 240 million shares are worth $11 billion. At $55 a share, the 55 percent stake in EchoStar is worth $13.2 billion. And at $65, it's worth $15.6 billion.

Those figures, based on regulatory filings, include gross proceeds from all Class A and Class B shares held by Ergen and his wife, Cantey, and their family trusts, plus profits from all of Ergen's stock options.

EchoStar spokeswoman Kathie Gonzalez and AT&T spokesman Michael Coe both declined to comment about the merger speculation.

Renewed speculation of an AT&T-EchoStar deal appears to have been fueled by EchoStar's announcement this week that it is considering separating its Dish network consumer business from other assets.

On Thursday, Oppenheimer & Co.'s Thomas Eagan said: "It seems to us a matter of when, not if, AT&T acquires EchoStar." Eagan predicted AT&T would pay "north of $56" a share for EchoStar.

Analysts say a deal would give AT&T more TV customers to compete with cable companies that offer a triple play of video, Internet and phone services.

AT&T has been rolling out Internet-TV services with mixed success.

EchoStar also faces increased competition from the triple-play offerings.

AT&T and EchoStar have a relationship dating back years. AT&T, then known as SBC, invested $500 million in EchoStar in 2003, and for years has resold EchoStar TV services in 13 states in the Midwest and Southwest.

But that agreement is scheduled to expire early next year, and AT&T hasn't announced what it plans to do.

Since last year, AT&T and EchoStar also have jointly marketed the Homezone, which combines satellite-TV service with Internet content.

Schaeffler said a DirecTV-EchoStar merger is also a possibility. A proposed deal was blocked in 2002, but antitrust regulators might be more favorable now, in light of additional TV competition from telcos.

John Malone's Liberty Media is closing soon on a deal with Rupert Murdoch to get a controlling interest in DirecTV.

Liberty CEO Greg Maffei said Wednesday that a merger with rival EchoStar probably would be the best strategic option for DirecTV.

But Maffei expressed concerns about regulatory obstacles - and whether Malone and Ergen could agree over "who trumps whom" in controlling a merged company.

That brings it back to Ergen: At what point and price would he be willing to part with EchoStar?

Comments made by Ergen during a conference call with analysts last year perhaps sum it up best: "My personal preference is we'd always remain an independent company and, you know, it would always be nice to run it and so forth," Ergen said. "But we're not suicidal as a company, and if there's opportunities out there that make sense," management will look at them.

EchoStar

DISH: Nasdaq

$45.98

+ $2.51

smithje@RockyMountainNews.com or 303-954-5155. Finance editor David Milstead and Bloomberg News contributed to this report.

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