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By Sanford Nowlin, San Antonio Express-News
Jan. 10--San Antonio-based communications giant AT&T Inc., for whom television has become an essential business component, may be in talks to buy EchoStar Communications Corp., the owner of the Dish Network satellite television service, analysts said.
AT&T is rolling out its own pay television services in coming weeks so it can more effectively battle cable providers, and it plans to sell Dish service in areas it can't reach with its network.
And for its part, Denver-based EchoStar may be looking for a deep-pocketed owner so it can better compete in the television business, analysts said. With 12 million customers, it trails Rupert Murdoch's DirecTV as the top U.S. satellite provider.
Though the two companies already have a marketing agreement under which AT&T bundles Dish along with its phone and Internet services, industry watchers cautioned that the existing relationship doesn't mean a merger is likely.
"It would be hard to imagine what either company would gain from an outright purchase," said Le Keough, telecom analyst for San Antonio-based Cullen/Frost Bankers. "Their current relationship certainly hasn't delivered much of what it promised." Speculation about an AT&T-EchoStar combination began circulating last week after a CNNMoney.com article said the two might be in talks. However, EchoStar Chief Executive Charlie Ergen on Friday denied he wants to sell.
AT&T officials declined to comment on the speculation.
Talk of an AT&T-EchoStar deal also may be fueled by the communications giant's plan to launch video services over its high-speed Internet lines. It wants to get into the TV business because its cable rivals such as Time Warner increasingly offer phone service as part of their service packages.
AT&T will launch its video service early this year in San Antonio, with plans to reach 18 million customers by the end of 2008. Officials have said the company will use Dish sales to fill in areas where it's unable to provide video over its own networks.
"I think an acquisition of a satellite TV provider would fit an immediate need, and they would continue to invest in their networks to offer network-based services," Atlanta-based telecom analyst Jeff Kagan said. "Eventually, when both services are available to the customer, the customer would have the choice." Even though a case could be made for the companies' merger, other analysts questioned whether AT&T would be interested. It already has the ability to sell Dish service through its marketing agreement with EchoStar.
What's more, the company -- formerly known as SBC Communications Inc. -- is still digesting its $16 billion merger with venerable long-distance giant AT&T Corp. Plus, it's working to improve the network of Cingular Wireless, its mobile communications unit.
"This isn't AT&T's priority right now," said Patrick Comack, telecom analyst for Zachary Investment Research in Miami. "It just seems fairly counterintuitive for them do this deal. Wall Street would slam them."
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