Dish Stock Up on AT&T Speculation


Shares of Dish Network rose more than 8% ($1.82) in early trading Thursday after Credit Suisse analyst Jonathan Chaplin released a report speculating that the time may be right for AT&T to buy the No. 2 satellite TV service provider.

Speculation that AT&T would attempt to buy Dish has run hot and cold for years. But Dish's recent moves to acquire wireless spectrum could make the satellite company even more attractive.

Dish shares climbed as high as $24 each on Feb. 10 (up 8.2% or $1.82 per share). The stock has since settled back, closing at $23.49 each, up 5.9% or $1.31 per share.

Dish recently said it would acquire bankrupt hybrid satellite and terrestrial communications company DBSD for $1 billion, a move that would give Dish access to a block of 20 MHz MSS wireless spectrum that Chaplin wrote could be worth between $3 billion and $5 billion.

Coupled with Dish chairman Charlie Ergen's play for another 20 MHz of MSS spectrum owned by TerreStar -- through EchoStar Satellite, a former Dish affiliate -- and Chaplin believes that AT&T may not be able to resist.

According to Chaplin, AT&T is hungry for wireless spectrum, especially as smartphone penetration climbs, and Dish potentially could capture high-quality frequencies.

In addition, its DBS business would allow AT&T to offer a triple play product outside of its U-Verse footprint and could lower its programming costs through existing Dish contracts. Dish also has about 14.3 million video customers, compared to about 3 million for U-Verse.

"We believe these assets are so appealing, that AT&T could bid for DISH again," Chaplin wrote.

Merger speculation between the two companies was heavy a few years ago after AT&T (the SBC Communications) became a reseller of Dish service. That speculation waned in 2008 when AT&T dropped Dish in favor of reselling DirecTV service.

But the analyst believes that both sides may be warmer to an offer. While Ergen may not be ready yet to retire -- he is only 57 years old -- Chaplin estimated that AT&T could offer as much as $20 billion for Dish and EchoStar, a 70% premium to their current value.