EchoStar Shares Up on Talk of DirecTV Acquisition

Telecom News Editorials Reports Glossary

6:30 am on July 20, 2006 | Category: Business, Television, Corporate, Regulation

Shares of America’s #2 satellite television provider, EchoStar Communications, have hit 17-month highs in recent days amid speculation that leading rival, DirecTV Group Inc., could try to purchase the company.

Such a merger would likely face regulatory and antitrust hurdles, but many analysts believe that these problems would be relatively easy to overcome. After all, the combined entity could be a strong competitor in the triple play communications industry, now increasingly polarized between cable and telecom carriers.

The decision to merge with DirecTV would rest solely with Charlie Ergen, EchoStar’s Chairman, CEO, and co-founder, who currently controls more than 90% of the company’s voting shares.

“Charlie has three choices. He can be acquired by DirecTV (or) AT&T or do a leveraged buyout and take the company private,” commented Kaufman Bros. analyst, Todd Mitchell, in a recent interview. “If he takes the company private, he still hasn’t done anything about his competitive position.”

In recent years, EchoStar has been on a slow but steady decline, unable to attract enough new customers to maintain financial sustainability. It is becoming increasingly clear to analysts that EchoStar will have a hard time staying both independent and profitable in this highly competitive and volatile industry.