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Wednesday, November 21, 2007

Oh, shit.
Posted by Jill | 10:41 AM
Or as Melissa would say, "Fuckity fuck-fuck-fuck-fuck-fuck."

As you regular readers know, Mr. Brilliant and I have begun researching HDTV with an eye towards purchasing right after War on Christmas. We've been a Dish Network household for about eight years, and we like the company so much that when I sold the Home Depot stock in my IRA, I had the broker buy some shares of Echostar instead.

The service is great, the programming selection is fantastic, they keep giving us new channels like the Documentary Channel and Veria, they give great promotions to their best customers, and the stock is up over $10 a share since I bought it.

And now it looks like it may all be ruined:

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.

Wall 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.


That may be, but a quick Google search this morning has more than one analyst saying that an AT&T takeover of Echostar within the next twelve months is highly likely.

I can't imagine a company I'd less want to take over my beloved Echostar than AT&T. Charlie Ergen is a bit of a folk hero to his customers, and to turn us over to those wonderful people who brought you secret NSA wiretap rooms is just too horrifying for words. It's at the very least not the stuff that makes me want to commit to another two years of Dish Network at this point.

The problem is, what are our options? Where we live, the alternatives are the odious Cablevision, which offers crappy customer service and outrageous pricing, and the as-bad-as-AT&T Verizon, which has sent door-to-door salesmen employed by third parties who obviously don't screen very well to harangue homeowners at all hours of the day and night to try and strongarm us into taking their FIOS service.

It's bad enough that we have our DSL and cell phone through Verizon; at least we have been able to do business for TV with a company that isn't completely ghastly.

If AT&T buys Echostar, however, all this will change.

If you listened to Randi Rhodes yesterday, you heard a great show about media consolidation. It's no exaggeration that just five companies own about 90% of what comes into our houses. If Dish goes the way of all startups, that consolidation is going to be that much worse.

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