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EchoStar Takeover Talk Bumps Stock

11/23/2007 07:00:00 PM Eastern

Shares of EchoStar Communications were whipped around last week as talk of an AT&T takeover moved from simmering to boiling.

The stock surged $7.66, or 19%, Monday on press reports and a Citigroup analyst research note that stoked the acquisition fire. Citigroup analyst Jason Bazinet upgraded EchoStar on Nov. 16 to “Buy” with a $52 price target, putting the chance of AT&T acquiring the satellite television provider in the next 12 months at 65%. Bazinet said the stock was attractive after pulling back 23% in the wake of its earnings, which revealed weaker-than-expected subscriber growth.

But enthusiasm waned and EchoStar shares fell 9% on Tuesday, helped in part by a report on the Wall Street Journal Website claiming the two sides weren't even talking. It was down more than 2% at midday Wednesday, trading around $42.18 after hitting a high of $50.80 on the week.

Talk of a marriage between EchoStar and AT&T has been pervasive, as the telco giant needs a video service to bundle with its phone and data services. AT&T is already pouring billions into the rollout of its IPTV video service U-verse, and also partners with both EchoStar's Dish Network and DirecTV to bundle services. It's expected that the telco will pick by year's end one DBS provider to continue partnering with.

On AT&T's earnings call last month, CFO Richard Lindner said the company's preference was to serve its customers with the U-verse video service where it can and fill in the holes with the DBS partnerships.

Earlier this month, the company increased by $500 million its U-verse capital expenditure estimate for the 2007-2008 period to $4.5-$5 billion, but also revised lower its homes-passed estimate by 1 million to 17 million. AT&T's subscriber roll stands at just 126,000 after adding 51,000 in the third quarter.

Representatives at AT&T and EchoStar declined to comment.

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