The chatter heated up Thursday morning after Oppenheimer & Co. analyst Thomas Eagan released a research note speculating that telephone giant AT&T could pay as much as $56 per share for Dish. Eagan based his $56 target on the same EBITDA (earnings before interest, taxes, debt and amortization) multiple as the Dolans' bid for Cablevision Systems: 8.6 times 2008 EBITDA.
“Given the success of the cable triple play and the lack of success of AT&T's U-verse rollout,” Eagan wrote, “it seems to us a matter of when, not if, AT&T acquires EchoStar.”
Eagan raised his rating on EchoStar to a buy from neutral, saying that its purchase of Sling Media and the potential split-up of the company add $4-$6 per share to Oppenheimer’s valuation.
In the research note, Eagan said including Sling’s service may be worth an additional 100,000 subscribers starting in 2008. Also, separating the company will decrease capital expenditures at Dish and increase free cash flow.
Eagan argued that the time is right for AT&T to make a move, noting that this spring, the company increased its U-verse build-out costs and lowered its customer target by 1 million.
EchoStar would not comment on the rumors and AT&T was unavailable for comment.
Earlier this week, EchoStar announced that it was buying Sling Media for $380 million in cash and EchoStar options. The company also said it was considering splitting into two separate publicly traded companies, one being satellite-TV service Dish Network and the other rolling up EchoStar’s technology and infrastructure assets, including Sling.
Sling is the maker of the Slingbox, which connects to a set-top box or digital-video recorder and delivers television content to PCs and hand-held devices through an Internet connection.