Here’s a headline that you won’t see very often, ‘AT&T will NOT be buying Dish Networks,’ because it makes no sense ‘ it’s a bit like saying there’s no news this week. But repeated investment rumors in the US just need squashing, and while you can never absolutely rule out mergers, because there are some idiots out there, and they’re dangerous, it would be pretty much madness for AT&T to go and buy Dish Networks.
The reasoning is simple. It looked hard at what kind of deal it might do with either DirecTV or Dish Networks after it acquired Bellsouth and realized that the better of the two TV options was DirecTV and has not sold another Dish Network subscriber since. If Dish is in any kind of a state (in investment terms due to lack of subscriber adds) then it was caused by AT&T.
I know that some disingenuous person out there will suggest that this was a deliberate ploy by AT&T to drive the price of DISH down, so that it could buy it more cheaply, when it fact, had it wanted such a deal, it could have said, ‘This is the price,’ sell yourself to us or we’ll give the distribution deal to DirecTV, and it wouldn’t have had to contribute to the damage of the property it was acquiring.
Also if you look at the net TV additions for AT&T it’s now doing more than fine with U-Verse and added 246,000 U-Verse IPTV customers taking it to 3 million in service, compared with Verizon’s 3.5 million. We reckoned at the time that this meant it retains about 1.9 million DTH subscribers across both DirecTV, it’s current partner, and Dish, its old partner. Why would it chase a technology which is now a little more than 33% of its total TV customers? Especially after spending $billions on upgrading its network with Project Lightspeed to be IPTV ready. That network now reaches 27 million living units and it is notching up 22% penetration in markets where it has been for 30 months. So even if U-Verse doesn’t pass another home, it’s on track to take penetration to at least 6 million in 30 months or so. Why would you buy 14 million subscribers in another technology that you can’t guarantee would swap over?
And why is AT&T supposed to be interested in Dish? Because it owns one slicve of UHF spectrum that AT&T could have easily bid on, and has claims to two slices of MSS spectrum, which AT&T could easily acquire for less than it would have to pay for DISH.
Credit Suisse is behind the latest rumor after Dish moved to spend $1 billion on buying bankrupt satellite operator DBSD. If AT&T had wanted the spectrum, it would have bought the spectrum, but instead, Credit Suisse reckons that it might pay $20 billion for Dish and DBSD. Not to mention that Dish CEO Charlie Ergen would no longer have a train set to play with, and we don’t see him eager to sell.
If you then add the fact that Ergen’s ‘other’ train set, the EchoStar satellite services and set top business that was spun out of Dish, has just agreed to acquire/merge with Hughes Communications in a transaction valued at $2 billion, aimed at offering Dish perhaps a return path through satellite broadband, then the price of any deal that AT&T imagined just went up. Of course AT&T doesn’t have to opt to take EchoStar, and this could be construed as Charlie Ergen enlarging his portfolio for when he is bought out of Dish.
Hughes’ shareholders will get $60.70 per share, a premium of 31% over Hughes’ unaffected closing share price on January 19th, 2011. The transaction is expected to close later this year, subject to certain closing conditions. The merger will create a powerful force in video and data transport, the company said and EchoStar beat off bids from Intelsat and Inmarsat.