EchoStar Lower on Plans to Bid for Wireless Spectrum

Shares of EchoStar Communications (DISH) fell 4.8% to $40.31 on Tuesday (losing as much as 10.6% intra-day) -- but recouped most of the losses in a single large trade in extended activity -- on negative analyst reaction to news the company will bid for wireless spectrum in the Federal Communications Commission's auction on Jan. 24. Steve Clement of Pacific Crest Securities called the auction -- with a minimum bid of $4.6B and likely reaching as high as $10B to $15B -- a "near-term cash drain with uncertain return on investment." William Kidd of Wedbush Morgan Securities was skeptical of EchoStar's ability to win the auction, let alone what it would do with the spectrum should it win. EchoStar shares were also hurt by the perception that a spectrum bid would prevent it from being taken over. AT&T, which is also participating in the auction, has been rumored to be eying a takeover of EchoStar. The fact that both are bidding in the auction prohibits them from discussing a potential merger. AT&T lost 1.1% to $37.86, but also regained most of the losses in extended trading. Meanwhile, shares of rival DirecTV Group (DTV) fell 2.3% to $23.90 on broader market weakness, after the company notified investors it will not bid in the FCC auction. DirecTV and EchoStar are both 5% (top-5) holdings of the PowerShares Dynamic Media (PBS) ETF.

Sources: Associated Press I, II, TheStreet.com
Additional Reading: If AT&T Is Buying Echostar, Why Are Insiders Selling? • Direct TV: May Be A Buy
Earnings call transcripts: EchoStar Q2 2007, DIRECTV Q3 2007

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