EchoStar Slides on Report It Will Bid on Spectrum

EchoStar (DISH) shares got hit hard Tuesday on a report that the company will bid in the FCC’s upcoming 700 MHz spectrum auction. TheStreet.com reports that Lehman issued a research note saying EchoStar has submitted an application to the FCC to bid in the upcoming auction. I can’t find the note so far, so I can’t confirm anything about what Lehman wrote. Meanwhile, Dow Jones is also reporting that EchoStar plans to bid. By contract, DirecTV (DTV) has said it will not bid in the auction.

A bid by EchoStar has two negative implications for the stock. One, if they won, it would imply a huge capital outlay to build out a network. And two, it would put the kibosh on any remaining hopes for a near-term acquisition of the company by AT&T (T), since under the rules of the auction competing bidders are barred from communicating to prevent any potential collusion. (AT&T has said it will bid in the auction.) As Oppenheimer’s Thomas Eagan noted this afternoon, “If both DISH and T do bid, it is likely that an imminent T take-out of DISH is remote.” Citigroup’s Jason Bazinet writes that while he doesn’t know if EchoStar is going to bid, he doesn’t think they have any chance of actually winning. Since “the likelihood of winning spectrum is so low, the sell-off may prove temporary,” he asserts.

EchoStar on Tuesday fell $2.05, or 4.8%, to $40.31; the stock has rebounded $1.75 in after hours trading.