AT&T Demands Payment On $500 Million DISH Note; So Does This Mean No Deal?

Joseph Weisenthal
Wednesday, June 18, 2008; 12:07 AM

Given the old rumors that AT&T ( NYSE: T) might eventually acquire DISH, this filing after the bell should've jumped out a little more? In it, DISH says AT&T is requiring it to pay back a $500 million note due July 2010. The note would have converted to DISH shares at $60.25, but with those shares currently trading at $33.02, AT&T isn't waiting around. Bernstein Analyst Craig Moffett titles a note on this development: "Invoking the Pre-Nup is Rarely a Prelude to Love."

He says the $500 million note was first acquired in 2003, as part of AT&T's strategic resale agreement with DISH (then EchoStar). There's been some lingering speculation that AT&T could buy Dish outright, but Moffett suspects this is the final nail in that coffin. What's more, this could indicate that any strategic relationship is on the way out too. The winner: DISH rival DirecTV ( NYSE: DTV). AT&T went exclusively with DISH last year, per contractual obligations, but it can revisit things in October, and it may decide to change ships entirely.

His conclusion: "If AT&T were to consolidate its relationship around DirecTV ? which, as we have noted before has a stronger product, and a stronger brand ? then DirecTV would have a clean sweep of the RBOC relationships, as it would then have exclusives with AT&T, Verizon (NYSE: VZ) and Qwest. Conversely, Dish Network would be left with relationships only with a handful of smaller rural TelCos (and one relatively large one, in Embarq) at a time when it is already lagging badly behind DirecTV in gross addition share."


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