EchoStar shares off on speculation of spectrum bid

NEW YORK, Dec 4 (Reuters) - Shares in EchoStar Communications Corp (DISH.O) fell as much as 10.6 percent on Tuesday as speculation mounted that the satellite television operator had entered the U.S. government auction for wireless spectrum. Analysts said if market speculation were correct, it would rule out any chance of phone company AT&T Inc (T.N) holding merger discussions with EchoStar, as U.S. regulatory rules prevent any two bidding parties from holding merger talks.

AT&T has said publicly that it will be participating in the bidding process for blocks of 700-megahertz wireless spectrum in an auction which is managed by the U.S. Federal Communications Commission.

The deadline for filing applications formally declaring an intention to bid was on Monday, but bidders can remain anonymous until the FCC reveals names later this month.

EchoStar has not publicly confirmed that it is taking part in the process and did not immediately reply to inquiries.

"The rules are you can't talk M&A with anybody who's bidding in the auction, so if EchoStar are bidding then they can't talk with AT&T," said Todd Mitchell, analyst at Kaufman Bros.

Industry watchers believe that EchoStar could be interested in using the wireless spectrum as a way to deliver voice and data services to complement its video service, helping it to compete more effectively with cable companies' own "triple-play" offers.

EchoStar shares rose to a year-high of $52.54 in mid-October as investors bet that AT&T would likely make a bid for the company by the end of the year, although the shares have been hit by volatility amid conflicting rumors.

Analysts said an acquisition of EchoStar's DISH Network by AT&T could help accelerate the phone company's ambitions to have a comprehensive video offering to add to its phone and Internet services.

AT&T is currently building its own U-Verse advanced video service, but analysts said the service is rolling out more slowly and expensively than investors had hoped.

Shares in EchoStar dropped as low as $37.85 on Nasdaq before recovering somewhat. In early afternoon dealings, they were off $2.22 or 5.2 percent at $40.14. Shares in AT&T were off 4 cents to $38.24.

(Reporting by Yinka Adegoke and Ritsuko Ando)

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