Can DISH Satisfy AT&T's Needs?

Hear that stomach growling? If you've been keeping up with the merger-gone-sideways world of AT&T (NYS: T) , then you know that noise is caused by the company's unmet appetite for wireless spectrum.

The proposed merger with T-Mobile that AT&T finally gave up on in December would have given it the spectrum it needed to better compete with Verizon (NYS: VZ) in their race to build superfast 4G LTE networks. To add injury to insult, AT&T not only failed to get that spectrum from T-Mobile, but it now must give T-Mobile some of its current spectrum -- along with $3 billion in cash -- to pay a penalty for the deal's failure.

And to pile on further, while AT&T's lawyers and lobbyists were pounding the pavement between the Department of Justice and the Federal Communications Commission trying to get the merger approved, Verizon was busy making its own spectrum-grabbing deals. Also in December, just before AT&T threw in the merger towel, Verizon made a deal with three cable companies -- Comcast, Time Warner Cable, and Bright House Networks -- to acquire a large cache of spectrum.

So, not to mince words: AT&T is desperate for more wireless spectrum. And when you add that desperation to the finite amount of spectrum that is out there, AT&T is on the wrong side of a seller's market for spectrum.

That brings us to DISH Network (NAS: DISH) , which happens to hold a bundle of spectrum that may have AT&T's mouth watering. Last week, DISH CEO Joe Clayton was interviewed on Bloomberg Television, where he said: "We're open to all possible options. We could be acquired or we could be the acquirer." If AT&T happens to become the acquirer, it would certainly have to pay a premium. Money manager Kevin Shacknofsky of Alpine Mutual told Bloomberg that paying "$50 [for a DISH share] is not cheap but reasonable." At the time of this writing, DISH shares were selling for under $28.

Other spectrum-grabbing scenarios for AT&T could include plays for Leap Wireless (NAS: LEAP) or MetroPCS (NYS: PCS) . However, looking at how well AT&T's T-Mobile acquisition turned out, maybe trying to acquire another wireless carrier lock, stock, and barrel may also be looked at askance by the regulators.

AT&T does have a tough row to hoe, but I wouldn't bet against it. Ironically, the antitrust issues that doomed its T-Mobile merger may actually play in its favor here. If the FCC and DOJ wouldn't let that merger happen because it would create an overpowering duopoly of AT&T and Verizon, what would it think about a mobile-carrier playing field that had only one viable major carrier: Verizon? Given that, I wouldn't be surprised if Verizon's deal with the cable companies gets a closer look than it has received so far. If that deal gets axed, too, then the horizon looks brighter for AT&T.

Keep track of these companies by placing them on the Fool's watchlist:

At the time this article was published Fool contributorDan Radovskyowns shares of AT&T. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.