After all the fevered expectation that built up last year, it turned out that Charlie Ergen, founder and CEO of EchoStar Communications Corp, did not sell his DISH Network satellite TV business to AT&T Inc. But he did spin off his set-top box unit EchoStar Holdings under the ticker SATS. There was also some insider selling at the time, which gave the impression a company sale wasn’t imminent.

And then we learned Ergen was preparing a bid for wireless spectrum in the upcoming U.S. FCC 700MHz auction. Such a move arguably ruled out any merger talks with AT&T , which is also bidding as FCC rules do not allow two bidding parties to talk with each other.

So end of story, right? Citi analyst Jason Bazinet doesn’t think so.

Bazinet, you may recall, got DISH shares jumping last year when he suggested there was a 65 percent chance that AT&T would buy EchoStar. In a new note published yesterday, he says:

Contrary to popular belief (and our prior view), tax-free SATS spin doesn’t thwart M&A for two years. And while insider selling was large in magnitude, it was narrow in breadth, suggesting M&A cannot be ruled out. Finally, the 700MHz auction delays, but doesn’t preclude, M&A.

We can’t help but wonder if CEO Ergen will sell DISH, but embed a long-term (above market) set-top-box contract into a sale agreement. This sort of scenario would allow Mr. Ergen to capture more M&A upside if he increases his SATS stake or takes SATS private.”

(Photo: Reuters)