AT&T's EchoStar Pursuit Cools

But buyout talks are far from dead, sources say.
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AT&T's

(T) - Get Report

hot pursuit of

EchoStar

(DISH) - Get Report

cooled suddenly last week as investors took a chilly view of the deal, but the talks continue.

The phone giant's board of directors grew concerned last week over the stock market's reaction to reports that the company was closing in on a bid between $64 and $68 a share for EchoStar, says a source familiar with AT&T's plans.

AT&T shares fell $1.80, or 4%, last Monday after

TheStreet.com

reported that the company was

nearing a $29.5 billion deal for EchoStar. Since the

discussions were first reported on Sept. 27, AT&T shares have fallen 12%.

But the deal isn't dead, say people close to both companies.

"Conversations are still going on," says another source familiar with the EchoStar side of the discussions. And the two sides are still talking of a price somewhere in the $60 range, the source adds.

AT&T had hoped to wrap up the deal with the Dish network broadcaster last week, but the phone company's board eased up a bit given the lack of investor enthusiasm. As one source said: "AT&T is digesting it."

Representatives for AT&T and EchoStar said the companies had no comment.

"From what I understand, it is still happening, just not as fast as expected," says another source who has talked to people close to the discussions.

Longtime AT&T watchers say the company has made up its mind to do the deal, noting that Ma Bell almost never gets this far without following through on a strategic move.

EchoStar's Dish network would give AT&T a national video offering, taking the telecom company well outside its largely Southwestern-focused markets. It would also acquire the video expertise and programming agreements necessary to operate on a national level.

Under AT&T, EchoStar's rising customer defection rate or churn would likely decline as the big telco makes it a prime element of its service bundle, industry observers say.

AT&T shares recently were unchanged at $37.63, while EchoStar shares were down $1 to $40.85.