Dish Network is looking a bit chipped, if not actually cracked or even broken – and maybe Direct TV is poised to pick up all the pieces and put the second-place satellite TV provider back together again.

That’s the picture I’m seeing with Dish, which saw it’s shares drop by $2.20 – or 7% total – after telecom giant AT&T is deep-sixing an agreement to help resell Dish’s programming services this week. Dish’s stock price, trading around $27 per share today, is off from a 52-week high of $42.78.

The news from AT&T seems to be hiding a bigger story. After all, the severing of a mere marketing agreement is hardly cause to put Dish’s stock into crisis mode. Some Wall Street eggheads say that AT&T might have been trying to send a bigger message to Dish.
Lehman Brothers analyst Vijay Jayant told his company’s investors that AT&T's notice of termination does not necessarily mean that the company has not selected Dish as its satellite partner going forward. He said AT&T is "just protecting its option to switch, if it wants to, without a major delay."

That said, if AT&T does cut its ties with Dish completely, then look for a bigger slide in Dish’s stock price. Jayant says that Dish's new customer sign-ups will decline and its churn, or customer cancellations, to increase, if AT%T turns its back on Dish altogether.

That would be a “heavy blow” to Dish, according to Sanford Bernstein analyst Craig E. Moffett . He estimates that AT&T contributes as much as 15 percent of Dish's gross customer additions.

Kaufman Bros. analyst Todd Mitchell thinks that Dish is a likely buyout candidate for Direct TV, the number one satellite dish provider in the U.S. "Dish has likely lost AT&T for good, but it is not over until it's over," he said. "(But) if Dish loses AT&T, we think it is a safe bet that DirecTV gets it, effectively shutting Dish out of all but the small rural telcos," Mitchell said.

Others say that Dish has its work cut out for, no matter what AT&T does. Writes Dow Jones NewsWire, in a company profile on Dish Network, “The Englewood, Colo., satellite TV provider has played the role of punching bag for the rest of the video-service industry, as rival DirecTV Group Inc. (DTV), the cable providers and the telecommunications companies all ate away at its market share in the first quarter. For Dish to rebound, the company must improve its customer service and high-definition TV offering - lingering issues that have left it vulnerable. And it may need to entice AT&T with a better deal if it wants to keep the telecom giant.”

I doubt that AT&T will return to Dish if it does, in fact, decide to completely cut ties. There are just too many options out there for subscriber partnerships, including Comcast, Verizon, Cablevision, and, of course, Direct TV.

But AT&T hasn’t left yet. The word right now is that AT &T The telecom giant is looking to open negotiations with both Dish and Direct TV, and will likely pit the two against each other for the best offer. Says Dow Jones, “AT&T is believed to receive a one-time payment for each customer it adds to Dish's service. But Qwest Communications gets a monthly recurring revenue for its DirecTV customers, and AT&T is likely angling for similar terms.”

Consequently, it’s an uphill climb for Dish. It’s had a run of hard luck – an HDTV satellite shot into orbit last year and failed to hit its mark and the satellite was tagged as a “total loss. Customer service is also a nightmare at Dish, and the company has only added 35,000 new subscribers in the first quarter, compared to 310,000 new customers added in the same time frame in 2007.

So it’s fair to say that AT&T may hold Dish’s future in its hands. If it drops Dish, then the company’s only hope may be if Direct TV is there to catch it before it crashes completely.