NEW YORK (CNNMoney.com) – Satellite television company EchoStar faces an interesting dilemma.

Right now, business is pretty darn good. The company reported on Wednesday that fourth quarter profits nearly doubled from a year ago on a 13 percent increase in sales and a 10 percent jump in subscribers. EchoStar (Research) finished 2005 with about 12 million subscribers to its DISH Network service.

And the DISH ran away with...: It's been a tumultuous ride for EchoStar shareholders but the stock has risen lately on takeover speculation.

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Shares rose 2 percent on the news Wednesday morning.

But the nation's second largest satellite TV firm faces tough challenges. In addition to competing with the larger DirecTV (Research), which is controlled by media conglomerate News Corp., EchoStar also faces competition from cable giants and telecoms like Verizon (Research) and AT&T (Research).

Some fear that EchoStar, despite having a solid, attractively priced TV service, won't be able to compete against companies that are offering video, voice and data, the so-called triple play.

With this in mind, there has been speculation that DirecTV and EchoStar are working on plans to jointly offer a wireless broadband data service to combat the threat from cable and telecoms. But until that's a reality, cable still has the upper hand, according to some analysts.

"EchoStar is a viable standalone but it is a one trick pony. It is very much a video story in a competitive market where cable has the triple play," said Matthew Harrigan, an analyst with Janco Partners.

There's also the possibility that EchoStar will soon face tougher competition from the two largest cable companies, Comcast (Research) and Time Warner (Research), in many markets. Comcast and Time Warner have teamed up to buy the assets of bankrupt cable firm Adelphia and that deal is set to close sometime this year. (Time Warner also owns CNNMoney.com)

The fear is that EchoStar, which often has sought to take advantage of customer dissatisfaction with cable firms, may run into trouble now that the two biggest cable companies are taking over the troubled Adelphia.

"Will the Adelphia acquisition by Comcast and Time Warner be an opportunity for EchoStar or will it make it harder to get subscribers? Adelphia has been a lackluster operator but Time Warner and Comcast should be better," said Thomas Eagan, an analyst with Oppenheimer & Co.

In addition, some are concerned that AT&T, which currently has a partnership to cross-sell EchoStar satellite TV service to its customers, will not need to partner with EchoStar for much longer since the telecom is in the process of building its own network for video services.

But Bill Jacobs, an analyst with money manager Harris Associates, which owns EchoStar in the Oakmark and Oakmark Equity and Income funds, said that these fears are a bit overdone.

"It's going to take a long time for AT&T to roll out video everywhere and EchoStar is strong in rural areas where AT&T is unlikely to go. For the next few years, EchoStar will be fine as a partner for AT&T," he said.

What's more, AT&T, which announced a blockbuster deal to buy BellSouth last week, could wind up funneling even more business toward EchoStar in the short-term.

That's because BellSouth, which currently has a partnership with DirecTV, could wind up terminating that deal once the AT&T merger is completed.

"EchoStar benefits from their relationship with AT&T going forward. The acquisition of BellSouth by AT&T raises the possibility that EchoStar could displace DirecTV with BellSouth customers," said Todd Mitchell, an analyst with Kaufman Brothers.

Finally, there's the question of whether or not EchoStar will even be a standalone entity for much longer. There has been speculation about whether EchoStar founder and CEO Charlie Ergen, who is also the company's controlling shareholder, is willing to sell the firm.

AT&T has been mentioned most often as the likely acquirer and Jacobs believes that a deal makes a lot of sense.

"AT&T is trying to roll out this huge video business but it doesn't have any scale, experienced management in video and they're likely to get killed on pricing," Jacobs said. "If AT&T buys EchoStar, that takes care of a lot of their problems."

Mitchell agreed that an AT&T acquisition of EchoStar is not out of the realm of possibility although it would probably not happen soon since AT&T has the BellSouth merger to digest.

In addition, he said that takeover speculation may also be built into EchoStar's stock price. Shares have shot up about 20 percent since mid-November.

Janco's Harrigan said he's also heard the AT&T-EchoStar rumors and adds that General Electric, which owns the NBC Universal media business, has also been mentioned in some takeover chatter. But he doubts that any deal for EchoStar is imminent.

Jacobs concedes that if EchoStar doesn't get taken over, it's going to be more difficult for EchoStar to compete against its more well-heeled rivals. Still, he continues to like the stock and doesn't think EchoStar is going away anytime soon.

"If EchoStar never gets together with AT&T it's a tougher business. But they'll generate a lot of cash flow. They'll have a place," he said.

Harrigan said he would not count out EchoStar either.

"Charlie Ergen has done an amazing job with an asset that doesn't have the brand power or sports programming of DirecTV or the triple play threat of cable," he said.

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Analysts quoted in this story do not own shares of EchoStar and their firms do not have investment banking relationships with the company.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan.