Clouds surround satellite TV merger

Murdoch could get back in picture if EchoStar-DirecTV fails.

By Ann Donahue -- Video Business, 9/25/2002

SEPT. 25 | While the proposed merger of satellite TV providers EchoStar Communications and DirecTV Inc. officially remains up in the air, sources inside the Beltway say that the Federal Communications Commission and the Department of Justice will nix the deal.

Staff attorneys from the DOJ have reportedly issued a negative recommendation on the $16 billion merger, which would create the country's largest satellite TV service with 18 million subscribers.

Representatives with EchoStar remain optimistic, however.

"We continue to provide information to the Department of Justice and the FCC," said EchoStar spokesman Marc Lumpkin. He declined to confirm reports that EchoStar CEO Charlie Ergen would meet with officials from both departments in the coming days.

A failure to complete the merger would reopen the door for Rupert Murdoch's News Corp., which was an ardent suitor for DirecTV before EchoStar reached its agreement in October. According to a published report, DirecTV is seeking to avoid a deal with Murdoch at all costs and is considering a management-led buyout.

A spokeswoman with DirecTV was unavailable for comment.

One of the main issues concerning the FCC and Department of Justice is monopoly concerns about TV access for rural customers who can't receive cable.

On Wednesday, Hughes Electronics Corp., the parent company of DirecTV, reduced its third-quarter subscriber growth forecasts. Instead of 250,000 to 300,000 new customers during the three-month period, the company now expects to acquire between 200,000 to 210,000. DirecTV attributed the drop to declining consumer confidence.

Despite these changes, DirecTV said it still expects to post higher-than-expected earnings, thanks to a jump in revenue per subscriber. Earnings for the quarter measured on an EBITDA basis should be boosted from $150 million to $195 million, according to the company.

During trading on Wednesday, shares of DirecTV were up more than 8% to $9.09. EchoStar was up more than 6% to $17.14

Reported in part by Daily Variety for Reed Business Information

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