EchoStar-DirecTV merger headed for rejection?

The proposed US$18.3 billion merger between US direct broadcast satellite providers EchoStar and DirecTV looks likely to be rejected by the US Justice Department for possible violation of antitrust laws.

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By  Marcus Webb Published  October 1, 2002

The proposed US$18.3 billion merger between US direct broadcast satellite providers EchoStar and DirecTV looks likely to be rejected by the US Justice Department for possible violation of antitrust laws.

Government regulators are reviewing antitrust questions and are expected to recommend this month to challenge the deal. Even if the merger receives approval, many believe regulators will insist on limiting EchoStar's ability to raise prices or control programming, a condition EchoStar officials may find unpalatable.

In anticipation of a possible rejection, DirecTV officials are already contemplating a management-led buyout. According to a report in the LA Times, some DirecTV executives may resort to a buyout of the company in the belief that is a better alternative to selling the leading satellite TV provider to Rupert Murdoch's entertainment giant News Corp., who lost to EchoStar in a bidding war for Hughes and DirecTV in October last year.

Early this month, a diverse group of opponents of the deal held a rally at the Justice Department headquarters urging antitrust officials to "dish the merger." Protesters numbering about 100 people expressed their opposition to the merger. Jim May, the National Association of Broadcasters chief lobbyist said the purpose of the protest was to demonstrate to the Justice Department that there is a very broad spectrum of groups and individuals who oppose the merger.

Broadcasters, small cable operators, Hispanic and rural organisations, organised labour and more than 150 lawmakers have all registered their opposition to the deal with both the Justice Department and the Federal Communications Commission (FCC). News Corp. head Rupert Murdoch says the merger would give television programmers fewer competing buyers for their shows and Missouri Farm Bureau Federation president Kruse says merger could keep households in sparsely populated areas from having a choice of pay television providers.

Linda Golonder, president of the National Consumers League, describes the merger as plain and simple monopoly. "For an estimated 22 million households that are beyond the reach of cable TV, the merger means take it or leave it; it's EchoStar or nothing. For the rest of us, it means you'll be left with a cable monopoly and a satellite monopoly," she told Hollywood Reporter.

Hughes' parent, General Motors Corp., originally put the El Segundo-based subsidiary up for sale because it needed cash from its controlling 30 percent stake in the publicly traded company to fund automotive operations. But after trying for more than two years to sell Hughes, GM is clearly showing signs of impatience.

The Federal Communications Commission is also reviewing the merger.

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