ECHOSTAR WANTS TO JOIN BIDDING FOR DIRECTV
DirecTV-News Corp courtship became complicated threesome following statement of EchoStar Chmn. Charlie Ergen that EchoStar- DirecTV merger would offer stockholders greatest value. Ergen, who has sat quietly on sidelines during DirecTV-News Corp. talks, reiterated his desire to work deal with long-time DBS rivals. “Obviously, for shareholders, the greatest synergy and therefore probably the value is some kind of combination between DirecTV and EchoStar,” Ergen told analysts in earnings conference call Thurs.
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Ergen comments were made public just days after SG Cowan research report indicated he had started laying groundwork for counterbid for DirecTV. “The problem with merger with News Corp. is that Hughes shareholders don’t know what they're getting,” satellite analyst said. “No one really knows what Sky Global is worth, whereas with EchoStar it has definitive value.” Ergen had indicated last Nov. that EchoStar was interested in buying DirecTV at around same time Rupert Murdoch and News Corp. started talks. However, Ergen admitted News Corp. was in “driver’s seat” following prolonged period of negotiations. He said EchoStar would “keep an eye on what happens” with DirecTV: “We have to be prepared for any eventuality.”
Ergen said his company would be interested in partnership or merger, but admitted deal could face intense regulatory scrutiny. Industry officials said FCC under leadership of Chmn. Powell might be more inclined to approve transaction, if it were to happen. Powell has expressed skepticism about ownership caps, preferring to allow market to dictate services. Report also indicated EchoStar-DirecTV partnership would place satellite TV in better position to compete with digital cable because of limited availability of spectrum and improved technology that compresses cable signals, allowing for more channels.
EchoStar is buoyed by unexpected high numbers, Wall St. analysts said. Company added 350,000 new subscribers to run total to 5.72 million in first quarter, and its stock jumped $4.60 following announcement. EchoStar plans to add 1.5- 2 million subscribers this year. Ergen said he wasn’t concerned about possible slowdown in economy. “If it happens, we're prepared for that.”
Meanwhile, Ergen said EchoStar 6, which had suffered anomaly 3 weeks ago, now was operating normally. He also said company had resumed shipments of Starband. Shipments had been placed on hold while issues involving installation were resolved, company said. Distribution of satellite Internet product was limited to initial group of 2,000 retailers. Now any retailer who participates in installation certification program can market product to customers. Company also revealed in 10-Q filing with SEC that it was self-insuring 5 of 6 satellites. EchoStar 1-5 are self- insured, EchoStar 6 is covered until end of July, filing said.