Merger talk boosts EchoStar Murdoch's DirectTV reported near deal; antitrust issues linger
By Joyzelle Davis Rocky Mountain News July 18, 2006 http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_4851243,00.html EchoStar's shares hit an 18- month high on Monday following a report that larger rival DirecTV is close to buying the Douglas County- based operator of the Dish Network satellite TV service. Some top money managers attending the annual Allen & Co. media mogul conference in Sun Valley, Idaho, last week "were convinced (DirecTV Chairman Rupert Murdoch) was close to making a deal" to buy EchoStar, the Los Angeles Times reported. The paper also said that EchoStar CEO Charlie Ergen told guests at the conference that a merger could save $3 billion each year in expenses. Federal regulators four years ago spiked EchoStar's proposed purchase of DirecTV from then-owner Hughes Electronics, citing antitrust concerns. Since then, "an argument could be made" that the landscape has substantially changed now that Comcast and Time Warner control the cable market and phone companies are entering the video market, DirecTV's CEO Chase Carey told the Times. "It makes a lot of sense," said Matthew Harrigan, an analyst at Greenwood Village-based Janco Partners. "A lot of time, you put these companies together and the cost savings aren't that evident. But there are enormous overlaps between EchoStar and DirecTV, and every 1 percent improvement in margin is worth over $250 million" in savings. EchoStar has 12.2 million subscribers, while El Segundo, Calif.-based DirecTV has 15.4 million. Talk of a merger between the two started in March, after DirecTV Chief Financial Officer Mike Palkovic told an industry conference that "we'd be crazy not to look at it." But he added that "market conditions" would first have to change for the deal to pass regulatory scrutiny. Ergen, addressing the speculation in a May earnings call, insisted EchoStar likes its independence but added that "we're not suicidal as a company, and if there's opportunities out there that make sense," management will look at them. If Ergen were to sell, it wouldn't be for cheap, analysts said. Ergen, EchoStar's controlling shareholder, would want "at the very least" $40 per share, said Wachovia Securities analyst Jeff Wlodarczak in a research note. Murdoch, in an interview with the Times, dismissed the idea that Ergen would sell. EchoStar spokeswoman Kathie Gonzalez declined to comment, as did DirecTV spokesman Robert Mercer. The two are cooperating on a joint bid for next month's U.S. auction of wireless airwaves, which could allow the satellite providers to launch their own Internet service. DirecTV and EchoStar's technology doesn't allow them to offer phone or Internet service, putting them at a disadvantage against cable companies' attractively priced bundles of phone, Internet and video service. Phone companies also are entering the market with similar bundles. Wlodarczak noted that while phone companies present another competitor in cities, rural markets still rely on DirecTV and EchoStar for TV service. That could create an antitrust concern for regulators. Janco's Harrigan also cautioned about taking a report out of Idaho summer camp for media titans too seriously. "People are always looking for news out of the Allen conference," Harrigan said. "I'd be a little careful" about reading too much into the report. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
