EchoStar, Hughes revise merger plan

Copyright 2002 / Los Angeles Times
Los Angeles Times...10/22/2002
From LexisNexis

Sallie Hofmeister, Times Staff Writer

In an effort to save their proposed $18-billion satellite-TV merger, EchoStar Communications Corp. and Hughes Electronics Corp. filed a revised plan Monday with federal regulators that will clear the way for new competition, said people familiar with the filing.

Under the proposal submitted to the Justice Department, EchoStar and Hughes have agreed to sell broadcast spectrum to cable rival Cablevision Systems Corp. Cablevision is planning to launch a limited satellite-TV service next summer.

Yet analysts wonder whether the Cablevision plan is too late. Two weeks ago, the Federal Communications Commission blocked the merger of EchoStar and Hughes, which owns DirecTV, because folding the nation's only two satellite-TV providers into one company would create a monopoly with limited consumer choice. Together, EchoStar and DirecTV would serve nearly 20 percent of all American households.

The FCC's formal decision, released Friday, indicated the commissioners remain skeptical of any new satellite-TV rival emerging because of the significant competitive hurdles. Critics of the Cablevision plan also have questioned whether the nation's seventh-largest cable company has the financial strength to become a bona fide satellite-TV competitor. Cablevision also submitted a proposal to the Justice Department on Monday as part of the effort, according to people familiar with the filings.

None of the parties involved would comment.

EchoStar and Hughes executives are scheduled to meet with the Justice Department on Monday. Various reports have indicated that the Justice Department also is leaning against the EchoStar-DirecTV deal.

Under the new proposal, EchoStar is willing to sell satellite slots that reach the West Coast, which would fill in blanks in Cablevision's satellite configuration, a source said. Cablevision now has spectrum that reaches mostly markets in the East and the Midwest.

EchoStar's shares closed Monday at $17, up 6 cents, on Nasdaq. Hughes' stock rose 10 cents to $8.97 on the New York Stock Exchange. And Cablevision's shares closed at $9.31, up 53 cents, on the NYSE.