Ergen Holds Winning Hand in GM Bid

10/29/2001 12:34 AM Eastern

EchoStar Communications Corp. chairman Charlie Ergen beat out business rival
Rupert Murdoch, chairman of News Corp., in his bid to gain control of the
largest direct-broadcast satellite company in the United States, DirecTV

General Motors Corp. announced a deal late Sunday night that would spin off
DirecTV parent Hughes Electronics Corp., which would then merge with EchoStar in
a deal valued at nearly $26 billion in cash and EchoStar stock.

Late Saturday night, News Corp. issued a brief statement announcing that it
had dropped its long-standing bid for Hughes. Murdoch had hoped to merge Hughes
and its DirecTV direct-broadcast satellite service into his SkyGlobal Networks
worldwide satellite-television operations.

'We have no option but to withdraw immediately our fully negotiated and
financed proposal,' Murdoch said in the statement, adding, 'We are disappointed
with the [GM] board's inaction in the face of an as-yet-unfinanced

With the help of bridge loans from GM and Deutsche Bank AG, EchoStar is
expected to fund $5.5 billion in financing to close the transaction, according
to a press release.

Ergen would head the new company, which would remain named EchoStar but would
market the DBS service under the more widely recognized DirecTV brand.

Ergen has agreed to select the best person from among the two DBS firms for
each job in the combined company. DirecTV CEO Eddy Hartenstein will serve on the
transition team.

In the spring of 1997, Murdoch and Ergen announced a DBS partnership of their
own, but it quickly fell apart. Shortly thereafter, Murdoch joined the cable
industry in attempts to make its satellite service, PrimeStar Partners L.P.,
more competitive with DirecTV and EchoStar. PrimeStar's attempts to deliver a
high-power DBS service were thwarted by the Department of Justice, and
PrimeStar's assets were eventually sold to DirecTV and EchoStar.

The proposed merger of DirecTV and EchoStar would create a DBS powerhouse
with more than 16.7 million subscribers. The National Rural Telecommunications
Cooperative and its affiliates control 1.8 million of DirecTV's subscribers.

The merger is subject to regulatory and shareholder approval.

In its press release, Hughes noted that the cable industry still controls
more than 80 percent of the pay television market.

'The new company would have enhanced scale to compete more effectively
against the dominant U.S. cable and broadband providers -- a critical factor
given increasing consolidation in the cable industry,' Ergen said in the press

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