Shortly after shocking the multichannel-video world with his
winning $25.8 billion bid for General Motors Corp.'s Hughes Electronics Corp.,
EchoStar Communications Corp. chairman Charlie Ergen started the long road of
selling the deal to investors.
In a conference with reporters and analysts here Monday, Ergen -- along with
GM CEO Richard Wagoner, Hughes CEO Jack Shaw, DirecTV Inc. CEO Eddy Hartenstein
and GM vice chairman and chief financial officer John Devine -- outlined more
details of the deal.
Wagoner called the deal a 'triple win' for Hughes, GM and EchoStar
Shaw said Hughes executives have been looking at the merger for several
months, adding that at a confidential meeting a few months ago, several Hughes
executives were asked which proposal provided the best value.
'To a person, each one said EchoStar,' Shaw said. 'Charlie Ergen built a
remarkable company and he expects to win. The fact that we're standing together
today is testament to that.'
However, Shaw would not compare the deal to the other offer on the table --
from News Corp., which backed out of the deal Saturday after 18 months of
According to Ergen, EchoStar will extract about $5 billion in synergies from
the merger by 2005, including between $900 million and $1.2 billion in
equipment-related savings; $750 million to $850 million in reduced churn; $600
million to $700 million in reduced programming costs; and $400 million to $450
million in reduced general and administrative expenses.
The merger will bring another $2.2 billion in revenue synergies, including
$900 million to $1 billion in advertising; $700 million to $800 million in local
services; $75 million to $125 million in video-on-demand and pay-per-view
revenue; and $50 million to $100 million in high-definition television.
Ergen also shrugged off concerns that the merger -- which would combine the
Nos. 1 and 2 direct-broadcast satellite service providers in the country --
could be blocked by federal regulators.
Ergen pointed out that cable operators control about 80 percent of the
multichannel-video market, while DBS only has 17 percent. And he stressed that
the competition isn't other DBS companies, but cable itself.
Ergen again said he would be willing to cap prices in order to allow rural
subscribers continued access to service. He added that the merger will also
allow the new EchoStar to bring new products and services -- like broadband data
and access to local broadcast channels -- to the rural market.
'There's no way we would be able to do that unless we put these two companies
together,' Ergen said.