EchoStar Communications Corp. chairman Charlie Ergen said last week that DirecTV Inc. has rebuffed his attempts to discuss how EchoStar might make a bid for its direct-broadcast satellite rival's assets.
DirecTV parent company General Motors Corp. has publicly said it is considering the sale of Hughes Electronics Corp., which includes DirecTV. "My gut feeling is they're probably pretty far along in talks with someone else," Ergen said.
During a conference call with analysts, Ergen noted that News Corp. was the only likely candidate to acquire DirecTV, which boasts more than 9 million DBS customers in the U.S., compared with 5 million for EchoStar's Dish Network.
But Ergen suggested completion of a deal between Hughes and News might require the involvement of several parties. That's mainly because the cash requirement is so high.
Microsoft Corp. and Liberty Digital have been reported as possible supporting players in a News takeover of DirecTV.
"You'll probably see a $50 [billion] or $60 billion value for DirecTV," Ergen predicted, adding that the price tag is an endorsement of satellite technology.
Analysts were not surprised that DirecTV didn't take Ergen's takeover plans seriously.
"I never thought of EchoStar as a real player there," PaineWebber Inc. analyst Thomas Eagan said. He expects a deal announcing DirecTV's new owners by the end of this year.
Recent volatility in both News and General Motors stock "doesn't help matters," Eagan added.
Lehman Brothers Inc. analyst Bob Berzins suggested that Ergen may have wanted to use a potential bid for DirecTV as a means of seeking inside information on the competition as part of the due diligence process.
When multichannel players such as News' Rupert Murdoch and Liberty's John Malone "make a $60 billion bet that this is the long-term future of the industry, that says something," Ergen said.
Such a deal would be a positive for the satellite industry in general, Eagan agreed, "but it would make DirecTV a stronger competitor" against Dish.