spacetoday.net: EchoStar and Hughes drop merger plans

Posted: Tue, Dec 10, 2002, 10:39 PM ET (0339 GMT)
Facing strong regulatory opposition, EchoStar and Hughes Electronics announced Tuesday that they were ending plans to merge their satellite television operations. The two companies said in a joint statement that they had reached a settlement on terms to terminate the proposed merger. Under the agreement EchoStar will pay Hughes, which operates the DirecTV service, a $600 million termination fee. However, Hughes will retain its 81 percent ownership stake in satellite operator PanAmSat; EchoStar had previously agreed to buy that stake even if the merger was called off. The companies cited strong opposition to the merger from both the FCC and the Justice Department, including a suit filed in federal court in October by the Justice Department and 23 states to block the merger. Those agencies cited anti-competitive concerns had the two companies, which dominate the direct-to-home satellite television market in the US, become a single entity. The timing of the announcement was somewhat unexpected, since the two companies filed a revised merger plan with the FCC less than two weeks ago, proposing to sell and lease some assets to Cablevision to allow that company to help establish a new satellite TV service. Under the original merger agreement Hughes could not back out on its own until mid-January. The end of EchoStar's merger attempt opens the door for Rupert Murdoch's News Corporation, which was outbid by EchoStar last year, to make another effort to acquire Hughes.