The nation's two largest satellite television companies are staging an eleventh-hour blitz to save their proposed merger -- including remaking the deal itself -- spurred by a surprise announcement last week that the Federal Communications Commission was set to rule on the partnership.
EchoStar Communications Corp. is attempting to buy DirecTV, owned by Hughes Electronics Corp., a division of General Motors Corp., in a $32 billion deal that would create one giant satellite television provider.
If regulators approve EchoStar's purchase of DirectTV, EchoStar CEO Charlie Ergen will lead a giant satellite television provider that will compete head-to-head with the cable industry. Above, Ergen speaks at an October 2001 press conference in New York City.
(Stuart Ramson - AP/File Photo)
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For the past 11 months, the two companies have been trying to persuade the FCC and the Justice Department to approve the deal, which faces considerable regulatory and antitrust hurdles. Last Friday on Fox News, FCC Chairman Michael K. Powell surprised many involved in the merger by saying his agency might be "days away from a decision."
If the FCC were to rule against the merger, as those who have met with FCC staffers anticipate, it would make the deal much more difficult to consummate, even if the Justice Department approved the union -- hardly a sure thing.
In response, EchoStar, which owns DirecTV rival Dish Network, and Hughes have scrambled to slow down the FCC, sending a letter to Powell on Monday asking that his agency wait until Justice makes a decision on the merger. The two companies have offered to reconfigure the partnership and give up certain satellite slots in order to allow a new competitor to emerge, a source familiar with the deal said.
Another source said EchoStar chief executive Charles W. Ergen began considering compromise after Justice listed its problems with the merger in late September. The FCC has provided no such guidance, the source said.
FCC commissioner Kevin J. Martin called EchoStar's concessions "interesting," assuming they are technically feasible. He said he is undecided on the deal.
EchoStar argues that a merger would help the satellite industry compete more vigorously against cable television. The company released statistics yesterday showing that cable rates are lower in areas with full-service satellite providers. In 10 large television markets -- including Atlanta, Chicago, Denver, Phoenix and St. Louis -- where consumers have a choice between cable and satellite, cable prices rose an average of 2.3 percent from 2000 to 2002, the data showed. In cities where consumers had no access to satellite services, cable prices rose an average of 11.3 percent.
"This has been a lengthy and involved process and all we're asking for at this point is a little extra time to present all of the information and potential options that are available and should be considered for this deal," said George Jamison, vice president for corporate communications at Hughes.
Both the FCC and the Justice Department have declined to comment on the deal.
Gene Kimmelman, co-director of the advocacy group Consumers Union, said he believes that EchoStar might be willing to address antitrust issues based on the meeting he had yesterday with staff members from Powell's office, as well as staff from FCC commissioners Martin, Kathleen Q. Abernathy and Michael J. Copps.
"It is quite clear to me . . . that EchoStar has now offered structural changes which would mean divestiture of [orbital satellite] slots and has indicated that it would be willing to divest enough capacity to make sure there is a second satellite provider in rural America and across the country," said Kimmelman, whose group has opposed the deal without such concessions.
