Weighing A Potential EchoStar-DirecTV Merger

[sweetbronxyankee]

A story in The Los Angeles Times fueled speculation that DirecTV Inc. would make a bid for EchoStar Communications Corp. The rumors apparently boosted EchoStar's stock to an 18-month high of $32.80 a share Monday.

The Times story, which covered a media conference in Sun Valley, Idaho, quoted EchoStar CEO Charlie Ergen saying the combination of the nation's two largest satellite TV providers could save $3 billion in expenses.


In a brief interview, News Corp. Chairman Rupert Murdoch, who controls El Segundo, Calif.-based DirecTV (NYSE: DTV), expressed doubts that Ergen would sell. Still, the Times quoted a number of sources who claimed that Murdoch was working on "something."

EchoStar attempted to purchase DirecTV three years ago in a deal that was thwarted by federal regulators concerned about antitrust laws.

However, DirecTV chief Chase Carey suggested that regulators could be convinced that the pay-TV landscape has changed now that Comcast and Time Warner hold most of the nation's cable markets. Meanwhile, telecommunications giants such as AT&T, Verizon and Qwest are venturing into the TV business as well.

Englewood-based EchoStar (NASDAQ: DISH) operates the Dish Network, the second-largest satellite TV service, with more than 12 million subscribers nationwide

 

[BFG]

LoL.

I guess these people creating merger rumours think they air is a lot different now from the previous attempt

 

[charper1]

The only difference I see now, is Voom is gone as a separate entity and now its News Corp wanting to buy out Dish Network as opposed to the other way around. Not that it changes much.

 

[Neutron]

What advantage would this have?

I see prices going up for satellite service if this happens.

 

[hobojoe]

my understanding is they rejected it because it would have made only one sat provider. now that vooms gone its even worse. and att and all the others are using dish networks or directv's service as a resale. they don't have any satellites for TV use. i really don't think it will happen. i hope it doesn't because you think your paying now! the only good i see is they can get there sat fleet together and stop mirroring channels providing us with every dam channel you could possibly dream up. I'm going to say no way not now!!!

 

[kissthesky]

Echostar - The end is Near

Would like to get everyone's reaction to this news....


Merger talk boosts EchoStar

Murdoch's DirectTV reported near deal; antitrust issues linger

By Joyzelle Davis, Rocky Mountain News
July 18, 2006

EchoStar's shares hit an 18- month high on Monday following a report that larger rival DirecTV is close to buying the Douglas County- based operator of the Dish Network satellite TV service.

Some top money managers attending the annual Allen & Co. media mogul conference in Sun Valley, Idaho, last week "were convinced (DirecTV Chairman Rupert Murdoch) was close to making a deal" to buy EchoStar, the Los Angeles Times reported. The paper also said that EchoStar CEO Charlie Ergen told guests at the conference that a merger could save $3 billion each year in expenses.

Federal regulators four years ago spiked EchoStar's proposed purchase of DirecTV from then-owner Hughes Electronics, citing antitrust concerns. Since then, "an argument could be made" that the landscape has substantially changed now that Comcast and Time Warner control the cable market and phone companies are entering the video market, DirecTV's CEO Chase Carey told the Times.

"It makes a lot of sense," said Matthew Harrigan, an analyst at Greenwood Village-based Janco Partners. "A lot of time, you put these companies together and the cost savings aren't that evident. But there are enormous overlaps between EchoStar and DirecTV, and every 1 percent improvement in margin is worth over $250 million" in savings.

EchoStar has 12.2 million subscribers, while El Segundo, Calif.-based DirecTV has 15.4 million.

Talk of a merger between the two started in March, after DirecTV Chief Financial Officer Mike Palkovic told an industry conference that "we'd be crazy not to look at it." But he added that "market conditions" would first have to change for the deal to pass regulatory scrutiny.

Ergen, addressing the speculation in a May earnings call, insisted EchoStar likes its independence but added that "we're not suicidal as a company, and if there's opportunities out there that make sense," management will look at them.

If Ergen were to sell, it wouldn't be for cheap, analysts said. Ergen, EchoStar's controlling shareholder, would want "at the very least" $40 per share, said Wachovia Securities analyst Jeff Wlodarczak in a research note.

Murdoch, in an interview with the Times, dismissed the idea that Ergen would sell. EchoStar spokeswoman Kathie Gonzalez declined to comment, as did DirecTV spokesman Robert Mercer.

The two are cooperating on a joint bid for next month's U.S. auction of wireless airwaves, which could allow the satellite providers to launch their own Internet service. DirecTV and EchoStar's technology doesn't allow them to offer phone or Internet service, putting them at a disadvantage against cable companies' attractively priced bundles of phone, Internet and video service. Phone companies also are entering the market with similar bundles.

Wlodarczak noted that while phone companies present another competitor in cities, rural markets still rely on DirecTV and EchoStar for TV service. That could create an antitrust concern for regulators.

Janco's Harrigan also cautioned about taking a report out of Idaho summer camp for media titans too seriously. "People are always looking for news out of the Allen conference," Harrigan said. "I'd be a little careful" about reading too much into the report.

Copyright 2006, Rocky Mountain News. All Rights Reserved.

 

[TNGTony]

I view these continuing gloom and doom thread for Dish Network under the "broken clock" theorum.

I'm sure that eventually, one of these rumors of merger/buy-out/sell-out by Charlie will be true, But then again even a broken clock is correct twice a day!

See ya
Tony

 

[kissthesky]

Thanks for the info. This "merger" is going to happen because the FCC cannot say yes to TWC/Comcast takeover of Adelphia and say no to this. The first thing DirecTV will do is eliminate Dish's Installation service department and you can quote me on that.

 

[minorthr]

Thanks for the info. This "merger" is going to happen because the FCC cannot say yes to TWC/Comcast takeover of Adelphia and say no to this. The first thing DirecTV will do is eliminate Dish's Installation service department and you can quote me on that.

Actually I think they can eliminate it. The argument against the merger before was that in rural areas if they let the merger happen people would have no choice in service providers other then the one satelite provider.

 

[kissthesky]

I view these continuing gloom and doom thread for Dish Network under the "broken clock" theorum.

I'm sure that eventually, one of these rumors of merger/buy-out/sell-out by Charlie will be true, But then again even a broken clock is correct twice a day!

See ya
Tony

I don't think this is as much doom and gloom as much as it is reality of the business climate now. Even a tight wad like Ergen can see the writing on the wall. Things have changed in the past 3 years since Charlie tried to buy DirecTV and it's so ironic that the tables have turned.

 

[kissthesky]

Actually I think they can eliminate it. The argument against the merger before was that in rural areas if they let the merger happen people would have no choice in service providers other then the one satelite provider.

I'm a ex FSS 3 @ Dish, they waste a great deal of money and equipment when contractors can do it for less...

 

[rdinkel]

If DirecTV takes over, HDLite wins for sure.

 

[RandallA]

Not happening.

 

[Sean Mota]

oh no... HD Lite in the Horizon wants to take over... No way...

 

[Sean Mota]

If it happens, it will be the end of HD and the new era of HD Lite. HD Lite plague DirecTv taking over and making HD Lite the standard.

 

[Neutron]

I really don't see this happening.

This would constitute a monopoly, which is illegal.

You can't compare it to the TWC/Comcast takeover of Adelphia since there are still other cable companies.

 

[kissthesky]

If it happens, it will be the end of HD and the new era of HD Lite. HD Lite plague DirecTv taking over and making HD Lite the standard.

excuse my ignorance, but what exactly is HD Lite?

 

[Poke]

Well Dish could buy out Direct but before anyone does anything the FCC will half to give the ok. Right now I dont see them doing that but if Direct is haveing money problems then they might let them go ahead and merge. But its going to be up to the FCC if anything happens at all. Right now I hope it does not due to useally things get really messed up when companys merge. But its NOT the end of EchoStar maybe Direct TV.

 

[psumattDE]

You can't compare it to the TWC/Comcast takeover of Adelphia since there are still other cable companies.

Thank you Neutron - finally a sensible comment.

 

[JohnH]

I don't want to go through another "will they or won't they" of this magnitude. There still is the antitrust concerns presented by rural consumers and it would not be a slam dunk.