Murdoch still in with a chance on DirecTV

LONDON - Analysts are predicting that Rupert Murdoch could have another attempt at winning DirecTV if EchoStar's $26bn (£18bn) deal runs into serious trouble with US regulators in Washington.

General Motors, which owns Hughes Electronic, the parent of DirecTV, has shrugged off concerns about a possible investigation by the Federal Communications Commission and possibly the Federal Trade Commission as well.



But as early as last week, at least 10 members of Congress, including the chairmen of several powerful committees, expressed serious reservations about such a merger.



If that happens, analysts are predicting that Murdoch's News Corporation will come back to the table with its position improved. Murdoch, the News Corp chairman and CEO, walked away from the deal on Saturday evening when GM decided to delay its decision on selling DirecTV.



Prior to walking away from the deal, Murdoch was said to have secured support from a number of congressmen including: Senator Ernest F Hollings, the South Carolina Democrat and chairman of the Senate commerce, science and transportation committee; and Billy Tauzin, the Louisiana Republican and chairman of the House energy and commerce committee.



This support could prove to be vital in the coming weeks as EchoStar seeks to win approval for its bid, which will create a combined satellite television with 16.7m subscribers. It is the size of the company that could prove its undoing.



EchoStar has argued in its defence that the size of the company is not an issue, as only a company with that many subscribers can successfully challenge the cable TV companies, which presently control more than 80% of the US pay-TV market.



The combined EchoStar-Hughes would control around 17% of the market. EchoStar points to this to answer the question of a whether a lengthy investigation is needed. GM is known to have consulted widely in Washington before making its decision.



In a statement, EchoStar said, "The combination of EchoStar and Hughes is expected to generate very substantial synergies utilising the advantages of direct-broadcast satellite television, cost savings from the elimination of costly duplicate satellite bandwidth and infrastructure, and strong management offering more effective fundamental business practices. The new company would also have enhanced scale to compete more effectively against the dominant US cable and broadband providers -- a critical factor given increasing consolidation in the cable industry."



The EchoStar deal amounts to a straightforward takeover of Hughes. Hughes shareholders will get about 0.73 of an EchoStar share for each Hughes share, which values Hughes shares at $18.44 (£12.78). It represents a premium of 20% on its Friday closing price of $15.35 (£10.57).




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