News Corp shares lost 50 cents on the Australian stock exchange today after reports began to circulate that EchoStar might trump News Corp's offer to merge Hughes, the GM division which owns DirecTV, with Sky Global Networks, parent of BSkyB.
The DirecTV deal is crucial to Rupert Murdoch's ambitions to build a global satellite network. The absence of DirecTV would leave a huge hole in his plans and leave News Corp with no way of filling it.
Hughes and GM have been told that EchoStar could formalise a bid next week. EchoStar is understood to be working on a proposal that would automatically give GM the $5bn (£3.5bn) in cash it is seeking.
A bid by EchoStar, which operates the Dish network in the US, is thought to be favoured by Hughes shareholders because of synergies between the two broadcasters and the likelihood that they could achieve a higher premium.
However, a takeover by EchoStar would face a much tougher regulatory investigation because the merged entity would have total control of the US satellite TV market.
If a merger with EchoStar were scuppered by US anti-trust regulators, Hughes would have to ensure its shareholders were not hurt by the deal. EchoStar is thought to be aiming to put pressure on GM to begin negotiations and then leave it up to Hughes shareholders to vote on whether they want to risk the anti-trust investigation.
News Corp shares opened in Australia yesterday at A$17.70 (£6.44) and ended the day at A$17.20 (£6.26). If News Corp's plans were ruined by EchoStar's bid, analysts believe its shares could fall to as low as A$13.50 (£4.90) as it would thwart Murdoch's ambition to build a global satellite network.
EchoStar's shares fell 3.5% yesterday on the Nasdaq to close at $34.02 (£24). Shares in GM fell 3% to close at $55 (£38.86) yesterday (May 23).