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| indiantelevision.com's Breaking News |
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| Satellite deal between EchoStar, Hughes
off |
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Indiantelevision.com
Team
(11 December 2002 5:00 pm) |
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| NEW YORK : It was a deal that could have
created a satellite behemoth. But US satellite television service
provider EchoStar Communications Corp, on Tuesday said it had abandoned
its proposed $18 billion acquisition of larger rival Hughes Electronics
Corp due to stiff opposition from regulators. |
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Both the US Justice Department and the Federal
Communications Commission, which feared the deal would stifle competition
in the pay TV market were successful in killing the deal. Hughes,
which operates the DirecTV service, and EchoStar, which owns the Dish
Network, said in a joint statement that they had agreed to end the
deal because it "could not be completed within the time allowed by
the merger agreement."
The deal, announced in October 2001, was supposed to help both companies
compete successfully with cable operators, and envisioned offering
local television service in every US market, apart from offering high
speed Internet access via satellite to rival the services offered
by cable companies. Each currently only has enough capacity to offer
local channels in a portion of the country on its own.
Regulators however foresaw 'too much power in rural markets that had
no access to cable' in the proposed merger. The Justice Department
and 23 states sued to block the merger, with a federal judge setting
a trial date for late February at the earliest. Authorities also maintained
that even in areas cable was available, viewers' choices would be
effectively be reduced to two from the earlier three.
Under the terms of the deal, Hughes had the right to walk away from
the deal after Jan. 21 and collect a $600 million break-up fee. EchoStar
was also obligated to buy Hughes' 81 percent stake in satellite service
PanAmSat Corp. for $2.7 billion. But in an agreement to abandon the
deal early, EchoStar agreed to pay the break-up fee, but was released
from its obligation to buy PanAmSat.
EchoStar will write off about $700 million in the fourth quarter for
the merger break-up fee and other related expenses.
The termination now opens the doors for Hughes to pursue other potential
deals, including one time suitor News Corp, although neither company
was willing to go on record about it, say reports. Last year, News
Corp. proposed combining Hughes with his own network of satellite
services and spinning the entity off as a publicly trade company,
with Microsoft Corp. and Liberty Media Corp. contributing cash to
the venture to buy out GM's stake, reports say. |
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