Speculation runs high on Echostar DirecTV merger

MUMBAI: Last few days, the American media industry has been full of speculation over a potential move that could change the dynamics of that country's pay TV industry.

The news is that DirecTV in which News Corp has a stake is looking at buying rival Echostar. However, the two companies have refused to comment on reports that have appeared in several publications.

The two parties account for almost all viewership of satellite television in the US. Rumour mongering escalated at the recently held Allen & Co. media and technology conference in Idaho. Charlie Ergen who owns Echostar had attended the conference and The New York Times had reported on the rumours.

In a recent piece in Reuters Wall Street, analysts were of the view that the presidential election in a few years time could spur a wave of mergers including DirectTV-EchoStar due to concerns that should the Democrats come into power, it would be more difficult to merge.

One roadblock here is that America's media watchdog, the Federal Communications Commission (FCC), had four years ago rejected a proposal for a merger saying that it contravened antithrust laws.

Interestingly a few months ago, DirecTV CFO Mike Palkovic, had told an industry conference that his company was interested in buying Echostar. Reports also state that Ergen is reluctant to give up control of his company.

A merger would result in cost savings that run into billions of dollars and they would be able to compete better with the cable TV industry. A report in states that both the firms are investing heavily in new satellites (and other infrastructure) to improve their HDTV offerings.

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