Most predict ultimate approval of merger
As EchoStar and DirecTV carry their merger talks from the boardroom to the nation’s capital, some in the industry and on Wall Street predict a stream of pessimistic press — followed by ultimate approval of the controversial deal. And success, if it comes, may be due in part to an unusual lack of opposition from potential adversaries in the media.
Proponents of combining the nation’s only two satellite providers insist it will be the first real competition to cable. Yet cable execs are lying low. Media congloms are relieved that Rupert Murdoch, who was the front-runner in the race for DirecTV for months, won’t be adding a U.S. distribution powerhouse to his global empire.
Vivendi Universal topper Jean Marie Messier acknowledged last week that his fear was in seeing a direct competitor bulk up on distribution.
Cable, an industry perpetually beset with complaints of rising rates and poor service, has never benefited from regulatory scrutiny. And cablers want to consolidate too. It’s not surprising that AOL Time Warner CEO Gerald Levin is fine with an EchoStar-DirecTV combo. His conglom is eyeing a merger of Time Warner Cable with AT&T Broadband in a move that would unite the nation’s top two cable operators.
Also, cablers relish the prospect of a long spell of uncertainty for the satellite business as the deal makes the rounds in Washington. EchoStar and DirecTV execs said last week they expect the approval process to take up to a year.
Even News Corp. may not be as proactively antagonistic as first imagined. “We think it’s going to generate plenty of opposition without us getting involved,” says one company insider. News Corp., he adds, would rather spend time to “refocus our efforts and look at other opportunities.”
A whole host of regulators must examine the deal, including the Federal Communications Commission, the Dept. of Justice, the Senate Judiciary Committee and the Senate Commerce Committee. All are likely to talk tough to improve their bargaining position in extracting concessions from the companies down the line.
FCC chairman Michael Powell said last week an EchoStar-DirecTV combination would create “significant concentration,” and appointed a special panel to examine the merger application.
Rep. W.J. “Billy” Tauzin, chair of the influential House Commerce Committee, says he’s keeping an “open mind,” but wants the combined company to develop a national pricing plan for rural areas where no cable is available — something EchoStar topper Charlie Ergen, who would run the new company, has agreed to. Ergen says he’s confident regulators will consider satellite as one component of the larger, cable-dominated pay TV market.
Other pols and public interest groups have been more outspoken against the merger. And shares of EchoStar and DirecTV parent Hughes Electronics, a unit of GM, have fallen every day since the deal was announced with a spread that some suggest means investors are far from convinced the deal will close.