Pact with rival DirecTV keeps sat biz alive, sez topper Ergen
NEW YORK — Survival was very much on the mind of Charlie Ergen on Monday as the EchoStar topper said he fears cable will soundly conquer the U.S. satellite TV biz unless his company is able to merge with larger rival DirecTV.
As the largest and second-largest players in the industry, the two would control more than 90% of the nation’s satellite TV households. But Ergen insisted that federal regulators must look at the entire pay TV landscape, including cable.
That would make EchoStar and DirecTV “No. 3 and No. 7 seven, not 1 and 2. This is about the TV market, not the satellite TV market,” he told reporters during a conference call to discuss his $32 billion unsolicited weekend bid for Hughes Electronics, which owns DirecTV.
Open to offers
Hughes parent GM said the automaker was reviewing the proposal and that its board “would give full consideration to any bona fide offer.” A GM spokeswoman said the company continues to negotiate with News Corp.
Regulators are seen as particularly concerned for rural sat customers who don’t have access to cable. But Ergen said it would be simple to put safeguards in place to protect them from price gouging — like a nationwide fee plan where rural subs pay the same as the lowest-paying customers in competitive markets.
“Cable is getting stronger. They have completed the transition to digital and are consolidating. … We have to be proactive and make sure our industry gets a fair shake,” he said.
However, Ergen said it’s unlikely EchoStar would pursue a combination with News Corp. if the Rupert Murdoch conglomerate wins the prize.
“We would continue to focus on the business we have. But I don’t think we would be as effective a competitor as we could be to the cable business.”
EchoStar is smaller, but it’s better run, more profitable and growing faster than DirecTV. People close to News Corp. acknowledge that Ergen wants the deal but speculate that he’s happy, meanwhile, to watch DirecTV deteriorate as he stalls Murdoch as long as possible.
Ergen stressed that his hostile bid for Murdoch’s coveted asset isn’t personal.
“I think we have a very cordial relationship. I highly respect Mr. Murdoch and how he’s built his business and I’ve learned a lot from my association with him. Having said that, we have to do what’s good for our shareholders and he has to do what’s good for his shareholders and we both see an attractive asset in Hughes.”
He noted that News Corp. would face a whole host of its own regulatory issues should Hughes agree to merge with that company.
‘We want to be Switzerland’
“We have no intention of being a programmer. We want to be Switzerland. We’re going to (get) the best prices for you because we can negotiate that but we’re probably not going to buy sports teams and studio content,” he said.
EchoStar shares fell 5.4% to $28.79 on Monday; that’s to be expected as investors ponder the financial fallout from such a giant acquisition.
News Corp. eased 2.09% to $37.45 on fears a deal with DirecTV and plans for a global satellite empire could be delayed or even scuttled.
Hughes, which could become the object of a bidding war, rose 3.5% to $20.04.