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GM, EchoStar to begin talks

Automaker to continue discussions with News Corp.

After a week of radio silence, Hughes Electronics parent General Motors has contacted EchoStar regarding its merger proposal and “will open up a dialogue with them,” GM spokeswoman Toni Simonetti said over the weekend.

She stressed that the automaker continues discussions with News Corp., which has been laboriously pursuing a Hughes transaction for many months. It’s a painful prospect for Rupert Murdoch’s conglom that this last-ditch offer by EchoStar could hold things up even further, or possibly risk unseating News Corp. altogether. Most industry players and Wall Streeters, however, still expect Murdoch to emerge victorious.

Simonetti declined to characterize GM’s communications with EchoStar or discuss the timing of talks.

An EchoStar spokeswoman said GM contacted the Denver-based satcaster late Friday afternoon. “We did hear from GM We are in direct conversation with them,” she said.

EchoStar, which was rebuffed outright when it first approached Hughes about a merger earlier this year, went public with a new offer last Sunday worth $32 billion in stock at that time. This time EchoStar took its case directly to GM and appears to be having better luck, although serious antitrust issues cloud a potential merger of the nation’s top two satellite broadcast companies. EchoStar has about 6 million subscribers; Hughes’ DirecTV subsid has about 10 million.

Top management at Hughes has been reshuffled, and its chairman stepped down several months ago. Several Hughes execs, such as DirecTV topper Eddy Hartenstein, are said to favor a deal with News Corp. Such a merger would draw DirecTV into Murdoch’s global empire of content and distribution. Murdoch wants to use DirecTV as the centerpiece of a new international satellite unit called Sky Global Networks.

In the tradition of the spin wars that accompany takeover battles, people close to EchoStar have implied that a deal between it and Hughes would be less complex to work out on a number of fronts since EchoStar is a much smaller company than News Corp. and is purely domestic. News Corp. and DirecTV, for instance, both have operations in Latin America.

People close to News Corp. have said talks with Hughes are progressing nicely and insist an EchoStar bid would never get past regulators.

GM would not comment on a lawsuit by a Hughes shareholder that it is favoring News Corp. in the talks and isn’t giving proper consideration to EchoStar’s offer or holding an auction to sell Hughes to the highest bidder.

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