Satcaster bidding to save DirecTV merger
NEW YORK — In an 11th-hour bid to buy extra time to salvage its imperiled merger with DirecTV, EchoStar has asked the Federal Communications Commission for a public hearing of its direct satcast service merger and offered to make “major revisions” to the terms of the proposed deal.
In a letter to the FCC late Monday, EchoStar effectively offered itself up for concession negotiations in a last- ditch effort to get its deal approved by the Justice Dept. EchoStar has asked that the FCC delay any decision — earlier reports hinted that a thumbs down from the agency was imminent — in order to meet with DOJ officials to address regulators’ cartel concerns.
“There are many important consumer benefits at stake, and we are asking the FCC not to rush to judgment before the DOJ makes its review,” spokesman Marc Lumpkin told Daily Variety.
The letter points out that the DOJ itself had only just taken the depositions of EchoStar topper Charlie Ergen on Thursday and Friday and had asked for additional time for the depositions to continue.
Lumpkin emphasized that public forums, or “en banc hearings,” were held as the federal government assessed previous high-profile communications mergers such as those between AOL and Time Warner, and WorldCom and MCI. EchoStar also requested that the FCC hold off on a verdict until after the DOJ has finished its own fact-finding review.
In the letter, EchoStar says it is open to discussing the possibility of major structural revisions to the transactions “that will go beyond remedies heretofore presented by the applicants such as national pricing.”
One such concession could involve Cablevision’s request to take over some of EchoStar spectrum.
On Monday, Wall Street seemed to be braced for a rejection of the deal and sent shares in EchoStar up while driving down the price of DirecTV owner Hughes, which would be faced with the prospect of a $4 billion cash hole. FCC chairman Michael Powell and at least two of the other three commissioners are reportedly opposed to the merger on grounds that it creates a DBS monopoly and is not in the interest of consumers.
If regulators do reject the estimated $18 billion merger, it could be just the beginning of an even longer legal appeal on how the decision was made. EchoStar would still be obliged to acquire Hughes-owned satellite operator PanAmSat and be required to pay Hughes parent General Motors a $600 million kill fee if the deal is rejected. According to a report from Lehman Brothers, Ergen may fight to reduce the charge, arguing that Hughes did not use its “best effort” to get the deal approved.
If EchoStar manages to save its deal, it will likely come at a price. Any revision that will make the deal more appealing to the trustbusters is bound to impinge on the profitability of a combined EchoStar-DirecTV entity.