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Will mergers face music?

AT&T-Comcast expected to see green light, DirecTV EchoStar to see red

The recent business turmoil may have spoiled Wall Street and Washington’s appetite for mega-media mergers.

So will the AT&T-Comcast and DirecTV EchoStar marriages clear the decks or be ordered to walk the plank by the U.S. Dept. of Justice or the Federal Communications Commission? Yes and no.

The AT&T-Comcast merger is expected to sail through and close in the fall, creating the nation’s biggest cable company.

But consensus is EchoStar-DirecTV could well be turned down by antitrust attorneys at DOJ. The idea of bringing the country’s two largest satcasters under one roof has raised red flags across the nation’s Capitol, with some lawmakers calling it an out-and-out monopoly.

“EchoStar is in trouble.” one prominent Washington insider says. But Rupert Murdoch is waiting.

EchoStar CEO Charlie Ergen snatched DirecTV from the brink of a deal with News Corp. “I’ve got a dark horse theory that Murdoch knew what he was doing when he didn’t raise his bid. He’ll get it anyway,” says fund manager Sal Muoio of SM Investors.

“Rupert’s message — bring me Ergen on a dish,” adds Jeffrey Chester of the public advocacy group Center for Digital Democracy.

With Vivendi Universal going belly-up and AOL Time Warner in a jam, everyone is skittish about blessing such cathedral-style weddings.

But media execs and Washington policy makers say the two mergers on the table don’t raise the same concerns. Both are old-fashioned horizontal deals, uniting companies with overlapping businesses.

It’s the half-baked attempts at vertical integration, like AOL TW and Vivendi, that are likelier to hit operational snags.

The FCC recently halted the merger review clock on the AT&T-Comcast deal, pending resolution of AT&T’s and AOL TW’s joint ownership of Time Warner Entertainment. The agency is likely to restart the clock in early September and complete its review by late October.

The clock continues to run on the FCC’s review of the EchoStar-DirecTV deal, also set to wind down by late October. The clock could be stopped, as it was earlier this year for several months, if the FCC has further questions on the proposal.

Ergen says the deal is in solid shape and regulators should view satellite and cable as competitors in the same market. Under that criteria, the merger wouldn’t pose an antitrust problem. Ergen has promised a national pricing plan to rural customers that can’t get cable.

DirecTV parent Hughes Electronics can walk if the parties fail to agree on financing terms. Such terms have yet to be finalized, according to documents filed with the FCC. In April, then again in May, Hughes waived deadlines for Ergen to outline the financing. The next deadline is mid-September.

Ergen would have to pay a whopping $600 million breakup fee if the deal falls through.

On the plus side, Ergen has locked up the competition for the better part of a year.

“The end result is that Charlie (Ergen) is doing fine,” another consumer advocate says. “He’s gotten a year to keep his competitor at bay.”

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