Echostar's Rerun Bid - for DirecTV - Company Business and Marketing

Industry Standard, The, August 20, 2001 by Aaron Pressman

EchoStar CEO Charlie Ergen got a smidgen of good news last week when the board of General Motors agreed to consider his revived $32 billion bid for the company's DirecTV unit. News Corp. chief Rupert Murdoch has been trying to buy DirecTV for more than a year. Nevertheless, many doubt that antitrust regulators would allow the only two major satellite TV services to merge.

EchoStar is distributing a white paper by a former Justice Department attorney arguing the deal could be approved because of efficiency gains. For example, satellite TV viewers could watch hundreds of new channels if EchoStar and DirecTV eliminated duplicate programming from their satellites. "If EchoStar and DirecTV can verify these procompetitive benefits and demonstrate that they are of a substantial magnitude, DOJ is likely to permit the merger," writes Donald Russell, former head of the Justice Department's telecommunications merger task force.

Big cable mergers have been approved before, but there's one critical difference this time: The land-based cable operators don't compete against one another. By contrast, EchoStar and DirecTV compete in every market in the country, providing two alternatives to local cable; approve the merger and suddenly there's only one competitor to cable.

"When two cable companies merge, you only care about the national market," says Blair Levin, an analyst at Legg Mason and a former top Federal Communications Commission official. "But when two direct competitors merge, you are talking about local markets."

Even if he loses, Ergen may win in the end, since his offer could make a Murdoch victory all the more expensive.