EchoStar Hints at Possible Purchase of Hughes Electronics

Direct-broadcast-satellite service EchoStar Communications Corporation will be first in line to buy Hughes Electronics Corporation, if parent company General Motors decides to spin it off. Hughes operates EchoStar's competitor, DirecTV. The acquisition would create a virtual monopoly in the skies, according to analysts who attended the Satellite Broadcasting and Communications Association's SkyForum conference in New York on Thursday, September 21.

The purchase would also create huge value for EchoStar, which at present enjoys only about half the market share claimed by its rival. EchoStar sees "lots of synergy" in the possible acquisition, according to chairman and CEO Charlie Ergen. "There is no combination of companies that would unleash as much value," Ergen told reporters. Merging the two companies could save "tens of billions of dollars" by consolidating satellite and uplink operations, and by eliminating expensive exclusivity premiums that DBSers pay for programming.

EchoStar isn't the only interested party; Rupert Murdoch's News Corporation is also rumored to be keen on acquiring Hughes. Should a bidding war erupt, it could have a negative impact on the value of the resulting merged company. News Corp. is already in the DBS business, with operations in Europe and South America. EchoStar and DirecTV are expected to have 16 million subscribers between them by the end of the year, of which more than 10 million will be DirecTV customers.