Hughes Electronics Buyout Will Combine USSB, DirecTV

The two biggest names in the direct broadcast satellite (DBS) business are about to become one. On Monday, December 14, Hughes Electronics Corporation announced that it will buy United States Satellite Broadcasting Company (USSB) for $1.3 billion in stock and cash.

Hughes owns DirecTV, USSB's competitor and the other big star in DBS's North American sky. Hughes has agreed to pay almost $14.50 per share for USSB stock, approximately 50% over its closing price of $9.675 on the previous Friday. USSB's stock climbed 35% in the week before on rumors of the Hughes buyout.

Hughes, a subsidiary of General Motors, will become the top satellite broadcaster, offering 210 channels from transponders at 110°W and 101°W longitudes. Spanish-language broadcasts will be beamed to earth from the 110° spot.

USSB has operated at a loss since 1981 by St. Paul, MN-based Hubbard Broadcasting, a pioneer in both terrestrial and satellite broadcasting. It was only in the past year that USSB achieved the milestone of two million subscribers. Hubbard sold partial interest in the company two years ago, but retained control until recently.

The Hughes/USSB deal will be complete by the middle of the coming year, according to company sources. DirecTV President Eddy W. Hartenstein expresses hope that the merger "will simplify the purchase-decision process for prospective subscribers and enhance our programming lineup and packaging flexibility. This transaction will strengthen DirecTV's brand awareness among consumers and increase our already strong customer-satisfaction ratings with a simplified and streamlined customer-service experience."

USSB and DirecTV are receivable on the same 18" dish-antenna/receiver systems, but the two services must be activated separately. Once the merger is complete, billing, pay-per-view requests, and all other customer-service operations will be combined. The new system will offer HBO and Showtime to all subscribers. No mention was made of offering discounts to subscribers of either service.