Ergen Abandons DirecTV Merger; Murdoch Waits in Wings

11 December 2002

A barely discernible puckering at each corner of the mouth – the Murdoch variant of a smile – is said to have flickered fleetingly across the saurian features of the media mogul as news broke Tuesday that US satellite broadcaster EchoStar has called off its agreed merger with rival DirecTV, owned by GM’s Hughes Electronics.

The deal’s death knell sounded in October when the Federal Communications Commission and the US Justice Department jointly blocked the merger of America’s number one and number two satellite-TV operators on grounds that it would create a monopoly [WAMN: 11-Oct-02].

But EchoStar boss Charlie Ergen doesn’t give up that easily and last month submitted a revised plan incorporating a number of major concessions to the FCC. It is believed this too was thrown out the window. Or, as some insiders imply, Ergen simply lost his zest for the $19 billion (€18.87bn; £12.09bn) deal and wanted out.

The exit will cost Ergen $600m in the form of a break-up fee to Hughes for walking away from the deal. But the Denver-headquartered satellite TV magnate has managed to wriggle out of a $2.7bn obligation to buy Hughes's 81% stake in satellite operator PanAmSat.

Said Jack Shaw Hughes’ president/ceo, as he donned his green eyeshade and dimpled rubber fingerstall: “Since the merger couldn't be completed, we concluded that this settlement is the best alternative for Hughes and places us in the best position to move ahead with our business.”

Which most onlookers take to mean setting out the welcome mat for Rupert Murdoch.

Data sourced from: Financial Times; additional content by WARC staff