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EchoStar Makes Few Changes in Merger Bid

The company submits a modified DirecTV deal to the FCC for approval, but chances appear slim.

November 30, 2002|Edmund Sanders | Times Staff Writer

WASHINGTON — Satellite television giant EchoStar Communication Corp.'s latest merger plan looks like a rerun.

The company's last-ditch attempt to salvage an $18-billion acquisition of rival DirecTV Inc. is based chiefly on its previously announced proposal to offer some satellite frequencies to Cablevision Systems Corp. Observers say there is hardly any chance the deal will go forward.

EchoStar filed the modified merger plan Wednesday with the Federal Communications Commission, in the hopes that the agency would see it differently than the Justice Department did when it rejected a similar proposal last month because of anti-competitive concerns.

The FCC had rejected EchoStar's original blueprint but gave the company until Wednesday to make changes.

At the same time, however, FCC officials expressed strong doubt that their concerns would be addressed by selling satellite slots to Cablevision, which hopes to launch a nationwide satellite service next year. FCC officials are skeptical that Cablevision has the financial strength to compete against a merged EchoStar and DirecTV.

Gene Kimmelman, co-director of the Consumers Union, had not yet seen the revised bid, but said he doubted that the FCC would reverse itself.

"They seemed so rigid in their reaction against the merger," said Kimmelman, who supports the deal because he believes that it would enable the combined company to better compete against local cable operators, thereby lowering cable rates. "I would hope the FCC would have an open mind, but I'm doubtful."

The FCC released the modified plan Friday without comment. EchoStar executives declined to comment, and Cablevision executives did not return phone calls.

A merger between EchoStar and DirecTV, owned by El Segundo-based Hughes Electronics Corp., would create a satellite giant with 18 million subscribers.

Under the modified plan, EchoStar would agree to transfer 51 satellite slots to Cablevision, theoretically restoring competition after the merger of EchoStar and DirecTV. EchoStar also would agree to license its products to Cablevision and share its transmission facilities until Cablevision gets on its feet.

The terms are similar to concessions offered last month to the Justice Department. Justice attorneys subsequently ruled that the Cablevison concessions did not go far enough, and filed suit to block the merger.

But this week's filing marks the first time those concessions have been formally presented to the FCC.

In its filing with the FCC, EchoStar insisted that the modifications are "significantly broader" than what was proposed to the Justice Department. It also complained that the FCC used a double standard in approving the recent AT&T Corp.-Comcast Corp. merger but rejecting the marriage of EchoStar and DirecTV.

Earlier this month, EchoStar appeared eager to challenge the Justice Department, making an emergency request for an immediate trial. But a federal judge denied the request.

EchoStar is racing against the clock to win government approval before its merger agreement with Hughes expires Jan. 21. Hughes is permitted to terminate the agreement under certain circumstances if the FCC has not approved the deal by Jan. 6, EchoStar said in its filing.

Hughes executives have said they do not expect to extend the deadline and are anxious to collect a $600-million breakup fee that they say EchoStar owes their company.

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