11-07-01, 11:20 AM
US regulator outlines concerns on EchoStar-Hughes
By Jeremy Pelofsky
WASHINGTON, Nov 7 (Reuters) - EchoStar Communications Corp. (NasdaqNM:D ISH - news) will have to overcome at least three major hurdles to win approval for its proposed purchase of rival satellite broadcaster Hughes Electronics Corp., a top U.S. regulator said on Wednesday.
EchoStar plans to combine its DISH network, the No. 2 digital broadcast satellite service, with Hughes No. 1 service DirecTV to create a firm with 16.7 million subscribers, making it the dominant satellite pay television player.
The combination would likely reduce competition in some urban markets to two players from three, to one player from two in some rural markets and give the new company most of the direct broadcast satellite, or DBS, slots, said Kenneth Ferree, who will head the Federal Communications Commission's review.
``On first blush, there are some real serious concentration issues here,'' Ferree told reporters during a news conference. ``We're talking about all of the prime DBS slots being held by the same entity. That is a concern.''
Ferree said he will meet on Thursday with officials from the companies to outline what should be included in their application to be submitted to the FCC but he declined to elaborate on what the commission planned to seek.
``EchoStar and DirecTV, they've said that they see some efficiencies in this proposed combination and maybe these efficiencies justify finding it will serve the public interest,'' Ferree said.
The U.S. Justice Department is expected to examine whether the deal violates antitrust laws and harms competition while the FCC will examine whether the deal is in the public interest.
Ferree's comments echo those by FCC Chairman Michael Powell, who last week said the combination would result in ``significant concentration'' and established the team headed by Ferree to manage the agency's review.
EchoStar Chief Executive Charles Ergen said earlier on Wednesday the company will have a tough time but will ultimately convince regulators to approve the satellite television provider's proposed $24.9 billion combination with Hughes.
However, Ergen said antitrust and communications officials have historically examined satellite service in the context of the broader pay television market, which he said will work in his favor.
``Yes, we have a lot of work to do, obviously powerful, powerful enemies will line up against us and sometimes they won't be up front,'' Ergen told a small group of reporters.
He cited television broadcasters and cable operators as those who will likely seek to block or hobble the combination.
``My experience in working with those departments is that they are going to look at the facts and make decisions based on the facts and that's what gives us a high degree of confidence'' of winning approval, Ergen said, referring to the Justice Department and the FCC.
Shares of EchoStar were down 11 cents to $24.27 shortly after midday on Wednesday, while shares of Hughes Electronics were down 9 cents to $13.87.
By Jeremy Pelofsky
WASHINGTON, Nov 7 (Reuters) - EchoStar Communications Corp. (NasdaqNM:D ISH - news) will have to overcome at least three major hurdles to win approval for its proposed purchase of rival satellite broadcaster Hughes Electronics Corp., a top U.S. regulator said on Wednesday.
EchoStar plans to combine its DISH network, the No. 2 digital broadcast satellite service, with Hughes No. 1 service DirecTV to create a firm with 16.7 million subscribers, making it the dominant satellite pay television player.
The combination would likely reduce competition in some urban markets to two players from three, to one player from two in some rural markets and give the new company most of the direct broadcast satellite, or DBS, slots, said Kenneth Ferree, who will head the Federal Communications Commission's review.
``On first blush, there are some real serious concentration issues here,'' Ferree told reporters during a news conference. ``We're talking about all of the prime DBS slots being held by the same entity. That is a concern.''
Ferree said he will meet on Thursday with officials from the companies to outline what should be included in their application to be submitted to the FCC but he declined to elaborate on what the commission planned to seek.
``EchoStar and DirecTV, they've said that they see some efficiencies in this proposed combination and maybe these efficiencies justify finding it will serve the public interest,'' Ferree said.
The U.S. Justice Department is expected to examine whether the deal violates antitrust laws and harms competition while the FCC will examine whether the deal is in the public interest.
Ferree's comments echo those by FCC Chairman Michael Powell, who last week said the combination would result in ``significant concentration'' and established the team headed by Ferree to manage the agency's review.
EchoStar Chief Executive Charles Ergen said earlier on Wednesday the company will have a tough time but will ultimately convince regulators to approve the satellite television provider's proposed $24.9 billion combination with Hughes.
However, Ergen said antitrust and communications officials have historically examined satellite service in the context of the broader pay television market, which he said will work in his favor.
``Yes, we have a lot of work to do, obviously powerful, powerful enemies will line up against us and sometimes they won't be up front,'' Ergen told a small group of reporters.
He cited television broadcasters and cable operators as those who will likely seek to block or hobble the combination.
``My experience in working with those departments is that they are going to look at the facts and make decisions based on the facts and that's what gives us a high degree of confidence'' of winning approval, Ergen said, referring to the Justice Department and the FCC.
Shares of EchoStar were down 11 cents to $24.27 shortly after midday on Wednesday, while shares of Hughes Electronics were down 9 cents to $13.87.