Nick, here is a portion of the article:
For EchoStar, a Win Either Way
By SETH SCHIESEL
EVEN if EchoStar, the nation's No. 2 satellite-television company, fails in its attempt to acquire the market leader, DirecTV, Charles W. Ergen, EchoStar's chairman, will probably end up looking smart.
Over the next few weeks, federal officials are scheduled to finish reviewing EchoStar's deal to acquire General Motors' Hughes Electronics division, which includes DirecTV. The deal is not dead, but its chances look slim.
G.M.'s board came within hours of agreeing to sell Hughes to Rupert Murdoch's News Corporation last October before Mr. Ergen rode in with the bold $25.8 billion last-hour bid that eventually won the day. Mr. Murdoch, who has been trying to move into the United States satellite market for about a decade, was deeply disappointed.
But as a connoisseur of the politics of business, even Mr. Murdoch would have to be impressed by how Mr. Ergen has handled the pending acquisition. In short, Mr. Ergen has put EchoStar's accelerator to the floor over the last 11 months while DirecTV has drifted into the slow lane.
William T. Esrey, chairman of Sprint, has recalled how his company lost momentum a few years ago as it was waiting to be acquired by WorldCom, a deal that was rejected by regulators in the summer of 2000. So, too, does DirecTV seem to have lost its edge as it has waited around to be acquired.
Look at the numbers.
In last year's third quarter, DirecTV was growing much faster, adding 425,000 subscribers while EchoStar added about 360,000. But in this year's third quarter, which ends today, Hughes has said that DirecTV will add only about 205,000 customers. Vijay Jayant, satellite analyst at Morgan Stanley, expects EchoStar to add about 300,000 in the quarter. DirecTV will still be bigger than EchoStar, with about 10.9 million subscribers to EchoStar's 7.8 million or so. But a year ago, DirecTV had a much bigger lead: 10.3 million to 6.4 million.
Meanwhile, Hughes expects to report earnings before interest, taxes, depreciation and amortization — or Ebitda, a rough measure of cash flow — of $195 million in the current quarter, while EchoStar, a smaller company, is expected to post Ebitda of about $230 million.
"Over the last year, EchoStar's gotten into distribution that was once unique to DirecTV, like Wal-Mart and Radio Shack," Mr. Jayant said.
Not only has Mr. Ergen been able essentially to freeze DirecTV with uncertainty over the last year, but he has almost surely become familiar with his main competitor's financial minutiae, which is always nice for a businessman.
It all means that even if his deal is doomed, it probably makes sense for Mr. Ergen to drag out the process and keep DirecTV tied up. Every day that Mr. Ergen keeps Hughes locked up is one more day that DirecTV is not in the hands of Mr. Murdoch and John C. Malone, the pay TV magnate who many expect would team up with Mr. Murdoch in a renewed bid for Hughes if the EchoStar deal died.
(Copyright the New York Times 2002)