EchoStar, Hughes dissolve satellite merger deal

Finally conceding defeat in the face of unbending government opposition, EchoStar and Hughes Electronics have terminated the merger of their respective satellite TV services, DISH Network and DirecTV. EchoStar will end up paying a $600 million cash breakup fee to Hughes, which agrees to retain its 81% ownership stake in PanAmSat.

Hughes had expected EchoStar to take PanAmSat as part of the merger break-up.

“There obviously was a disagreement between Hughes and EchoStar regarding EchoStar’s requirement to pay the termination fee and acquire our internets in PanAmSat,” said a Hughes spokesman, noting the General Motors business unit decided to avoid potential litigation and accept just the break-up fee. “We have $600 million cash in the bank,” he said.

For EchoStar, the break-up came as a bitter disappointment. Federal regulators never bought the company’s argument that a merged satellite provider was necessary to compete with an increasingly consolidated cable industry. The company, in a press release, said it would continue to seek alternative innovative ways to provide competition to cable.

Hughes, meanwhile, is again a free agent and “will begin to look at opportunities,” the spokesman said.

Those opportunities are expected to include News Corp., which is run by media magnate Rupert Murdoch and which was bidding on the satellite unit before EchoStar offered the best deal the first time around and, potentially, Liberty Media, run by John Malone. News Corp., which owns an extensive stable of programming under the FOX umbrella, could also face tight regulatory scrutiny in the event of a takeover attempt.

Either way, Hughes hasn’t made a move yet, he said.

“Up until this morning [when the break-up was officially announced] we’ve not been at liberty to even take a phone call from somebody who’s interested,” he said. “This is a process that will begin today.”

The spokesman also disputed reports that Hughes’ technology advancement had been impeded as the company waited to merge with EchoStar. A joint satellite box, which was to be developed for when the companies merge, is no longer an issue and both companies are free to continue to develop their own proprietary technology.

“We don’t believe we’ve lost any ground at all,” he said. “The company’s performance is stronger today that it’s been in the past few years and that’s because we have focused on fundamentals and worked very hard over the last few years.”