Ergen Changes Course1/26/2003 07:00:00 PM Eastern
What does Charlie want? That's the question media executives were asking when word broke that EchoStar Communications Chairman Charlie Ergen had approached Liberty Media and News Corp. about their buying his operation rather that his DBS competitor DirecTV.
The move derailed the conventional wisdom that DBS-hungry Rupert Murdoch would simply sweep up the pieces of EchoStar's failed takeover of DirecTV parent Hughes Electronics and secure the national U.S. satellite footprint for which he has lusted for more than a decade.
Wall Street executives say Ergen might simply be trying to complicate DirecTV's search for a buyer or supporter given the financial needs of its controlling shareholder, General Motors. But some believe that Ergen is looking toward the end of his company as an independent in a world where media conglomerates own his cable and DBS competitors and network suppliers.
"Three years from now, after he's picked off all the Charter and AT&T Broadband cable subscribers he can, maybe he doesn't want to be an independent company," said Bank of America securities analyst Doug Shapiro. Also, News Corp. and partner Liberty would get a pure U.S. consumer DBS business, without all the other satellite assets that come along with DirecTV.
EchoStar's stock actually moved down on the talks, as Wall Street focused on Ergen and Murdoch's bitter history. The two were partners in 1997 but clashed over control issues, and News Corp. bailed out of EchoStar, leaving a precious satellite slot behind. News Corp. also lobbied antitrust regulators mightily—and successfully—to thwart EchoStar's takeover of Hughes.
Buying EchoStar would take about $18 billion at its recent of $25 per share. A $35 price would cost News Corp. $22 billion.