Liberty Media, which is soon to take control of direct broadcast satellite (DBS) service DirecTV, and number two DBS operator EchoStar Communications are making a joint bid for fixed satellite operator Intelsat, according to a report in the Wall Street Journal.
Intelsat, the largest satellite services operator, has been in play since April, when several private equity firms expressed interest in buying the world's largest satellite operator, which is burdened with some $11.5 billion in debt after its 2006 acquisition of PanAmSat.
A deal between two competing DBS operators to get into the fixed satellite business might seem surprising. But Liberty Chairman John Malone has previously hinted that a partnership between DirecTV and EchoStar might make sense and create operating efficiencies. The companies currently operate separate satellite platforms that for the most part beam the same channels across the U.S.
"You know, if the government wouldn't let us put the businesses together today, we can at least save a lot of cost and capital by cooperating in certain areas," Malone told B&C in an interview last December. "If you think, 'What are the possibilities for DTV?' Well, we could form an alliance with EchoStar and share a high-definition platform, which would either double the capacity or cut the costs in half or some combination.
We could develop content jointly with EchoStar for that high-definition platform, which would be very interesting."
At the Consumer Electronics Show in January, EchoStar chairman Charlie Ergen said that some cooperation on technical resources with DirecTV could happen in the future, such as sharing transmission backhauls or co-investing in backup satellites.
A joint bid for Intelsat would obviously take that premise to a much higher level, and would put Liberty and EchoStar in control of a company that delivers broadcast and cable programming to many of DBS' cable and telco competitors.
EchoStar has some experience in the satellite services business. It currently leases unused Ku-band capacity on one of its satellites to on an occasional use basis to broadcasters for news feeds and the like. And DirecTV is already financially involved with Intelsat. The company provides satellite capacity for DirecTV Latin America. Intelsat also provides satellite capacity to cable networks in which Liberty has a financial stake, such as Discovery and Starz.