A no-lose play

Ergen's EchoStar could win even if $32B DirecTV bid fails

It's the kind of game a veteran card counter like Charlie Ergen loves: one in which he wins no matter what happens. Whether the EchoStar chairman wins a lot or a little depends on General Motors, Rupert Murdoch and antitrust regulators.

As EchoStar Communications launched a $32 billion hostile bid for DirecTV parent Hughes Communications last week, Ergen professed sincerity in contending that the bid is superior to Murdoch's News Corp.'s and that an EchoStar deal can survive antitrust scrutiny.

"I don't put a suit on unless I'm serious," said the unusually well-tailored Ergen last week.

Media and industry executives see three likely outcomes. The least likely is that Ergen wins and Hughes parent General Motors accepts EchoStar's offer, once again frustrating Murdoch's decade-long effort to get in on U.S. DBS action. GM has already rejected EchoStar's approaches several times, in part because of the risk that antitrust regulators would reject a deal.

A second option is that Ergen gets turned down but makes Murdoch's acquisition more expensive or merely prolongs the process. Ergen is particularly eager for antitrust regulators to focus on Murdoch's tying DirecTV's nationwide distribution to News Corp.'s portfolio of cable networks. Hughes management acknowledges that the 18-month-long negotiation with Murdoch has distracted them and hurt DirecTV's operating results.

A third possibility is that Murdoch pays Ergen to go away. For example, EchoStar has filed an antitrust suit over DirecTV's lock on retail distribution through major electronics chains like Circuit City. Murdoch could settle that and end those exclusive deals.

GM last week said only that it is taking Ergen's offer "very seriously."


Down in Flames

Charlie Ergen's bid for DirecTV is rocketing toward earth. Can he put it back into orbit or will Murdoch pick up the pieces?