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Hi Folks:


I received this press release this Sun. afternoon from EchoStar. I've not posted the full release, which should be available from wire services tomorrow. This will eventualy have major implications for the availability of HDTV broadcasts via DirectTV.


ECHOSTAR ANNOUNCES PROPOSAL TO COMBINE WITH

HUGHES ELECTRONICS FOR $32 BILLION, OR $23 PER GMH SHARE


Combination Would Establish Only Fully Competitive Alternative To U.S. Cable/Broadband Providers, Providing Consumers More Channels, Better Service, Greater Access To Broadband Services and Competitive Pricing


Synergies Could Create Up To Additional $56 Billion


Littleton, CO – August 5, 2001 – EchoStar Communications Corporation (NASDAQ: DISH) today announced that it has made a proposal to General Motors Corporation (NYSE: GM) to combine with Hughes Electronics Corporation in a tax-free, all-stock transaction. The holders of shares of Hughes tracking stock (NYSE: GMH) would receive EchoStar common stock.


An EchoStar/Hughes combination would:


· Provide superior opportunity for GMH and GM shareholders to maximize the value of their investment in Hughes;


· Establish the only fully competitive alternative to powerful U.S. cable/broadband providers, particularly important in light of increasing consolidation among the nation’s large cable providers; and


· Boast a national footprint, with access to virtually all 100 million U.S. TV households.


Highlights of EchoStar’s proposal include:


· GMH shareholders to receive 0.75 EchoStar shares for each GMH share, or $22.83 per GMH share based on EchoStar’s closing stock price of $30.44 on August 3, 2001, representing a premium to GMH shareholders of approximately 18 percent before the impacts of significant synergies;


· Hughes valued at $32.3 billion based on EchoStar’s closing stock price of $30.44 on August 3, 2001, including the assumption of $1.9 billion of Hughes debt, before taking into account the enormous value of the synergies that could be generated from the combination;


· Vast synergies of up to approximately $56 billion, net present value, expected from the combination, to be shared by GMH, GM and EchoStar shareholders as well as consumers;


· Synergies could provide GMH shareholders with up to an additional $37 billion net present value, or approximately $26 per GMH share, making the total value of EchoStar’s proposal as much as $49 per GMH share;


· Synergies could provide General Motors shareholders with up to an additional $11 billion net present value, or approximately $20 per GM share, making the total value of EchoStar’s proposal as much as $38 per GM share; and


· GM and GMH shareholders would together own approximately 66% of the fully diluted equity in a combined company.


“This is an extremely compelling combination for GM, GMH and EchoStar shareholders,†said EchoStar Chairman and CEO, Charles Ergen. “The combination of EchoStar and Hughes could create unparalleled synergies that will substantially increase the value of the combined company. The GM board of directors now has the opportunity to deliver that enormous value to GM and GMH shareholders.


“The new company would have enhanced scale to compete effectively against the large U.S. cable and broadband providers – a critical factor given increasing consolidation in the cable industry. All shareholders will benefit from the massive synergy opportunities that could be created by this combination and the proven ability of EchoStar to consistently deliver shareholder value.


“U.S. consumers would also benefit from the combined company’s ability to enter new markets with local service, provide additional content, increase HDTV offerings, accelerate the introduction of next-generation broadband services and offer nationwide competitive pricing. Together, EchoStar and Hughes can also provide a range of services that will bridge the ‘digital divide’ – providing high-speed broadband solutions to consumers and businesses in rural areas otherwise far from the information superhighway. We are confident that this transaction will receive the necessary regulatory approvals.â€


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Michael Tchong

Editor, Prosumer Magazine
 

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Quote:
U.S. consumers would also benefit from the combined company’s ability to enter new markets with local service, provide additional content, increase HDTV offerings
I like the sound of this; I really hope this happens. But I fear that News Corp will prevail though; when Murdoch goes after something, he usually tends to get what he wants.


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"You can't argue with a confident man"

- Napoleon Wilson, Assault on Precinct 13
 

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Echostar has previously offered to buy DirecTV from GM, but GM has turned them down because they are concerned that the deal might not receive antitrust approval.


Presently, there are a limited number of satellite slots available for Echostar's and DirecTV's birds. A significant part of the two companies' channel lineups are the same. If the two companies were combined, then Echostar's argument to the antitrust regulators is that the duplication could be eliminated, thereby freeing up significant satellite transponder capacity for new channels (including high-def channels). Echostar will argue that this will be a significant public benefit of the deal, and the main reason to allow it to proceed.


The counterargument is that allowing the two satellite companies to combine will eliminate competition between the two, thereby reducing consumer choice and presumably leading to higher prices. Echostar's argument against this is that the two satellite services don't really compete with each other. Instead (Echostar argues), they compete primarily with the local cable company in each municipality, and that the cable companies still have a dominant share of the market. By allowing Echostar and DirecTV to combine, a more formidable competitor to cable will be created, eventually imposing more pricing discipline on the cable operators.


What does everyone think? Do the two satellite services really compete with each other? Or is it really a cable vs. satellite decision?


[This message has been edited by lhl12 (edited 08-06-2001).]
 

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I would like to see them combine. That is the fastest way to get more satellites. Then they can loosen up on the over-compression and add more high-def.




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-Glenn


"Obstacles are what you see when you lose sight of your goals"
 

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I believe this is the only way we'll ever get significantly greater HD offerings. Both suffer from too limited a bandwidth for either to give us what we're looking for. We're all also sick of the insane compression schemes that both providers use. However, somehow I doubt this will ever come to pass.
 

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This sure puts the pressure on the GM board.


I hope Charlie pulls it off.


If I worked for DirecTV, I'd feel the same way. Rupert is not going to be a benevolent boss, IMO.




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Ken Elliott
 

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Even though I hope this happens, if the deal went through, it would be years before we saw any transponder space open up. Why? Because they'd have to keep the 2 (incompatible) systems running in parallel. The alternative (equipment exchange) is too costly.


And, if they did decide to do that the numbers favor keeping the DTV gear and phasing out the Echostar boxes. I for one don't relish losing the 5000 + modulator or the upcoming HD PVR...


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Peter
 

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Number one, I don't believe this will pass "anti-trust" review.

Number two, lack of competition is NOT beneficial to our best interests - that should be obvious.


Besides, if Dish bought DirecTV, wouldn't that be kind of like Canada annexing the United States? Which system do you think would prevail in the final analysis?


John in VA
 

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Whether it is spot beams, a merger, or something else, DBS better get their SDTV OTA picture quality back up above Time Warner Digital cable, or their subscriber base will eventually start to decline as more people get bigger sets and see how awful their picture is on the SDTV channels.
 

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I hope the merger goes through. We need more competition against AT&T Broadband and other cable companies who do not offer as many channels as satellite. In Denver AT&T Broadband offers no HDTV, no choice of east or west on HBO and Showtime, etc.


I hope Charlie pulls this off.


I was surprised to see a Press Release on Sunday.


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Well, that would be one way to fix the DirecTV pirate problem, Echostar buys them and then replaces all their receivers for Echostar's.
 

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Obviously this merger is bad.


No competition means as a company you get to do what you want. What you want is more channels, not less. You get that with less HDTV. With no competition to drive you to supply HDTV, then why bother. You also get to charge what you want.


Like it was said. This will never pass anti-trust muster (thank god). We need two competing systems to get them to one-ups each other. That is better for us HDTV users.


Rick
 

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Is merging with either company a "good thing"?


Murdoch is all about the dollar. My beef with him is how he runs Sat. operations in the rest of the world. Salon.com reported last year he pulled BBC from his line-up because the Chinese asked him to. (The BBC has a long history of reporting things China doesn't want reported.) Do you think the next generation of STB's are going to have fair copy protection under his rule. Fat chance.


Then we have Charles. Sure he was Gore's largest contributor (Check out opensecrets.org). But hey, so are most of the MPAA members. So the question really becomes how will a new company react if the only competition is the local cable company. The nice thing for DBS providers is HD geeks buy high-margin programming. HBO-HD, Showtime-HD. Hell throw on the end of any channel and I'm sure you could get a few more bucks out of us. We're good high margin customers. Having two companies fighting over us gets ensures a good price and more attention to our copy protection concerns.


So, the bottom line is I think more choice is better.
 

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In the end, this merger is a winner and the best bet for consumers. Cable is going to be basically controlled by 3-4 regional monopolies (it almost is already), that face competition only from Dish and DirecTV.


But, you say, how can only 2 sides facing off be better for us than 3? Well, only a combined Dish-DirecTV can possibly match cable's bandwidth. Only a combined system will eventually justify super-powerful, super-cheap STBs that do all sorts of wonderful things (think economies of scale).


The satellite will always offer a harder install than cable. They will be forced to do things to make their offering better. They will have the ability and the NEED to improve picture quality (which sucks, by and large, right now). They will have the bandwidth to offer more locals and therefore compete in many more cities (Dish and DirecTV both compete in big cities, neither competes in smaller cities). They will likely be the driving force behind HDTV.


I see a million problems with combining, but I'm convinced that over a 3-5 year period, it is far and away the most consumer-friendly option. We need to start the ball rolling if we are to realize the benefits in the next decade.


Mark
 

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Most likely News Corp. will be the one merging with Hughes Electronics (DirecTV). From press releases it looked like a deal between the two companies was a sure thing (of course this was before Echostar's new bid offer). That, combined with antitrust concerns could be enough to once again reject Echostars offer (BTW - If AOL can buy Time Warner, you'd think this type of merger would be a piece of cake - $32 billion for Hughes vs. $190 billion for Time Warner. Perhaps its because Echostar and DirecTV are in the exact same business ).
 

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I agree that there would be donwsides in terms of combining two incompatable systems, but you have to evaluate this vs. the alternatives. General Motors WILL sell DTV to someone.


If that someone is Murdoch, we should all be pushing for the Echostar deal. Fox has already made it clear that they think 480p is all anyone could possibly need. I'm sure Rupert would eventually apply this thinking to any Sat systems he owns. And as far as content is concerned, he is clearly interested in NOTHING but trash appeal to the lowest common denominator.


We wouldn't just lose all HD signals, we'd probably lose Sundance, IFC, AMC, PBS half the PPV choices and more, all to make room for full-time wrestling, a 24 hour "Temptation Island" channel, and all Geraldo all the Time.


We should all be praying that the Echostar deal goes through or a new white Knight appears to rescue us.
 

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Quote:
Originally posted by Ken Ross:
Both suffer from too limited a bandwidth for either to give us what we're looking for.
Actually EchoStar has considerably more bandwidth for HD than DirecTV, but the possibilities are interesting - all main channels on 119 or 110 with the other sat carrying some HD, and other scenarios.


While I think that this would be a good move (vs. the other way around), I don't know if the expanded "capacity" makes up for the lack of competition, which we are only just recently see work in the HD arena.


I would have to say competition is more important than a combined service efficience may 5-10 years out.


Tim
 

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Quote:
Originally posted by kelliot:
If I worked for DirecTV, I'd feel the same way. Rupert is not going to be a benevolent boss, IMO.
Ken

I'm not so sure about that. My guess is that very many people at DirecTV, especially the high paid management suits, would be looking for a job if either Dish or Murdoch takes over. Since Murdoch is not currently running a Stateside satellite operation, he would likely keep more people on; perhaps that's one reason why the DirecTV board are less than enthusiastic about a Dish offer, aside from the issue of monopolies and mergers.

Incidentally there's a very nice article currently at Salon.com about Michael Powell (chairman, FCC) and how he is very pro-merger of communications companies. http://www.salon.com/tech/feature/20...ell/index.html



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"You can't argue with a confident man"

- Napoleon Wilson, Assault on Precinct 13
 

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Personally I sure hope it goes through also! I was a previous customer of Direct TV and I found their signal to be quite a bit more overly compressed than Dish Networks. Their poor compression algorithm scheme render a high degree of pixelation on my set to the point that it was un-watchable. When calling Direct TV I found that very few of their customer service reps. knew very much about HDTV at all. I even spoke with tech reps. that didn't know a whole lot either. Hopefully, Dish Network will better educate this group if and when they do get absorbed into the Dish family.


I also think that having all the current satellites should help with the compression issues. As for the anti-trust issue, while Dish may be the only satellite provider, their are ample alternatives from the cable companies and from OTA transmissions, so there really would be no monopoly on signals.




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Cobra
 
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