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Ergen’s Offer Fails, Merger Blocked Again

EchoStar’s attempt to acquire Hughes Electronics and its DirecTV operation failed to gain regulatory approvals for the second time last week, when the Department of Justice (DOJ) filed a lawsuit to block the deal.

The DOJ said the merger would harm consumers by eliminating competition between the two largest satellite television companies. The move came despite some last-minute concessions by EchoStar chairman Charlie Ergen, who offered to sell certain satellite orbital slots and and a satellite to Cablevision, which is looking to start a new national satellite TV company.

“We are obviously disappointed that at this time we have not been able to convince regulatory officials to share our vision,” stated Ergen of the DOJ’s decision. “EchoStar will continue to explore all possible means to be allowed to compete against the cable giants and for more choice for all consumers.”

Ergen reportedly offered to transfer some 62 frequencies from both East and West Coast orbital slots, sell a satellite and lease capacity on other satellites to give Cablevision’s Rainbow DBS company a national footprint. Cablevision also planned to launch a satellite in March, and begin services in 2003.

The new satellite service would emphasize local sports, regional programming, HDTV channels and use a new set-top box developed by Motorola with various advanced features to help spark rapid subscriber growth, reports said.

EchoStar representatives met with the DOJ last week, prior to the court filing, to discuss the “the competitive effects and benefits of the merger, and provide additional information that the DOJ had requested,” according to an EchoStar spokesman.

The FCC ruled against the merger on Oct. 10, and gave EchoStar and Hughes 30 days to submit revisions to address concerns that the merger would harm consumers. The FCC said it would remove competition and replace it with “a proposed national pricing plan, which would have to be enforced by regulatory authorities.”