EchoStar buys DirecTV for $26 billion

General Motors has signed a definitive agreement to sell its satellite TV company Hughes Electronics, best known for its DirecTV brand, to its smaller rival EchoStar Communications in a deal worth $25.8 billion, GM confirmed Sunday.

EchoStar's interest in purchasing Hughes was largely based on its desire to expand its satellite-delivered broadband services, GM said in a statement. In the past, EchoStar has indicated such a merger would allow it to compete directly with AT&T Broadband.

Hughes Electronics and its subsidiaries, DirecTV and DirecTV Broadband have about 10 million subscribers in total, and with EchoStar's 6.7 million subscribers, the combined company is expected to hold about 17% of the pay television market, serving approximately 14.9 million direct-broadcast satellite TV customers, GM said.

EchoStar and Hughes Electronics could not immediately be reached for comment.

EchoStar has been competing with News Corp. and its chairman, Rupert Murdoch, for Hughes and in August argued that a merger between EchoStar and Hughes would establish "the only fully competitive alternative" to powerful U.S. cable and broadband providers.

The newly merged company will retain the EchoStar name and sell its products and services under the DirecTV brand, GM said. Current EchoStar Chairman and CEO Charles Ergen, will retain his position at the new EchoStar, which is expected to employ about 20,000 people, GM said.

U.S. consumers are likely to see benefits from the combined company's increased capacity. It could offer users next-generation high speed Internet services sooner, while "significantly" increasing the number of markets served with local channels by way of satellite and increasing high-definition TV offerings, Ergen said in the statement.

EchoStar is offering 0.73 EchoStar shares for each share of Hughes, valuing each Hughes share at $18.44, GM said. As part of the deal, GM will first technically spin off Hughes as its own company before merging it with EchoStar, the company said. EchoStar estimates it will need $5.5 billion of total financing.

The deal, which has already been approved by the board of directors of both companies, is expected to be finalized in the second half of 2002, pending standard stockholder and regulatory approvals, GM said.

EchoStar, in Littleton, Colo., can be contacted at +1-303-723-1000, or at www.dishnetwork.com/. General Motors, in Detroit, can be contacted at +1-313-556-5000, or at www.generalmotors.com/. Hughes Electronics, in El Segundo, Calif., can be contacted at +1-310-364-6000, or at www.hughes.com/. DirecTV Broadband, in Cupertino, Calif., can be contacted at +1-408-863-6600, or at www.directvbroadband.net/. The News Corporation Ltd., in New York, can be reached at +1-212-852-7017, or at www.newscorp.com/

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