Gartner: EchoStar And Hughes Merger Isn't Over

Now that the FCC has rejected the proposed merger of satellite broadcasters EchoStar (owner of DISH network) and Hughes (owner of DirecTV), Gartner G2 has issued a report that predicts more turmoil for satellite media.

EchoStar chairman Charlie Ergen is “famously litigious” according to the report, written by Laura Behrens. He will almost certainly challenge the FCC’s decision. The next move is widely expected to come from Rupert Murdoch’s NewsCorp, the spurned suitor for DirecTV just a year ago. Murdoch “encouraged objections to the merger among broadcasters, consumers and other interest groups,” the report says. He may partner with John Malone’s Liberty Media. To make a run at Hughes. A dark horse candidate would be General Electric, which owns NBC. Cablevision has a proposed competing DBS service on the books, but needs access to more bandwidth to make it viable. Cablevision, according to G2, is too debt-ridden to make an offer for Hughes.

“Sheer size did not kill this deal, Behrens says. “The proposed merger of AT&T Broadband and Comcast is headed for approval, even though it will create a larger pay TV operator than a merged EchoStar/DirecTV would have—22 million vs. 18 million subscribers. Monopoly was the critical factor here… This merger would have effectively reduced the DBS field from two to one. In areas without cable service, the pay-TV market would consist of a single provider. The likelihood of higher prices and other monopolistic evils was too much to ignore.”



The turmoil left in the FCC’s wake may result in greater consumer penetration for satellite. G2 counsels retailers to expect another year of competing satellite set-top boxes and price promotions. Look for stepped up marketing from both companies as they claw for market share before another deal is announced.

G2 advises cable operators to “move quickly on the current opportunity by enhancing your digital tier, deploying video on demand, and improving customer care—you’ll need every advantage you can use against the proven prowess of Liberty, NewsCorp or GE.”

And it urges satellite companies to gain market share by concentrating on strengths with consumers—perceived better quality, choice and service.

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