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Steve Young: Rural U.S. has stake in EchoStar/Hughes merger

Young
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EchoStar Communications Corp. has made an unsolicited $30.4 billion stock bid to buy Hughes Electronics Corp. A combination of EchoStar and Hughes would create a company that can compete with AT&T Broadband, the largest U.S. cable operator, with 16 million subscribers.

EchoStar now will compete with Rupert Murdoch's News Corp., which is seeking to buy Hughes and gain control of DirecTV.

Steve Young, a New-York based senior correspondent and anchor for CNN Financial News, discusses the ramifications of a possible EchoStar/Hughes deal.

Q: How would this merger between EchoStar Communications Corp. and Hughes Electronics Corp. affect the average consumer?

Young: Folks in rural America have a big stake in how this turns out because there are huge patches of the country that cable TV still doesn't reach. An EchoStar/Hughes combination would obviously focus more on programming in this country and might be more attentive to servicing the cable gaps with local programming.

EchoStar says it will save a lot of costs by eliminating overlapping personnel. That could mean prices might go down, or it might just mean that prices would stay the same or even rise because there would be only one direct broadcast satellite (DBS) monopolist.

Q: Would consumers benefit more from a News Corp./Hughes merger or an EchoStar/Hughes merger?

Young: The News Corp./Hughes merger might blend in more programming from other parts of the world that a sizable part of the audience might find an intriguing alternative. On the other hand, Murdoch's News Corp. has been associated with tabloid newspapers and TV that some viewers might find a disappointment.

Q: Why is there such interest from these two companies in Hughes?

Young: Both companies covet Hughes because it's the biggest DBS company in the U.S., with 10 million subscribers compared to EchoStar's 6 million. Size matters.

Either would-be acquirer says it could save billions by combining such departments as marketing, distribution and the fleets of satellites each company owns. That should mean more money for investors, but history suggests customers might not want to hold their breath for falling prices.

Q: What does General Motors have to do with all of this?

Young: General Motors owns 30 percent of Hughes shares but all of the DirecTV assets.







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