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Monday, 29 October, 2001, 05:47 GMT
DirecTV sold to Echostar
General Motors has sold DirecTV, the biggest US satellite broadcaster, and its parent Hughes Electronics, to Echostar Communications for $25.8bn in cash and shares.

Rupert Murdoch's News Corp dropped out of the running on Saturday, after a GM board meeting failed to decide between the two competing bids.

If the deal is approved by regulators, it would give Echostar a near monopoly over the home satellite business in the US.

The deal ends Rupert Murdoch's ambition to create a global satellite television network, unless the regulator bars the tie-up between the two biggest operators in the US market.

EchoStar deal

EchoStar will now have to convince Hughes' shareholders it has sufficient financing for the bid, which features a $5.5bn cash component.

EchoStar's head Charlie Ergen has confirmed that two major banks are providing backing.

Last Wednesday, Deutsche Bank agreed to provide additional $2.25bn in financing for the bid, matching the contribution of UBS Warburg, EchoStar's financial advisor.

DirecTV is the main satellite provider in the United States with 10 million subscribers, while Echostar owns the second-ranked service, with 6.7 million subscribers.

News Corp disappointed

Mr Murdoch is reportedly angry about the time which GM took to make decision, which allowed Mr Ergen to improve his bid.

Rupert Murdoch
Mr Murdoch was disappointed that the deal was off
"We have no option but to withdraw immediately our fully negotiated and financed proposal," said Mr Murdoch.

He added: "Hughes would have been an excellent strategic fit for our global platforms, and we are disappointed with the (GM) board's inaction".

News Corp had hoped to merge DirecTV with its Sky Global network, creating a worldwide platform to distribute its huge portfolio of TV shows and films, and spin off the business as a separately-quoted company.

Reaching 10% of US homes, DirecTV had a strong attraction forNews Corp.

Warning signs

News Corp had been in on-off talks with GM since October last year and linked up with Microsoft and Liberty Media, run by John Malone, as its US partners backing the purchase.

Then in August this year, EchoStar entered the fray.

The deal has been falling apart for a while and in early October Mr Murdoch acknowledged he remained only "50-50" confident that News Corp would emerge the winner.

At a time when many media firms were warning that cancelled advertising after the terrorist attacks would hurt their profits, Hughes reported 24.6% revenue growth to $2.1bn for the three months from July to September 2001.

DirecTV attracted 425,000 new subscribers in that period and posted revenue growth of 18% to $1.3bn.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Louise Greenwood
"Rupert Murdoch decided to withdraw his offer this weekend"
The BBC's Andrew Walker
"Some of those legislators have already been hinting that they want this deal prohibited"
See also:

11 Oct 01 | Business
Murdoch 'still wants DirecTV'
02 Oct 01 | Business
Murdoch suffers ad slump
06 Sep 01 | Business
China offers Murdoch TV deal
06 Aug 01 | Business
Murdoch faces DirecTV rival
02 May 01 | Business
Murdoch's DirecTV talks back on
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