US satellite TV giant shuts broadband

The loss-making internet service, DirecTV Broadband, has 160,000 subscribers and is linked to the DirecTV satellite broadcaster.

Hughes has promised the closure marks the start of a cull to improve efficiency following the collapse earlier in the week of the $16bn (£10bn ) merger of its DirecTV business with Echostar.

The two firms agreed to dissolve their merger pact after US regulators blocked the tie-up with Echostar in October fearing it could stifle competition in the satellite TV business.

'First step'

Media analysts have welcomed the decision to fold DirecTV Broadband, which was expected to produce a cash flow shortfall of at least $110m this year.

The service was designed to offer viewers a single TV and internet package but struggled to compete with similar packages from cable TV operators.

"This announcement was long overdue," said William Kidd, an analyst at Lehman Brothers. "We'd like to see some further action on Hughes' other loss making businesses."

Announcing the closure, Hughes' chief executive Jack Straw promised to do just that.

"When the merger agreement was terminated earlier this week, we promised our shareholders and customers that we would move quickly to strengthen the profitability and efficiency of our company," said Mr Straw.

"This decision is the first of these moves"

Costly failure

DirecTV is the main satellite TV provider in the US with 10 million subscribers.

Echostar owns the number two service with 6.7 million viewers.

Announcing the collapse of the deal, the companies said that Echostar had paid $600m in cash, while Hughes retained its 81% stake in PanAmSat.

Echostar said it would also write off about $700m in the fourth quarter of the financial year to cover the "merger break-up fee and other related merger expenses".

Echostar beat off competition from media tycoon Rupert Murdoch's News Corp group to win the battle for Hughes last year.

News Corp had hoped to merge the DirecTV service with its Sky Global network.