HUGHES—Hughes Buyer Expected to Pressure Cable

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By this week, the year-long auction for Hughes Electronics Corp. by its corporate parent, General Motors Corp., could be decided.

GM’s board was to decide whether to award its El Segundo-based satellite unit to Rupert Murdoch’s News Corp. or to dark horse candidate EchoStar Communications Corp.

GM has been negotiating with Australia-based News Corp. for the past year, and despite some late momentum amassed by EchoStar, the main U.S. competitor to Hughes’ DirecTV broadcasting unit, it appeared that News Corp. still had the upper hand.

“EchoStar realizes, with its securing of an additional $5.5 billion of cash (to add to its all-stock bid), that they’re making a final effort to get the deal done,” said Jim Stroud, a broadband analyst with Carmel Group in Monterey. “That being said, I think News Corp. still has the inside track, and I think Rupert will wind up with Hughes.”

If News Corp. wins, expect Murdoch to inject a renewed competition into satellite delivery on both a cost and a content level, Stroud said. Both satellite competitors would likely resume taking subscribers from cable, he said.

News Corp. plans to combine DirecTV with its worldwide satellite holdings. News Corp. would pump its own programming into DirecTV a la AOL Time Warner Inc. including sports and movies.

If EchoStar’s bid succeeds, satellite instantly becomes a viable option for consumers in many of the nation’s medium-sized cities, again positioning it to take customers from cable operators. By conserving spectrum now taken up with duplicate programming, EchoStar would be able to deliver local programs in more markets, and introduce more interactive services.

News Corp. would expand local programming as well, but at a slower pace due to the need to launch new satellites, Stroud said.

In a conference call last week, EchoStar chief executive Charlie Ergen assured investors that the company was well positioned no matter what the outcome of the Hughes talks. There were suggestions that Ergen was trying to prepare shareholders for a News Corp. victory, but EchoStar spokeswoman Judianne Atencio refuted that view.

If he loses this prize, don’t expect Ergen to roll over. “Charlie has shown amazing resiliency throughout his career in the satellite industry. I certainly would not bet on Charlie Ergen not being successful,” Stroud said.