ECHOSTAR MAKES LAST-DITCH EFFORT FOR APPROVAL OF DIRECTV DEAL

GM said letter was way to remind Commission that DoJ still “had work to finish” and review process still was incomplete, spokeswoman said, and company wanted “FCC to consider all of these potential changes.” FCC Chmn. Powell had indicated Fri. that ruling on deal was “imminent.” EchoStar item has been “on the 8th floor percolating” with commissioners since last week, satellite attorney told us.

FCC ex parte filing was response “to public comments” from Powell that decision was about to be made, Hughes spokesman said. “It looked like the timing was going to be before we would have the opportunity to present all of the available options and solutions” to FCC and Justice. “We are just asking them for some more time. We believe it is a fair and reasonable request.” Fight over deal is far from over, spokesman said: “Obviously we're committed to getting the merger done and we are going to do everything we can do.” He said companies planned to “propose some revisions that will make a big difference.” He refused to speculate on revisions or conditions companies might be willing to accept from govt.

If FCC had scuttled merger before DoJ acted, it would have ended hopes of EchoStar and Hughes, analyst said. While EchoStar wouldn’t admit it, ex parte letter to Chmn. Powell was desperate attempt to save deal, analysts and lawyers said. They characterized it as attempt to keep deal alive and buy more time to work out framework for negotiation of conditions.

In asking for “major revisions” that went beyond national pricing, providing local service in all 210 DMAs and high-speed Internet service, EchoStar said it was preparing “structural remedy” proposal that would be presented before Oct. 28 meeting with DoJ officials. Justice had scheduled meeting to discuss concerns about deal. EchoStar Chmn. Charles Ergen gave deposition on takeover to DoJ Oct.3-4, but Justice wants another deposition from him, which hasn’t been scheduled yet, ex parte filing said.

Structural remedies usually includes divestiture, and in this case “EchoStar hasn’t made enough of a case to warrant approval” by regulators at DoJ and FCC, one analyst said. For example, Cablevision has asked Commission to force EchoStar to give up slot at 61.5 degrees W so it can launch rival DBS service (see separate story), but sources familiar with proceedings said top officials of 2 companies hadn’t met. “It’s easiest and most cost-efficient” alternative available to EchoStar, one analyst said.

Last-min. moves didn’t surprise many familiar with antitrust proceedings. “We're still skeptical that they are going to find a way to save the deal,” Legg Mason analyst David Kaut said: “There’s a good chance the FCC in deference to the DoJ would hold off making a decision. I would imagine they [FCC] would let them [Justice] take the lead, especially if they are talking about major revisions.” Legg Mason expects EchoStar to negotiate some kind of divestiture or consent decree. “Whether it will fly or not, we have to see,” Kaut said: “The DoJ is apparently willing to listen, giving them a chance to come up with something.”

Cablevision proposal may not be enough to satisfy regulators. “They would be 3rd competitor with zero subscribers and not just facing cable, but EchoStar-DirecTV combination with superior subscriber base and satellites in the air,” analyst said: “Is there some way [for FCC and DoJ] to split the baby? Can EchoStar give up enough spectrum and still satisfy DoJ and FCC. I don’t know if that sweet spot exists.” Analyst said he was “surprised” by fact that Justice was providing EchoStar with additional time because of impending departure of Charles James, chief of Antitrust Div. Hill staffer told us Senate Judiciary Committee would be “taking a close look” at Cablevision proposal to see whether it “offers a possible increase in competition.”

EchoStar-DirecTV “have their backs against the wall,” Consumers Union co-dir. Gene Kimmelman said. Justice might be able to make deal more palatable for consumers while providing more competition to cable if EchoStar economists Andrew Joskow of National Research Assn. and Robert Willig of Princeton could prove deal was in public interest, Kimmelman said. If EchoStar agreed to divest some of its spectrum, “we would have the trappings of a major victory” for consumers, he said.

“Anything they [EchoStar] do is going to be a tough sell because they haven’t endeared themselves to people in the government or outside of the government,” Media Access Project Pres. Andrew Schwartzman said. Industry observer questioned EchoStar strategy, saying “I don’t think Wall St. is going to buy” Cablevision proposal.

EchoStar’s “last-minute plea raises serious questions” that must be answered, NRTC Vp-External Affairs Adam Schwartz said, and public should evaluate “revisions” closely. NRTC is concerned that EchoStar is just “stalling for time,” he said. NRTC has prepared 6-page “Flip-Flop Chart” that documents at least 22 occasions when companies made conflicting statements about key merger issues. “EchoStar has well-known history of making dubious promises, breaking those promises, and engaging in litigation to press its advantages,” Schwartz said: “Why should we think this latest move is anything different?” He said “there are no concessions EchoStar can offer that would make this merger in the public interest.”

Meanwhile, CWA asked FCC to reject EchoStar proposal. In letter to Chmn. Powell from Pres. Morton Bahr, union recalled what he said was EchoStar’s “union-busting record,” and charged that EchoStar “will stop at nothing, including breaking the law, to make sure its employees” won’t have opportunity to exercise their legal right to form union. “If EchoStar merges with DirecTV, consumers will be denied choices and our ability to encourage good labor relations is diminished,” Bahr said.