From today´s WSJ:
EchoStar Communications Corp.'s latest strategy to acquire rival satellite broadcaster Hughes Electronics Corp. depends on a risky determining factor: Can would-be rival Cablevision Systems Corp. launch its own satellite-television business quickly enough to mollify antitrust enforcers?
To win regulators over to the deal, EchoStar has essentially offered to nurture a new competitor in the satellite industry by hiving off to Cablevision a large swath of broadcast spectrum, proprietary technology and other assistance. But Cablevision, a cable operator in Bethpage, N.Y., faces big practical hurdles in its plan to launch a nationwide satellite system. The company would need quickly to raise more than $2 billion and attract millions of new subscribers.
Under federal merger guidelines, the government typically wants to be convinced that entry of a new competitor in an industry will occur promptly, which usually is interpreted to mean within two years. Several Wall Street analysts, satellite-industry officials and antitrust lawyers said they were skeptical Cablevision could afford to build its proposed satellite business, to be called Rainbow, fast enough to meet such a timetable.
The new service is slated for launch by the end of 2003, and during the following year Cablevision hopes its emphasis on local sports, regional programming and innovative set-top boxes with interactive features will spur rapid subscriber growth. The boxes are being developed by Motorola Inc., and Cablevision contends it will be able to serve millions of viewers in the Northeast now unable to receive satellite signals due to mountains or other obstacles.
EchoStar Chairman Charlie Ergen hopes federal antitrust enforcers accept that scenario. Before EchoStar made its concessions, the Federal Communications Commission had blasted the proposed Hughes-EchoStar combination on the grounds that it would mean "immediate and substantial" harm to consumers.
EchoStar's Dish network and Hughes's DirecTV unit together have nearly 18 million satellite-TV subscribers throughout the U.S., and the two entrenched competitors are seeking to convince regulators that Rainbow would serve as a credible counterweight to what the government otherwise would consider a virtual monopoly.
It would be "very, very difficult for any new satellite company without national brand recognition" to become a viable competitor in a few years, according to Joe Galzerano, an analyst at CIBC World Markets in New York.
Cablevision officials have said they expect to have adequate financing for the satellite service, possibly through the sale of assets. Some outsiders estimate that eventually could take $5 billion or more. Monday, Cablevision renounced an investment-solicitation document that had been circulated last week and was reported in The Wall Street Journal and other publications. Cablevision said it had no knowledge of or affiliation with Skyway Capital Partners, the investment group circulating the plan.
-- John R. Wilke and Peter Grant contributed to this article.
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