First off, the deal as I understand it is for cash. That is something both Liberty and News Corp will have plenty of when their current deals are consumated. If the cable partners would have taken some debt with cash, they would have paid eight.
The motives of the DOJ are clear. Cable is a legal monopoly that they can't touch (break up). Congress has regulated rates and that lead to an even greater concentration of cable assets into the largest and strongest companies. Congress, the FCC and the DOJ have been frustrated with cable rate regulation and the lack of credible competition to drive down price. They fail to understand that while DBS is a competitor, the price to buy or lease a dish and box, plus the expensive packages is far greater than the basic or top tier cable, thus providing no price competition. Cable loses customers mostly due to poor service or limited channels.
Mr. Charlie Ergin has been the driving force behind the DOJ. He has lived on capital hill since he secured financing after the AskyB deal fell apart. He has recieved much sympathy and help. He used key evidence and depositions in his lawsuit against Murdoch to implicate Malone in collusison and lay out an "evil cable monopoly plot" to destroy and new viable competitor. That is all bullshit. Malone was approached by Murdoch before he even went to Echostar. Malone wanted to merge Tempo (now TSATA) with AskyB. Because of the partnership in Primestar, they needed the permission of the other partners. Levin said no way. He and Murdoch don't get along and Time Warner had been stone walling Murdoch's new cable channel, FX.
Malone let the deal slip away under TWX pressure and the result was the deal between Echo and AskyB. Ergin went nuts with the spin calling it the Deathstar and predicting the end to cable dominance. Murdoch wasn't comfortable with his outspoken new partner and elements of the deal began to change. Murdoch started to think he made a mistake. Ergan was making him into a villan of the cable industry, while Ergan didn't need cable, Murdoch networks are a vital part of his empire and Ergan was killing any potential for News Corp to cut deals for his networks with cable. He went to Malone and said "help me get out of this, what should I do?" The DOJ calls Malone's advice collussion. BS!
Everyone will get what they want here and the cables will lose out, but the fact that the so called cable cartel will no longer control Primestar, guts the DOJ case. If Murdoch, the supposed victim of this extortion and collussion to break his deal with Echostar, says that it didn't happen that way, then summary judgement or case dismissed. It won't hurt that the DOJ says the public will be hurt by the Primestar merger just as they have won the JD Power customer satisfaction award for the second year in a row.
Ergan will get what he wants, the 119 slot. He has been crying about it for years. That will be big for Echostar. Primestar will get 110 and have a new bird in the air within 6 months. Until then they can use the bird at 119 with 27 transponders. USSB owns the other slots at 110. With DBS 1 in trouble and their stock in the tank, it is not out of the question that they could do a deal to offer a premium package to Primestar, just like DTV and get some much needed revenue. DTV has not even guaranteed them a spot on DBS 2 or 3.
The issue now is if the cables will agree to this cash price without
any upside upon the approval. With Malone at the helm, they might. I think the stock is a great buy under $6. I would buy more here with an eye to sell above or at $10.
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