December 10, 2002 9:29 AM PST

EchoStar, Hughes scrap merger plans

In a widely anticipated move, EchoStar Communications and Hughes Electronics terminated their proposed merger, the companies announced Tuesday.

The announcement marks an end to a merger that would have created the largest satellite TV company worldwide, combining Hughes' DirecTV with EchoStar's Dish Network, in a deal valued at $25.6 billion when it was announced last year.

While the two industry titans had hoped to bolster their competitive edge against cable operators and improve their ability to carry local TV programming, antitrust regulators and the Federal Communications Commission argued that the union would greatly decrease competition for paid television service. The FCC blocked the deal in October, referring the case to an administrative law judge.

The companies canceled their merger plans when they determined that the deal could not be completed within the time allowed under the merger agreement, the two parties said in a statement.

Under the termination agreement, EchoStar paid Hughes, a subsidiary of General Motors, a cash payment of $600 million. And Hughes, which had initially planned to sell its 81 percent stake in PanAmSat to EchoStar for $2.7 billion, will now keep its ownership in PanAmSat.

EchoStar plans to write off $700 million in the fourth quarter for merger-related expenses and the $600 million breakup fee.


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