EchoStar to buy Murdoch, MCI satellite assets 2 sellers abandon plans to set up U.S. satellite business

December 01, 1998|By BLOOMBERG NEWS

LITTLETON, Colo. -- Echo- Star Communications Corp. will buy News Corp. and MCI WorldCom Inc.'s satellite television assets for $1.05 billion in stock as the two sellers abandon plans to set up a U.S. satellite TV business.

News Corp. and MCI WorldCom Inc. will exchange satellite transmission licenses, two satellites, a satellite broadcast facility and other assets for a 37 percent stake in EchoStar, the No. 3 U.S. satellite TV provider.

News Corp., controlled by Rupert Murdoch, and MCI WorldCom acquired the satellite licenses in 1996 in hopes of becoming partners to operate a major U.S. satellite TV company. The companies never began broadcasting, though, and searched for buyers after deciding that existing satellite broadcasters had too much of a lead.

"We thought there was an opportunity to go forward and try and build a business," said Chase Carey, News Corp. co-chief operating officer, but "we encountered problems."

The transaction is the second such deal between the companies. Littleton, Colo.-based EchoStar last year sued News Corp., the world's fifth-largest media company, after it backed out of plans to buy 50 percent of EchoStar.

Under the new agreement, EchoStar will call off its $5 billion lawsuit against News Corp. if the latest transaction is approved.

As part of the agreement, EchoStar will carry News Corp.'s Fox News on its satellite network and gain rights to retransmit the programming of Fox-owned TV stations.

EchoStar said it will be able to transmit more than 500 channels with the new licenses and satellites. It also will sell a minimum of 500,000 set-top boxes, an order worth $75 million to $100 million, to News Corp. for its satellite TV operations elsewhere in the world.

"I think the long-term benefits are clear," said Rob Kaimowitz, an ING Baring Furman Selz analyst who maintains a "strong buy" rating on EchoStar.

Under the agreement, Echo- Star will pay 24.0 million newly issued Class A common shares to News Corp. and 5.9 million to MCI.

Kaimowitz said the partners paid $682.5 million for the licenses for 28 satellite frequencies and are giving EchoStar satellites worth $450 million. He said EchoStar also will acquire a satellite -- uplink center worth $100 million.

EchoStar shares rose $3.8125, to $38.8125; MCI WorldCom fell $3.4375, to $59; and News Corp. American depositary receipts, each representing four ordinary shares in Australia, fell 37.5 cents to $28. News Corp. is based in Sydney, and MCI WorldCom is based in Jackson, Miss.

The agreement follows last month's collapse of Primestar Inc.'s proposed $1.1 billion purchase of American Sky Broadcasting Co., which is jointly owned by News Corp. and MCI WorldCom, because of regulatory hurdles.

Primestar is the United States' second-biggest satellite

broadcaster.

Pub Date: 12/01/98

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