US satellite TV operatorDirecTV may end up costing far more than Rupert Murdoch had bargained for nowthat rival EchoStar Communications has weighed in with a surprise $30.4bncompeting bid.
The news immediately tookits toll on shares of Murdoch's News Corp which fell by more than 3% inearly trading on the Australian stock exchange as analysts tried to assess theimplications of EchoStar's counter-offer.
Murdoch has been in advancednegotiations with DirecTV's current owner, General Motors' HughesElectronics division, in the hope of merging the US leader in providingsatellite TV services with his own Sky Global network of internationalsatellite operators.
The protracted talks weresaid to be proceeding well after a number of false starts until Sunday whenEchoStar proposed to offer 0.75 of its shares for each
Hughes share. The bid, whichrepresents an 18% premium over Hughes' closing price on Friday, alsoincludes the assumption of $1.9bn in Hughes debt.
Based in Colorado,EchoStar's operates the number two US satellite television service, thefast-growing Dish Network. The company hopes to achieve significantcost-savings through merging its service with DirecTV through economies ofscale and the elimination of any overlaps.
'The combined company'sunrivaled satellite network and subscriber base would enable it to achievegreater profitability than either company would be able to achieve on itsown,' said chief executive Charles Ergen in a letter to GM chairman JohnSmith.
The race to buy DirecTVcoincides with the prospect of an alternative bidding war erupting overAT&T's Broadband division that controls the largest number of cableTV subscribers in the US. Comcast effectively put that unit into play when itunfurled a $44.5bn hostile takeover bid last month.
Since then, the number twocable operator, AOL Time Warner, is known to have discussed a possible mergingof its cable interests with those of AT&T - an idea that could wellencounter anti-trust concerns in Washington.
The Walt Disney Co, concernedthat its films and programming might locked out of a cable and satellite marketcontrolled by rival studio conglomerates, has also reportedly looked intoteaming up with two other cable operators, Cox Communications and PaulAllen's Charter Communications, to buy AT&T Broadband for themselves.